Proposed Rule2021-22208
National Service Life Insurance Premium Payment and Loan Amendment
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 13, 2021
Issuing agencies
Veterans Affairs Department
Abstract
The Department of Veterans Affairs (VA) proposes to amend its National Service Life Insurance regulations to offer Service-Disabled Veterans' Insurance policyholders the option of remitting premiums for government life insurance coverage only on a monthly or annual basis. VA also proposes to increase the amount that Veteran policyholders are eligible to borrow against the value of their life insurance policies and to adjust the interest rates charged for fixed-rate loans in certain circumstances.
Full Text
<html>
<head>
<title>Federal Register, Volume 86 Issue 195 (Wednesday, October 13, 2021)</title>
</head>
<body><pre>
[Federal Register Volume 86, Number 195 (Wednesday, October 13, 2021)]
[Proposed Rules]
[Pages 56846-56848]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-22208]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 8
RIN 2900-AR29
National Service Life Insurance Premium Payment and Loan
Amendment
AGENCY: Department of Veterans Affairs.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The Department of Veterans Affairs (VA) proposes to amend its
National Service Life Insurance regulations to offer Service-Disabled
Veterans' Insurance policyholders the option of remitting premiums for
government life insurance coverage only on a monthly or annual basis.
VA also proposes to increase the amount that Veteran policyholders are
eligible to borrow against the value of their life insurance policies
and to adjust the interest rates charged for fixed-rate loans in
certain circumstances.
DATES: Comments must be received on or before December 13, 2021.
ADDRESSES: Comments may be submitted through <a href="http://www.Regulations.gov">www.Regulations.gov</a>.
Comments should indicate that they are submitted in response to ``RIN
2900-AR29--National Service Life Insurance Premium Payment and Loan
Amendment.'' Comments received will be available at <a href="http://regulations.gov">regulations.gov</a> for
public viewing, inspection or copies.
FOR FURTHER INFORMATION CONTACT: Paul Weaver, Insurance Specialist,
Department of Veterans Affairs Insurance Service (310/290B), 5000
Wissahickon Avenue, Philadelphia, PA 19144, (215) 842-2000, ext. 4263.
(This is not a toll-free number.)
SUPPLEMENTARY INFORMATION: Under the authority of 38 U.S.C. 1901-1929,
VA currently administers four distinct life insurance programs:
National Service Life Insurance (NSLI), Veterans' Special Life
Insurance (VSLI), Veterans' Reopened Insurance (VRI), and Service-
Disabled Veterans' Insurance (S-DVI). As of January 31, 2021, these
life insurance programs are providing insurance coverage under 458,424
policies owned by Veterans.
1. Payment of Premiums for Programs Issuing New Policies
Section 1908 of title 38, U.S.C., requires VA to ``prescribe the
time and method of payment of the premiums on insurance'' for those
programs by issuing regulations. VA has implemented this authority in
38 CFR 8.2(c). Section 8.2(c) requires Veteran policyholders to pay
premiums on a monthly basis, with the option of paying premiums on a
quarterly, semi-annual, or annual basis if the premiums are paid in
advance. NSLI, VSLI, and VRI are closed to new issues, and VA does not
propose to modify any premium paying requirements pertaining to these
life insurance programs. However, S-DVI remains open to new issues and
is currently providing coverage to Veterans with service-connected
disabilities. More than 275,000 Veteran policyholders are insured under
S-DVI, and less than 3,000 pay premiums on a quarterly or semi-annual
basis. Because very few S-DVI policyholders are paying premiums on a
quarterly or semi-annual basis and these payment options add
administrative complexity and program costs associated with calculating
premiums due for policyholders who elect these payment options, VA
proposes to eliminate these two payment options for policyholders
receiving future issue of S-DVI. Moreover, research shows that lapsed
rates tend to increase with the number of premium payments made each
year, with the notable exception of monthly payment modes. See, e.g.,
Cathy Ho & Nancy Muise, U.S. Individual Life Persistency: Guaranteed &
Simplified Issue--A Joint Study Sponsored by Soc'y of Actuaries & LIMRA
16 (2013), https://www.soa.org/globalassets/assets/
[[Page 56847]]
Files/Research/Exp-Study/research-2013-gisi-study.pdf (last visited
Aug. 5, 2021). Thus, we propose to amend Sec. 8.2(c) to require
policyholders receiving future issue of S-DVI to submit premiums on the
policy monthly due date or in advance on an annual basis. Veterans who
were previously insured under S-DVI will retain the option of paying
premiums on a monthly basis or in advance on a quarterly, semi-annual,
or annual basis. The proposed amendment is consistent with 38 CFR 8.4,
which allows Veteran policyholders to pay premiums by a monthly
deduction from disability compensation or certain other payments due
from VA. The proposed rule would also apply to Veteran policyholders
who become insured under 38 U.S.C. 1922B(a)(1). (On January 1, 2023, VA
will begin issuing policies under a new service-disabled Veterans'
insurance program, authorized by section 2004(a)(1) of the Johnny
Isakson and David P. Roe, M.D. Veterans Health Care and Benefits
Improvement Act of 2020, Pub. L. 116-315, and codified at 38 U.S.C.
1922B.) In addition, we would add a paragraph in Sec. 8.2(c) to make
clear that NSLI, VSLI, and VRI policyholders, as well as current S-DVI
policyholders, may continue to pay premiums on a monthly basis or in
advance on an annual, semi-annual, or quarterly basis.
2. Adjust Policy Loan Amounts and Interest Rates
Section 1906 of title 38, U.S.C., provides VA discretion to provide
reasonable and practicable provisions pertaining to cash and loan
values by publishing regulations. In 38 CFR 8.13(a), VA states that
``the United States will lend to the insured . . . any amount which
will not exceed 94 percent of the [policy's] reserve.'' Standard
insurance industry practice allows policyholders access to the full
cash value of their policies. To align with standard insurance industry
practice, VA proposes to provide Veteran policyholders with access to
the full cash value that policies accrue over the time period in which
Veteran policyholders pay premiums for life insurance coverage. Thus,
VA proposes to remove from Sec. 8.13(a) the 94 percent limit on the
amount that Veteran policyholders may borrow.
In addition, managing multiple loans for a single policyholder is
administratively complex and costly. Furthermore, it would be cost
prohibitive to modify current technology to support multiple loans for
one policyholder. Thus, VA proposes to amend Sec. 8.13(d) to require
Veteran policyholders with existing fixed-rate loans who want to apply
for additional loans on their policies to refinance these existing
fixed-rate loans into new variable-rate loans subject to a new loan
rate equal to variable loan rates available from VA at the time of the
loan application. This practice is acceptable within the insurance
industry and would allow VA to offer loans against the remaining
available cash value of Veterans' life insurance coverage, and reduce
administrative complexity and costs associated with managing multiple
loans for a single policyholder.
Executive Orders 12866 and 13563
Executive Orders 12866 and 13563 direct agencies to assess the
costs and benefits of available regulatory alternatives and, when
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, and other advantages; distributive impacts;
and equity). Executive Order 13563 (Improving Regulation and Regulatory
Review) emphasizes the importance of quantifying both costs and
benefits, reducing costs, harmonizing rules, and promoting flexibility.
The Office of Information and Regulatory Affairs has determined that
this rule is not a significant regulatory action under Executive Order
12866. The Regulatory Impact Analysis associated with this rulemaking
can be found as a supporting document at www.<a href="http://regulations.gov">regulations.gov</a>.
Regulatory Flexibility Act
The Secretary hereby certifies that this proposed rule would not
have a significant economic impact on a substantial number of small
entities as they are defined in the Regulatory Flexibility Act, 5
U.S.C. 601-612. This proposed rule would directly affect only
individuals and would not directly affect any small entities.
Therefore, pursuant to 5 U.S.C. 605(b), the initial and final
regulatory flexibility analysis requirements of 5 U.S.C. 603 and 604 do
not apply.
Unfunded Mandates
The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C.
1532, that agencies prepare an assessment of anticipated costs and
benefits before issuing any rule that may result in the expenditure by
State, local, and tribal governments, in the aggregate, or by the
private sector, of $100 million or more (adjusted annually for
inflation) in any one year. This proposed rule would have no such
effect on State, local, and tribal governments, or on the private
sector.
Paperwork Reduction Act
This proposed rule contains no provisions constituting a collection
of information under the Paperwork Reduction Act of 1995 (44 U.S.C.
3501-3521).
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance numbers and titles for
the programs affected by this document are 64.030, Life Insurance for
Veterans--Face Amount of New Life Insurance Policies Issued, and
64.031-Life Insurance for Veterans--Direct Payments for Insurance.
List of Subjects in 38 CFR Part 8
Disability benefits, Life insurance, Loan programs--veterans,
Military personnel, Veterans.
Signing Authority
Denis McDonough, Secretary of Veterans Affairs, approved this
document on September 14, 2021, and authorized the undersigned to sign
and submit the document to the Office of the Federal Register for
publication electronically as an official document of the Department of
Veterans Affairs.
Jeffrey M. Martin,
Assistant Director, Office of Regulation Policy & Management, Office of
the Secretary, Department of Veterans Affairs.
For the reasons stated in the preamble, the Department of Veterans
Affairs proposes to amend 38 CFR part 8 as set forth below:
PART 8--NATIONAL SERVICE LIFE INSURANCE
0
1. The authority citation for part 8 continues to read as follows:
Authority: 38 U.S.C. 501, 1901-1929, 1981-1988.
0
2. Amend Sec. 8.2 by revising paragraph (c)(2) and adding paragraph
(c)(3) to read as follows:
Sec. 8.2 Payment of premiums.
* * * * *
(c) * * *
* * * * *
(2) Policyholders may pay premiums in advance on an annual basis.
(3) Policyholders insured as of [EFFECTIVE DATE OF THE FINAL RULE]
may pay premiums in advance on an annual, semi-annual, or quarterly
basis.
* * * * *
0
3. Amend Sec. 8.13:
[[Page 56848]]
0
a. In paragraph (a), by removing ``which will not exceed 94 percent''
and adding ``policy'' before ``reserve'' in the first sentence; and
0
b. By revising paragraph (d).
The revision reads as follows:
Sec. 8.13 Policy loans.
* * * * *
(d) Notwithstanding any other provisions of this section, the
variable loan rate shall not exceed 12 percent or be lower than 5
percent per annum. For policyholders with an existing fixed-rate loan
who subsequently apply for an additional loan on the same policy, the
existing fixed-rate loan shall be refinanced into the new variable-rate
loan at the prevailing variable rate at the time of the new loan
application.
[FR Doc. 2021-22208 Filed 10-12-21; 8:45 am]
BILLING CODE 8320-01-P
</pre></body>
</html>Indexed from Federal Register on October 13, 2021.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.