Proposed Rule2022-14942
National Service Life Insurance-Veterans Affairs Life Insurance (VALife) Program Amendments
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
July 14, 2022
Issuing agencies
Veterans Affairs Department
Abstract
The Department of Veterans Affairs (VA) proposes to amend its regulations that govern National Service Life Insurance (NSLI), among other things, to accomplish the following: implement provisions contained in legislation that authorized a new program of insurance; clarify which individuals are eligible to take actions on an insurance policy; elucidate on various provisions regarding coverage and benefits under the new insurance program; and state which individuals are ineligible to benefit from the unlawful and wrongful killing of a veteran policyholder.
Full Text
<html>
<head>
<title>Federal Register, Volume 87 Issue 134 (Thursday, July 14, 2022)</title>
</head>
<body><pre>
[Federal Register Volume 87, Number 134 (Thursday, July 14, 2022)]
[Proposed Rules]
[Pages 42118-42126]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-14942]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 8
RIN 2900-AR53
National Service Life Insurance--Veterans Affairs Life Insurance
(VALife) Program Amendments
AGENCY: Department of Veterans Affairs.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The Department of Veterans Affairs (VA) proposes to amend its
regulations that govern National Service Life Insurance (NSLI), among
other things, to accomplish the following: implement provisions
contained in legislation that authorized a new program of insurance;
clarify which individuals are eligible to take actions on an insurance
policy; elucidate on various provisions regarding coverage and benefits
under the new insurance program; and state which individuals are
ineligible to benefit from the unlawful and wrongful killing of a
veteran policyholder.
DATES: Comments must be received on or before September 12, 2022.
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-AR53--National Service Life Insurance--Veterans Affairs Life
Insurance (VALife) Program Amendments.'' 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: Section 1922B of title 38, United States
Code, requires VA to issue policies under a new program of veterans'
life insurance beginning on January 1, 2023. Consistent with 38 U.S.C.
1922B and other statutes in the NSLI subchapter (38 U.S.C. 1901-1929),
VA proposes to implement this new program of insurance by amending 38
CFR part 8 as set forth below.
1. Definition of Part 8 Terms
Guardian
Current 38 CFR 8.0(e) defines the term ``guardian'' to mean ``any
representative certified by the appropriate Veterans Service Center
Manager, under [38 CFR 13.55], to receive benefits in a fiduciary
capacity on behalf of the insured or the beneficiary, or to take the
actions listed in [38 CFR] 8.32.'' We note that Sec. 13.55 was removed
in 2018, see 83 FR 32716, 32738 (July 13, 2018), but current Sec.
8.0(e) essentially refers to a VA-appointed fiduciary, as defined in
current Sec. 13.20 (defining the term ``fiduciary'' as ``an individual
or entity appointed by VA to receive VA benefits on behalf of a
beneficiary for the use and benefit of the beneficiary and the
beneficiary's dependents''). The current definition of ``guardian,''
therefore, only allows a VA-appointed fiduciary to take the actions
that are enumerated in Sec. 8.32. Some of these actions include
applying for a life insurance policy, reinstating a lapsed policy, and
cash surrendering a policy. 38 CFR 8.32(a), (b), (f). Private insurers
allow state-appointed guardians and attorneys-in-fact who hold power of
attorney for an individual as their principal to take these same
actions. VA proposes to revise Sec. 8.0(e) to include within the
[[Page 42119]]
definition of the term ``guardian,'' not only VA-appointed fiduciaries,
but also state-appointed guardians and conservators, as well as
attorneys-in-fact (i.e., persons holding power of attorney). However,
VA also proposes to clarify that if a VA-appointed fiduciary and either
a state-appointed guardian/conservator or attorney-in-fact are not the
same individual and both attempt to take conflicting actions on an
incompetent insured's policy, the VA-appointed fiduciary shall have the
exclusive authority to take actions on the policy. In that scenario, VA
would not allow the state-appointed guardian/conservator or attorney-
in-fact to take actions on the insurance policy unless VA removes the
policyholder's fiduciary or the state-appointed guardian/conservator or
attorney-in-fact is appointed as the VA fiduciary. These amendments
would align VA procedures with commercial insurance practices and would
afford those caring for incompetent insureds--whether they are VA-
appointed fiduciaries, state-appointed guardians/conservators, or
attorneys-in-fact--greater authority over VA life insurance actions.
The amendments would also resolve potential conflicts between a VA-
appointed fiduciary and either a state-appointed guardian/conservator
or an attorney-in-fact.
Veterans' Affairs Life Insurance (VALife)
VA proposes to add a new paragraph (f) to 38 CFR 8.0 that would
define the term ``Veterans' Affairs Life Insurance (VALife)'' to mean
``insurance that is issued under section 1922B of title 38 U.S.C.'' The
title of the legislation that created VALife, ``Modernization of
Service-Disabled Veterans Insurance,'' and its statutory heading in
section 1922B, ``Service-Disabled Veterans Insurance,'' are similar to
the name of VA's existing life insurance program for service-disabled
veterans, which Congress renamed ``Legacy Service-Disabled Veterans'
Insurance'' when it authorized the creation of VALife. See 38 U.S.C.
1922; Public Law 116-315, Title II, Sec. 2004(b)(1), (c)(1) (2021). VA
has issued policies for Legacy Service-Disabled Veterans' Insurance,
formerly known as Service-Disabled Veterans' Insurance (SDVI), since
1951 and will continue to provide such insurance coverage even after it
closes to new issues on December 31, 2022. See 38 U.S.C. 1922(d)(1)
(``The Secretary may not accept any application by a Veteran to be
insured under this section after December 31, 2022.''). Policyholders
could be confused by the similarities in program names and legislative
and statutory headings. For purposes of clarity, VA proposes to define
VALife to mean the new program of life insurance authorized by 38
U.S.C. 1922B to distinguish it from the renamed SDVI program.
Application for Insurance Issued Under 38 U.S.C. 1922B
VA would require veterans applying for VALife to submit an
application online or through another medium prescribed by the
Secretary. Therefore, VA proposes to add a new paragraph (g) to Sec.
8.0 that would define an application for VALife as a properly completed
application form submitted online or through another medium prescribed
by the Secretary. Cf. 84 FR 138, 139 (Jan. 18, 2019) (defining a
``claim'' for benefits under 38 CFR part 3); see also, e.g., Veterans
Justice Grp., LLC v. Sec'y of Veterans Affairs, 818 F.3d 1336, 1350
(Fed. Cir. 2016) (holding that 38 U.S.C. 5101(a)(1) affirmatively
grants the Secretary authority to prescribe the forms of application by
claimants).
Beneficiary
VA proposes to define the term ``beneficiary'' that is contained in
38 U.S.C. 1922B(e) to include both principal and contingent
beneficiaries. Although section 1922B(e) refers broadly to ``a
beneficiary,'' we interpret that reference to include both principal
and contingent beneficiaries because both commercial industry insurers
and all existing Government life insurance programs allow insureds to
name both types of beneficiaries. In the event that the insured has
designated a contingent beneficiary, and the principal beneficiary does
not file a claim, predeceases the insured, or is barred from receiving
payment by operation of the slayer's rule, then the contingent
beneficiary will be paid before an alternate beneficiary in the order
of precedence is eligible to file a claim and receive payment.
2. Effective Date for an Insurance Policy Issued Under 38 U.S.C.
1922(a) or 1922B
Current 38 CFR 8.1(b) states that the effective date of an
insurance policy that is issued under 38 U.S.C. 1922(a) is the date
that a valid application and premium payment are delivered to VA. VA
proposes to amend the heading of current 38 CFR 8.1 to clarify that
insurance policies issued under VALife would have the same effective
date as policies issued under SDVI. This amendment is consistent with
the longstanding VA practice of determining the effective date of
coverage for other Government life insurance programs based on the
delivery of an application and an initial premium payment. However, we
propose to revise Sec. 8.1(a) to clarify that benefits due under an
SDVI policy are payable any time after the effective date, but benefits
due under a VALife policy are payable any time two years after the
effective date.
VA also proposes to add a note 3 to current paragraph (b) that
would state that when veterans apply for insurance coverage through an
electronic medium, the date of delivery of the premium payment shall be
the date of the valid authorization of the premium payment. The note
would also state that in cases where the authorization does not result
in the required premium payment because there were insufficient funds
to cover the full initial premium amount, the delivery date of the
premium payment shall be the date that the full initial premium amount
is received by VA.
Current paragraph (c) provides three different options for SDVI
policyholders to choose as an effective date other than the date of
delivery described in paragraph (b). VA proposes to clarify that the
effective date options for SDVI would not be available for VALife, and,
therefore, VA would amend paragraph (c) to state that it does not apply
to VALife.
3. Provisions During Waiting Period
Section 1922B(c)(3)(A) states that if a veteran dies during the
two-year period described in paragraph (2), the Secretary shall pay to
the beneficiary of the veteran the amount of premiums paid by the
veteran under this section, plus interest. VA proposes to add a new
paragraph (e) to current 38 CFR 8.2 to explain that if a veteran
enrolls in VALife for an amount less than the statutory maximum and
elects to apply for additional coverage at a later date and dies before
completing the two-year waiting period for the additional VALife
coverage amount, the beneficiary shall be refunded premiums that were
paid for the additional VALife coverage, plus interest, in accordance
with 38 U.S.C. 1922B(c)(3)(A). VA also proposes to explain in new
paragraph (e) that if an insured surrenders or cancels a VALife policy
during this same two-year period, the United States would not return to
the insured the premiums that were paid to purchase the coverage. VA's
proposal is consistent with the practice of commercial insurers, as
comparable permanent insurance policies do not return the full amount
of premiums that an insured pays when the insured surrenders policy
coverage during the policy's waiting and enrollment period.
[[Page 42120]]
4. Calculation of Time Period and Veteran's Age
Current Sec. 8.6 establishes the rules for calculating the time
period for applying and reinstating life insurance coverage and paying
premiums. VA proposes to revise the title of Sec. 8.6 to read
``Calculation of Time Period; Veteran's Age,'' designate the current
text as paragraph (a), and make some technical edits to the text in re-
designated paragraph (a). Section 1922B(a)(3)(A) requires that veterans
apply for VALife coverage prior to age 81, except in limited
circumstances described in subparagraph (B). VA proposes to add new
paragraph (b) to Sec. 8.6 to state as follows: ``For VALife, the
premium will be determined using the age of the veteran at his or her
nearest birthday on the effective date of the policy.'' If the
veteran's next birthday is within six months of the effective date of
the policy, his or her premium will be calculated at one year older
than the current age. If the veteran's birthday is more than six months
after the effective date of the policy, his or her current age will be
used to calculate the premium. For example, if the veteran's birthday
is February 16, 1980, and the effective date of the policy is June 1,
2022, the premium age is 42. However, if the same veteran's policy's
effective date is December 1, 2022, the premium age is 43. When VA
developed VALife, VA actuaries established the premium table for the
insurance program using this standard because it is consistent with
commercial life insurance practices and with VA's currently
administered programs. However, VA proposes, for the purposes of
determining a veteran's eligibility for insurance under section
1922B(a)(3), to use the age of the veteran at his or her last birthday
prior to application because it would provide a veteran approaching age
81 with additional time to elect insurance coverage and still be
consistent with the VALife statute (38 U.S.C. 1922B(a)(3)(B)). VA
proposes to add a new paragraph (c) to make this clarification.
Although these proposed amendments contain different standards, it is
common in the private insurance market for the term ``age'' to have a
variety of meanings for insurance calculations (see 12A Couch on Ins.
Sec. 179:13, n.1.), and VA is explaining in this proposed rulemaking
how it would calculate the insured's age for different purposes.
VA also proposes to add a new paragraph (d) that would clarify
under what conditions a veteran who is beyond age 81 would be eligible
to receive VALife coverage. The VALife statute states that ``[t]he
Secretary may not grant insurance to a veteran . . . unless . . . the
veteran submits the application for such insurance before the veteran
attains 81 years of age [or] . . . with respect to a veteran who has
attained 81 years of age . . . the veteran filed a claim for
compensation under chapter 11 of this title before attaining such age .
. . [and] based on such claim, and after the veteran attained such age,
the Secretary first determines that the veteran has a service-connected
disability.'' 38 U.S.C. 1922B(a)(3). VALife was created to replace
SDVI, and under SDVI, a veteran can be granted insurance if he or she
applies within two years following an initial service-connection
determination for any disability. 38 U.S.C. 1922(a). However,
eligibility for SDVI is not restricted to the two-year period following
the veteran's first service-connection determination. VAOPGCPREC 77-90
(finding of service connection for a disability on a secondary basis
establishes a new period for filing an application for SDVI). Although
veterans are not eligible for SDVI by reason of an increase in a
rating, see id., a grant of individual unemployability under 38 CFR
4.18, or a finding of incompetency under 38 CFR 3.353, the two-year
period to apply for SDVI is not limited by age, and a veteran who
receives a grant of service connection for a new and different
disability becomes eligible again to apply for SDVI. Consistent with
Congressional intent in allowing issuance of SDVI coverage at advanced
ages following an initial determination of service connection for a
disability, VA proposes to allow any veteran who applies for service
connection for a disability, either on a primary or secondary basis,
before attaining age 81 but receives an initial grant on that claim
after attaining age 81 to apply for VALife if the veteran otherwise
meets the criteria of 38 U.S.C. 1922B(a)(3)(B). For example, a veteran
who applies for service connection for a disability at age 79, but does
not receive an actual grant of service connection on that claim until
the age of 82, would have a two-year time period to apply for VALife
and would receive full VALife coverage if they paid their premiums
throughout the requisite two-year waiting period. VA's interpretation
of this section of the VALife statute would encourage participation in
VALife and provide life insurance coverage to veterans who are unlikely
to be able to purchase life insurance in the private, commercial market
due to their age and disabilities.
VA also proposes to limit the issuance of a VALife policy under 38
U.S.C. 1922B(a)(3)(B) to a maximum age of 95. This proposal aligns the
maximum issue age for a VALife policy with the maximum issue age of an
SDVI ordinary life policy, as determined by VA in line with common
industry practice to ensure financial soundness and based on the 1941
Commissioners Standard Ordinary Table of Mortality, which is referenced
in 38 U.S.C. 1922. VALife's guaranteed acceptance whole life coverage
most closely mirrors ordinary life policies issued under the SDVI
program, which is being closed and replaced with the new program.
5. Reinstatement Period
Current 38 CFR 8.7 allows a policyholder to reinstate coverage
within five years of the date of lapse of coverage if the policyholder
submits all outstanding premiums and evidence of good health and pays
interest on the arrearage if not reinstated within six months from
lapse. VA proposes to revise Sec. 8.7(a) to indicate that the
paragraph does not apply to VALife policies. In conjunction with that
change, VA proposes to add a new paragraph (e) to Sec. 8.7 to state
that coverage issued under VALife that lapses for non-payment of
premiums may only be reinstated if the former policyholder submits all
premiums in arrears from their respective due dates, plus interest, to
reinstate the coverage within two years of the date of the lapse and
has not yet attained the age of 81. This two-year period is consistent
with the two-year enrollment and waiting period from the effective date
of a VALife policy until the coverage can pay a death benefit (38
U.S.C. 1922B(c)(2)) and is intended to incentivize policyholders with
lapsed policies to reinstate coverage as soon as possible after
lapsing. VA believes that a shorter reinstatement period is also
warranted because VA would not require policyholders to submit proof of
insurability to reinstate coverage. Veterans who do not reinstate
VALife coverage within this two-year period would remain eligible to
reapply for VALife but would be required to wait two years between
their re-enrollment date and the date the full VALife coverage amount
takes effect.
VA is proposing in new Sec. 8.7(e) to make the maximum age for
reinstatement age 80, which is our publicized maximum issue age for
VALife. This is consistent with the practice of the commercial
insurance industry, in which most companies do not allow reinstatement
beyond the maximum issue age for their products.
[[Page 42121]]
While we are allowing issues up to age 95 for VALife, that is only for
the category of veterans who applied for service connection for a new
condition prior to age 81 but did not receive notification of an
initial award for that new condition until after attaining age 81.
Given that we are not requiring proof of satisfactory health as a
condition for reinstatement, the maximum age limitation, in addition to
the two-year time limit after lapse to apply, will mitigate the risk of
anti-selection.
For clarity, VA also proposes to revise the heading of Sec. 8.7
from ``Reinstatement of National Service Life Insurance except
insurance issued pursuant to section 1925 of title 38 U.S.C.'' to
``Reinstatement.''
6. New Program of Insurance Is Not Participating
Paragraph (a)(3) of 38 CFR 8.10 states that Government life
insurance programs issued under 38 U.S.C. 1904(c) and 1922(a) do not
pay dividends. VALife is only authorized to issue coverage on a non-
participating basis (38 U.S.C. 1922B(a)(5)(A)(i)), which means that the
new insurance program would not issue policies that pay dividends to
its policyholders. See 5 Couch on Ins. Sec. 69:46 n.1 (participating
plan provides for a refund of a portion of the premium as a dividend at
the end of the policy period). For purposes of clarity, VA proposes to
revise paragraph (a)(3) by adding a reference to section 1922B.
7. Surrender of VALife Coverage; Development of VALife Cash Values
VA proposes to clarify that Sec. 8.11(a) and (b), which provides
that cash value, paid-up insurance, and extended term insurance, except
as provided in Sec. 8.14(b), shall become effective at the completion
of the first policy year on certain NSLI plans and explains the process
for requesting a cash surrender, respectively, would not apply to
VALife.
VA also proposes to amend Sec. 8.11 to add a new paragraph (j)
stating that cash values for VALife would be developed using the 1941
Commissioners Standard Ordinary Mortality Table (1941 CSO Table) and an
interest rate of 3.5 percent per annum. The 1941 CSO Table is the same
mortality basis as that prescribed for cash values in SDVI (38 U.S.C.
1922(a)(1)).
VA would also state in the new paragraph (j) that VA would not be
obligated to pay cash value in the event of lapse or surrender during
the two-year waiting period prior to VALife coverage becoming payable
for a death benefit because cash value does not begin to accrue until
the two-year waiting period elapses. Additionally, if an insured
enrolls in VALife for an amount less than the statutory maximum and
elects to apply for additional coverage at a later date, the cash value
on the additional amount of coverage would not begin accruing until the
end of the two-year waiting period for the additional coverage. Full
coverage would not be in force under VALife until the two-year waiting
period has been completed. See 38 U.S.C. 1922B(c)(2). And consistent
with other life insurance programs currently administered by VA, VA
would transfer any premiums paid for coverage that lapses or is
surrendered, to the credit of the VALife revolving fund that is
established under 38 U.S.C. 1922B(a)(5)(A)(i) to support the financial
health of VALife.
VA would also explain in new paragraph (k) the process for an
insured to cash surrender a policy and the process to issue the
surrender value of the policy to the insured. VA would apply a process
similar to cash surrenders under existing policies as explained in
Sec. 8.11(b), with the following differences: (1) applications would
be primarily through an electronic medium in order to decrease
administrative costs; and (2) indebtedness and paid up additions would
not apply as the VALife program does not initially plan to provide
policy loans and is a non-participating program without dividends.
Dividends are required in order to issue paid up additions.
For clarity, VA also proposes to revise the heading of this section
from ``Cash value and policy loan'' to ``Cash value.''
8. Policy Loans
Section 1906 of title 38, United States Code, permits VA to
establish regulations pertaining to loans. VA has implemented that
authority in 38 CFR 8.13, and paragraph (a) of that section requires VA
to lend to an insured monies borrowed against the security of the cash
value of his or her insurance coverage, subject to the insured meeting
various criteria. VALife is designed to be completely self-supporting,
unlike other programs of NSLI which receive an annual subsidy to cover
excess claims expenses. See 38 U.S.C. 1919(a) (authorizing
appropriation for NSLI), 1922(a)(5) (authorizing appropriations in part
for SDVI). Because VA has determined that it would not be actuarially
sound to offer loans under VALife at its inception on January 1, 2023,
VA proposes to amend Sec. 8.13 by adding a new paragraph (e) that
would state that the United States shall only issues loans to VALife
policyholders if VA determines that doing so is administratively and
actuarially sound for the VALife Program.
9. Extended Term and Paid-Up Insurance
Under 38 CFR 8.14 and 8.15, insureds who fail to pay premiums do
not go into lapse status and instead remain covered under their
policies according to the extended term value of their coverage, or
their coverage amount is reduced to a level that is consistent with the
policyholder's accrued cash value. Both regulations were promulgated to
prevent life insurance coverage from lapsing and are consistent with
the intent of preventing policyholders from going into lapse status.
However, VA proposes to add language to each section stating that, for
purposes of VALife, such extended term or reduced paid-up insurance
would not be available to veterans during the VALife two-year waiting
period. VA also proposes to add language clarifying that as soon as the
two-year waiting period ends, VALife policyholders would enjoy the
protection of extended term and reduced paid-up insurance coverage that
both sections provide to policyholders covered under other Government
life insurance programs.
10. Slayer's Rule Exclusion
The Federal common-law slayer's rule is a public policy that
precludes killers from benefitting from their victims' deaths. 76 FR
77455 (Dec. 13, 2011). The statutes governing the NSLI programs of life
insurance are silent regarding whether a beneficiary who killed the
decedent, or a family member of such a beneficiary, may receive the
proceeds of the victim's insurance coverage. Some courts have applied
the slayer's rule to claims for NSLI proceeds. Shoemaker v. Shoemaker,
263 F.2d 931 (6th Cir. 1959). However, there are a variety of different
requirements for applying the slayer's rule depending on the state
where the killing occurred. See Annot., 26 A.L.R.2d 987 (1952 & 1998
Supp.); 4 Couch on Ins. Sec. 62:19. Therefore, VA believes it is
necessary to establish a uniform Federal rule for applying the slayer's
rule to Government life insurance death proceeds for all NSLI policies,
including VALife. VA has previously codified a slayer's rule in 38 CFR
9.5 that pertains to the payment of death proceeds under
Servicemembers' Group Life Insurance. For purposes of consistency, VA
proposes to amend 38 CFR 8.19 to designate the existing text as
paragraph (a) and to create a new paragraph (b)
[[Page 42122]]
that would state that where a beneficiary has been determined to have
intentionally and wrongfully killed the insured, the provisions found
in 38 CFR 9.5(e) shall be applied to payment of insurance. Under what
is known as the extended slayer's rule, some jurisdictions also
disqualify members of a slayer's family, other than individuals also
related to the victim, from receiving the proceeds of an insurance
policy. 76 FR 77455. Consistent with Sec. 9.5(e)(2), VA proposes to
incorporate the extended slayer's rule into 38 CFR 8.19 in order to
prevent killers from receiving even the indirect benefits of their
wrongdoing by receiving or inheriting, through relatives, the financial
benefits of the killing.
11. Eligibility for Those Insured Under 38 U.S.C. 1922(a) to Purchase
VALife After December 31, 2025; Increases in VALife Coverage
Veteran policyholders insured under 38 U.S.C. 1922(a) are eligible
to maintain their insurance coverage during the initial two-year VALife
enrollment period if they apply for VALife between January 1, 2023, and
December 31, 2025. 38 U.S.C. 1922(d)(2)(A), (B). Although 38 U.S.C.
1922(d)(3) states that a veteran may not be insured under both programs
simultaneously other than as provided by paragraph (2)(B), we interpret
subsection (d)(3) to mean that a veteran may not be insured under both
programs simultaneously except if a veteran who is insured under SDVI
elects to be insured under VALife during the initial two-year
enrollment period. Also, neither this statute nor the VALife statute
addresses whether a policyholder who is insured under 38 U.S.C. 1922(a)
is eligible to apply for VALife after December 31, 2025, if the
policyholder surrenders his or her life insurance policy or informs VA
that he or she desires to terminate coverage in order to become
eligible for VALife. VA proposes to add new Sec. 8.35 to 38 CFR part 8
that would explain the eligibility criteria for those insured under 38
U.S.C. 1922(a) to purchase VALife after December 31, 2025. Veterans
would be eligible to purchase VALife coverage upon surrender or
cancellation of the policy along with a written statement to VA that
the policyholder desires to terminate his or her existing life
insurance coverage in order to apply for VALife and initiate the two-
year waiting period before VALife will pay a death benefit to the
policyholder's beneficiary. This statement would be in a form that is
prescribed by the Secretary.
12. Issuance of Coverage Under 38 U.S.C. 1922B Following Additional
Elections
Under 38 U.S.C. 1922B(a)(4)(A), a veteran may elect to be insured
for between $10,000 and $40,000, in $10,000 increments. VA proposes to
add a new Sec. 8.36 to 38 CFR part 8 that would explain that veterans
who do not elect the statutory maximum amount of VALife coverage may
still apply for additional VALife coverage at a later date, but the
two-year waiting period imposed by 38 U.S.C. 1922B(c)(2) must be
satisfied before the additional coverage amount of VALife is in force.
Allowing veterans to apply for additional VALife coverage would be an
important feature of VALife for policyholders, as life circumstances
may change, such as marriage or the birth of a child. These life events
may create the need for additional coverage. However, the two-year
waiting period allows for addressing any adverse selection risks while
providing this flexibility to insureds. This is consistent with
private, commercial insurance provider practices.
Executive Orders 12866 and 13563
Executive Orders (E.O.) 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). E.O. 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
proposed rule is not a significant regulatory action under E.O. 12866.
The Regulatory Impact Analysis associated with this rulemaking can be
found as a supporting document at <a href="http://www.regulations.gov">www.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 generally be small business
neutral as it implements statutory provisions that only allow the
United States to issue life insurance coverage to veterans with
service-connected disabilities. 38 U.S.C. 1922B(a)(1) (``[T]he
Secretary shall carry out a service-disabled veterans insurance program
under which a veteran is granted insurance by the United States against
the death of such individual occurring while such insurance is in
force.''). Although there are statutes in 38 U.S.C. 1901-1988 that
allow VA to purchase a large group life insurance policy from a private
commercial insurer, those statutory authorities only apply to the
Servicemembers' Group Life Insurance Program, which provides life
insurance coverage to Service members and their dependents and former
Service members, and they do not provide VA with the authority to
purchase a group life insurance policy from a private insurer for
purposes of providing VALife coverage. As such, the overall impact of
this proposed rule would be of no benefit or detriment to small
businesses, because these insurance policies would only be issued by
the United States to veterans with service-connected disabilities.
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 includes provisions constituting new collections
of information under the Paperwork Reduction Act of 1995 (44 U.S.C.
3501-3521) that require approval by the Office of Management and Budget
(OMB). Accordingly, under 44 U.S.C. 3507(d), VA has submitted a copy of
this rulemaking action to OMB for review and approval.
OMB assigns control numbers to collections of information it
approves. VA may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a
currently valid OMB control number. If OMB does not approve the
collection of information as requested, VA will immediately remove the
provisions containing the collection of
[[Page 42123]]
information or take such other action as is directed by OMB.
Comments on the new collections of information contained in this
rulemaking should 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-AR53;
National Service Life Insurance--Veterans Affairs Life Insurance
(VALife) Program Amendments'' and should be sent within 60 days of
publication of this rulemaking. The collections of information
associated with this rulemaking can be viewed at: <a href="http://www.reginfo.gov/public/do/PRAMain">www.reginfo.gov/public/do/PRAMain</a>.
OMB is required to make a decision concerning the collections of
information contained in this rulemaking between 30 and 60 days after
publication of this rulemaking in the Federal Register. Therefore, a
comment to OMB is best assured of having its full effect if OMB
receives it within 30 days of publication. This does not affect the
deadline for the public to comment on the provisions of this
rulemaking.
The Department considers comments by the public on new collection
of information in--
<bullet> Evaluating whether the new collections of information are
necessary for the proper performance of the functions of the
Department, including whether the information will have practical
utility;
<bullet> Evaluating the accuracy of the Department's estimate of
the burden of the new collection of information, including the validity
of the methodology and assumptions used;
<bullet> Enhancing the quality, usefulness, and clarity of the
information to be collected; and
<bullet> Minimizing the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technological collection
techniques or other forms of information technology, e.g., permitting
electronic submission of responses.
The collections of information associated with this rulemaking
contained in 38 CFR 8.0(g), 8.7, 8.11, 8.19, 8.35 and 8.36 are
described immediately following this paragraph, under their respective
title.
Title: Application for Veterans' Affairs Life Insurance (VALife).
OMB Control No: 2900-XXXX (New/TBD).
CFR Provision: 38 CFR 8.0(g) and 8.36.
<bullet> Summary of collection of information: The new collection
of information in proposed 38 CFR 8.0(g) and 8.36 would require
individuals applying for or increasing VALife coverage to provide
certain information to VA.
<bullet> Description of need for information and proposed use of
information: The information would be used by VA to determine the
eligibility of veterans with service-connected disabilities who elect
to apply for, or increase, VALife coverage.
<bullet> Description of likely respondents: Veterans, veterans' VA-
appointed fiduciaries, and veterans' state-appointed guardians and
custodians and attorneys-in-fact.
<bullet> Estimated number of respondents: 185,000 annually.
<bullet> Estimated frequency of responses: One time per
application.
<bullet> Estimated average burden per response: 10 minutes.
<bullet> Estimated total annual reporting and recordkeeping burden:
Based on a projected 185,000 annual respondents and an average burden
per response of 10 minutes, VA estimates a total annual reporting and
recordkeeping burden of 30,833 hours.
<bullet> Estimated cost to respondents per year: VA estimates the
total information collection burden cost to be $863,632 per year
(30,833 burden hours for respondents x $28.01 per hour).*
* To estimate the total information collection burden cost, VA used the
Bureau of Labor Statistics (BLS) median hourly wage for hourly wage for
``all occupations'' of $28.01 per hour. This information is available
at <a href="https://www.bls.gov/oes/current/oes_nat.htm#13-0000">https://www.bls.gov/oes/current/oes_nat.htm#13-0000</a>.
Title: Veterans' Affairs Life Insurance (VALife) Policy Maintenance
Form.
OMB Control No: 2900-XXXX (New/TBD).
CFR Provisions: 38 CFR 8.7, 8.11, and 8.19.
<bullet> Summary of collection of information: The new collection
of information in proposed 38 CFR 8.7 would require an individual to
use the new form to request reinstatement for VALife. The new
collection of information in proposed Sec. 8.11(k) would require an
individual to use the new form to surrender the VALife policy and
request payment of the cash value. An individual could also use the new
form to request beneficiary changes on a VALife policy under proposed
Sec. 8.19(a).
<bullet> Description of need for information and proposed use of
information: The information would be used by VA to reinstate a VALife
policy or to complete a insured's request to surrender coverage under
VALife.
<bullet> Description of likely respondents: Veterans, veterans' VA-
appointed fiduciaries, and veterans' state-appointed guardians and
custodians and attorneys-in-fact.
<bullet> Estimated number of respondents: 26,672 annually.
<bullet> Estimated frequency of responses: One action per form.
<bullet> Estimated average burden per response: 5 minutes.
<bullet> Estimated total annual reporting and recordkeeping burden:
Based on a projected 26,672 annual respondents and an average burden
per response of 5 minutes, VA estimates a total annual reporting and
recordkeeping burden of 2,223 hours.
<bullet> Estimated cost to respondents per year: VA estimates the
total information collection burden cost to be $62,266 per year (2,223
burden hours for respondents x $28.01 per hour).*
* To estimate the total information collection burden cost, VA used the
Bureau of Labor Statistics (BLS) median hourly wage for hourly wage for
``all occupations'' of $28.01 per hour. This information is available
at <a href="https://www.bls.gov/oes/current/oes_nat.htm#13-0000">https://www.bls.gov/oes/current/oes_nat.htm#13-0000</a>.
Title: Veterans' Affairs Life Insurance (VALife) Surrender/
Conversion Form.
OMB Control No: 2900-XXXX (New/TBD).
CFR Provisions: 38 CFR 8.35.
<bullet> Summary of collection of information: The new collection
of information in proposed 38 CFR 8.35 would require an individual to
confirm their surrender of any current SDVI coverage at the time they
apply for VALife.
<bullet> Description of need for information and proposed use of
information: The information would be used by VA to surrender an
existing SDVI policy so that a Veteran can apply for VALife.
<bullet> Description of likely respondents: Veterans, veterans' VA-
appointed fiduciaries, and veterans' state-appointed guardians and
custodians and attorneys-in-fact.
<bullet> Estimated number of respondents: 26,672 annually.
<bullet> Estimated frequency of responses: One action per form.
<bullet> Estimated average burden per response: 5 minutes.
<bullet> Estimated total annual reporting and recordkeeping burden:
Based on a projected 26,672 annual respondents and an average burden
per response of 5 minutes, VA estimates a total annual reporting and
recordkeeping burden of 2,223 hours.
<bullet> Estimated cost to respondents per year: VA estimates the
total information
[[Page 42124]]
collection burden cost to be $62,266 per year (2,223 burden hours for
respondents x $28.01 per hour).*
* To estimate the total information collection burden cost, VA used the
Bureau of Labor Statistics (BLS) median hourly wage for hourly wage for
``all occupations'' of $28.01 per hour. This information is available
at <a href="https://www.bls.gov/oes/current/oes_nat.htm#13-0000">https://www.bls.gov/oes/current/oes_nat.htm#13-0000</a>.
Assistance Listing
The Assistance Listing number and title for the program affected by
this document is 64.103, Life Insurance for Veterans.
List of Subjects in 38 CFR Part 8
Life insurance, Veterans.
Signing Authority
Denis McDonough, Secretary of Veterans Affairs, approved this
document on June 30, 2022, 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
General Counsel, Department of Veterans Affairs.
For the reasons stated in the preamble, VA is proposing 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, unless
otherwise noted.
0
2. Amend Sec. 8.0 by:
0
a. Revising paragraph (e); and
0
b. Adding paragraphs (f), (g), and (h).
The revision and additions read as follows:
Sec. 8.0 Definitions of terms used in connection with title 38 CFR,
part 8, National Service Life Insurance.
* * * * *
(e) What does the term ``guardian'' mean? The term guardian means
any state-appointed guardian or conservator, attorney-in-fact, or VA-
appointed fiduciary, as defined in Sec. 13.20, who is responsible for
receiving VA benefits in a fiduciary capacity on behalf of the insured
or the beneficiary, or to take the actions listed in Sec. 8.32.
Note to paragraph (e): If a VA-appointed fiduciary and either a
state-appointed guardian/conservator or attorney-in-fact are not the
same individual and both attempt to take conflicting actions on an
incompetent insured's policy, the VA-appointed fiduciary shall have
the exclusive authority to take actions on the policy.
(f) What does the term ``Veterans' Affairs Life Insurance
(VALife)'' mean? The term Veterans' Affairs Life Insurance, or VALife
in its abbreviated form, means a policy of insurance that is issued
under section 1922B of title 38 U.S.C.
(g) What does the term ``application for VALife'' mean? The term
application for VALife means a properly completed application form
submitted online or through another medium prescribed by the Secretary.
(h) What does the term ``beneficiary'' mean? The term
``beneficiary'' means a principal or contingent beneficiary designated
by the insured.
0
3. Amend Sec. 8.1 by:
0
a. Revising the heading;
0
b. Revising paragraph (a);
0
c. Adding Note 3 in paragraph (b);
0
d. Removing ``Yes,'' and adding in its place ``For insurance other than
VALife,'' in paragraph (c).
The revisions and addition read as follows:
Sec. 8.1 Effective date for an insurance policy issued under section
1922(a) or 1922B of title 38 U.S.C.
(a) What is the effective date of the policy? The effective date is
the date policy coverage begins. Benefits due under a policy issued
under section 1922(a) are payable any time after the effective date.
Benefits due under a policy issued under section 1922B are payable any
time two years after the effective date.
(b) * * *
Note 3 to paragraph (b): If you apply for insurance coverage
through an electronic medium, the date of delivery of the premium
payment will be the date you authorize payment of the initial
premium. In cases where the authorization does not result in the
required premium payment because there were insufficient funds to
cover the full initial premium, the delivery date of the premium
payment will be the date your full initial premium is received by
VA.
* * * * *
0
4. Amend Sec. 8.2 by adding paragraph (e) to read as follows:
Sec. 8.2 Payment of premiums.
* * * * *
(e) If a policyholder enrolls in VALife for an amount less than the
statutory maximum and elects to apply for additional coverage at a
later date and dies before completing the two-year waiting period for
the additional VALife coverage amount, the beneficiary shall be
refunded premiums that were paid for the additional VALife coverage,
plus interest, in accordance with 38 U.S.C. 1922B(c)(3)(A). If a
policyholder surrenders or cancels a VALife policy during the two-year
waiting period imposed by 38 U.S.C. 1922B(c)(2) before coverage is in
force, the United States shall not return to the policyholder the
premiums that were paid to purchase the coverage.
0
5. Revise Sec. 8.6 to read as follows:
Sec. 8.6 Calculation of Time Period; Veteran's Age.
(a) If the last day of a time period specified in Sec. 8.2 or
Sec. 8.3, or the last day allowed for filing an application for
National Service Life Insurance or for applying for reinstatement
thereof, or paying premiums due thereon, falls on a Saturday, Sunday,
or legal holiday, the time period will be extended to include the
following workday.
(b) For VALife, the premium will be determined using the age of the
veteran at his or her nearest birthday on the effective date of the
policy.
(c) For purposes of determining a veteran's eligibility for VALife
under 38 U.S.C. 1922B(a)(3)(A), the age of the veteran at his or her
last birthday prior to the date of application will be used.
(d) For purposes of determining a veteran's eligibility for VALife
under 38 U.S.C. 1922B(a)(3)(B), with respect to a veteran who has
attained 81 years of age, an initial grant of service connection for a
new or secondary condition for which the veteran applied for disability
compensation before attaining 81 years of age will satisfy the
eligibility criteria; however, VA will not grant insurance to such a
veteran based on an increase in an existing disability rating, a grant
of individual unemployability under 38 CFR 4.18, or a finding of
incompetency under 38 CFR 3.353. VA will not issue a VALife policy to a
veteran over age 95.
0
6. Amend Sec. 8.7 by:
0
a. Revising the heading;
0
b. Removing ``Any policy'' and adding in its place ``Subject to
paragraph (e), any policy'' in paragraph (a); and
0
c. Adding paragraph (e).
The revisions and addition read as follows:
Sec. 8. 7 Reinstatement.
* * * * *
(e) Coverage issued under VALife that lapses for non-payment of
premiums may only be reinstated if the former policyholder submits all
premiums in arrears from their respective due dates, plus interest, to
reinstate the coverage within two years of the date of the lapse and
has not yet reached age 81.
[[Page 42125]]
(The Office of Management and Budget has approved the information
collection provisions in this section under control number 2900-
XXXX.)
0
7. Amend Sec. 8.10 by revising paragraph (a)(3) to read as follows:
Sec. 8.10 How paid.
(a) * * *
(3) Issued under sections 1904(c), 1922(a), and 1922B of title 38
U.S.C.
* * * * *
0
8. Amend Sec. 8.11 by:
0
a. Revising the heading;
0
b. Adding at the end in paragraph (a) ``This paragraph shall not apply
to VALife.'';
0
c. Removing ``Upon'' and adding in its place ``For insurance other than
VALife, upon'' in paragraph (b); and
0
d. Adding paragraphs (j) and (k).
The revisions and additions read as follows:
Sec. 8.11 Cash value.
* * * * *
(j) Cash values that accrue for VALife will be developed using a
multiple of the 1941 Commissioners Standard Ordinary Mortality Table
and an interest rate of 3.5 percent per annum. Cash values will not
accrue and will not be payable until the completion of the two-year
waiting period imposed by 38 U.S.C. 1922B(c)(2). If a VALife policy
lapses or is surrendered before completion of the two-year waiting
period, then any amounts that VA has collected, such as premium
payments, shall be returned to the credit of the VALife revolving fund
that is established under 38 U.S.C. 1922B(a)(5)(A)(i). If a veteran
enrolls in VALife for an amount less than the statutory maximum and
elects to apply for additional coverage at a later date, the cash value
on the additional amount of coverage would not begin accruing until the
end of the two-year waiting period for the additional coverage.
(k) The United States will pay the cash value, in full or in part,
of any VALife policy, subject to the limitations in Sec. 8.11(j), to
insureds upon request through electronic medium or other method
prescribed by the Secretary. Unless otherwise requested by the insured,
a surrender will be deemed effective as of the end of the premium month
in which the application for cash surrender is delivered to the
Department of Veterans Affairs, or as of the date of payment for the
cash value, whichever is later.
(The Office of Management and Budget has approved the information
collection provisions in this section under control number 2900-
XXXX.)
* * * * *
0
9. Amend Sec. 8.13 by adding paragraph (e) to read as follows:
Sec. 8.13 Policy loans.
* * * * *
(e) For VALife, the United States shall only issue policy loans if
the Secretary determines that offering loans is administratively and
actuarially sound.
0
10. Amend Sec. 8.14 by adding paragraph (d) to read as follows:
Sec. 8.14 Provision for extended term insurance--other than 5-year
level premium term or limited convertible 5-year level premium term
policies.
* * * * *
(d) VALife shall not be extended automatically as term insurance
until the insured has paid the required premiums during the two-year
waiting period that is imposed by 38 U.S.C. 1922B(c)(2) before VALife
coverage is in force.
0
11. Revise Sec. 8.15 to read as follows:
Sec. 8.15 Provision for paid-up insurance; other than 5-year level
premium term or limited convertible 5-year level premium term policies.
(a) If a National Service Life Insurance policy on any plan other
than 5-year level premium term or limited convertible 5-year level
premium term plan has not been surrendered for cash, upon written
request of the insured and complete surrender of the insurance with all
claims thereunder, after the expiration of the first policy year and
while the policy is in force under premium-paying conditions, the
United States will issue paid-up insurance for such amount as the cash
value less any indebtedness, and a charge for administrative cost for
insurance issued under 38 U.S.C. 1925, will purchase when applied as a
net single premium at the attained age of the insured. For this purpose
the attained age is the age on the birthday anniversary nearest to the
effective date of the policy plus the number of years and months from
that date to the date the paid-up insurance becomes effective. Such
paid-up insurance will be effective as of the expiration of the period
for which premiums have been paid and earned; and, any premiums paid in
advance for months subsequent to that in which the application for
paid-up insurance is made shall be refunded to the insured. The paid-up
insurance, if eligible to participate in and to receive dividends,
shall be with the right to dividends. The insured may at any time
surrender the paid-up policy for its cash value or obtain a loan on
such paid-up insurance.
(b) The United States shall not issue paid-up insurance under
VALife until the insured has paid premiums during the two-year waiting
period imposed by 38 U.S.C. 1922B(c)(2) before VALife coverage is in
force.
0
12. Revise Sec. 8.19 to read as follows:
Sec. 8.19 Beneficiary and optional settlement changes.
(a) The insured shall have the right at any time, and from time to
time, and without the knowledge or consent of the beneficiary to cancel
or change a beneficiary and/or optional settlement designation. A
change of beneficiary or optional settlement to be effective must be
made by notice in writing signed by the insured and forwarded to the
Department of Veterans Affairs by the insured or designated agent, and
must contain sufficient information to identify the insured. A
beneficiary designation and an optional settlement selection, but not a
change of beneficiary, may be made by last will and testament duly
probated. Upon receipt by the Department of Veterans Affairs, a valid
designation or change of beneficiary or option shall be deemed to be
effective as of the date of execution. Any payment made before proper
notice of designation or change of beneficiary has been received in the
Department of Veterans Affairs shall be deemed to have been properly
made and to satisfy fully the obligations of the United States under
such insurance policy to the extent of such payments.
(b) If a beneficiary has been determined to have intentionally and
wrongfully killed the insured, the provisions found in 38 CFR 9.5(e)
shall be followed.
0
13. Add Sec. 8.35 to read as follows:
Sec. 8.35 Eligibility for those insured under 38 U.S.C. 1922(a) to
purchase insurance under 38 U.S.C. 1922B after December 31, 2025.
An insured under a Legacy Service Disabled Veterans' Insurance
policy shall be eligible to purchase VALife coverage after December 31,
2025, upon cancellation of his or her Legacy Service Disabled Veterans'
Insurance policy and surrender of any cash value that his or her
coverage has accrued in accordance with 38 CFR 8.11. The policyholder
must also submit a statement in a form that is prescribed by the
Secretary, which clearly indicates that the policyholder desires to
terminate his or her existing life insurance coverage in order to apply
for VALife and initiate the two-year waiting period imposed by 38
U.S.C. 1922B(c)(2) before such VALife coverage is in force.
(Authority: 38 U.S.C. 501, 1901-1929, 1981-1988)
(The Office of Management and Budget has approved the information
collection
[[Page 42126]]
provisions in this section under control number 2900-XXXX.)
0
14. Add Sec. 8.36 to read as follows:
Sec. 8.36 Issuance of coverage under section 1922B of title 38
U.S.C. following additional elections.
An insured who elects less than the maximum amount of VALife
coverage under 38 U.S.C. 1922B(a)(4)(A) shall remain eligible to
purchase additional VALife coverage up to the VALife statutory maximum.
Any insured who elects to apply for additional VALife coverage shall be
subject to the two-year waiting period imposed by 38 U.S.C. 1922B(c)(2)
before such additional VALife coverage is in force.
(Authority: 38 U.S.C. 501, 1901-1929, 1981-1988)
(The Office of Management and Budget has approved the information
collection provisions in this section under control number 2900-
XXXX.)
[FR Doc. 2022-14942 Filed 7-13-22; 8:45 am]
BILLING CODE 8320-01-P
</pre></body>
</html>Indexed from Federal Register on July 14, 2022.
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.