Federal Employees' Group Life Insurance and Federal Employees Health Benefits Programs; Reconsideration of Employing Office Enrollment Decisions

Federal RegisterDec 27, 1994

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OFFICE OF PERSONNEL MANAGEMENT

5 CFR Parts 870, 871, 872, 873, 874, and 890

[RIN 3206-AF94]

Federal Employees' Group Life Insurance and Federal Employees

Health Benefits Programs; Reconsideration of Employing Office

Enrollment Decisions

AGENCY: Office of Personnel Management.

ACTION: Final rule.

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SUMMARY: The Office of Personnel Management (OPM) is issuing final

regulations to improve the administrative process used by the Federal

Employees' Group Life Insurance (FEGLI) and Federal Employees Health

Benefits (FEHB) Programs in resolving disputes between Federal

employees and agencies over coverage and enrollment issues. The purpose

of these regulations is to improve the performance of the Government by

delegating to Federal agencies the authority to reconsider disputes

over coverage and enrollment issues in these two programs and to make

retroactive as well as prospective corrections of errors.

EFFECTIVE DATE: February 27, 1995.

FOR FURTHER INFORMATION CONTACT: Margaret Sears (202) 606-0191.

SUPPLEMENTARY INFORMATION: On June 17, 1994, OPM published proposed

regulations (59 FR 31171) that would delegate to agencies the authority

to make final reconsideration decisions on enrollment issues under the

FEGLI and FEHB Programs and to make retroactive as well as prospective

corrections where appropriate.

OPM received comments from nine agency headquarters or

installations, one employee organization, and one health insurance

carrier. Three commenters expressed their approval of the proposed

regulations without further comment. The other eight commenters

expressed various concerns about the changes made by the proposed

regulations and about the procedures they would have to develop in

order to comply with them. Generally, the comments reflected

considerable confusion on the part of agencies as to exactly what they

would be required to do under these proposed regulations.

Four commenters expressed the belief that the statistics provided

in the supplementary information do not support the delegation of the

reconsideration decision to agencies because they represent errors on

the part of agencies. These statistics showed that about one-third of

the cases OPM received involved decisions about retroactive changes,

which agencies cannot make under current regulations. Therefore, these

do not represent errors on the part of agencies. An additional 23

percent of the requests OPM received were returned to the agencies

because the employees had not followed administrative procedures--in

most cases employees had not asked their agencies for an initial

decision. These, also, do not represent agency errors. Because some

cases involved both an enrollment issue and a retroactive coverage

issue, the percentages do not show the exact number of cases where

agency error may have been involved. However, in more than half the

cases, agency error was not involved. Considering the tremendous volume

of enrollment decisions that employing offices make each year, the fact

that so few decisions are disputed by employees reflects a remarkable

achievement by employing offices.

Three commenters were uncertain about what ``administrative error''

means. Generally, an administrative error occurs when an employing

office misapplies the law or regulations, misinforms employees, or

fails to inform employees when required to do so. It could include any

mistake on the part of the employing office that directly results in

the loss of a benefit or opportunity to an employee. We have not

incorporated a definition into the regulations because doing so would

tend to narrow the application of the term. One of the commenters asked

that we clarify the difference between ``administrative error'' in

Secs. 870.102(a) and 890.103(a) and ``error'' in Secs. 870.102(b) and

890.103(b). There is no difference; therefore, we are changing the

regulations to read ``administrative error'' in each case.

Three commenters questioned OPM's ``equity and good conscience''

authority and asked if they must give an appeal right to OPM when they

issue a reconsideration decision. OPM's ``equity and good conscience

authority,'' which allows us to order the correction of an

administrative error, is not a part of the administrative review

process. The administrative review process ends with the agency's

reconsideration decision. However, without the authority to order a

correction, OPM could not overrule an agency reconsideration decision

that is obviously in disregard of law and regulations and is unfair to

the employee. While these situations are rare, OPM must retain the

authority to correct them. OPM will issue guidance to agencies to help

them in developing procedures for making reconsideration decisions.

One commenter believes that, although delegation will reduce costs

to OPM, it will increase them for the agencies. Based on the relatively

small number of reconsideration decisions that OPM issues each year for

the entire Government, it is unlikely that any agency will have a large

enough volume of reconsideration requests to affect costs. However, if

an agency should find that it is getting an unusually large number of

reconsideration requests, it may find that the procedures or training

it is giving to personnel staff in its installations need to be

reviewed and strengthened.

One commenter requested that OPM issue procedures regarding the

review of agency actions when heirs contest the life insurance coverage

of a deceased employee. This kind of dispute is a claims issue rather

than an enrollment issue. Life insurance claims are handled by the

Office of Federal Employees' Group Life Insurance (OFEGLI). If it

appears that enrollment issues are involved OFEGLI normally contacts

OPM for help in resolving the matter. Since this kind of dispute must

be resolved on a case-by-case basis, detailed procedures for agencies

are inappropriate.

One commenter suggested that OPM give agencies more flexibility in

the enrollment and change in enrollment rules. OPM is currently

developing regulations that would bring much greater flexibility to the

rules for enrolling in FEHB plans and for changing FEHB enrollments. We

expect to issue these as proposed regulations within the next few

months.

One commenter asked how these regulations would apply to decisions

on FEGLI and FEHB issues previously handled solely by the agency or the

retirement system (for example, whether an employee meets the

requirements for continuing coverage into retirement, whether a spouse

meets the eligibility requirements for present or future benefits from

the retirement system, or whether an individual meets the requirements

for FEHB coverage as a hostage under Public Law 101-513). These

regulations affect only reconsideration decisions that were previously

made by OPM under Sec. 870.205 and Sec. 890.104, which will now be made

by the employing agencies (or retirement system, if appropriate) rather

than OPM. Agency and retirement system decisions made under other

provisions are unaffected by these regulations.

One commenter asserted that, since OPM has the statutory authority

to administer both of these programs and to enter into contracts with

carriers, these regulations constitute an abrogation of OPM's authority

as plan sponsor. OPM disagrees. Both the FEGLI and the FEHB laws are

structured so that agencies perform the day-to-day functions necessary

to handle their employees' enrollments and enrollment changes. Although

OPM has performed the reconsideration function in the past, the law

does not prohibit the delegation of this function to agencies.

Two commenters expresses the concern that employees would not have

their cases reviewed outside the agency. One of these felt that, since

FEGLI and FEHB decisions are not appealable to the Merit System

Protection Board (MSPB), OPM should review these cases because it is

responsible for the policies on which they are based. The other felt

that OPM has the expertise necessary to resolve enrollment disputes

that agencies lack, and that no change should be made unless chapter 71

of title 5, U.S. Code, is amended to allow employees to grieve agency

decisions on FEGLI and FEHB enrollment issues. It is true that FEGLI

and FEHB decisions are not subject to review by the Merit Systems

Protection Board nor may they be grieved under chapter 71 of title 5,

U.S. Code. We believe that, for the most part, agencies already have

the expertise necessary to make these decisions and that a level of

administrative review that is independent of the agency is unnecessary.

OPM will provide guidance and other assistance to agencies in setting

up procedures for making reconsideration decisions.

One commenter suggested that we set a time limit on the length of

the retroactive period that agencies may authorize. We do not believe

that setting an arbitrary time limit would be appropriate. A

retroactive correction must be based on an administrative error and the

employee must request a retroactive correction. The agency must

consider each case on its own merits. Most requests for retroactive

correction are for FEHB enrollment issues. Generally, these are self-

limiting in terms of the length of the retroactive period because

carriers generally require that claims be made no later than December

31 of the calendar year following the one in which the medical service

was provided. However, we recognize that agencies do not have

experience in granting retroactive corrections; therefore, we are

modifying the FEHB regulations so that they apply only to retroactive

corrections of administrative errors that occur after December 31,

1994.

One commenter requested that OPM provide guidance to help them

develop procedures and allow sufficient lead time for them to do this.

OPM will provide guidance to help agencies set up procedures; however,

agencies will find that the reconsideration function is not difficult.

They have been making the initial decisions on prospective corrections

for many years, and reconsideration decisions are similar. We do not

believe that a lengthy delay is necessary with regard to prospective

corrections. The modification we are making in the regulation to limit

retroactive corrections of administrative errors occurring after

December 31, 1994, will have a delaying effect on decisions regarding

retroactive corrections.

One commenter suggested that we change the proposed regulations at

5 CFR 870.102 to read ``The employing office may make prospective and

retroactive corrections * * *'' to conform to the language in 5 CFR

890.103. The difference in language is intentional. Under current

regulations, an agency's failure to withhold Basic Life insurance

premiums is always corrected retroactively because coverage is

automatic unless the employee submits a waiver. Similarly, an agency's

failure to process a waiver on a timely basis is retroactive to the

effective date of the waiver. Since agencies are not free to make a

judgment as to whether the change should be retroactive in these cases,

it is not appropriate for the regulations to imply that they do.

However, the language of the FEGLI regulations does not preclude either

prospective or retroactive changes that do not conflict with the law or

regulations. In the case of FEHB enrollments, the agency is generally

free to make a judgment as to whether a prospective or retroactive

change is appropriate.

One commenter suggested that we clarify whether OPM's decision to

order a retroactive correction is subject to retroactive payment of

premiums under Secs. 870.102 and 890.103. Since retroactive payment of

premiums is required under the law, it has been OPM's practice to

include the requirement for payment of retroactive premiums in its

letters to the agencies ordering the retroactive correction. However,

we are modifying the regulations to make it clear that the requirement

for payment of retroactive premiums applies regardless of who

authorizes the retroactive correction.

One commenter suggested that we change the requirements for the

information that must be included in an employee's request for

reconsideration to include a copy of the initial decision. We have

intentionally not included a copy of the initial decision as a

regulatory requirement. This information should be given in the initial

decision itself; however, we do not agree that the copy of the initial

decision need be included for the request to be considered timely under

the regulations. If the request includes sufficient information to

identify the individual, it can be accepted as a timely request and the

initial decision can be requested if it is not included.

One commenter suggested that Secs. 870.103(c)(2) and 890.104(c)(2)

be changed to specify that the reconsideration review is an independent

level of review. We are making this modification in the interest of

clarity.

One commenter asked how these regulations apply to agencies that

have previously delegated initial decisions to another agency through a

Memorandum of Understanding (MOU). Such agencies may need to amend the

MOU's to show which agency is to make the reconsideration decision.

Currently the initial decision letters have been directing employees to

ask OPM to reconsider the initial decision. Under the revised

regulations the initial decision must tell the employee how to seek

reconsideration.

One commenter expressed the concern that the term ``agency'' used

in Sec. 890.104 could restrict the agency's options about the role of

the National Finance Center (NFC) in the reconsideration process for

those agencies that have a MOU with NFC to administer their payroll or

FEHB accounts for enrollees who make direct premium payments. Since NFC

acts as an agent for the agency, these regulations in no way restrict

NFC's role. However, agencies and NFC will need to decide which will

perform the reconsideration function and then modify the MOU

accordingly.

In general, the comments we received indicated that agencies are

uncertain about what reconsideration actually is. Therefore, we are

adding a definition of the term ``reconsideration'' to clarify that it

is the final part of the administrative review process and consists of

a determination of whether the law and regulations were correctly

applied when the initial decision was made.

In addition, there were several suggestions to correct real or

perceived technical or typographical errors in the proposed

regulations. We have made changes where appropriate.

Regulatory Flexibility Act

I certify that this regulation will not have a significant economic

impact on a substantial number of small entities because it merely

amends administrative procedures currently performed by OPM and Federal

agencies.

List of Subjects

5 CFR Part 870

Administrative practice and procedure, Government employees,

Hostages, Iraq, Kuwait, Lebanon, Life insurance, Retirement.

5 CFR Parts 871, 872, and 873

Administrative practice and procedure, Government employees, Life

insurance, Retirement.

5 CFR 874

Government employees, Life insurance, Retirement.

5 CFR Part 890

Administrative practice and procedure, Government employees, Health

facilities, Health insurance, Health professions, Hostages, Iraq,

Kuwait, Lebanon, Reporting and recordkeeping requirements, Retirement.

Office of Personnel Management.

James B. King,

Director.

Accordingly, OPM is amending 5 CFR parts 870, 871, 872, 873, 874,

and 890 as follows:

PART 870--FEDERAL EMPLOYEES' GROUP LIFE INSURANCE PROGRAM

1. The authority citation for part 870 continues to read as

follows:

Authority: 5 U.S.C. 8716; Sec. 870.202(c) also issued under 5

U.S.C. 7701(b)(2); subpart J is also issued under section 599C of

Pub. L. 101-513, 104 Stat. 2064, as amended.

2. In subpart A, Sec. 870.102 is revised, Sec. 870.103 is

redesignated as Sec. 870.104, a new Sec. 870.103 is added, and newly

redesignated Sec. 870.104 is amended by revising the introductory text

of the definition of Employing office, adding paragraph (d) to the

definition of Employing office and by adding a definition of

Reconsideration to read as follows:

Sec. 870.102 Correction of errors.

(a) The employing office may make corrections of administrative

errors as to coverage or changes in coverage at any time.

(b) OPM may order correction of an administrative error upon a

showing satisfactory to OPM that it would be against equity and good

conscience not to do so.

(b) Retroactive corrections of coverage are subject to the

provisions of Sec. 870.401(h).

Sec. 870.103 Initial decision and reconsideration.

(a) Who may file. (1) An employee may request his or her agency to

reconsider an employing office's initial decision denying insurance

coverage or the opportunity to change coverage.

(2) An annuitant may request his or her retirement system to

reconsider its initial decision affecting insurance coverage.

(3) A judge may request his or her agency, or retirement system if

applicable, to reconsider an employing office's initial decision that

denies an entitlement related to assignments under 5 U.S.C. 8706(e) of

this chapter.

(b) Initial employing office decision. An employing office's

decision is considered an initial decision as used in paragraph (a) of

this section when rendered by the employing office in writing and

stating the right to an independent level of review (reconsideration)

by the appropriate agency or retirement system. However, an initial

decision rendered at the highest level of review available within OPM

is not subject to reconsideration.

in writing, must include the claimant's name, address, date of birth,

Social Security number, reason(s) for the request, and, if applicable,

retirement claim number.

(2) The reconsideration review must be an independent level of

review made at or above the level at which the initial decision was

rendered.

(d) Time limit. A request for reconsideration of an initial

decision must be filed within 30 calendar days from the date of the

written decision stating the right to a reconsideration. The time limit

on filing may be extended when the individual shows that he or she was

not notified of the time limit and was not otherwise aware of it, or

that he or she was prevented by circumstances beyond his or her control

from making the request within the time limit. An agency or retirement

system decision in response to a request for reconsideration of an

employing office's decision is a final decision as described in

paragraph (e) of this section.

(e) Final decision. After reconsideration, the agency or retirement

system must issue a final decision, which must be in writing and must

fully set forth the findings and conclusions.

Sec. 870.104 Definitions.

* * * * *

Employing office means the office of the agency or retirement

system to which jurisdiction and responsibility for life insurance

actions have been delegated.

* * * * *

(d) For judges of the United States Court of Veterans Appeals, the

employing office is the United States Court of Veterans Appeals.

* * * * *

Reconsideration means the final level of administrative review of

an employing office's initial decision to determine if the employing

office correctly applied the law and regulations.

* * * * *

3. In subpart B, Sec. 870.205 is removed.

PART 871--STANDARD OPTIONAL LIFE INSURANCE

1. The authority citation for part 871 continues to read as

follows:

Authority: 5 U.S.C. 8716.

2. In subpart A, Sec. 871.103 is revised to read as follows:

Sec. 871.103 Correction of errors; initial decision and

reconsideration.

The rules and procedures under Secs. 870.102 and 870.103 are

applicable in this part, subject to the provisions of Sec. 871.401(g).

Sec. 871.104 [Amended]

3. In Sec. 871.104 the reference to ``Sec. 870.103'' is removed and

``Sec. 870.104'' is added in its place.

Sec. 871.206 [Removed]

4. In subpart B, Sec. 871.206 is removed.

PART 872--ADDITIONAL OPTIONAL LIFE INSURANCE

1. The authority citation for part 872 continues to read as

follows:

Authority: 5 U.S.C. 8716.

2. In subpart A, Sec. 872.103 is revised to read as follows:

Sec. 872.103 Correction of errors; initial decision and

reconsideration.

The rules and procedures under Secs. 870.102 and 870.103 are

applicable in this part, subject to the provisions of Sec. 872.401(g).

Sec. 872.104 [Amended]

3. In Sec. 872.104 the reference to ``Sec. 870.103'' is removed and

``Sec. 870.104'' is added in its place.

Sec. 872.206 [Removed]

4. In subpart B, Sec. 872.206 is removed.

PART 873--FAMILY OPTIONAL LIFE INSURANCE

1. The authority citation for part 873 continues to read as

follows:

Authority: 5 U.S.C. 8716.

2. In subpart A, Sec. 873.103 is revised to read as follows:

Sec. 873.103 Correction of errors; initial decision and

reconsideration.

The rules and procedures under Secs. 870.102 and 870.103 are

applicable in this part, subject to the provisions of Sec. 873.401(e).

Sec. 873.104 [Amended]

3. In Sec. 873.104 the reference to ``Sec. 870.103'' is removed and

``Sec. 870.104'' is added in its place.

Sec. 873.206 [Removed]

4. In subpart B, Sec. 873.206 is removed.

PART 874--ASSIGNMENT OF LIFE INSURANCE

1. The authority citation for part 874 continues to read as

follows:

Authority: 5 U.S.C. 8716.

Sec. 874.101 [Amended]

2. In subpart A, Sec. 874.101, the reference to ``Sec. 870.103'' is

removed and ``Sec. 870.104'' is added in its place.

3. In subpart C, Sec. 874.305 is revised to read as follows:

Sec. 874.305 Correction of errors; initial decision and

reconsideration.

The rules and procedures under Secs. 870.102 and 870.103 are

applicable in this part, subject to the provisions of Sec. 874.502.

PART 890--FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM

1. The authority citation for part 890 continues to read as

follows:

Authority: 5 U.S.C. 8913; Sec. 890.803 also issued under 50

U.S.C. 403p, 22 U.S.C. 4069c and 4069c-1; subpart L also issued

under sec. 599C of Pub. L. 101-513, 104 Stat. 2064, as amended.

2. Section 890.101 is amended by adding the definition

Reconsideration to read as follows:

Sec. 890.101 Definitions; time computations.

* * * * *

Reconsideration means the final level of administrative review of

an employing office's initial decision to determine if the employing

office correctly applied the law and regulations.

* * * * *

3. In Sec. 890.103, paragraphs (a) and (b) are revised and

paragraph (d) is added to read as follows:

Sec. 890.103 Correction of errors.

(a) The employing office may make prospective corrections of

administrative errors as to enrollment at any time. The employing

office may make retroactive corrections of administrative errors that

occur after December 31, 1994.

(b) OPM may order correction of an administrative error upon a

showing satisfactory to OPM that it would be against equity and good

conscience not to do so.

* * * * *

(d) Retroactive corrections are subject to withholdings and

contributions under the provisions of Sec. 890.502.

4. Section 890.104 is revised to read as follows:

Sec. 890.104 Initial decision and reconsideration on enrollment.

(a) Who may file. Except as provided under Sec. 890.1112, an

individual may request an agency or retirement system to reconsider an

initial decision of its employing office denying coverage or change of

enrollment.

(b) Initial employing office decision. An employing office's

decision is considered an initial decision as used in paragraph (a) of

this section when rendered by the employing office in writing and

stating the right to an independent level of review (reconsideration)

by the agency or retirement system. However, an initial decision

rendered at the highest level of review available within OPM is not

subject to reconsideration.

in writing, must include the claimant's name, address, date of birth,

Social Security number, name of carrier, reason(s) for the request,

and, if applicable, retirement claim number.

(2) The reconsideration review must be an independent review

designated at or above the level at which the initial decision was