Federal Employees' Group Life Insurance Program: Merger of Life Insurance Regulations; Living Benefits; Assignment of Life Insurance

OFFICE OF PERSONNEL MANAGEMENT

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

RIN 3206-AF32, 3206-AG79, 3206-AG68

Federal Employees' Group Life Insurance Program: Merger of Life

Insurance Regulations; Living Benefits; Assignment of Life Insurance

AGENCY: Office of Personnel Management.

ACTION: Final rule.

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

regulations to combine the five parts of title 5 of the Code of Federal

Regulations relating to the Federal Employees' Group Life Insurance

(FEGLI) Program and to simplify the language of the regulations. This

will ease administration and aid in understanding the Program. We also

are issuing final regulations to implement the FEGLI Living Benefits

Act and assignment of life insurance.

EFFECTIVE DATE: October 17, 1997.

FOR FURTHER INFORMATION CONTACT: Karen Leibach, 202-606-0004.

SUPPLEMENTARY INFORMATION: On May 3, 1995, OPM published proposed

regulations (60 FR 21759), merging the five parts of title 5 of the

Code of Federal Regulations relating to the Federal Employees' Group

Life Insurance Program. The merger deletes parts 871, 872, 873, and 874

and combines the information now contained in those parts into an

expanded part 870. This results in a complete presentation of material

in one place.

In addition to merging the regulations, we reorganized the

material; incorporated some material formerly found in Federal

Personnel Manual (FPM) Supplement 870-1, which was abolished as of

December 31, 1994; and simplified the language to make the regulations

easier to understand.

We received one comment from a retiree organization, which

expressed approval of the consolidation and the simplified language.

We made changes to reflect statutory changes since the proposed

regulations were prepared and made other minor language modifications

and clarifications.

On June 15, 1995, OPM published interim regulations (60 FR 31371),

implementing Pub. L. 103-409, the FEGLI Living Benefits Act, which

permits terminally ill individuals covered by FEGLI to elect a lump sum

payment of their Basic insurance as a living benefit.

We received one comment from an individual who suggested allowing

covered individuals to make such an election prior to their becoming

terminally ill and allowing someone other than the insured to make the

election. The Living Benefits Act states that terminally ill individual

may elect a Living Benefit. Terminally ill is defined as having a life

expectancy of 9 months or less. Therefore, OPM does not have the

statutory authority to permit such elections prior to an individual's

being diagnosed as terminally ill. We reviewed the requirement that

only the insured may elect a Living Benefit. At the present time we are

not experiencing a problem in this area. However, we will continue to

monitor the situation to determine whether any changes should be made

in the future.

We made one significant change to the Living Benefits regulations.

The interim regulations state that if an individual elects a Living

Benefit, he/she cannot then assign any remaining insurance. We

reevaluated that position and have revised the regulations to state

that an individual can assign his/her remaining insurance (if any)

following a Living Benefit election. We also made changes in numbering

and language to conform the Living Benefits regulations to the order

and style of the merged regulations.

On October 4, 1995, OPM published interim regulations (60 FR

51881), implementing Section 4 of Public Law 103-336, which permits all

insured Federal employees and former employees to irrevocably assign

ownership of their FEGLI insurance. Previously, only judges could

assign ownership of their insurance.

We received one comment from a Federal agency asking whether the

reference to ``other person(s)'' was intended to prevent the assignee

from designating a corporation as a contingent beneficiary and also

suggesting that the regulations include instructions concerning

procedures for reassigning the insurance. The regulations in place at

the time included a ``corporation'' in the definition of ``person.''

The definition of ``assignment'' also specifically includes transfer of

ownership to a corporation. We do not believe that regulations are the

appropriate forum for detailed instructions. Instructions more properly

belong in handbooks, operating manuals, and other guidance to agencies.

The commentor also suggested some perfecting language changes. We

accepted some of these suggestions. We also made changes in numbering

and language to conform the assignment regulations to the order and

style of the merged regulations.

Regulatory Flexibility Act

I certify that these regulations will not have a significant

economic impact on a substantial number of small entities, because the

regulations will affect only Federal employees, annuitants, and

compensationers.

List of Subjects in 5 CFR Parts 870, 871, 872, 873 and 874

Administrative practice and procedure, Government employees,

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

U.S. Office of Personnel Management.

Janice R. Lachance,

Acting Director.

Accordingly, OPM is amending title 5, Code of Federal Regulations,

as follows:

1. Part 870 is revised to read as follows:

PART 870--FEDERAL EMPLOYEES' GROUP LIFE INSURANCE PROGRAM

Subpart A--Administration and General Provisions

Sec.

870.101 Definitions.

870.102 The policy

870.103 Correction of errors.

870.104 Initial decision and reconsideration.

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Subpart B--Types and Amount of Insurance

870.201 Types of insurance.

870.202 Basic insurance amount (BIA).

870.203 Post-election BIA.

870.204 Annual rates of pay.

870.205 Amount of Optional insurance.

870.206 Accidental death and dismemberment.

Subpart C--Eligibility

870.301 Eligibility for life insurance.

870.302 Exclusions.

Subpart D--Cost of Insurance

870.401 Withholdings and contributions for Basic insurance.

870.402 Withholdings for Optional insurance.

870.403 Withholdings and contributions following a Living Benefit

election.

870.404 Withholdings and contributions provisions that apply to

both Basic and Optional insurance.

870.405 Direct premium payments under 5 U.S.C. chapter 84 (Federal

Employees' Retirement System--FERS).

Subpart E--Coverage

870.501 Basic insurance: effective dates of automatic coverage.

870.502 Basic insurance: waiver/cancellation of insurance.

870.503 Basic insurance: cancelling a waiver.

870.504 Optional insurance: election.

870.505 Optional insurance: waiver/cancellation of insurance.

870.506 Optional insurance: cancelling a waiver.

870.507 Open enrollment periods.

870.508 Nonpay status.

870.509 Transfers to international organizations.

Subpart F--Termination and Conversion

870.601 Termination of Basic insurance.

870.602 Termination of Optional insurance.

870.603 Conversion of Basic and Optional insurance.

Subpart G--Annuitants and Compensationers

870.701 Eligibility for life insurance.

870.702 Election of Basic insurance.

870.703 Amount of life insurance.

870.704 Reinstatment of life insurance.

870.705 Reemployed annuitants.

870.706 MRA-plus-10 annuitants.

Subpart H--Order of Precedence and Designation of Beneficiary

870.801 Order of precedence and payment of benefits.

870.802 Designation of beneficiary.

870.803 Child incapable of self-support.

Subpart I--Assignments of Life Insurance.

870.901 Assignments permitted.

870.902 Making an assignment.

870.903 Effective date of assignment.

870.904 Amount of insurance.

870.905 Withholdings.

870.906 Cancellation of insurance.

870.907 Termination and conversion.

870.908 Annuitants and compensationers.

870.909 Designations and changes of beneficiary.

870.910 Notification of current addresses.

Subpart J--Benefits for United States Hostages in Iraq and Kuwait and

United States Hostages Captured in Lebanon

870.1001 Purpose.

870.1002 Definitions.

870.1003 Coverage and amount of insurance.

870.1004 Effective date of insurance.

870.1005 Premiums.

870.1006 Cancellation of insurance.

870.1007 Termination and conversion.

870.1008 Order of precedence and designation of beneficiary.

870.1009 Responsibilities of the U.S. Department of State.

Subpart K--Living Benefits

870.1101 Eligibility for a Living Benefit.

870.1102 Amount of a Living Benefit.

870.1103 Election procedures.

Authority: 5 U.S.C. 8716.

Subpart A--Administration and General Provisions

Sec. 870.101 Definitions.

Annuitant means a former employee entitled to an annuity under a

retirement system established for employees. This includes the

retirement system of a nonappropriated fund instrumentality of the

Department of Defense or the Coast Guard.

Assign and assignment refer to an individual's irrevocable transfer

to another individual, corporation, or trustee all ownership of FEGLI

coverage (except Option C).

Assignee means the individual, corporation, or trustee to which an

individual irrevocably transfers ownership of FEGLI coverage (except

Option C).

Child, as used in the definition of family member for Option C

coverage, means a legitimate child, an adopted child, a stepchild who

lives with the employee or former employee in a regular parent-child

relationship, or a recognized natural child. It does not include a

stillborn child, a grandchild, or a foster child. The child must be

under age 22 or, if age 22 or over, must be incapable of self-support

because of a mental or physical disability which existed before the

child reached age 22.

Child, as used in the order of precedence for payment of benefits,

means a legitimate child, an adopted child, or a recognized natural

child, of any age. It does not include a stepchild, a stillborn child,

a grandchild, or a foster child. An individual who has reached age 18

is considered an adult and can receive a benefit payment in his/her

name. However, if the age of adulthood where the individual has his/her

legal residence is set at a lower age, the individual is considered an

adult upon reaching that lower age. Adopted children do not inherit

from their birth parents under the order of precedence stated in 5

U.S.C. 8705, other than as designated beneficiaries, but inherent from

their adoptive parents. However, a child who is adopted by the spouse

of a birth parent inherits from that birth parent.

Compensation means compensation under subchapter I of chapter 81 of

title 5, United States Code, which is payable because of an on-the-job

injury or disease.

Compensationer means an employee or former employee who is entitled

to compensation and whom the Department of Labor determines is unable

to return to duty.

Date of retirement, as used in 5 U.S.C. 8706(b)(1)(A), means the

starting date of annuity.

Dependent means living with or receiving regular and substantial

support from the insured individual.

Duly appointed representative of the insured's estate means an

individual named in a court order granting the individual the authority

to receive, or the right to possess, the insured's property; the order

must be issued by a court having jurisdiction over the insured's

estate. Where the law of the insured's legal residence provides for the

administration of estates through alternative procedures which do away

with the need for a court order, this term also means an individual who

shows that he/she is entitled to receive, or possess, the insured's

property under the terms of those alternative procedures.

Employee means an individual defined by section 8701(a) of title 5,

United States Code.

Employing office means the agency office or retirement system

office that has responsibility for life insurance actions.

(1) The Administrative Office of the United States Courts is the

employing office for judges of the following courts:

(i) All United States Courts of Appeals;

(ii) All United States District Courts;

(iii) The Court of International Trade;

(iv) The Court of Federal Claims; and

(v) The District Courts of Guam, the Northern Mariana Islands, and

the Virgin Islands.

(2) The Washington Headquarters Services is the employing office

for judges of the United States Court of Appeals for the Armed Forces.

(3) The United States Tax Court is the employing office for judges

of the United States Tax Court.

(4) The United States Court of Veterans Appeals is the employing

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office for judges of the United States Court of Veterans Appeals.

Family member means a spouse (including a valid common law

marriage) and unmarried dependent child(ren).

Immediate annuity means:

(1) An annuity that begins no later than 1 month after the date the

insurance would otherwise stop (the date of separation from service),

and

(2) An annuity under Sec. 842.204(a)(1) of this title for which the

starting date has been postponed under Sec. 842.204(c) of this title.

Judge means an individual appointed as a Federal justice or judge

under Article I or Article III of the Constitution.

OFEGLI means the Office of Federal Employees' Group Life Insurance,

which pays benefits under the policy.

OPM means the Office of Personnel Management.

OWCP means the Office of Workers' Compensation Programs, U.S.

Department of Labor, which administers subchapter I of chapter 81 of

title 5, United States Code.

Parent means the mother or father of a legitimate child or an

adopted child. The term parent includes the mother of a recognized

natural child; it also includes the father of a recognized natural

child if the recognized natural child meets the definition provided

below.

Recognized natural child, with respect to paternity, is one for

whom the father meets one of the following:

(1) (i) Has acknowledged paternity in writing;

(ii) Was ordered by a court to provide support;

(iii) Before his death, was pronounced by a court to be the father;

(iv) Was established as the father by a certified copy of the

public record of birth or church record of baptism, if the insured was

the informant and named himself as the father of the child; or

(v) Established paternity on public records, such as records of

schools or social welfare agencies, which show that with his knowledge

the insured was named as the father of the child.

(2) If paternity is not established by paragraph (1) of this

definition, such evidence as the child's eligibility as a recognized

natural child under other State or Federal programs or proof that the

insured included the child as a dependent child on his income tax

returns may be considered when attempting to establish paternity.

Reconsideration means the final level of administrative review of

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

office followed the law and regulations correctly in making the initial

decision concerning FEGLI eligibility and coverage.

Service means civilian service which is creditable under subchapter

III of chapter 83 or chapter 84 of title 5, United States Code. This

includes service under a nonappropriated fund instrumentality of the

Department of Defense or the Coast Guard for an individual who elected

to remain under a retirement system established for employees described

in section 2105(c) of title 5.

Terminally ill means having a medical prognosis of a life

expectancy of 9 months or less.

Underdeduction means a failure to withhold the required amount of

life insurance deductions from an individual's pay, annuity, or

compensation. This includes nondeductions (when none of the required

amount was withheld) and partial deductions (when only part of the

required amount was withheld).

Sec. 870.102 The policy.

Basic, Option A, Option B, and Option C benefits are payable

according to a contract with the company or companies that issue a

policy under Sec. 8709 of title 5, United States Code. Any court action

to obtain money due from this insurance policy must be taken against

the company that issues the policy.

Sec. 870.103 Correction of errors.

(a) The employing office may make corrections of administrative

errors regarding coverage or changes in coverage. Retroactive

corrections are subject to the provisions of Sec. 870.401(f).

(b) OPM may order correction of an error after reviewing evidence

that it would be against equity and good conscience not to do so.

Sec. 870.104 Initial decision and reconsideration.

(a) An individual may ask his/her agency or retirement system to

reconsider its initial decision denying life insurance coverage, the

opportunity to change coverage, or the opportunity to assign insurance.

(b) An employing office's decision is an initial decision when the

employing office gives it in writing and informs the individual of the

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

appropriate agency or retirement system.

(c) A request for reconsideration must be made in writing and must

include the employee's (or annuitant's) name, address, date of birth,

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

retirement claim number.

(d) A request for reconsideration must be made within 30 calendar

days from the date of the initial decision. This time limit may be

extended when the individual shows that he/she was not notified of the

time limit and was not otherwise aware of it or that he/she was unable,

due to reasons beyond his/her control, to make the request within the

time limit.

(e) The reconsideration must take place at or above the level at

which the initial decision was made.

(f) After reconsideration, the agency or retirement system must

issue a final decision to the insured individual. This decision must be

in writing and must fully state the findings.

Subpart B--Types and Amount of Insurance

Sec. 870.201 Types of insurance.

(a) There are two types of life insurance under the FEGLI Program:

Basic and Optional.

(b) There are three types of Optional insurance: Option A (standard

optional insurance), Option B (additional optional insurance), and

Option C (family optional insurance).

Sec. 870.202 Basic insurance amount (BIA).

(a)(1) An employee's Basic insurance amount (BIA) is either:

(i) His/her annual rate of basic pay, rounded to the next higher

thousand, plus $2,000; or

(ii) $10,000; whichever is higher, unless an employee has elected a

Living Benefit under subpart K of this part. However, the BIA can never

be more than the annual rate of pay for Level II Executive Schedule

positions under Sec. 5313 of title 5, U.S.C., rounded to the next

higher thousand, plus $2,000.

(2) The BIA of an individual who is eligible to continue Basic Life

insurance coverage as an annuitant or compensationer is the BIA in

effect at the time his/her insurance as an employee would stop under

Sec. 870.601.

(b) An employee's BIA automatically changes whenever annual pay is

increased or decreased by an amount sufficient to raise or lower pay to

a different $1,000 bracket, unless the employee has elected a Living

Benefit under subpart K of this part.

(c) The amount of an employee's Basic Life insurance coverage is

equal to his/her BIA multiplied by the appropriate factor based on the

employee's age, as follows:

------------------------------------------------------------------------

Age Factor

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35 or under.................................................. 2.0

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36........................................................... 1.9

37........................................................... 1.8

38........................................................... 1.7

39........................................................... 1.6

40........................................................... 1.5

41........................................................... 1.4

42........................................................... 1.3

43........................................................... 1.2

44........................................................... 1.1

45 or over................................................... 1.0

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Sec. 870.203 Post-election BIA.

(a) The BIA of an individual who elects a Living Benefit under

subpart K of this part is the amount of insurance left after the

effective date of the Living Benefit election. This amount is the

individual's post-election BIA.

(1) the post-election BIA of an individual who elects a full Living

Benefit is 0.

(2) The post-election BIA of an employee who elects a partial

Living Benefit is the BIA as of the date OFEGLI receives the completed

Living Benefit application (the ``pre-election'' BIA), reduced by the

percentage which the partial lump-sum payment represents of the full

Living Benefit payment the employee could have received if he/she

elected a full Living Benefit; this amount is rounded up or down to the

nearest multiple of $1,000 or, if midway between multiples, to the next

higher multiple.

(b) The post-election BIA cannot change after the effective date of

the Living Benefit election.

(c) For purposes of computing the payment of benefits upon the

death of an insured individual who elected a partial Living Benefit,

the post-election BIA will be multiplied by the age factor in effect on

the date OFEGLI received the completed Living Benefit application.

Sec. 870.204 Annual rates of pay.

(a) (1) An insured employee's annual pay is his/her annual rate of

basic pay as fixed by law or regulation.

(2) Annual pay for this purpose includes the following:

(i) Interim geographic adjustments and locality-based comparability

payments as provided by Pub. L. 101-509 (104 Stat. 1479);

(ii) Premium pay for standby duty for Federal civilian firefighters

under 5 U.S.C. 5545(c)(1);

(iii) Premium pay for overtime inspectional service for customs

officers as provided by Pub. L. 103-66 107 Stat. 453);

(iv) For a law enforcement officer as defined under 5 U.S.C.

8331(20) and Secs. 831.902 and 842.802 of this title, premium pay for

administratively uncontrollable overtime under 5 U.S.C. 5545(c)(2);

(v) Night differential pay for wage employees;

(vi) Environmental differential pay for employees exposed to danger

or physical hardship;

(vii) Tropical differential pay for citizen employees in Panama;

(viii) Special pay adjustments for law enforcement officers;

(ix) Availability pay for criminal investigators under 5 U.S.C.

5545a; and

(x) Bonuses for physicians and dentists of the Department of

Veterans Affairs under Pub. L. 96-330 (94 Stat. 1030).

(b) To convert a pay rate of other than annual salary to an annual

rate, multiply the pay rate by the number of pay units in a 52-week

work year.

(c) The annual pay for a part-time employee is his/her basic pay

applied to his/her tour of duty in a 52-week work year.

(d) The annual pay for an employee on piecework rates is the total

basic earnings for the previous calendar year, not counting premium pay

for overtime or holidays.

(e) The annual pay for an employee with a regular schedule who

works at different pay rates is the weighted average of the rates at

which the employee is paid, projected to an annual basis.

(f) The annual pay for a non-Postal intermittent employee or an

employee who works at different pay rates without a regular schedule is

the annual rate which he/she is receiving at the end of the pay period.

(g) If an employee legally serves in more than 1 position at the

same time, and at least 1 of those positions entitles him/her to life

insurance coverage, the annual pay is the sum of the annual basic pay

fixed by law or regulation for each position. Exception: this doesn't

apply to part-time flexible schedule employees in the Postal Service.

Sec. 870.205 Amount of Optional insurance.

(a) Option A coverage is $10,000. However, if an employee's annual

rate of pay is more than the sum of the annual rate of basic pay for

Level II Executive Schedule positions under 5 U.S.C. 5313 plus $10,000,

Option A coverage automatically increases. The amount of Option A

coverage in this case is the difference between the employee's annual

rate of pay, (rounded to the next higher thousand if not already an

even thousand), and the maximum allowable BIA.

(b) (1) Option B coverage comes in 1, 2, 3, 4, or 5 multiples of an

employee's annual pay (after the pay has been rounded to the next

higher thousand, if not already an even thousand). A multiple cannot be

more than the annual rate of basic pay for Level II Executive Schedule

positions under 5 U.S.C. 5313, rounded to the next higher thousand.

(2) The amount of Option B coverage automatically changes whenever

annual pay is increased or decreased by an amount sufficient to raise

or lower pay to a different $1,000 bracket.

(c) Option C coverage is $5,000 payable upon the death of a spouse

and $2,500 payable upon the death of an eligible child. Payments are

made to the insured individual.

Sec. 870.206 Accidental death and dismemberment.

(a) (1) Accidental death and dismemberment coverage is an automatic

part of Basic and Option A insurance for employees.

(2) There is no accidental death and dismemberment coverage with

Options B and C.

(3) Individuals who are insured as annuitants or compensationers do

not have accidental death and dismemberment coverage.

(b) (1) Under Basic insurance, accidental death benefits are equal

to the BIA, but without the age factor described in Sec. 870.202(c).

(2) Under Option A, accidental death benefits are equal to the

amount of Option A.

(c)(1) Under Basic insurance, accidental dismemberment benefits for

the loss of a hand, foot, or eye are equal to one-half the BIA. For

loss of 2 or more of these in a single accident, benefits are equal to

the BIA.

(2) Under Option A, accidental dismemberment benefits for the loss

of a hand, foot, or eye are equal to one-half the amount of Option A.

For loss of 2 or more of these in a single accident, benefits are equal

to the amount of Option A.

(3) Accidental dismemberment benefits are paid to the employee.

Subpart C--Eligibility

Sec. 870.301 Eligibility for life insurance.

(a) Each nonexcluded employee is automatically insured for Basic

insurance unless he/she waives it.

(b)(1) Optional insurance must be specifically elected; it is not

automatic.

(2) An employee may elect one or more types of Optional insurance

if:

(i) He/she has Basic insurance;

(ii) He/she doesn't have a waiver of that type (or types) of

Optional insurance still in effect; and

[[Page 48735]]

(iii) His/her periodic pay, after all other deductions, is enough

to cover the full cost.

Sec. 870.302 Exclusions.

(a) The following employees are excluded from life insurance

coverage by law:

(1) An employee of a corporation supervised by the Farm Credit

Administration, if private interests elect or appoint a member of the

board of directors.

(2) An individual who is not a citizen or national of the United

States and whose permanent duty station is outside the United States.

Exception: an individual who met the definition of employee on

September 30, 1979, by service in an Executive agency, the United

States Postal Service, or the Smithsonian Institution in the area which

was then known as the Canal Zone.

(3) An individual first employed by the Government of the District

of Columbia on or after October 1, 1987. Exceptions:

(i) An employee of St. Elizabeths Hospital, who accepts employment

with the District of Columbia Government following Federal employment

without a break in service, as provided in section 6 of Pub. L. 98-621

(98 Stat. 3379);

(ii) An employee of the District of Columbia Financial

Responsibility and Management Assistance Authority (Authority), who

makes an election under the Technical Corrections to Financial

Responsibility and Management Assistance Act (section 153 of Pub. L.

104-134 (110 Stat. 1321)) to be considered a Federal employee for life

insurance and other benefits purposes; employees of the Authority who

are former Federal employees are subject to the provisions of

Secs. 870.503(d) and 870.705 of this part;

(iii) The Corrections Trustee and the Pretrial Services, Defense

Services, Parole, Adult Probation and Offender Supervision Trustee and

employees of these Trustees who accept employment with the District of

Columbia government within 3 days after separating from the Federal

Government; and

(iv) Effective October 1, 1997, judicial and nonjudicial employees

of the District of Columbia Courts, as provided by Pub. L. 105-33 (111

Stat. 251).

(4) Teachers in Department of Defense dependents schools overseas,

if employed by the Federal Government in a nonteaching position during

the recess period between school years.

(b) The following employees are also excluded from life insurance

coverage:

(1) An employee serving under an appointment limited to 1 year or

less. Exceptions:

(i) An employee whose full-time or part-time temporary appointment

has a regular tour of duty and follows a position in which he/she was

insured, with no break in service or with a break in service of no more

than 3 days;

(ii) An acting postmaster;

(iii) A Presidential appointee appointed to fill an unexpired term;

and

(iv) Certain employees who receive provisional appointments as

defined in Sec. 316.403 of this title.

(2) An employee who is employed for an uncertain or purely

temporary period, who is employed for brief periods at intervals, or

who is expected to work less than 6 months in each year. Exception: an

employee who is employed under an OPM-approved career-related work-

study program under Schedule B lasting at least 1 year and who is

expected to be in pay status for at least one-third of the total period

of time from the date of the first appointment to the completion of the

work-study program.

(3) An intermittent employee (a non-full-time employee without a

regularly scheduled tour of duty). Exception: an employee whose

intermittent appointment follows, with no break in service or with a

break in service of no more than 3 days, a position in which he/she was

insured and to which he/she is expected to return.

(4) An employee whose pay, on an annual basis, is $12 a year or

less.

(5) A beneficiary or patient employee in a Government hospital or

home.

(6) An employee paid on a contract or fee basis. Exception: an

employee who is a United States citizen, who is appointed by a contract

between the employee and the Federal employing authority which requires

his/her personal service, and who is paid on the basis of units of

time.

(7) An employee paid on a piecework basis. Exception: an employee

whose work schedule provides for full-time or part-time service with a

regularly scheduled tour of duty.

(c) OPM makes the final determination about whether the above

categories apply to a specific employee or group of employees.

Subpart D--Cost of Insurance

Sec. 870.401 Withholdings and contributions for Basic insurance.

(a) The cost of Basic insurance is shared between the insured

individual and the Government. The employee pays two thirds of the

cost, and the Government pays one-third.

(b)(1) During each pay period in which an insured employee is in

pay status for any part of the period, $0.165 must be withheld from the

employee's biweekly pay for each $1,000 of the employee's BIA. The

amount withheld from the pay of an employee who is paid on other than a

biweekly basis must be prorated and adjusted to the nearest one-tenth

of 1 cent.

(2) The amount withheld from the pay of an insured employee whose

annual pay is paid during a period shorter than 52 work weeks is the

amount obtained by converting the biweekly rate to an annual rate and

prorating the annual rate over the number of installments of pay

regularly paid during the year.

(3) The amount withheld from the pay of an insured employee whose

BIA changes during a pay period is based on the BIA in force at the end

of the pay period.

(c) For each pay period in which an employee is insured, the

employing agency must contribute an amount equal to one-half the amount

withheld from the employee's pay. This agency contribution must come

from the appropriation or fund that is used for the payment of the

employee's pay. For an elected official, the contribution must come

from the appropriation or fund that is available for payment of other

salaries in the same office.

(d)(1) For an annuitant who elects to continue Basic insurance and

chooses the maximum reduction of 75 percent after age 65 under

Sec. 870.702(a)(2), the amount withheld monthly is $0.3575 for each

$1,000 of the BIA. For a compensationer who makes this election, the

amount withheld weekly is $0.0825 for each $1,000. These withholdings

stop the month after the month in which the annuitant reaches age 65.

There are no withholdings from individuals who retired or began

receiving compensation before January 1, 1990, and who elected the 75

percent reduction. For the purpose of this paragraph, an individual who

separates from service after meeting the requirements for an immediate

annuity under 5 U.S.C. 8412(g) is considered to retire on the day

before the annuity begins.

(2) For an annuitant who elects to continue Basic insurance and

chooses the maximum reduction of 50 percent after age 65 under

Sec. 870.702(a)(3), the amount withheld monthly is $0.8775 for each

$1,000 of the BIA until the month after the month in which the

annuitant reaches age 65; the amount is then reduced to $0.52 for each

$1,000. For a compensationer who makes this election, the amount

withheld weekly is $0.2025 for each $1,000 of the BIA until

[[Page 48736]]

age 65; the amount is then reduced to $0.12 for each $1,000.

(3) For an annuitant who elects to continue Basic insurance and

chooses no reduction after age 65 under Sec. 870.702(a)(4), the amount

withheld monthly is $2,0475 for each $1,000 of the BIA until the month

after the month in which the annuitant reaches age 65; the amount is

then reduced to $1.69 for each $1,000. For a compensationer who makes

this election, the amount withheld weekly is $0.4725 for each $1,000 of

the BIA until age 65; the amount is then reduced to $0.39 for each

$1,000.

(e)(1) For each period in which an annuitant or compensationer is

insured, OPM must contribute an amount equal to one-half the amount

that would be withheld under paragraph (d)(1) of this section.

Exception: for USPS employees who become annuitants or compensationers

after December 31, 1989, the Postal Service pays the Government

contributions.

(2) The Government contribution is the same amount whether the

individual elects a maximum 75 percent reduction, a maximum 50 percent

reduction, or no reduction.

(3) The Government contribution stops the month after the month in

which the individual reaches age 65.

(f) When an agency withholds less than or none of the proper amount

of Basic life insurance deductions from an individual's pay, annuity,

or compensation, the agency must submit an amount equal to the sum of

the uncollected deduction and any applicable agency contributions

required under 5 U.S.C. 8708 to OPM for deposit in the Employees' Life

Insurance Fund.

Sec. 870.402 Withholdings for Optional insurance.

(a) The insured individual pays the full cost of all Optional

insurance. There is no Government contribution toward the cost of any

Optional insurance.

(b) During each pay period in any part of which an insured employee

is in pay status, the employing agency must withhold the full cost of

Optional insurance from his/her pay.

(c) Subject to the provisions for reemployed annuitants in

Sec. 870.705, the full cost of Optional insurance must be withheld from

the annuity of an annuitant and from the compensation of a

compensationer. These withholdings stop the month after the month in

which an annuitant or compensationer reaches age 65.

(d)(1) The biweekly cost per $10,000 of Option A coverage is:

For persons under age 35....................................... $0.40

For persons ages 35 through 39................................. .50

For persons ages 40 through 44................................. .70

For persons ages 45 through 49................................. 1.10

For persons ages 50 through 54................................. 1.80

For persons ages 55 through 59................................. 3.00

For persons ages 60 and over................................... 7.00

(2) The amount withheld from pay, annuity, or compensation paid on

other than a biweekly basis must be prorated and adjusted to the

nearest cent.

(e)(1) The biweekly cost per $1,000 of Option B coverage is:

For persons under age 35....................................... $0.04

For persons ages 35 through 39................................. .05

For persons ages 40 through 44................................. .07

For persons ages 45 through 49................................. .11

For persons ages 50 through 54................................. .18

For persons ages 55 through 59................................. .30

For persons ages 60 and over................................... .70

(2) The amount withheld from pay, annuity, or compensation paid on

other than a biweekly basis must be prorated and adjusted to the

nearest one-tenth of 1 cent.

(f)(1) The biweekly cost of Option C coverage is based on the age

of the employee, annuitant, or compensationer. the cost is:

For persons under age 35....................................... $0.30

For persons ages 35 through 39................................. .31

For persons ages 40 through 44................................. .52

For persons ages 45 through 49................................. .70

For persons ages 50 through 54................................. 1.00

For persons ages 55 through 59................................. 1.50

For persons ages 60 and over................................... 2.60

(2) The amount withheld from pay, annuity, or compensation paid on

other than a biweekly basis must be prorated and adjusted to the

nearest cent.

(g) For the purpose of this subpart, an individual is considered to

reach age 35, 40, 45, 50, 55, or 60 on the first day of the first pay

period beginning on or after the January 1 following his/her

corresponding birthday.

(h) The amount withheld from the pay of an insured employee whose

annual pay is paid during a period shorter than 52 work weeks is the

amount obtained by converting this biweekly rate for his/her age group

to an annual rate and prorating the annual rate over the number of

installments of pay regularly paid during the year.

(i) When an agency withholds less than or none of the proper amount

of Optional life insurance deductions from an individual's pay,

annuity, or compensation, the agency must submit an amount equal to the

uncollected deductions required under 5 U.S.C. 8714a, 8714b, and 8714c

to OPM for deposit in the Employees' Life Insurance Fund.

Sec. 870.403 Withholdings and contributions following a Living Benefit

election.

(a) Withholdings and contributions for Basic insurance for an

individual who elects a full Living Benefit under subpart K of this

part stop at the end of the pay period in which the Living Benefit

election is effective.

(b) Withholdings and contributions for Basic insurance for an

employee who elects partial Living Benefit under subpart K of this part

are based on the post-election BIA. This reduction in withholdings and

contributions starts at the end of the pay period in which the Living

Benefit election is effective.

(c) Withholdings and contributions for Basic insurance for an

annuitant or compensationer who elected a partial Living Benefit as an

employee are based on the post-election BIA.

(d) There is no change in withholdings for Optional insurance for

individuals who elect a Living Benefit.

Sec. 870.404 Withholdings and contributions provisions that apply to

both Basic and Optional insurance.

(a) Withholdings (and Government contributions, when applicable)

are based on the amount of insurance in force at the end of the pay

period.

(b) Withholdings are not required for the period between the end of

the pay period in which an employee separates from service and the date

his/her annuity or compensation begins.

(c) No payment is required while an insured employee is in nonpay

status for up to 12 months. Exception: an employee who is in nonpay

status while receiving compensation.

(d) The deposit described in Secs. 870.401(f) and 870.402(i) must

be made no later than 60 calendar days after the date the employing

office determines the amount of the underdeduction that has occurred,

regardless of whether or when the underdeduction is recovered by the

agency. The agency must determine whether to waive collection of the

overpayment of pay, in accordance with 5 U.S.C. 5584, as implemented by

4 CFR chapter I, subchapter G. However, if the agency involved is

excluded from the provisions of 5 U.S.C. 5584, it may use any

applicable authority to waive the collection.

(e) Effective October 21, 1972, when there is an official finding

that an employee was suspended or fired erroneously, no withholdings

are made from the back pay. Exception: if death or accidental

dismemberment occurs during the period between the employee's removal

and the finding that the agency action was erroneous,

[[Page 48737]]

premiums are withheld from the back pay awarded.

(f) If an individual's periodic pay, compensation, or annuity isn't

sufficient to cover the full withholdings, any amount available for

life insurance withholding must be applied first to Basic insurance,

with any remainder applied to Optional insurance (first to Option B,

then Option A, then Option C).

Sec. 870.405 Direct premium payments under 5 U.S.C. chapter 84

(Federal Employees' Retirement System--FERS).

(a) If the FERS annuity, excluding subchapter III of 5 U.S.C.

chapter 84 (Thrift Savings Plan), is too low to cover premiums for

Basic insurance, the retirement system must notify the annuitant (or

the assignee, if the insurance has been assigned under subpart I of

this part) of the opportunity to pay his/her share of the Basic

insurance premium directly to the retirement system.

(b) The retirement system must establish a method for accepting

these direct premium payments. The retirement system must provide the

annuitant with a premium payment schedule and the requirements for

continued enrollment.

(c) The annuitant must send the retirement system the required

premium for every pay period during which the coverage continues,

excluding the 31-day temporary extension of coverage provided in

Sec. 870.601. The annuitant must make payment after the pay period in

which he/she is covered, according to the schedule established by the

retirement system. If it does not receive payment by the due date, the

retirement system must notify the annuitant that coverage will be

continued only if he/she makes payment within 15 days after receiving

the notice. The Basic insurance of an annuitant who doesn't pay within

the specified time limit terminates. An individual whose coverage

terminates because of nonpayment of premium cannot re-elect or

reinstate coverage, except as provided in paragraph (d) of this

section.

(d) If, for reasons beyond his/her control, an annuitant is unable

to pay within 15 days after receiving the notice, he/she may request

reinstatement of coverage by writing to the retirement system. Such a

request must be made within 30 calendar days from the date of

termination and must be accompanied by proof that the annuitant was

prevented from paying within the time limit for reasons beyond his/her

control. The retirement system will decide if the individual is

eligible for reinstatement of coverage. If eligibility is approved, the

coverage is reinstated back to the date of termination.

(e) Termination of coverage for failure to pay premiums within the

time limit established according to paragraph (c) of this section is

effective at the end of the last pay period for which payment has been

received on time.

(f) The retirement system must submit all direct premium payments,

along with its regular life insurance premiums, to OPM according to

procedures set by OPM.

Subpart E--Coverage

Sec. 870.501 Basic insurance: effective dates of automatic coverage.

(a)(1) When an employee is appointed or transferred to a position

in which he/she is eligible for insurance, the employee is

automatically insured for Basic insurance on the day he/she enters on

duty in pay status, unless, before the end of the first pay period, the

employee files a waiver of Basic insurance with the employing office or

had previously filed a waiver which remains in effect.

(2) An insured employee who moves to another covered position is

automatically insured on the effective date of the move, unless the

employee files a waiver of Basic insurance with the new employing

office before the end of the first pay period in the new position.

(3) When an employee of the District of Columbia Financial

Responsibility and Management Assistance Authority elects to be

considered a Federal employee under section 153 of Pub. L. 104-134 (110

Stat. 1321), he/she is automatically insured on (i) the date the

employee enters on duty in pay status with the Authority, or (ii) the

date the Authority receives the employee's election to be considered a

Federal employee, whichever is later.

(b) An employee who returns to pay and duty status after a period

of more than 12 months of nonpay status is automatically insured at the

time he/she actually enters on duty in pay status, unless, before the

end of the first pay period, the employee files a waiver of Basic

insurance coverage with the employing office or had previously filed a

waiver which remains in effect.

(c) For an employee who serves in cooperation with a non-Federal

agency and who is paid in whole or in part from non-Federal funds, OPM

sets the effective date. This date must be part of an agreement between

OPM and the non-Federal agency. The agreement must provide either:

(1) That the required withholdings and contributions be made from

Federally controlled funds and deposited into the Employees' Life

Insurance Fund on a timely basis, or

(2) That the cooperating non-Federal agency, by written agreement

with the Federal agency, make the required withholdings and

contributions from non-Federal funds and transmit that amount to the

Federal agency for deposit into the Employees' Life Insurance Fund on a

timely basis.

(d) If an employee waived Basic insurance on or before February 28,

1981, the waiver was automatically cancelled effective on the 1st day

the employee entered on duty in pay status on or after April 1, 1981.

Basic insurance coverage was automatically effective on the date of the

waiver's cancellation, unless the employee filed a new waiver of Basic

insurance with the employing office before the end of the pay period

during which the coverage became effective.

Sec. 870.502 Basic insurance: waiver/cancellation of insurance.

(a) An insured individual may cancel his/her Basic insurance at any

time by filing a waiver of Basic insurance coverage. An employee files

with the employing office. An annuitant files with OPM or other office

that administers his/her retirement system. If still employed, a

compensationer files with the employing office, and if not still

employed, with OPM. The waiver is effective, and the insurance stops,

at the end of the pay period in which the waiver is properly filed.

Exception: an individual who has assigned his/her insurance under

subpart I of this part cannot cancel the insurance.

(b) An individual who cancels his/her Basic insurance automatically

cancels all forms of Optional insurance.

Sec. 870.503 Basic insurance: cancelling a waiver.

(a) An annuitant or compensationer who has filed a waiver of Basic

insurance cannot cancel the waiver.

(b) An employee who has filed a waiver of Basic insurance may

cancel the waiver and become insured if:

(1) At least 1 year has passed since the effective date of the

waiver, and

(2) He/she provides satisfactory medical evidence of insurability.

(c) OFEGLI reviews the Request for Insurance filed by an employee

who has compiled with paragraph (b) of this section and decides whether

to approve it. The insurance is effective when, after OFEGLI's

approval, the employee actually enters on duty in pay status in a

position in which he/she is eligible for

[[Page 48738]]

insurance. If the employee doesn't enter on duty in pay status within

31 days following the date of OFEGLI's approval, the approval is

automatically revoked and the employee is not insured.

(d) When an employee who has been separated from service for at

least 180 days is reinstated on or after April 1, 1981, a previous

waiver of Basic insurance is automatically cancelled. Unless the

employee files a new waiver, Basic insurance becomes effective on the

1st day he/she actually enters on duty in pay status in a position in

which he/she is eligible for coverage. Exception: for employees who

waived Basic insurance after February 28, 1981, separated, and returned

to Federal service before December 9, 1983, the waiver remained in

effect; these employees were permitted to elect Basic insurance by

applying to their employing office before March 7, 1984.

Sec. 879.504 Optional insurance: election.

(a)(1) Each employee must elect or waiver Option A, Option B, and

Option C coverage, in a manner designated by OPM, within 31 days after

becoming eligible unless during earlier employment he/she filed an

election or waiver which remains in effect. The 31-day time limit for

Option B or Option C begins on the 1st day after February 28, 1981, on

which an individual meets the definition of an employee.

(2) An employee of the District of Columbia Financial

Responsibility and Management Assistance Authority who elects to be

considered a Federal employee under section 153 of Pub. L. 104-134 (110

Stat. 1321) must elect or waive Option A, Option B, and Option C

coverage within 31 days after the later of:

(i) The date his/her employment with the Authority begins, or

(ii) The date the Authority receives his/her election to be

considered a Federal employee.

(3) Within 6 months after an employee becomes eligible, an

employing office may determine that the employee was unable, for

reasons beyond his/her control, to elect any type of Optional insurance

within the time limit. In this case, the employee must elect or waive

that type of Optional insurance 31 days after he/she is notified of the

determination. The insurance is retroactive to the 1st day of the first

pay period beginning after the date the individual became eligible or

after April 1, 1981, whichever is later. The individual must pay the

full cost of the insurance from that date for the time that he/she is

in pay status, retired, or receiving compensation and under age 65.

(b) Any employee who doesn't file a Life Insurance Election with

his/her employing office, in a manner designated by OPM, specifically

electing any type of Optional insurance is considered to have waived it

and does not have that type of Optional insurance.

(c) For the purpose of having Option A as an employee, an election

of this insurance filed on or before February 28, 1981, is considered

to have been cancelled effective at the end of the pay period which

included March 31, 1981, unless the employee didn't actually enter on

duty in pay status during the 1st pay period which began on or after

April 1, 1981. In that case the election is considered to have been

cancelled on the first day after the end of the next pay period in

which the employee actually entered on duty in pay status. In order to

have Option A as an employee after the date of this cancellation, an

employee must specifically elect the coverage by filing the Life

Insurance Election with his/her employing office subject to the

provisions of Sec. 870.504(a) or Sec. 870.506(b).

(d) Optional insurance is effective the 1st day an employee

actually enters on duty in pay status on or after the day the employing

office receives the election.

(e) For an employee whose Optional insurance stopped for a reason

other than a waiver, the insurance is reinstated on the 1st day he/she

actually enters on duty in pay status in a position in which he/she

again becomes eligible.

Sec. 870.505 Optional insurance: waiver/cancellation of insurance.

(a) An insured individual may cancel entirely any type of Optional

insurance, or reduce the number of multiples of his/her Option B

insurance, at any time by filing a waiver of Optional insurance

coverage. An employee files with the employing office. An annuitant

files with OPM or other office that administers his/her retirement

system. If still employed, a compensationer files with the employing

office, and if not still employed, with OPM. Exception: an individual

who has assigned his/her insurance under subpart I of this part cannot

cancel Option A or Option B coverage.

(b) A cancellation of Optional insurance becomes effective, and

Optional insurance stops, at the end of the pay period in which the

waiver is properly filed. Exception: if Option C is cancelled because

there are no eligible family members, the effective date is retroactive

to the end of the pay period in which there stopped being any eligible

family members.

(c) A waiver of Optional insurance remains in effect until it is

cancelled as provided in Sec. 870.506.

Sec. 870.506 Optional insurance: cancelling a waiver.

(a) When there is a change in family circumstances. (1) A waiver of

Option A cannot be cancelled due to a change in family circumstances.

(2) An employee who has waived Option B coverage may elect it, and

an employee who has Option B of fewer than five multiples of annual pay

may increase the number of multiples, upon his/her marriage or divorce,

upon a spouse's death, or upon acquiring an eligible child.

(3) The number of multiples of Option B coverage that an employee

can obtain or add (which can't exceed a total of five) is limited to

the following:

(i) For marriage, the number of additional family members (spouse

and eligible children) acquired with the marriage;

(ii) For acquisition of children, the number of eligible children

acquired; and

(iii) For divorce or death of a spouse, the total number of

eligible children of the employee.

(4) An employee who has waived Option C coverage may elect it upon

his/her marriage or upon acquiring an eligible child. An employee may

also elect Option C coverage upon divorce or death of a spouse if the

employee has any eligible children.

(5)(i) The employee must file an election under paragraph (a)(2) or

(a)(4) of this section with the employing office, in a manner

designated by OPM, along with proof of the event, no later than 60 days

following the date of the event that permits the election; the employee

may instead file the election before the event and provide proof no

later than 60 days following the event.

(ii) This 60-day time limit may be extended if the individual isn't

serving in a covered position on the date of the event or if the

individual separates from covered service prior to the end of the 60-

day time limit. This extension cannot exceed the 31-day time limit for

electing insurance following employment in a covered position or, for

an election under paragraph (a)(4) of this section, the 31-day period

following the 1st day on which the individual becomes eligible to

cancel a waiver of Basic insurance.

(6)(i) The effective date of Option B insurance elected under

paragraph (a)(1) of this section is the 1st day the employee actually

enters on duty in pay

[[Page 48739]]

status on or after the day the employing office receives the election.

(ii) The effective date of Option C insurance elected under this

paragraph is the day the employing office receives the election, or the

date of the event, whichever is later.

(b) When there is no change in family circumstances. (1) An

employee who has waived Option A or Option B coverage may elect it if:

(i) At least 1 year has passed since the effective date of the

waiver, and

(ii) He/she provides satisfactory medical evidence of insurability.

(2) An employee who has Option B coverage of fewer than five

multiples of annual pay may increase the number of multiples if:

(i) At least 1 year has passed since the effective date of his/her

last election of fewer than five multiples (including a reduction in

the number of multiples), and

(ii) He/she provides satisfactory medical evidence of insurability.

(iii) The requirement for at least 1 year to have passed since the

effective date of the last election doesn't apply when an employee

elected fewer than five multiples because of the limitation under

paragraph (a)(3) of this section.

(3) A waiver of Option C cannot be cancelled without a change in

family circumstances, unless authorized during an open enrollment

period.

(c) OFEGLI reviews the request filed by an employee who has

complied with paragraph (b) of this section and decides whether to

approve it. The Optional insurance is effective when, after OFEGLI's

approval, the employee actually enters on duty in pay status in a

position in which he/she is eligible for insurance and files a Life

Insurance Election. If the employee doesn't enter on duty in pay status

within 31 days following the date of OFEGLI's approval, the approval is

automatically revoked and the employee does not have the Optional

insurance requested.

(d) If an employee waived Option A insurance on or before February

28, 1981, the waiver was automatically cancelled effective on the 1st

day the employee entered on duty in pay status on or after April 1,

1981. Option A was effective on the date of the waiver's cancellation,

if the employee filed an election of Option A during the March 1, 1981,

through March 31, 1981, open enrollment period. If the employee didn't

file the election with his/her employing office during the March 1981

open enrollment period, the employee is considered to have waived

Option A on March 31, 1981.

(e) When an employee who has been separated from service for at

least 180 days is reinstated on or after April 1, 1981, a previous

waiver of Optional insurance is automatically cancelled, as follows:

(1) An employee who returned to service between April 1, 1981, and

December 8, 1983, after a 180-day break in service was permitted to

elect any form of Optional insurance by applying to his/her employing

office before March 7, 1984.

(2) An employee who returns to service after December 8, 1983,

following a 180-day break in service may elect any form of Optional

insurance by applying to his/her employing office within 31 days after

reinstatement. Coverage is effective on the 1st day the employee

actually enters on duty in pay status in a position in which he/she is

eligible for insurance on or after the date the employing office

receives the election. If the employee doesn't file a Life Insurance

Election, in a manner designated by OPM, within the 31-day period, the

employee is considered to have waived Optional insurance. However, an

employee who fails to file during the 31-day period due to reasons

beyond his/her control may enroll belatedly under the conditions stated

in Sec. 870.504(a)(3).

(f) An annuitant or compensationer is not eligible to cancel a

waiver of any type of Optional insurance or to increase multiples of

Option B under this section.

Sec. 870.507 Open enrollment periods.

(a) There are no regularly scheduled open enrollment periods for

life insurance. Open enrollment periods are held only when specifically

scheduled by OPM.

(b) During an open enrollment period, unless OPM announces

otherwise, eligible employees may cancel their existing waivers of

Basic and/or Optional insurance by electing the insurance in a manner

designated by OPM.

(c)(1) OPM sets the effective date for all insurance elected during

an open enrollment period. The newly elected insurance is effective on

the 1st day of the first pay period which begins on or after the OPM-

established date and which follows a pay period during which the

employee was in pay and duty status for at least 32 hours, unless OPM

announces otherwise.

(2) A part-time employee must be in pay and duty status for one-

half the regularly scheduled tour of duty shown on his/her current

Standard Form 50 for newly elected coverage to become effective, unless

OPM announces otherwise.

(3) An employee who has no regularly scheduled tour of duty or who

is employed on an intermittent basis must be in pay and duty status for

one-half the hours customarily worked before newly elected coverage can

become effective, unless OPM announces otherwise. For the purpose of

this paragraph, employing offices can determine the number of hours

customarily worked by averaging the number of hours worked in the most

recent calender year quarter prior to the start of the open enrollment

period.

(d) Within 6 months after an open enrollment period ends, an

employing office may determine that an employee was unable, for reasons

beyond his/her control, to cancel an existing waiver by electing to be

insured during the open enrollment period. In this case, if the

employee wants coverage, he/she must submit an election within 31 days

after being notified of the determination. Coverage is retroactive to

the first pay period which begins on or after the effective date set by

OPM and which follows a pay period during which the employee was in pay

and duty status for at least 32 hours, unless OPM announces otherwise.

If the employee doesn't file an election within this 31-day time limit,

he/she will be considered to have waived coverage.

Sec. 870.508 Nonpay status.

(a) An employee who is in nonpay status is entitled to continue

life insurance for up to 12 months. No premium payments are required,

unless the employee is receiving compensation.

(b) If an insured employee who is entitled to free insurance while

in nonpay status accepts a temporary appointment to a position in which

he/she would normally be excluded from insurance, the insurance

continues. The amount of Basic insurance is based on whichever

position's salary is higher. Withholdings are made from the employee's

pay in the temporary position.

(c) If an insured employee goes on leave without pay (LWOP) to

serve as a full-time officer or employee of an employee organization,

within 60 days of the start of the LWOP he/she may elect to continue

life insurance. The insurance continues for the length of the

appointment, even if the LWOP lasts longer than 12 months. The employee

must pay to the employing office the full cost of Basic and Optional

insurance. There is no Government contribution for these employees.

(d) If an insured employee goes on LWOP while assigned to a State

government, local government, or

[[Page 48740]]

institution of higher education, life insurance continues for the

length of the assignment, even if the LWOP lasts longer than 12 months.

The employee must pay his/her premiums to the Federal agency on a

current basis. The agency must continue to pay its contribution as long

as the employee makes his/her payments.

Sec. 870.509 Transfers to international organizations.

An employee transferred to an international organization may

continue life insurance coverage as provided in 5 U.S.C. 3582.

Regulations governing these transfers are in part 352 of this title.

Subpart F--Termination and Conversion

Sec. 870.601 Termination of Basic insurance.

(a) Except as provided in Sec. 870.701, the Basic insurance of an

insured employee stops on the date he/she separates from service,

subject to a 31-day extension of coverage.

(b) The Basic insurance of an employee who separates from service

after meeting the requirement for an immediate annuity under

Sec. 842.204(a)(1) of this title and who postpones receiving the

annuity, as provided by Sec. 842.204(c) of this title, stops on the

date he/she separates from service, subject to a 31-day extension of

coverage.

(c) The Basic insurance of an insured employee who moves without a

break in service to a position in which he/she is excluded from life

insurance stops on his/her last day in the former position, subject to

a 31-day extension of coverage.

(d)(1) Except as provided in Sec. 870.701, the Basic insurance of

an insured employee who is in nonpay status stops on the date the

employee completes 12 months in nonpay status, subject to a 31-day

extension of coverage. The 12 months' nonpay status may be broken by

periods of less than 4 consecutive months in pay status. If an employee

has at least 4 consecutive months in pay status after a period of

nonpay status, he/she is entitled to begin the 12 months' continuation

of Basic insurance again. If an employee has used up his/her 12 months'

continuation in nonpay status and returns to duty for less than 4

consecutive months, his/her Basic insurance stops on the 32nd day after

the last day of the last pay period in pay status.

(2) For the purpose of paragraph (d)(1) of this section, 4

consecutive months in pay status means any 4-month period during which

the employee is in pay status for at least part of each pay period.

(3) For the purpose of paragraph (d)(1) of this section, an

individual who is entitled to benefits under part 353 of this chapter

is considered to be an employee in nonpay status.

Sec. 870.602 Termination of Optional insurance.

(a) The Optional insurance of an insured employee stops when his/

her Basic insurance stops, subject to the same 31-day extension of

coverage.

(b) The Optional insurance of an employee who separates from

service after meeting the requirement for an immediate annuity under

Sec. 842.204(a)(1) of this title and who postpones receiving the

annuity, as provided by Sec. 842.204(c) of this title, stops on the

date he/she separates from service, subject to a 31-day extension of

coverage.

(c) If an insured employee isn't eligible to continue Optional

coverage as an annuitant or compensationer as provided by Sec. 870.701,

the Optional insurance stops on the date that his/her Basic insurance

is continued or reinstated under the provisions of Sec. 870.701,

subject to a 31-day extension of coverage.

(d) If, at the time of an individual's election of Basic insurance

during receipt of annuity or compensation, he/she elects no Basic life

insurance as provided by Sec. 870.702(a)(1), the Optional insurance

stops at the end of the month in which the election is received in OPM,

subject to a 31-day extension of coverage.

(e) Except as provided in Sec. 870.405, Optional insurance stops,

subject to a 31-day extension of coverage, at the end of the pay period

in which it's determined that an individual's periodic pay,

compensation, or annuity, after all other deductions, isn't enough to

cover the full cost of the Optional insurance. If an individual has

more than one type of Optional insurance and his/her pay, compensation,

or annuity is sufficient to cover some but not all of the insurance,

Option C terminates first, followed by Option A, and then the multiples

of Option B.

Sec. 870.603 Conversion of Basic and Optional insurance.

(a)(1) When group coverage terminates for any reason other than

voluntary cancellation, an employee may apply to convert all or any

part of his/her Basic and Optional insurance to an individual policy;

no medical examination is required. The premiums for the individual

policy are based on the employee's age and class of risk. An employee

is eligible to convert the policy only if he/she doesn't return, within

3 calendar days from the terminating event, to a position covered under

the group plan. If insurance has been assigned under subpart I of this

part, it is the assignee(s), not the employee, who has(have) the right

to convert.

(2) The employing agency must notify the employee/assignee(s) of

the loss of coverage and the right to convert to an individual policy

either before or immediately after the event causing the loss of

coverage.

(3) The employee/assignee(s) must submit the request for conversion

information to OFEGLI. It must be postmarked within 31 days following

the date of the terminating event or within 31 days of the date the

employee/assignee received the notice of loss of group coverage and

right to convert, whichever is later.

(4) An employee/assignee who fails to use his/her conversion right

within 31 days after receiving notice of the right to convert or within

31 days of the terminating event, whichever is later, is considered to

have refused coverage, unless OFEGLI determines the failure was for

reasons beyond the employee's control, as described in paragraph (a)(5)

of this section.

(5) When an agency fails to provide the notification required in

paragraph (a)(2) of this section, or the employee/assignee fails to

request conversion information within the time limit set in paragraph

(a)(3) of this section for reasons beyond his/her control, the employee

may make a belated request by writing to OFEGLI. The employee/assignee

must make the request within 6 months after becoming eligible to

convert the insurance. The employee/assignee must show that he/she

wasn't notified of the loss of coverage and the right to convert and

was not otherwise aware of it or that he/she was unable to convert to

an individual policy for reasons beyond his/her control. OFEGLI will

determine if the employee/assignee is eligible to convert. If the

request is approved, the employee must convert within 31 days of that

determination.

(b) The individual conversion policy is effective the day after the

group coverage ends. The employee/assignee must pay the premiums for

any period retroactive to that date.

(c) The 31-day extension of coverage provided under this subpart

does not depend upon timely notification of the right to convert to an

individual policy. The extension cannot be continued beyond 31 days.

[[Page 48741]]

Subpart G--Annuitants and Compensationers

Sec. 870.701 Eligibility for life insurance.

(a) When an insured employee retires, Basic life insurance (but not

accidental death and dismemberment) continues or is reinstated if he/

she:

(1) Is entitled to retire on an immediate annuity under a

retirement system for civilian employees, including the retirement

system of a nonappropriated fund instrumentality of the Department of

Defense or the Coast Guard;

(2) Was insured for the 5 years of service immediately before the

date the annuity starts, or for the full period(s) of service during

which he/she was eligible to be insured if less than 5 years; and

(3) Has not converted to an individual policy as described in

Sec. 870.603. If it is determined that an individual is eligible to

continue the group coverage as an annuitant after he/she has already

converted to an individual policy, the group enrollment may be

reinstated. If the individual wants the group coverage reinstated, the

conversion policy must be voided, the group policy must be reinstated

retroactively, and the premiums already paid on the conversion policy

must be refunded to the individual.

(b) Following separation or the completion of 12 months' nonpay

status, a compensationer's Basic life insurance (but not accidental

death and dismemberment) continues or is reinstated if he/she:

(1) Has been insured for the 5 years of service immediately before

the date of entitlement to compensation, or for the full period(s) of

service during which he/she was eligible to be insured if less than 5

years; and

(2) Has not converted to an individual policy as described in

Sec. 870.603. If it is not determined that an individual is eligible to

continue the group coverage as a compensationer until after he/she has

converted, the group enrollment may be reinstated. If the individual

wants the group coverage reinstated, the conversion policy must be

voided, the group policy must be reinstated retroactively, and the

premiums already paid on the conversion policy must be refunded to the

individual.

(c) An individual who meets the requirements under paragraphs (a)

or (b) of this section or Sec. 870.706 for continuation or

reinstatement of life insurance must complete an election, in a manner

designated by OPM, at the time entitlement is established. For the

election to be valid, OPM must receive the election before OPM has made

a final decision on the individual's application for annuity or

supplemental annuity or an individual's request to continue life

insurance as a compensationer. If there is no valid election, OPM

considers the individual to have chosen the option described in

paragraph (a)(2) of Sec. 870.702.

(d) If the annuity or compensation of an insured individual is

terminated, or if the Department of Labor finds that an insured

compensationer is able to return to duty, his/her Basic life insurance

held as an annuitant or compensationer stops on the date of the

termination or finding. There is no 31-day extension of coverage or

conversion right.

(e)(1) An annuitant or compensationer who is eligible to continue

or have reinstated Basic insurance is also eligible to continue or have

reinstated Optional insurance if he/she meets the same coverage

requirements for Optional insurance as those stated in paragraph (a) or

(b) of this section for Basic insurance.

(2) For the purpose of continuing insurance as an annuitant or

compensationer, an employee is not considered to have been eligible for

Option C during any period when the employee had no eligible family

members.

Sec. 870.702 Election of Basic insurance.

(a) Unless he/she has elected a Living Benefit, an individual who

makes an election under Sec. 870.701(c) must select one of the

following options:

(1) Termination of the insurance. The individual's insurance stops

upon conversion to an individual policy as provided under Sec. 870.603.

If the individual doesn't convert to an individual policy, insurance

stops at the end of the month in which OPM or the employing office

receives the election;

(2) Continuation or reinstatement of Basic insurance with a maximum

reduction of 75 percent during retirement. Premiums are withheld from

annuity or compensation (except as provided under 870.401(d)(1)). The

amount of Basic Life insurance in force reduces by 2 percent of the BIA

each month until the maximum reduction is reached. This reduction

starts at the beginning of the 2nd month after the date the insurance

would otherwise have stopped or the date of the insured's 65th

birthday, whichever is later;

(3) Continuation or reinstatement of Basic insurance with a maximum

reduction of 50 percent during retirement. Premiums are withheld from

annuity or compensation. The amount of Basic insurance in force reduces

by 1 percent of the BIA each month until the maximum reduction is

reached. This reduction starts at the beginning of the 2nd month after

the date the insurance would otherwise have stopped or the date of the

insured's 65th birthday, whichever is later; or

(4) Continuation or reinstatement of Basic insurance with no

reduction after age 65. Premiums are withheld from annuity or

compensation.

(b)(1) Unless an employee has elected a partial Living Benefit

under subpart K of this part or an individual has assigned the

insurance under subpart I of this part, an insured individual may

cancel an election under paragraph (a)(3) or (a)(4) of this section at

any time. The amount of Basic insurance automatically switches to the

amount that would have been in force if the individual had originally

elected the 75 percent reduction. This revised amount is effective at

the end of the month in which OPM receives the request to cancel the

previous election.

(2) If an individual files a waiver of insurance, the coverage

stops without a 31-day extension of coverage or conversion right. This

is effective at the end of the month in which OPM receives the waiver.

(c) Unless he/she chooses to terminate his/her insurance, an

employee who has elected a partial Living Benefit must choose the no

reduction election under paragraph (a)(4) of this section. He/she

cannot later change to the 75 percent reduction.

(d) If an employee has assigned his/her insurance, he/she cannot

cancel an election under paragraph (a)(3) or (a)(4) of this section.

Only the assignee(s) may cancel this election. Exception: if the

employee elected a partial Living Benefit before assigning the

remainder of his/her insurance, the assignee(s) cannot cancel the

election under paragraph (a)(4) of this section.

Sec. 870.703 Amount of life insurance.

(a)(1) The amount of Basic insurance an annuitant or compensationer

can continue is his/her BIA on the date insurance would otherwise have

stopped because of separation from service or completion of 12 months

in nonpay status. The amount of Basic insurance in force is the BIA

minus any reductions applicable under Sec. 870.702(a).

(2) For the purpose of paying benefits upon the death of an insured

individual under age 45 who is retired or receiving compensation, the

BIA will be multiplied by the appropriate age factor shown in

Sec. 870.202(c). Exceptions:

(i) If the insured individual retired or started receiving

compensation before October 10, 1980, or

[[Page 48742]]

(ii) If the insured individual elected a partial Living Benefit as

an employee under subpart K of this part.

(3)(i) For an annuitant or compensationer who elected a partial

Living Benefit as an employee, the amount of Basic insurance he/she can

continue is the post-election BIA, as shown in Sec. 870.203(a)(2).

(ii) For the purpose of paying benefits upon the death of an

insured annuitant or compensationer under age 45 who elected a partial

Living Benefit as an employee, the BIA will be multiplied by the age

factor in effect on the date OFEGLI received the completed Living

Benefit application.

(b)(1) The amount of Option A coverage an annuitant or

compensationer can continue is the amount in force on the date

insurance would otherwise stop.

(2) An annuitant's or compensationer's Option A coverage reduces by

2 percent a month up to a maximum reduction of 75 percent. This

reduction starts at the beginning of the 2nd month after the date the

insurance would otherwise have stopped or the date of the insured's

65th birthday, whichever is later.

(c)(1) The number of multiples of Option B coverage an annuitant or

compensationer can continue is the smallest number of multiples in

force during the applicable period of service required to continue

Option B.

(2) Each multiple of an annuitant's or compensationer's Option B

coverage reduces by 2 percent a month. This reduction starts at the

beginning of the 2nd month after the date the insurance would otherwise

have stopped or the insured's 65th birthday, whichever is later. At

12:00 noon on the day before the 50th reduction, the insurance stops,

with no extension of coverage or conversion right.

(d) The amount of an annuitant's or compensationer's Option C

coverage on each family member reduces by 2 percent a month. This

reduction starts at the beginning of the 2nd month after the date the

insurance would otherwise have stopped or the annuitant's or

compensationer's 65th birthday, whichever is later. At 12:00 noon on

the day before the 50th reduction, the insurance stops, with no

extension of coverage or conversion right.

(e)(1) Judges retiring under 28 U.S.C. 371 (a) and (b), 28 U.S.C.

372(a), and 26 U.S.C. 7447 are considered employees under the FEGLI

law. Basic and Optional insurance for these judges continues without

interruption or reduction upon retirement.

(2) If a judge chooses to receive compensation instead of an

annuity, his/her Basic and Optional insurance reduces as stated in

Sec. 870.702 and paragraphs (b), (c), and (d) of this section.

Sec. 870.704 Reinstatement of life insurance.

(a) An annuitant whose disability annuity terminates because he/she

recovers from the disability or because his/her earning capacity

returns, and whose disability annuity is later restored under 5 U.S.C.

8337(e) (after December 31, 1983), may elect to resume the Basic

insurance held immediately before his/her disability annuity

terminated. OPM must receive the election within 60 days after OPM

mails a notice of insurance eligibility and an election form.

(b) An annuitant described in paragraph (a) of this section may

elect to resume any Optional insurance held immediately before the

annuity terminated if:

(1) He/she has made an election under paragraph (a) of this

section; and

(2) OPM receives the election within 60 days after OPM mails a

notice of insurance eligibility and an election form.

(c) Basic and Optional insurance reinstated under paragraphs (a)

and (b) of this section is effective on the 1st day of the month after

the date OPM receives the election. Any applicable annuity withholdings

are also reinstated on the 1st day of the month after OPM receives the

election.

(d) The amounts of Basic and Optional insurance reinstated under

paragraphs (a) and (b) of this section are the amounts that would have

been in force if the individuals's annuity hadn't terminated.

Sec. 870.705 Reemployed annuitants.

(a)(1) If an insured annuitant is appointed to a position in which

he/she is eligible for insurance, the amount of his/her Basic life

insurance as an annuitant (and any applicable annuity withholdings) is

suspended on the day before the 1st day in pay status under the

appointment, unless the reemployed annuitant waives all insurance

coverage. The Basic insurance benefit payable upon the death of a

reemployed annuitant who has Basic insurance in force as an employee

can't be less than the benefit which would have been payable if the

individual hadn't been reemployed.

(2) Except as provided in paragraph (b) of this section, the Basic

insurance obtained as an employee stops with no 31-day extension of

coverage or conversion right, on the date reemployed terminates. Any

suspended Basic insurance (and any applicable annuity withholdings) is

reinstated on the day following termination of the reemployment.

(b) Basic insurance obtained during reemployment can be continued

after the reemployment terminates if:

(1) The annuitant qualifies for a supplemental annuity or receives

a new retirement right;

(2) He/she has had Basic insurance as an employee for at least 5

years of service immediately before separation from reemployment or for

the full period(s) during which such coverage was available to him/her,

whichever is less; and

(3) He/she doesn't convert to nongroup insurance when Basic

insurance as an employee would otherwise terminate.

(c) If the Basic insurance obtained during reemployment is

continued as provided in paragraph (b) of this section, any suspended

Basic life insurance stops, with no 31-day extension of coverage or

conversion right.

(d) (1) An annuitant appointed to a position in which he/she is

eligible for Basic insurance, is also eligible for Optional insurance

as an employee, unless he/she has on file an uncancelled waiver of

Basic or Optional insurance.

(2) If the individual has Option A or C as an annuitant, that

insurance (and applicable annuity withholdings) is suspended on the day

before his/her 1st day in pay status under the appointment. Unless he/

she waives Option A or C (or waives Basic insurance), he/she obtains

Option A or C as an employee.

(3) If the individual has Option B as an annuitant, that insurance

(and applicable annuity withholdings) continues as if the individual

weren't reemployed, unless:

(i) The individual files with his/her employing office an election

of Option B, in a manner designated by OPM, within 31 days after the

date of reemployment. in this case Option B (and applicable annuity

withholdings) as an annuitant is suspended on the date that Option B as

an employee becomes effective; or

(ii) The individual waives Basic insurance.

(4) The Option B benefit payable upon the death of a reemployed

annuitant is the amount in effect as an annuitant, unless he/she

elected to have Option B as an employee.

(5) Except as provided in paragraph (e) of this section, the

Optional insurance obtained as an employee stops, with no 31-day

extension or conversion right, on the date reemployment terminates. The

amount

[[Page 48743]]

of suspended Optional insurance which remains in force after applicable

monthly reductions after age 65 (and corresponding withholdings) is

reinstated on the day after reemployment terminates.

(e) Optional life insurance obtained during reemployment may be

continued after the reemployment terminates if the annuitant:

(1) Qualifies for a supplemental annuity or receives a new

retirement right;

(2) Continues his/her Basic life insurance under paragraph (a) (2),

(3), or (4) of Sec. 870.702; and

(3) Has had Optional insurance as an employee for at least the 5

years of service immediately before separation from reemployment or for

the full period(s) of service during which it was available to him/her,

whichever is less.

(f) If Optional insurance obtained during reemployment is continued

as provided in paragraph (e) of this section, any suspended Optional

insurance stops, with no 31-day extension of coverage or conversion

right.

(g) If a reemployed annuitant waives life insurance as an employee,

the waiver also cancels his/her life insurance as an annuitant.

Sec. 870.706 MRA-plus-10 annuitants.

(a) The Basic insurance of an individual whose coverage terminates

under Sec. 870.601(b), and who meets the requirements for continuing

Basic insurance after retirement as stated in Sec. 870.701(a), resumes

on the starting date of annuity or on the date OPM receives the

application for annuity, whichever is later. The individual must file

an election as provided in Sec. 870.701(c) so that OPM receives it

within 60 days after OPM mails a notice of insurance eligibility and an

election form.

(b) Optional insurance of an individual whose coverage terminates

under Sec. 870.602(b), and who meets the requirements for continuing

Optional insurance after retirement under Sec. 870.701(e), resumes on

the starting date of annuity or on the date OPM receives the

application for annuity, whichever is later.

Subpart H--Order of Precedence and Designation of Beneficiary

Sec. 870.801 Order of precedence and payment of benefits.

(a) Benefits are paid according to the order of precedence stated

in 5 U.S.C. 8705(a), as follows:

(1) to the designated beneficiary (or beneficiaries);

(2) If none, to the widow(er);

(3) If none, to the child, or children in equal shares, with the

share of any deceased child going to his/her children;

(4) If none, to the parents in equal shares or the entire amount to

the surviving parent;

(5) If none, to the executor or administrator of the estate;

(6) If none, to the next of kin according to the laws of the State

in which the insured individual legally resided.

(b) If an insured individual provides in a valid designation of

beneficiary for insurance benefits to be payable to the insured's

estate, or to the Executor, Administrator, or other representative of

the insured's estate, or if the benefits would otherwise be payable to

the duly appointed representative of the insured's estate under the

order of precedence specified in 5 U.S.C. 8705(a), payment of the

benefits to the duly appointed representative of the insured's estate

bars recovery by any other person.

(c) Option A and B insurance in force on a person on the date of

his/her death is paid, on receipt of a valid claim, in the same order

of precedence and under the same conditions as Basic insurance. A

designation of beneficiary for Basic insurance is also a designation of

beneficiary for Options A and B, unless the insured individual states

otherwise in his/her designation.

(d) Upon the death of an insured family member, Option C benefits

are paid to the employee, annuitant, or compensationer responsible for

withholdings under Sec. 870.402(f), except as provided in paragraph (e)

of this section.

(e) If an employee, annuitant, or compensationer entitled to

receive Option C benefits dies before the benefits are paid, the Option

C benefits are paid to the individual(s) entitled to receive Basic life

insurance benefits under the statutory order of precedence. However, if

the insurance has been assigned in accordance with subpart I of this

part, any prior designations of beneficiary were cancelled; benefits in

this instance are paid under the statutory order of precedence,

starting with the second on the list.

Sec. 870.802 Designation of beneficiary.

(a) If an insured individual wants benefits paid differently from

the order of precedence, he/she must file a designation of beneficiary.

A designation of beneficiary cannot be filed by anyone other than the

insured individual. Exception: if the insurance has been assigned under

subpart I of this part, the insured individual cannot designate a

beneficiary; only the assignee(s) can designate beneficiaries.

(b) A designation of beneficiary must be in writing, signed by the

insured individual, and witnessed and signed by two people. The

employing office (or OPM, in the case of an individual receiving an

annuity or compensation) must receive the designation before the death

of the insured.

(c) A designation, change, or cancellation of beneficiary in a will

or any other document not witnessed and filed as required by this

section has no legal effect with respect to benefits under the chapter.

(d) A witness to a designation of beneficiary cannot be named as a

beneficiary.

(e) Any individual, firm, corporation, or legal entity can be named

as a beneficiary, except an agency of the Federal or District of

Columbia Government.

(f) An insured individual (or an assignee) may change his/her

beneficiary at any time without the knowledge or consent of the

previous beneficiary. This right cannot be waived or restricted.

(g) (1) A designation of beneficiary is automatically cancelled 31

days after the individual stops being insured.

(2) An assignment under subpart I of this part automatically

cancels an insured individual's designation of beneficiary.

(h) An insured individual may provide that a designated beneficiary

is entitled to the insurance benefits only if the beneficiary survives

him/her for a specified period of time (not more than 30 days). If the

beneficiary doesn't survive for the specified period, insurance

benefits will be paid as if the beneficiary had died before the

insured.

Sec. 870.803 Child incapable of self-support.

(a) When it receives a claim for Option C benefits because of the

death of a child age 22 or older, OFEGLI determines, based on whatever

evidence it considers necessary, whether the deceased child was

incapable of self-support because of a mental or physical disability

which existed before the child reached age 22.

(b) If an employee elects Option C under Sec. 870.506(a) (3), and

the opportunity to elect is based solely on the acquisition of a child

age 22 or older, the employee must submit to the employing office, at

the time of making the election, a doctor's certificate stating that

the child is incapable of self-support because of a physical or mental

disability which existed before the child reached age 22 and which is

expected

[[Page 48744]]

to continue for more than 1 year. The certificate must include the name

of the child, the type of disability, how long it has existed, and its

expected future course and duration. The certificate must be signed by

the doctor and show his/her office address.

Subpart I--Assignments of Life Insurance

Sec. 870.901 Assignments permitted.

(a) (1) Section 208 of the Bankruptcy Amendments and Federal

Judgeship Act of 1984, Pub. L. 98-353 (98 Stat. 355), effective July

10, 1984, permits Federal judges to irrevocably assign their FEGLI

coverage to one or more individuals, corporations, or trustees. Section

4 of Pub. L. 103-336 (108 Stat. 2661), effective October 3, 1994,

extended this right to all Federal employees, annuitants, and

compensationers.

(2) An individual may assign ownership of all life insurance under

this part, except Option C. If an individual wishing to make an

assignment owns more than one type of coverage, he/she must assign all

the insurance; an individual cannot assign only a portion of the

coverage. Option C cannot be assigned.

(b) An individual cannot name conditional assignees in case the

primary assignee dies before the insured individual.

(c) If the insurance is assigned to two or more individuals,

corporations, or trustees, the insured individual must specify

percentage shares, rather than dollar amounts or types of insurance, to

go to each assignee.

(d) If an individual who has made an assignment later elects

increased insurance coverage under Sec. 870.506 or during an open

enrollment period, the increased coverage is considered included in the

already existing assignment. The right to increase coverage remains

with the insured individual, rather than transferring to the assignee.

(e) An individual who assigns ownership of insurance continues to

be the insured individual, but the assignee receives those rights of an

insured individual that are specified in this part.

(f) Once assigned, the value of the insurance increases or

decreases automatically as provided by this part. Exception: if the

insured individual elected a Living Benefit before assigning the

remainder of his/her insurance, the amount of Basic insurance does not

increase or decrease.

(g) An insured individual who has assigned his/her insurance cannot

elect a Living Benefit; nor can an assignee elect a Living Benefit on

behalf of the insured individual.

(h) An insured individual who has elected a Living Benefit under

subpart K of this part may assign the remainder of his/her insurance.

The assignment would affect Option A, Option B, and, for an employee

who elected a partial Living Benefit, Basic insurance.

Sec. 870.902 Making an assignment.

To assign insurance, an insured individual must complete an

approved assignment form. Only the insured individual may make an

assignment; no one can assign on behalf of an insured individual. The

individual must submit the completed and signed form to the employing

office indicating the intent to irrevocably assign all ownership of the

insurance; the form must also be signed by 2 witnesses. (Assignments

submitted prior to November 28, 1986, were accepted without an approved

assignment form.)

Sec. 870.903 Effective date of assignment.

An assignment under this subpart is effective on the date the

employing office receives the properly completed, signed, and witnessed

assignment form.

Sec. 870.904 Amount of insurance.

The amount of insurance is the amount of the insured individual's

Basic insurance, plus any Option A and Option B coverage.

Sec. 870.905 Withholdings.

Premium withholdings for assigned insurance are withheld from the

salary, annuity, or compensation of the insured individual, as provided

in subpart D of this part.

Sec. 870.906 Cancellation of insurance.

(a) The right to cancel (or reduce) insurance transfers to the

assignee; the insured individual cannot cancel (or reduce) insurance

after making an assignment.

(b) The assignee has the right to cancel insurance according to the

provisions of Secs. 870,502 and 870.505. When there is more than one

assignee, all assignees must agree to the cancellation. A cancellation

of Basic insurance also cancels all Optional insurance.

Sec. 870.907 Termination and conversion.

(a) Assigned insurance terminates under the conditions stated in

subpart F of this part.

(b)(1) When an insured individual's insurance terminates, an

assignee has the right to convert all or part of the group insurance to

an individual policy on the insured individual. The conditions stated

in subpart F of this part apply to assignees who elect to convert.

(2) When there is more than one assignee, each assignee has the

right to convert all or part of his/her share of the insurance. Any

assignee who doesn't convert loses all ownership of the insurance.

(3) When there is more than one assignee, the maximum amount of

insurance each assignee will be able to convert is determined by the

dollar amount corresponding to the assignee's share of the total

insurance. This amount will be rounded up to the next higher thousand,

if it's not already an even thousand dollar amount.

(4) Premiums for converted life insurance are based on the insured

individual's age and class of risk at the time the conversion policy is

issued.

(5) The employing office must notify each assignee of the

conversion right at the time the assigned group insurance terminates.

(c) The assignment terminates 31 days after the insurance

terminates, unless the insured individual is reemployed in or returns

to a position in which he/she is entitled to coverage under this

chapter within 31 days after the insurance terminates.

Sec. 870.908 Annuitants and compensationers.

(a) If an employee assigns Basic insurance and later becomes

eligible to continue such insurance coverage as an annuitant or

compensationer as provided in Sec. 870.701:

(1) At the time he/she retires or becomes eligible as a

compensationer, the insured individual may elect unreduced or partially

reduced insurance coverage as provided in Sec. 870.702(a). This right

remains with the insured individual and does not transfer to the

assignee. Exception: if the insured individual elected a partial Living

Benefit as an employee under subpart K of this part, he/she can only

elect unreduced insurance coverage.

(2) After the individual has made the election described in

paragraph (a)(1) of this section, the assignee (or, if more than one,

all of the assignees acting together) may, at any time, elect to cancel

the annuitant's or compensationer's election of increased coverage, as

provided in Sec. 870.702(b). The right to cancel the election transfers

to the assignee; the annuitant or compensationer cannot cancel the

election after making an assignment. Exception: if the individual

elected a partial Living Benefit as an employee under subpart K of this

part, the assignee(s) cannot cancel the election of unreduced insurance

coverage.

[[Page 48745]]

(b) When more than one assignee has been named, at the time the

insured individual becomes eligible to continue coverage as an

annuitant or compensationer, some assignees may choose to convert their

part of the insurance, while others may choose to continue the coverage

during the insured individual's retirement or receipt of compensation.

The amount of each type of continued insurance is determined by the

total percentage of the shares of the assignees who choose to continue

the coverage.

(c)(1) When an annuitant who has assigned his/her insurance is

reemployed in a position in which he/she is entitled to life insurance

coverage, the coverage he/she acquires as a reemployed annuitant is

subject to the existing assignment.

(2) The right of a reemployed annuitant to elect Option B coverage

as an employee rather than as an annuitant under Sec. 870.705(d)(3)

remains with the insured individual and does not transfer to the

assignee. Any Option B coverage elected as an employee is subject to

the existing assignment.

Sec. 870.909 Designations and changes of beneficiary.

(a)(1) An assignment automatically cancels an insured individual's

prior designation of beneficiary. After making an assignment, an

individual cannot designate a beneficiary; the right to designate

beneficiaries transfers to the assignee.

(2) Each assignee may designate a beneficiary or beneficiaries to

receive insurance benefits upon the death of the insured individual and

may also later change the beneficiaries. An assignee may designate

himself/herself the primary beneficiary and name another contingent

beneficiary(ies) to receive insurance benefits if the assignee dies

before the insured individual.

(b) Benefits for assigned insurance are paid to the assignee(s) if

the assignee(s) did not designate a beneficiary.

(c) Benefits for assigned insurance are paid to an assignee's

estate if the assignee dies before the insured individual and:

(1) The assignee (or the assignee's heirs) did not designate a

beneficiary; or

(2) The assignee's designated beneficiary dies before the insured

individual.

(d) The provisions of Sec. 870.802 apply to designations of

beneficiary made by assignees.

Sec. 870.910 Notification of current addresses.

Each assignee and each beneficiary of an assignee must keep the

office where the assignment is filed informed of his/her current

address.

Subpart J--Benefits for United States Hostages in Iraq and Kuwait

and United States Hostages Captured in Lebanon

Sec. 870.1001 Purpose.

This subpart sets forth the conditions for life insurance coverage

according to the provisions of section 599C of Pub. L. 101-513 (104

Stat. 2035).

Sec. 870.1002 Definitions.

In this subpart:

Hostage and hostage status have the meaning set forth in section

599C of Pub. L. 101-513 (104 Stat. 2035).

Pay period for individuals insured under this subpart means the pay

period set by the U.S. Department of State.

Period of eligibility means the period beginning on the effective

date set forth in Sec. 870.1004 and ending 12 months after hostage

status ends for hostages in Iraq and Kuwait and 60 months after hostage

status ends for hostages captured in Lebanon.

Sec. 870.1003 Coverage and amount of insurance.

(a) An individual is covered under this subpart when the U.S.

Department of State determines that the individual is eligible under

section 599C of Pub. L. 101-513 (104 Stat. 2035).

(b)(1) The amount of Basic life insurance for these individuals is

the amount specified in Sec. 870.202, subject to the applicable

conditions stated in this subpart.

(2) The BIA under Sec. 870.202 is the amount of the payment

specified in section 599C(b)(2) of Pub. L. 101-513 (104 Stat. 2035),

rounded to the next higher $1,000, plus $2,000.

(c) Individuals who have Basic insurance under this section also

have group accidental death and dismemberment insurance.

(d) Individuals insured by this subpart are not eligible for

Optional insurance.

(e) Individuals insured by this subpart are not considered

employees for the purpose of this part.

(f) Eligibility for insurance under this subpart depends on the

availability of funds under section 599C(e) of Pub. L. 101-513 (104

Stat. 2035).

Sec. 870.1004 Effective date of insurance.

Insurance under this subpart was effective on August 2, 1990, for

hostages in Iraq and Kuwait and on June 1, 1982, for hostages captured

in Lebanon, unless the U.S. Department of State sets a later date.

Sec. 870.1005 Premiums.

(a) Government contributions and employee withholdings required

under subpart D of this part are paid from the funds provided under

section 599C(e) of Pub. L. 101-513 (104 Stat. 2035).

(b) If an individual isn't insured for the full pay period,

premiums are paid only for the days he/she is actually insured. The

daily premium is the monthly premium multiplied by 12 and divided by

365.

(c) OPM may accept the payments required by this section in advance

from a State Department appropriation, if necessary to fund the 12-

month period of coverage beginning the earlier or:

(1) The day after sanctions or hostilities end; or

(2) The day after the individual's hostage status ends.

(d) OPM will place any funds received under paragraph (c) of this

section in an account set up for that purpose. OPM will make the

deposit required under 5 U.S.C. 8714 from the account when the

appropriate pay period occurs.

Sec. 870.1006 Cancellation of insurance.

(a) An individual who is insured under this subpart may cancel his/

her insurance at any time by written request. The cancellation is

effective on the 1st day of the pay period after the pay period in

which the U.S. Department of State receives the request.

(b) Cancellation must be requested by the insured individual and

cannot be requested by a representative acting on the individual's

behalf.

(c) An individual who cancels the insurance under this section

cannot obtain the insurance again, unless the U.S. Department of State

determines that it would be against equity and good conscience not to

allow the individual to be insured.

Sec. 870.1007 Termination and conversion.

(a) Insurance under this subpart terminates 12 months after hostage

status ends, unless the individual cancels the insurance earlier.

(b) Insured individuals whose coverage terminates are eligible for

the 31-day extension of coverage and conversion as set forth in subpart

F of this part, unless the individual cancelled the coverage.

Sec. 870.1008 Order of precedence and designation of beneficiary.

Insurance benefits are paid under the order of precedence set forth

in 5 U.S.C. 8705(a) and under the provisions of subpart H of this part.

[[Page 48746]]

Sec. 870.1009 Responsibilities of the U.S. Department of State.

(a) The U.S. Department of State functions as the ``employing

office'' for individuals insured under this subpart.

(b) The U.S. Department of State must determine the eligibility of

individuals under Pub. L. 101-513 (104 Stat. 2035) for insurance under

this subpart. This includes determining whether an individual is barred

from insurance under chapter 87 of title 5 U.S.C. because of other life

insurance as provided in section 599C of Pub. L. 101-513 (104 Stat.

2035).

Subpart K--Living Benefits

Sec. 870.1101 Eligibility for a Living Benefit.

(a) Effective July 25, 1995, an insured individual who is certified

by his/her doctor as terminally ill, as defined in Sec. 870.101, may

elect to receive a lump-sum payment of Basic insurance.

(b) Optional insurance is not available for payment as a Living

Benefit.

(c)(1) The effective date of a Living Benefit election is the date

on which the Living Benefit payment is cashed or deposited. Once an

election becomes effective, it can't be revoked. No further election of

Living Benefits can be made.

(2) If the insured individual dies before cashing or depositing the

Living Benefit payment, the payment must be returned to OFEGLI.

(d) If the insured individual has assigned his/her insurance, he/

she cannot elect a Living Benefit; nor can an assignee elect a Living

Benefit on behalf of an insured individual.

(e) If an individual has elected a Living Benefit, he/she may

assign his/her remaining insurance.

Sec. 870.1102 Amount of a Living Benefit.

(a)(1) An employee may elect to receive either:

(i) A full Living Benefit, which is all of his/her Basic insurance,

or

(ii) A partial Living Benefit, which is a portion of his/her Basic

insurance, in a multiple of $1,000.

(2) An annuitant or compensationer may only elect to receive a full

Living Benefit.

(b) The amount of Basic insurance elected as a Living Benefit will

be reduced by an actuarial amount representing the amount of interest

lost to the Fund because of the early payment of benefits.

(c)(1) If an individual elects a full Living Benefit, the post-

election BIA will be 0. If an employee elects a partial Living Benefit,

the post-election BIA will be the BIA reduced in proportion to the

amount of Basic insurance elected as a Living Benefit, as prescribed by

Pub. L. 103-409 (108 Stat. 4231).

(2) The post-election BIA cannot change after the effective date of

a Living Benefit election.

(d)(1) If an employee elects a full Living Benefit, Basic

accidental death and dismemberment coverage terminates as of the

effective date of the election.

(2) If an employee elects a partial Living Benefit, Basic

accidental death and dismemberment coverage is reduced to equal the

post-election BIA.

Sec. 870.1103 Election procedures.

(a) The insured individual must request information on Living

Benefits and an application form directly from OFEGLI.

(b)(1) Only the insured individual can apply for a Living Benefit;

no one can apply on his/her behalf.

(2) The insured individual must complete the first part of the

application and have his/her physician complete the second part. The

completed application must be submitted directly to OFEGLI.

(c)(1) OFEGLI reviews the application, obtains certification from

the insured's employing office regarding the amount of insurance and

the absence of an assignment, and determines whether the individual

meets the requirements to elect a Living Benefit.

(2) If OFEGLI needs additional information, it will contact the

insured or the insured's physician.

(3) Under certain circumstances, OFEGLI may require a medical

examination before making a decision. In these cases, OFEGLI is

financially responsible for the cost of the medical examination.

(d)(1) If the application is approved, OFEGLI sends the insured a

check for the Living Benefit payment and an explanation of benefits.

(i) Until the check has been cashed or deposited, the individual

may change his/her mind about electing a Living Benefit; if this

happens, the individual must mark the check ``void'' and return it to

OFEGLI.

(ii) Once the insured individual has chased or deposited the

payment, the Living Benefit election becomes effective and cannot be

revoked; OFEGLI then sends explanations of benefits to the insured's

employing office, so it can make the necessary changes in withholdings

and deductions.

(2) If the application is not approved, OFEGLI will notify the

insured individual and the employing office. The decision is not

subject to administrative review; however, the individual can submit

additional medical information or reapply at a later date if future

circumstances warrant.

PART 871--[REMOVED]

2. Part 871 is removed.

PART 872--[REMOVED]

3. Part 872 is removed.

PART 873--[REMOVED]

4. Part 873 is removed.

PART 874--[REMOVED]

5. Part 874 is removed.

[FR Doc. 97-24585 Filed 9-16-97; 8:45 am]

BILLING CODE 6325-01-M