Federal EmployeesGroup Life Insurance Program: New Premiums

OFFICE OF PERSONNEL MANAGEMENT

5 CFR PART 870

RIN 3206-AI54

Federal Employees--Group Life Insurance Program: New Premiums

AGENCY: Office of Personnel Management.

ACTION: Interim regulations with request for comments.

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SUMMARY: The Office of Personnel Management is issuing interim

regulations as a result of the Federal Employees Life Insurance

Improvement Act, enacted October 30, 1998, to expand the number of age

bands in the Federal Employees' Group Life Insurance (FEGLI) Program,

to implement new premium rates for all coverage categories, and to

change the current birthday rule effective date for Optional insurance

when an employee, annuitant, or compensationer moves from one premium-

rated age band to another for Optional insurance. The purpose of these

regulations is to publish the new changes within the time frame

prescribed by law.

DATES: Interim regulations are effective April 24, 1999. Comments must

be received on or before May 27, 1999.

ADDRESSES: Send written comments to Abby L. Block, Chief, Insurance

Policy and Information Division, Office of Insurance Programs,

Retirement and Insurance Service, Office of Personnel Management, P.O.

Box 57, Washington, DC 20044; delivered to OPM, Room 3425, 1900 E

Street NW, Washington, DC; or FAX to (202) 606-0633.

FOR FURTHER INFORMATION CONTACT: Sharon Neuner, (202) 606-0004.

SUPPLEMENTARY INFORMATION: The Federal Employees Life Insurance

Improvement Act increases the options available under the FEGLI Program

to provide greater choice of coverage and to continue coverage that

would otherwise terminate. This has necessitated an expansion of the

number of age bands and a change in the premium rates for all coverage

categories. Additionally, the interim regulations change the current

birthday rule effective date for Optional insurance when an employee,

annuitant, or compensationer moves from one premium-rated age band to

another for Optional insurance.

The standard age band of ``60 and over'' has been divided into

three new age bands of 60-64, 65-69, and 70 and over for Option C

insurance. Option C (Family) insurance new age bands are necessary to

accommodate changes provided under the law, which allow for the

election of unreduced Option C at retirement by continuing to pay

premiums after age 65. Currently, an individual is considered to have

reached 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. Effective April 24, 1999, the date for age-

banded premium rate changes as a result of a birthday will be the first

day of the pay period following the pay period in which the birthday

occurs. For enrollees whose birthday occurs between January 1 and April

23, 1999, the effective date of the age-banded change will be the first

pay period beginning on or after April 24, 1999. (For retirees, any

changes in premium levels will be reflected in their June 1, 1999,

annuity payments.)

The last premium change for Basic coverage and for some age

categories for Option A (Standard), B, and C insurances was on the

first pay period beginning on or after January 1, 1993. Actuarial

analyses indicate the Federal Employees' Group Life Insurance Program

continues to experience changes relevant to premiums, including

improved mortality. This has resulted in a decrease in the Basic

premium rate.

The reduction in Option A rates is due to improved morbidity. The

reduction in Option B and C premium rates for enrollees in most age-

bands under age 60 is primarily due to the change in the birthday rule,

which will move enrollees into new age bands sooner.

As prescribed by law, there are increased coverage options under

Option C which allow employees to elect coverage up to five times the

current amount. The premium for Option C coverage will equal the

premium rate for one multiple times the number of multiples selected.

The new age bands and premium rates for 65-69 and 70 and over will go

into effect on the first day of the pay period beginning on or after

April 24, 2000.

Legislative changes eliminated the maximums on Basic and Option B.

The elimination of the maximum for Basic and Option B means that the

available amount of Option A coverage will be $10,000 for all eligible

employees.

As provided by law, an open enrollment period, effective April 24,

1999 through June 30, 1999, will be offered to employees. Employees

will be given the chance to review their insurance needs and, if

needed, either add to their coverage or enroll in FEGLI if they have

previously waived some or all coverage. Proposed regulations will be

published in the near future which expand on and clarify other changes

in the Federal Employees' Group Life Insurance Program as a result of

Pub. L. 105-311.

Finally, OPM is assessing the need for new age bands and increased

premiums associated with retirees' new option of continuing unreduced

Option B coverage beyond age 65. Since retirees and employees are

covered by the same premium rates, this new option has the potential

for significantly increasing the premiums that employees age 65 and

over now pay. For example, rates could double for employees age 70 and

over. Given this potential impact, OPM will not determine new age bands

and premium rates until all alternatives have been thoroughly explored

and the earliest that any increase would be effective is April 24,

2001. Any increases resulting from these changes would be phased in

over a three-year period starting on that date.

Waiver of Notice of Proposed Rulemaking

Pursuant to section 553(b)(3)(B) of title 5 of the U.S. Code, I

find that good cause exists for waiving the general notice of proposed

rulemaking. This notice is being waived in order to implement required

legislation within the time specified by law and in time for open

enrollment decision making,

[[Page 22544]]

which will be held from April 24 to June 30, 1999. Waiver of the notice

of proposed rulemaking will provide agencies with sufficient advanced

notice to implement systems modifications required by these interim

regulations.

Executive Order 12866, Regulatory Review

This rule has been reviewed by the Office of Management and Budget

in accordance with Executive Order 12866.

Regulatory Flexibility Act

I certify that these regulations will not have a significant

economic impact on a substantial number of small entities because they

affect Federal employees and annuitants only.

List of Subjects in 5 CFR Part 870

Administrative practice and procedure, Government employees,

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

Office of Personnel Management.

Janice R. Lachance,

Director.

Accordingly, OPM is amending 5 CFR Part 870 as follows:

PART 870--FEDERAL EMPLOYEES' GROUP LIFE INSURANCE PROGRAM

1. The authority citation for part 870 is revised to read as

follows:

Authority: 5 U.S.C. 8716; subpart J also issued under sec. 599C,

Pub. L. 101-513, 104 Stat. 1979, Sec. 870.302 also issued under

secs. 11202(f), 11232(e), and 11246 (b) and (c) Pub. L. 105-33, 111

Stat. 251 and sec. 7(e), Pub. L. 105-274, 112 Stat. 2419;

Sec. 870.401 and 870.402 also issued under Pub. L. 105-311, 112

Stat. 2950.

Subpart D--Cost of Insurance

Sec. 870.401 Withholdings and contributions for Basic insurance.

2. In Sec. 870.401, paragraphs (b)(1) and (d) are revised to read

as follows:

* * * * *

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

pay status for any part of the period, $0.1550 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 one cent.

* * * * *

(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 $0.3358 for each

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

amount withheld weekly is $0.0775 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 $0.9258 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 $0.59 for each

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

withheld weekly is $0.2175 for each $1,000 of the BIA until age 65; the

amount is then reduced to $0.14 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 $2.3758 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 $2.04 for each $1,000. For a compensationer who makes

this election, the amount withheld weekly is $0.5475 for each $1,000 of

the BIA until age 65; the amount is then reduced to $0.47 for each

$1,000.

Sec. 870.402 Withholdings for Optional insurance.

3. In Sec. 870.402, the tables in paragraphs (d)(1) and (e)(1) are

revised and paragraphs (f)(1) and (g) are revised to read as follows:

(d)(1) * * *

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

For persons ages 35 through 39................................. .40

For persons ages 40 through 44................................. .60

For persons ages 45 through 49................................. .90

For persons ages 50 through 54................................. 1.40

For persons ages 55 through 59................................. 2.70

For persons ages 60 and over................................... 6.00

* * * * *

(e)(1) * * *

For persons under age 35....................................... $0.03

For persons ages 35 through 39................................. .04

For persons ages 40 through 44................................. .06

For persons ages 45 through 49................................. .10

For persons ages 50 through 54................................. .15

For persons ages 55 through 59................................. .31

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

* * * * *

(f)(1) The biweekly cost of Option C for one multiple of coverage

is based on the age of the employee, annuitant, or compensationer.

Table 1 shows the age bands and associated cost up through age 59,

effective the first day of the pay period beginning on or after April

24, 1999. The age bands 60-64, 65-69 and 70 and over, the applicable

premium rates, and effective dates are shown in Table 2.

Table 1.

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For persons under age 35....................................... $0.27

For persons ages 35 through 39................................. .34

For persons ages 40 through 44................................. .46

For persons ages 45 through 49................................. .60

For persons ages 50 through 54................................. .90

For persons ages 55 through 59................................. 1.45

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Table 2.--Effective Date

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First pay period on or after 4/24/99 4/24/2000

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For persons ages 60 through 64................ 2.60 2.60

For persons ages 65 through 69................ 2.60 3.00

For persons ages 70 and over.................. 2.60 3.40

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* * * * *

(g) For the purpose of this subpart, effective April 24, 1999, an

individual is considered to reach age 35, 40, 45, 50, 55, 60, 65, or 70

on the first day of the pay period following the pay period in which

his/her birthday occurs.

* * * * *

[FR Doc. 99-10595 Filed 4-23-99; 12:21 pm]

BILLING CODE 6325-01-P