Federal Employees' Group Life Insurance Program: Court Orders

OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 870

RIN 3206-AI49

Federal Employees' Group Life Insurance Program: Court Orders

AGENCY: Office of Personnel Management.

ACTION: Interim rule with request for comments.

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

regulations to implement a new law, which was enacted July 22, 1998.

This law requires that provisions of a court decree of divorce,

annulment, or legal separation, or the terms of a court order or court-

approved property settlement agreement relating to such a court decree

be followed instead of the otherwise existing statutory order of

precedence for payment of benefits under the Federal Employees' Group

Life Insurance Program.

DATES: Interim rules are effective May 6, 1999. Comments must be

received on or before June 7, 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, PO

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

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

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

SUPPLEMENTARY INFORMATION: The Federal Employees' Group Life Insurance

(FEGLI) law sets an order of precedence for payment of benefits

following the death of an insured employee, annuitant, or

compensationer (5 U.S.C. 8705). First in the order of precedence is a

designated beneficiary. There has been no statutory limitation on

changing designations.

When a divorce decree requires an individual insured under FEGLI to

name his/her children or former spouse as the beneficiary, it is

possible the individual may not comply or may comply and then change

the designation at a later date. This action, while potentially in

violation of the court order, did not violate the FEGLI law.

Pub. L. 105-205, 112 Stat. 683, enacted July 22, 1998, requires

benefits to be paid in accordance with the terms of a court decree of

divorce, annulment, or legal separation, or the terms of any court

order or court-approved property settlement agreement relating to a

court decree of divorce, annulment, or legal separation, regardless of

whether or not the insured individual actually completes a designation

complying with the court order, if the court order is received in the

appropriate office before the death of the insured individual. To the

extent provided in the court order, the court order supersedes any

prior designation by the insured individual. Pub. L. 105-205 also

prohibits an insured individual from changing his/her designation,

unless the person(s) named in the court order agrees or unless the

court order is subsequently modified by the court that originally

issued it.

These regulations define the types of court orders that the law

applies to and state that the statutory order of precedence will not be

applicable if such a court order has been received in the appropriate

office on or after the date of enactment of the legislation and prior

to the death of the insured. The appropriate office for active

employees is their employing agency; the appropriate office for

separated employees (annuitants) is OPM. For a compensationer, during

the first 12 months of nonpay status the appropriate office is their

employing agency; after separation or the completion of 12 months in

nonpay status, the appropriate office is OPM. To avoid the possibility

of a fraudulent submission, we are requiring that certified copies of

the court orders be submitted.

In the event of conflicting court orders, the Office of Federal

Employees' Group Life Insurance (OFEGLI) will pay benefits based on

whichever court order has the earliest date of execution and meets the

requirement of having been received by the appropriate office on or

after the date of enactment and before the death of the insured. (A

domestic relations court order from one court does not automatically

have the effect of modifying an existing domestic relations court order

from another court.)

Pub. L. 105-205 also allows a court order to direct the insured to

make an irrevocable assignment to the person(s) named in the court

order. However, until the insured individual properly completes an

assignment form, the assignment does not occur.

These regulations also correct an error to Sec. 870.506(e)(2) to

state that eligible employees who return to Federal service after a

break in service of 180 days or more receive whatever Optional

insurance coverage they had before separation, if they do not submit a

Life Insurance Election specifically electing or waiving Optional

insurance.

Waiver of General Notice of Proposed Rulemaking

Under section 553 (b)(3)(B) and (d)(3) of title 5, United States

Code, I find that good cause exists for waiving the general notice of

proposed rulemaking. These regulations implement Pub. L. 105-205, which

became effective July 22, 1998.

Regulatory Flexibility Act

I certify that this regulation will not have a significant economic

impact on a substantial number of small entities because the regulation

will only affect life insurance benefits of Federal employees and

retirees.

Executive Order 12866, Regulatory Review

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

in accordance with Executive Order 12866.

List of Subjects in 5 CFR Part 870

Administrative practice and procedure, Government employees,

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

U.S. Office of Personnel Management.

Janice R. Lachance,

Director.

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

[[Page 16602]]

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

of Pub. L. 101-513, 104 Stat. 2064, as amended; Sec. 870.302 also

issued under sections 11202(f), 11232(e), and 11246(b) and (c) of

Pub. L. 105-33, 111 Stat. 251; Secs. 870.101, 870.801, 870.802, and

870.901 also issued under Pub. L. 105-205, 112 Stat. 683.

2. In Sec. 870.101, the definition Court order is added in

alphabetical order to read as follows:

Sec. 870.101 Definitions.

* * * * *

Court order means any court decree of divorce, annulment, or legal

separation, or the terms of any court order or court-approved property

settlement agreement relating to any court decree of divorce,

annulment, or legal separation, the terms of which require FEGLI

benefits to be paid to a specific person or persons.

* * * * *

3. In Sec. 870.506, the third sentence of paragraph (e)(2) is

revised to read as follows:

Sec. 870.506 Optional insurance: cancelling a waiver.

* * * * *

(e) * * *

(2) * * * If the employee doesn't file a Life Insurance Election,

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

gets whatever Optional insurance coverage he/she had immediately before

separating from Federal service and is considered to have waived any

other Optional insurance. * * *

* * * * *

4. In Sec. 870.801, paragraph (a), introductory text, is revised,

paragraphs (d) and (e) are redesignated as paragraphs (e) and (f), and

a new paragraph (d) is added to read as follows:

Sec. 870.801 Order of precedence and payment of benefits.

(a) Except as provided in paragraph (d) of this section, benefits

are paid according to the order of precedence stated in 5 U.S.C.

8705(a), as follows:

* * * * *

(d)(1) If there is a court order in effect naming a specific person

or persons to receive life insurance benefits upon the death of an

insured individual, Basic insurance and Option A and Option B insurance

will be paid to the person or persons named in the court order, instead

of according to the order of precedence.

(2) To qualify a person for such payment, a certified copy of the

court order must be received by the appropriate office on or after July

22, 1998, and before the death of the insured.

(3)(i) For employees, the appropriate office is their employing

agency.

(ii) For annuitants, the appropriate office is OPM.

(iii) For compensationers during the first 12 months of nonpay

status, the appropriate office is their employing agency.

(iv) For compensationers after separation or the completion of 12

months in nonpay status, the appropriate office is OPM.

(4) If, within the applicable time frames, the appropriate office

receives conflicting court orders entitling different persons to the

same insurance, benefits will be paid based on whichever court order

was issued first.

* * * * *

5. In Sec. 870.802, the first sentence of paragraph (a) is revised,

and a new paragraph (i) is added to read as follows:

Sec. 870.802 Designation of beneficiary.

(a) Except as provided in paragraph (i) of this section, if an

insured individual wants benefits paid differently from the order of

precedence, he/she must file a designation of beneficiary. * * *

* * * * *

(i) (1) Except as provided in paragraph (i)(2) of this section, if

a court order has been received in accordance with Sec. 870.801(d), an

insured individual cannot designate a different beneficiary, unless

(i) The person(s) named in the court order gives written consent

for the change, or

(ii) The court order is modified.

(2) If a court order has been received in accordance with

Sec. 870.801(d), and the court order applies to only part of the

insurance benefits, an insured individual can designate a different

beneficiary to receive the insurance benefits that are not included

under the court order. If the insured individual does not make a

designation for these benefits and there is no previous valid

designation on file, benefits will be paid according to the order of

precedence shown in Sec. 870.801(a).

(3) If a court order received in accordance with Sec. 870.801(d) is

subsequently modified without naming a new person to receive the

benefits, and a certified copy of the modified court order is received

by the appropriate office before the death of the insured, the insured

individual can designate a beneficiary. Benefits will be paid according

to the order of precedence shown in Sec. 870.801(d) if the insured

individual does not complete a new designation of beneficiary.

6. In Sec. 870.901, paragraph (i) is added to read as follows:

Sec. 870.901 Assignments permitted

* * * * *

(i) A court order can direct that an insured individual make an

irrevocable assignment to the person(s) named in the court order. For

an assignment to be effective, the insured individual must follow the

procedures in Sec. 870.902.

[FR Doc. 99-8279 Filed 4-5-99; 8:45 am]

BILLING CODE 6325-01-P