Federal Register Extracts

Agency: "Department of Veterans Affairs."

SUMMARY: The Department of Veterans Affairs (VA) proposes to amend its regulations that govern National Service Life Insurance (NSLI), among other things, to accomplish the following: implement provisions contained in legislation that authorized a new program of insurance; clarify which individuals are eligible to take actions on an insurance policy; elucidate on various provisions regarding coverage and benefits under the new insurance program; and state which individuals are ineligible to benefit from the unlawful and wrongful killing of a veteran policyholder.

DATES: Comments must be received on or before September 12, 2022.

ADDRESSES: Comments may be submitted through www.regulations.gov. Comments should indicate that they are submitted in response to "RIN 2900-AR53--National Service Life Insurance--Veterans Affairs Life Insurance (VALife) Program Amendments." Comments received will be available at regulations.gov for public viewing, inspection or copies.

FOR FURTHER INFORMATION CONTACT: Paul Weaver, Insurance Specialist, Department of Veterans Affairs Insurance Service (310/290B), 5000 Wissahickon Avenue, Philadelphia, PA 19144, (215) 842-2000, ext. 4263. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: Section 1922B of title 38, United States Code, requires VA to issue policies under a new program of veterans' life insurance beginning on January 1, 2023. Consistent with 38 U.S.C. 1922B and other statutes in the NSLI subchapter (38 U.S.C. 1901-1929), VA proposes to implement this new program of insurance by amending 38 CFR part 8 as set forth below.

1. Definition of Part 8 Terms

Guardian

Current 38 CFR 8.0(e) defines the term "guardian" to mean "any representative certified by the appropriate Veterans Service Center Manager, under [38 CFR 13.55], to receive benefits in a fiduciary capacity on behalf of the insured or the beneficiary, or to take the actions listed in [38 CFR] 8.32." We note that SEC 13.55 was removed in 2018, see 83 FR 32716, 32738 (July 13, 2018), but current SEC 8.0(e) essentially refers to a VA-appointed fiduciary, as defined in current SEC 13.20 (defining the term "fiduciary" as "an individual or entity appointed by VA to receive VA benefits on behalf of a beneficiary for the use and benefit of the beneficiary and the beneficiary's dependents"). The current definition of "guardian," therefore, only allows a VA-appointed fiduciary to take the actions that are enumerated in SEC 8.32. Some of these actions include applying for a life insurance policy, reinstating a lapsed policy, and cash surrendering a policy. 38 CFR 8.32(a), (b), (f). Private insurers allow state-appointed guardians and attorneys-in-fact who hold power of attorney for an individual as their principal to take these same actions. VA proposes to revise SEC 8.0(e) to include within the definition of the term "guardian," not only VA-appointed fiduciaries, but also state-appointed guardians and conservators, as well as attorneys-in-fact (i.e., persons holding power of attorney). However, VA also proposes to clarify that if a VA-appointed fiduciary and either a state-appointed guardian/conservator or attorney-in-fact are not the same individual and both attempt to take conflicting actions on an incompetent insured's policy, the VA-appointed fiduciary shall have the exclusive authority to take actions on the policy. In that scenario, VA would not allow the state-appointed guardian/conservator or attorney-in-fact to take actions on the insurance policy unless VA removes the policyholder's fiduciary or the state-appointed guardian/conservator or attorney-in-fact is appointed as the VA fiduciary. These amendments would align VA procedures with commercial insurance practices and would afford those caring for incompetent insureds--whether they are VA-appointed fiduciaries, state-appointed guardians/conservators, or attorneys-in-fact--greater authority over VA life insurance actions. The amendments would also resolve potential conflicts between a VA-appointed fiduciary and either a state-appointed guardian/conservator or an attorney-in-fact.

Veterans' Affairs Life Insurance (VALife)

VA proposes to add a new paragraph (f) to 38 CFR 8.0 that would define the term "Veterans' Affairs Life Insurance (VALife)" to mean "insurance that is issued under section 1922B of title 38 U.S.C." The title of the legislation that created VALife, "Modernization of Service-Disabled Veterans Insurance," and its statutory heading in section 1922B, "Service-Disabled Veterans Insurance," are similar to the name of VA's existing life insurance program for service-disabled veterans, which Congress renamed "Legacy Service-Disabled Veterans' Insurance" when it authorized the creation of VALife. See 38 U.S.C. 1922; Public Law 116-315, Title II, SEC 2004(b)(1), (c)(1) (2021). VA has issued policies for Legacy Service-Disabled Veterans' Insurance, formerly known as Service-Disabled Veterans' Insurance (SDVI), since 1951 and will continue to provide such insurance coverage even after it closes to new issues on December 31, 2022. See 38 U.S.C. 1922(d)(1) ("The Secretary may not accept any application by a Veteran to be insured under this section after December 31, 2022."). Policyholders could be confused by the similarities in program names and legislative and statutory headings. For purposes of clarity, VA proposes to define VALife to mean the new program of life insurance authorized by 38 U.S.C. 1922B to distinguish it from the renamed SDVI program.

Application for Insurance Issued Under 38 U.S.C. 1922B

VA would require veterans applying for VALife to submit an application online or through another medium prescribed by the Secretary. Therefore, VA proposes to add a new paragraph (g) to SEC 8.0 that would define an application for VALife as a properly completed application form submitted online or through another medium prescribed by the Secretary. Cf. 84 FR 138, 139 (Jan. 18, 2019) (defining a "claim" for benefits under 38 CFR part 3); see also, e.g., Veterans Justice Grp., LLC v. Sec'y of Veterans Affairs, 818 F.3d 1336, 1350 (Fed. Cir. 2016) (holding that 38 U.S.C. 5101(a)(1) affirmatively grants the Secretary authority to prescribe the forms of application by claimants).

Beneficiary

VA proposes to define the term "beneficiary" that is contained in 38 U.S.C. 1922B(e) to include both principal and contingent beneficiaries. Although section 1922B(e) refers broadly to "a beneficiary," we interpret that reference to include both principal and contingent beneficiaries because both commercial industry insurers and all existing Government life insurance programs allow insureds to name both types of beneficiaries. In the event that the insured has designated a contingent beneficiary, and the principal beneficiary does not file a claim, predeceases the insured, or is barred from receiving payment by operation of the slayer's rule, then the contingent beneficiary will be paid before an alternate beneficiary in the order of precedence is eligible to file a claim and receive payment.

2. Effective Date for an Insurance Policy Issued Under 38 U.S.C. 1922(a) or 1922B

Current 38 CFR 8.1(b) states that the effective date of an insurance policy that is issued under 38 U.S.C. 1922(a) is the date that a valid application and premium payment are delivered to VA. VA proposes to amend the heading of current 38 CFR 8.1 to clarify that insurance policies issued under VALife would have the same effective date as policies issued under SDVI. This amendment is consistent with the longstanding VA practice of determining the effective date of coverage for other Government life insurance programs based on the delivery of an application and an initial premium payment. However, we propose to revise SEC 8.1(a) to clarify that benefits due under an SDVI policy are payable any time after the effective date, but benefits due under a VALife policy are payable any time two years after the effective date.

VA also proposes to add a note 3 to current paragraph (b) that would state that when veterans apply for insurance coverage through an electronic medium, the date of delivery of the premium payment shall be the date of the valid authorization of the premium payment. The note would also state that in cases where the authorization does not result in the required premium payment because there were insufficient funds to cover the full initial premium amount, the delivery date of the premium payment shall be the date that the full initial premium amount is received by VA.

Current paragraph (c) provides three different options for SDVI policyholders to choose as an effective date other than the date of delivery described in paragraph (b). VA proposes to clarify that the effective date options for SDVI would not be available for VALife, and, therefore, VA would amend paragraph (c) to state that it does not apply to VALife.

3. Provisions During Waiting Period

Section 1922B(c)(3)(A) states that if a veteran dies during the two-year period described in paragraph (2), the Secretary shall pay to the beneficiary of the veteran the amount of premiums paid by the veteran under this section, plus interest. VA proposes to add a new paragraph (e) to current 38 CFR 8.2 to explain that if a veteran enrolls in VALife for an amount less than the statutory maximum and elects to apply for additional coverage at a later date and dies before completing the two-year waiting period for the additional VALife coverage amount, the beneficiary shall be refunded premiums that were paid for the additional VALife coverage, plus interest, in accordance with 38 U.S.C. 1922B(c)(3)(A). VA also proposes to explain in new paragraph (e) that if an insured surrenders or cancels a VALife policy during this same two-year period, the United States would not return to the insured the premiums that were paid to purchase the coverage. VA's proposal is consistent with the practice of commercial insurers, as comparable permanent insurance policies do not return the full amount of premiums that an insured pays when the insured surrenders policy coverage during the policy's waiting and enrollment period.

4. Calculation of Time Period and Veteran's Age

--This is a summary of a Federal Register article originally published on the page number listed below--

Proposed rule.

CFR Part: "38 CFR Part 8"

RIN Number: "RIN 2900-AR53"

Citation: "87 FR 42118"

Federal Register Page Number: "42118"

"Proposed Rules"