February 13, 1979 M29-1, Part II\
Change 15

CONTENTS

CHAPTER 9. CASH SURRENDERS

PARAGRAPH **PAGE\
**9.01 General 9-I\
9.02 Processing Requests for Information on Cash Values 9-2\
9.03 Processing Formal and Informal Applications for Cash Surrender by
the Computer 9.4\
9.04 Manually Processing Formal and Informal Applications for Cash
Surrender . 9-4a\
9.05 Processing Requests for Cancellation of Application for Cash
Surrender 9-7

9.06 Processing Requests for Surrender Cancellation, With TD Form 1664X,
Returned Check Notice,

Attached 9-8

9.07 Establishing Accounts Receivable for Overpaid Cash Surrenders 9-9\
9.08 Processing Surrender for Paid-Up Insurance 9-9\
9.09 Application for Cash Surrender of Limited Payment Life Policy with
Ml Premiums Paid and Earned. . 9-11\
9.10 Processing Cash Surrenders Without Insurance Folder 9-12

9-j

January 30, 1974 M29-1, Part II\
Change 11

CHAPTER 9. CASH SURRENDERS

9.01 GENERAL

a\. VA Form 29-1546, Application for Cash Surrender Value, and VA Form
29-5772, Loan and Cash Surrender Values, are applications designed for
requesting a surrender of a policy. A letter containing a specific
request for a surrender over the insured\'s signature may be considered
as an informal application. Other documents will be received requesting
information on surrender values, cancellation of applications for
surrender and cancellation of surrenders where the check has not been
cashed. These applications will be received and processed in the Policy
Service Section.

b\. If the correct insurance folder is not l e is not66ached to the
document or if no folder is attached, take action to obtain it. A VA
Form 29-58 86 Insurance Record Print out(RPO), should also be available
before an input document is introduced into the system to process the
surrender.

c\. When there will be a delay in processing the application or
communication, release FL 29-108 to the insured and note the application
accordingly. When records are located in the other office, airmail the
application or correspondence to that office.

d\. Upon receipt of a surrender application, either formal or informal,
which has been associated with an RPO, and there is no record of the
insurance folder, authority for processing the surrender without the
folder will be vested with the Chief, Policy Service Section. The
surrender may be processed without verification of the signature if the
check is to be mailed to the address of record. The signature will be
verified in these cases when the folder is subsequently associated with
the insurance folder. Verification of signature will be made prior to
processing when the check is to be mailed to an address other than the
address of record. When verification of signature is necessary before
action can be taken, every possibility will be pursued to obtain a
microfilm print or photocopy of documents available in the office
bearing the insured\'s signature. If verification of the signature
cannot be obtained, FTS may be used to contact the insured at the
address to which the check is to be mailed to authenticate she action to
be taken. The application will be appropriately noted.

e\. The signature on the application must be compared with the
insured\'s witnessed signature on records in the insurance folder to
determine that the application was made over the written signature of
the insured. When it is apparent that the signature is not the
insured\'s, or that the signature is questionable, release a dictated
letter to the insured asking for verification of the application for
cash surrender. The letter will state that the signature on the
application appears to be different from that on file. Enclose another
application and request the insured to have signature on the new
application witnessed by a VA representative or by one disinterested
person. The address of the witness should also be stated. The letter
will clearly indicate that the request for a new application is being
made solely to protect the insured\'s interests. Diary the case for 30
calendar days. If no reply is received from the insured, the application
bearing the questionable signature will not be processed.

f\. When a question of the insured\'s competency arises in connection
with a surrender application, take the following action:

\(l\) Request the Disability Determination Unit to determine whether the
insured is competent or incompetent. Include type and amount of pending
disbursement in the request.

\(2\) The Disability Determination Unit will return the case with the
insurance folder for further processing after determination is made.

g\. The computer will not process cash surrenders in the following types
of cases:

\(1\) The how paid code is l or 5.

\(2\) There are more than two policies and an insurance overpayment lien
exists on any of the policies.

**9-1**

M29-1, Part II January 30, 1974

change

\(3\) Policy to be surrendered is on 724 waiver.

\(4\) A pending transaction exists for policy to be surrendered, or
there is a pending transaction not identified by policy number.

\(5\) Life or policy is frozen on account to be surrendered.

\(6\) Any case where application is submitted after expiration of 31-day
grace period. The 46- or 61-day rule is not applicable.

\(7\) Unearned premiums are to be included in surrender settlement, and
the TDIP fund is different from the policy fund.

\(8\) Master record indicates other indebtedness or incompetency.

\(9\) The application is for a partial surrender for cash.

\(10\) Deduction amount is not equal to the total premium. (How paid
codes 3 and 6)

(11.) Deduction is not paying premiums on a month-to-month or
l-month-in-advance basis. (How paid code 3 or 6)

\(12\) The policy is less than l year, and has no surrender value.

\(13\) The policy is 5-year level premium term.

\(14\) Account has off-tape indebtedness or statutory lien.

\(15\) Returned mail indicated.

\(16\) Action type indicates impending automatic surrender.

\(17\) Policy not in a multiple of \$500.

\(18\) Dividend year is earlier than the effective date of surrender.

Next month due for TDIP is different from the i insurance next month
due.

: When action is taken to initiate automatic processing and edits are
not met, an RPO will be generated with a reason code in the 600 series.

h\. All accounts, except allotment and DFB accounts, which are cash
surrendered by automatic system processing, are immediately purged from
tape. Allotment and DFB accounts are not purged immediately. Instead,
the how paid code is automatically changed to l and the account frozen
with a 953 CS diary pending receipt of the deduction discontinuance.
When the discontinuance is received, the system will automatically
delete the diary and generate a reason code 100 and/or 107 RPO for
clerical analysis. All accounts which are manually cash surrendered are
immediately purged from tape when the surrender is processed.

i\. When a VA Form 29-1546 or 29-5772 is released to an insured, a
self-addressed kraft envelope will be enclosed for his use. When the
kraft envelope is returned by the insured, it will **be** selected and
processed before the routine mail. All cash surrender applications will
be handled on a priority basis.

9.02 PROCESSING REQUESTS FOR INFORMATION ON CASH VALUES

a\. Information on the cash value of a policy is furnished the insured
upon request or when the loan value of

the policy is being furnished.

9-2

M29-1, Part II

Advance Manual Change No. 6-83 July 5, 1983

[Chapter 9]{.underline} - [Cash Surrenders]{.underline}

A. [Change:]{.underline} M29-1, Part II, Chapter 9. This Advance Manual
Change is issued in\
conjunction with Advance Manual Change No. 18-83 in MP-6, Part II,\
Supplement No. 1.4, which expands the use of RPO Reason Code 644\
to apply to cash surrender transactions rejected because of loan\
indebtedness exceeding \$10,000. M29-1, Part II, which contains a\
listing of conditions under which the system will not process cash\
surrenders, is updated accordingly.

B. [Procedures]{.underline}: Page 9-2, add the following to subparagraph
9.01g:

\(20\) Loan indebtedness exceeds \$10,000.

C. New or Revised

[Insurance Forms]{.underline}: None

DISTRIBUTION:

335/29 80\
310/290 55\
310/291 200\
310/Library 1\
244C 10

**April 27 1972** **M29-I, Part II**\
**Change 6**

b\. \[For computer system processing,\] VA Form 29-323,
\[Disbursements,\] or VA Form 29-8521, \[Disbursements,\] transaction
type 603, \[is prepared. Computation code 3 is entered in block 74 on VA
Form 29-323 or in the RPO Req block on VA Form 29-8521. The computation
date is entered in blocks 22-26 of VA Form 29-323 or the
Postmark(Computation Date field on VA Form 29-8521. It is an AS OF
date.\]

c\. \[The computer system will make the necessary computations and
generate a completed VA Form 29-5772, including the net cash and net
loan values. The net cash value is the maximum cash value minus the
indebtedness (loans, accumulated interest, premium shortages, liens,
including overpayment liens on another policy of the insured). If the
indebteness exceeds the loan value, zeros will be printed in the NET
LOAN block.

\[d. When any of the following conditions are indicated, clerical
processing is required:

\(l\) There is a life or policy freeze.

\(2\) Level premium term insurance.

\(3\) Account has off-tape indebtedness or statutory lien.

\(4\) Incompetency is indicated.

\(5\) Insurance is lapsed including extended insurance.

\(6\) Day number cannot be calculated from input data.

\(7\) Policy not in force l year.

\(8\) Action type indicates impending automatic surrender.

\(9\) Returned mail indicated.

\(10\) Overpayment lien in effect on another policy of the insured.

(11.) Loan interest not capitalized.

NOTE: If input is inserted into the computer system when any of the
above conditions are on the master record, the input will be rejected
and an RPO, reason code 611, generated for clerical pro processing.

e\. Clerical processing to provide information on the cash value of a
policy:

\(l\) If the plan of insurance is 5LPT, or if a permanent plan policy
has been in force for less than 12 months, a- FL 29-108 is prepared and
released. On a permanent plan, the cash value at the end of the first
policy year is included.

\(2\) If premiums are paid through or beyond the current premium month,
compute the cash value as follows:

\(a\) Determine the period of time (years and months) the policy will
have been in force from the effective date through the prospective
premium month in which the cash surrender will be requested.

\(b\) Using the plan of insurance, the age of the insured on the
effective date of the policy, and the years and months the policy will
have been in force, obtain the fractional reserve value per \$ l ,000 of
insurance. (See par. 8.03e(2)(b) for list of manuals containing
fractional reserve values.)

\(c\) Multiply the fractional reserve value per \$ l ,000 of insurance
by the thousands of insurance and add, if available, any dividend
credit/deposit balance on the account. This is the maximum cash value.

**9-3**

M29-1, Part II April 27, 1972

Change 6

\(d\) Subtract the indebtedness (loans, accumulated interest, premium
shortages, liens, including an insurance overpayment lien on another
policy of the insured). This is the net cash value.

\(e\) To compute the net loan value refer to chapter 8, paragraph 8.03.

\(3\) Where a form, MTST, or a dictated letter is released manually, the
net cash value and the net loan value will be furnished.

\(4\) When it is necessary to process the cash value of paid-up
insurance clerically, a VA Form 29-320, Request for Calculation, will be
prepared and sent to the Actuarial Computers for computation.

\(5\) If there is Other indebtedness indicated, obtain amounts and
types. Compute interest, when applicable, through the prospective date
of cash surrender.

\(6\) If the insured is incompetent, a dictated letter will be released
to the Chief Attorney of the appropriate regional office. The cash value
available through the prospective premium month in which the cash
surrender will be granted will be included in the letter.

\(7\) VA Form 29-5772 will be prepared and released in all instances
where it is not indicated that a dictated letter or VA FL 29-108 is to
be released. The insured\'s letter will be enclosed with the reply.

\(8\) If the insured requests additional information, the reply will be
by dictated letter. If the insured\'s letter contains information of
record value, it will be stamped Ready for File, signed, dated and sent
to be filed in the insurance folder. Otherwise, it will be disposed of
in accordance with Records Control Schedule VB-l.\]

9.03 PROCESSING FORMAL AND INFORMAL APPLICATIONS FOR CASH SURRENDER BY
THE COMPUTER

a\. VA Form \[29-323\] or \[ \] 29-8521 \[is prepared\] to initiate
system processing of a cash surrender \[ \].

b\. When VA Form \[29-323 is prepared\] to initiate system processing of
the cash surrender and the check is to be mailed to an address different
from that in the master record, \[ \] VA Form 29-322, \[Disbursement\]
Address or Trailer Input, \[will also be prepared\]. When the address on
the application is intended as an address change for \[ j insurance
purposes, \[ l VA Form 29-5934, Change of Address for Insurance
Purposes, \[will be prepared\] in lieu of VA Form 29-322. VA Form
29-8521 contains an area to be used when addresses are involved.

c\. When action is not initiated \[for\] system \[processing of the cash
surrender\] , \[ j a request for an RPO \[will be prepared\] and \[ j
the master record \[frozen.\]

d\. When preparing VA Form \[29-323\] or \[ \] 29-8521 to initiate
system processing of a cash surrender, transaction type 615 will be used
only after reviewing the records to be sure that all of the following
conditions are adequately covered:

\(l\) That overpayment lien on another policy will be paid from the
proceeds of the cash surrender.

\(2\) That cash surrender may be processed under certain conditions even
though there was loan activity within the last 20 days.

\(3\) Overages of \$25 or more or shortages in excess of 29 percent of a
monthly 1?premium have been clerically validated on deduction accounts.

NOTE: If any of the above conditions are not involved, transaction type
605 will be used.

e\. After input documents are prepared to initiate system processing of
the cash surrender, send with all material to the Voucher Audit Unit for
review and verification.

94

January 30, 1974 M29-1, Part II\
Change 11

f \[Cash surrender of an endowment policy with both paid-up life and
paid-up endowment additions will be processed as follows:

\(l\) To surrender the parent policy and both paid-up additions, VA Form
29-323, Disbursements, or VA Form 29-5886b, RPO (Insurance Record
Printout), will be prepared using the appropriate transaction type (605
or 615) with computation code 1.

\(2\) To surrender the parent policy and the paid-up endowment
additions, VA Form 29-323 or VA Form 29-5886b will be prepared using
transaction type 605 or 615 with computation code 2. The paid-up life
additions will remain on the master record. When an endowment policy is
surrendered for cash, its paid-up endowment additions must be
surrendered also.

g.\] When the cash surrender is processed, the system will \[generate\]
VA Form 29-332, Notice of Cash

Surrender. \[ \]The original is released \[to the insured\] by the
Voucher Audit Unit and the duplicate is filed in the insurance folder.

9.04 MANUALLY PROCESSING FORMAL AND INFORMAL APPLICATIONS FOR CASH
SURRENDER

a\. Review the cash surrender application for acceptability.

b\. If the RPO does not indicate Insured Incompetent or indicates
Incompetent but no Guardian Appointed, or material in the insurance
folder or accompanying correspondence indicates the insured is
incompetent, or may be, send the material to the Disability
Determination Unit for a decision.

c\. If there is other indebtedness, obtain amounts and type. Withhold
the necessary amount from the cash surrender value to offset the
indebtedness.

d\. If there is evidence of a Disbursement Pending, check the liability
master record for the number and types of disbursement. Take necessary
action to include the amount of such disbursements in the net amount
payable.

e\. If the insured has other policies in force, check for any
outstanding insurance overpayment liens for the other policies. If a
lien exists, deduct the amount of the lien automatically. Send a
dictated letter to the insured advising him of the action taken. The
letter will grant the insured the opportunity of returning the check.

9-4a

January IS, 1971 M29-1, Part II

f\. If the how paid code in the master record is 5 and/or there is an
active disability award, release **a** dictated letter to the insured
covering:

\(I\) The advisability of retaining the insurance and that the TDIP
benefits will be discontinued by the cash surrender action.

\(2\) The fact that h-may obtain a loan up to 94 percent of the cash
value.

\(3\) That his application will not be processed unless he reaffirms ht-
request.

4 (a) If the request is reaffirmed, send the material to the insurance
officer, or a designee, for final approval to

process the surrender.

\(b\) If approval is granted, process the surrender as prescribed.

g\. If the insurance is in force under premium-paying conditions, check
the amount and date of the last transaction.

\(I\) If the amount of the payment was less than \$100 and less than 20
days have elapsed since it was made, and there is no history of
dishonored checks; i.e., not more than one returned check within the
last 2 years, process the application without delay.

\(2\) If the amount of the payment was \$ 100 or more, and less than 20
days have elapsed since it was made, determine if payment was made by
personal check. If so, withhold vouchering of the surrender check until
bank clearance of the remittance is assured. Advise the insured about
the delay and the reason therefore. If the remittance was not a personal
check, process the application without delay.

h\. Under NSLI, if the premiums are not paid through the premium month
of surrender, check for Administrator\'s Decision 902 or dividend
credits. If any, apply to the unpaid premiums. Under USGLI, a request
will be honored anytime within 3 months from an unpaid premium, and the
reserve value in this instance would cover the period through the day
before the next premium was due.

**i.** If the how paid code is 2 (Reduced Paid-Up Insurance) or 4
(Extended Insurance), request the cash value of such insurance on VA
Form 29-320, Request for Calculation, and attach to the RPO.

j\. If dividends are due for the current and/or prior years, and for the
months from the last policy anniversary date through the Value As Of
Date (surrender date), compute the amount of all such dividends.

k\. If annual interest is due on dividend credits and/or deposits but
has not been added, compute and enter the amount due in the Interest
Amount block of the dividend credit/deposit segment. If interest has
been added but is not due, reverse the interest addition.

l\. If interest has been added on the loan and/or lien beyond the day
following the date through which the cash value is established, compute
the amount of interest credit due.

m\. If interest is due on a loan and/or lien, compute the amount due
from the day after the loan and/or lien effective date, or the day after
the anniversary date, whichever is later, through the day after the
Value As Of

Date. Enter the amount due in the Interest Amount block.

n\. If section 724 waiver is in effect, attach VA Form 29-320 to the RPO
and send to the computers requesting a calculation of the pure insurance
risk credits due through the Value As Of Date.

n\. If processing a surrender on an allotment or DFB account, place the
notation (Month-Year) included in , to indicate the last deduction taken
into consideration when processing the surrender.

.

**9-5**

M29-1, Part II January 15,1971

p\. If an informal application is acceptable, stamp, date and initial
the application as below:

Accept as Informal Application for Cash Surrender

(Date of Acceptance) (Initials of person\
authorizing acceptance)

Date Initials

Authority for acceptance is limited to the Chief, Policy Service Section
or higher.

g\. If the application is approved, note the application approved, date
and sign. A namestamp may be used in lieu of signature.

r\. When the cash surrender is approved, VA Form 29-332 will be
completed as follows:

IDENTIFICATION SEGMENT:

\(I\) The name and address of the insured should be entered in the space
provided on the form, if check is to be issued to the insured. If check
is to be issued to the insured\'s legal representative, enter (Richard
Doe), Guardian for (John Doe).

\(2\) File Number. Enter file number including letter prefix.

\(3\) Policy No.-Prefix-Last 3 Digits. Enter letter prefix for policy
number and last three digits of policy number.

POLICY SEGMENT:

\(I\) Date of Issue-Mo.-Day-Year. Enter month, day and year policy was
effective.

\(2\) Amount. Enter face amount of insurance.

\(3\) Plan. Make entries as follows:

\(a\) If policy is being surrendered under premium-paying conditions,
enter plan.

\(b\) If under extended insurance, enter EXT. INS.

\(c\) If reduced paid-up or paid-up endowment, enter Pd-up Life or End.

\(4\) Age. Make entries as follows:

\(a\) If surrendered under premium-paying conditions, enter insured\'s
age at issue.

\(b\) If extended insurance, enter insured\'s age at date of lapse.

\(c\) If reduced paid-up life or reduced paid-up endowment, enter
insured\'s age at effective date of such paid-up insurance.

\(5\) Amount Surrendered. Enter same amount as shown in Amount.

\(6\) Amount Retained. Enter NONE.

\(7\) Surrender Value. Enter surrender value.

9-6

August 31, 1971 M29-1, Part II

*a* Change 3

\(8\) Effective Date of Surrender-Mo.-Day-Yr. Enter date of surrender.

CREDIT SEGMENT:

\(1\) Plan changed from- \_\_\_\_\_\_\_ to- \_\_\_\_\_\_\_\_ . Leave
blank.

\(2\) Reserve Value. Enter the amount of reserve calculated. ( j

\(3\) Difference in Reserve. Leave blank.

\(4\) Unpaid Dividends. Enter amount of unpaid dividends and dividend
year(s) to which they are to be

charged.

\(5\) Unearned Premiums Plus Overage. Enter amount of all unearned
premiums, and premium overages.

\(6\) Dividend Credit/Deposit. Enter balance shown in dividend
credit/deposit segment.

\(7\) Interest Credit. Enter amount of interest earned on dividend
credit/deposit balance(s).

\(8\) Pure Ins. Risk Credits. Enter amount of pure insurance risk
credits and interest calculated.

\(9\) Total Credits. Enter total credits.

DEBIT SEGMENT:

\(l\) Policy Loan. Enter loan balance.

\(2\) Loan Int. to Date of Surrender or Change. Enter amount of interest
computed.

\(3\) Lien Principal. Enter amount of premium and/or insurance
overpayment lien(s).

\(4\) Lien Int. to Date of Surrender or Change. Enter amount of interest
due on lien indebtedness.

\(5\) Unpaid Premiums. Plus Shortage to Date of Surrender or Change.
Enter amount of unpaid premiums plus shortages.

\(6\) Difference in Reserve. Leave blank.

\(7\) Other. Enter amount of Finance Indebtedness, Service Department
Indebtedness or Internal Revenue Service Indebtedness.

\(8\) Total Debits. Enter total debits.

\(9\) Net Amount Payable. Enter difference between amounts in Total
Credits and Total Debits.

9.05 PROCESSING REQUESTS FOR CANCELLATION OF APPLICATION FOR CASH
SURRENDER

a\. Upon receipt of the request for cancellation, associate the request
with the application for cash surrender and the insurance folder.

b\. If cancellation of the application is approved, take action as
follows:

\(l\) Enter Canceled per request dated \_\_\_\_\_\_\_\_ , on the
application for cash surrender.

**9-7**

M29-1, Part2 August 31,1971

Change 3

\(2\) File the request, after being stamped Ready for File, signed and
dated, in the insurance folder with the application, if the insured did
not, request return of the application.

\(3\) Void any preliminary action taken in processing the application.

\(4\) Notify the insured of the action taken.

c\. If the voucher has been released but the request for cancellation
was mailed before the date of the voucher, request the insured to return
the check when he receives it. The letter should contain the following
statement:

We wish to stress that the return of the deck representing the proceeds
of the surrender will not in itself be considered as an obligation on
the part of the Veterans Administration to set aside the surrender of
the insurance.

9.06 PROCESSING REQUESTS FOR SURRENDER CANCELLATION, WITH TD FORM 1664X,
RETURNED CHECK NOTICE, ATTACHED

a\. Upon receipt of the request for cancellation with TD Form 1664X
attached,, associate with the application for cash surrender and the
insurance folder.

b\. If cancellation of the application is approved, take action as
follows:

\(l\) Enter Canceled per request dated \_\_\_\_\_\_\_\_\_\_\_\_ , on the
application for cash surrender.

\(2\) Punch holes, using a two-hole punch, at the bottom of the TD Form
1664X.

\(3\) On the reverse of the TD Form 1664X, place a impression showing
the following\
information: \`v,

Check is proper for cancellation.

El On-Tape Reason for Cancellation

El Off-Tape (No input)

For off-tape cancellations, indicate below the purpose for which check
was originally issued:

Dividend\_\_\_\_\_\_\_\_\_\_\_\_\_ Cash Surrender\_\_\_\_\_\_\_\_\_\_
RO#\_\_\_\_\_\_\_\_\_\_\_

Year Other (Explain) XC#\_\_\_\_\_\_\_\_\_\_\_

Premium Refund

Policy Loan

SF 1098 Number \_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Signature of Authorizing Employee

\(4\) Complete the above-stamped impression by entering all necessary
information except the SF 1098, Schedule of Canceled Checks, number.

\(5\) Prepare input documents to restore the account on the master
record and to reverse debit and credit actions taken when the surrender
was processed.

\(6\) Send the TD Form l664X, insurance folder and all supporting
documents required for the cancellation of the surrender to the Voucher
Audit Unit.

9-8

April 27, 1972 M29-1, Part II\
Change 6

9.07 ESTABLISHING ACCOUNTS RECEIVABLE FOR OVERPAID CASH SURRENDERS

a\. Overpayments in cash surrender transactions may result from:

\(1\) Premiums not paid to date of surrender due to premature stoppage
of deductions.

\(2\) Error in calculation of reserve, unearned premiums, dividends,
etc.

\(3\) Wrong date of surrender.

\(4\) Failure to deduct an outstanding indebtedness such as loan, lien,
etc.

b\. The procedure for establishing an Accounts Receivable indebtedness
applies only where the insured has no other active policies in force. If
there are other active policies, follow regular lien procedure.

\[9.08 PROCESSING SURRENDER FOR PAID-UP INSURANCE

a\. When paid-up insurance information is to be computed and released to
the insured by the computer system, the following action will be taken:

\(1\) VA Form 29-323 or 29-8521, transaction type 603, is prepared.
Computation code 2 is entered in block 74 of VA Form 29-323 or in the
RPO Reg. block of VA Form 29-8521. The computation date is entered in
blocks 22-26 of VA Form 29-323 or the Postmark/Computation Date field of
VA Form 29-8521. It is an AS OF date.

\(2\) The computer system will generate a VA Form 298348, Information
About Your Insurance, with the following completed paragraph:

THE RESERVE OF ON YOUR POLICY AS OF\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

LESS LOAN AND INTEREST OF\_\_\_\_\_\_\_\_\_ PLUS YOUR DIVIDENDS AND
INTEREST OF \_\_\_\_\_\_\_

WILL PURCHASE PAID-UP INSURANCE IN THE AMOUNT OF\_\_\_\_\_\_\_\_\_\_\_

\(3\) The loan and dividend data will be printed only when such segments
are in the master record.

b\. When any of the following conditions are indicated, clerical
processing is required:

\(1\) There is a life or policy freeze.

\(2\) Level premium term insurance.

\(3\) Account has off-tape indebtedness or statutory lien.

\(4\) Incompetency is indicated.

\(5\) Insurance is lapsed (including extended insurance).

\(6\) Day number cannot be calculated from input data.

\(7\) Policy not in force 1 year.

\(8\) Action type indicates impending automatic surrender.

(9 ) Returned mail indicated.

\(10\) Overpayment lien in effect on another policy of the insured.

**9-9**

M29-1, Part II April 27, 1972

Change 6

(11.) Loan interest not capitalized.

\(12\) How paid code is zero.

\(13\) RH contract.

\(14\) Endowment at Age 96 contract.

NOTE: If input is inserted into the computer system when any of the
above conditions are on the master record, the input will be rejected
and an RPO, reason code 611, generated for clerical processing.

c\. Clerical processing to provide information on the paid-up value of a
policy is:

\(l\) If the plan of insurance is 5LPT, or if a permanent plan policy
has been in force for less than 12 months, a VA FL 29-108 is prepared
and released. On a permanent plan, the paid-up value at the end of the
first policy year is included.

\(2\) If the policy is eligible for surrender for paid-up insurance, a
VA Form 29-320, Request for Calculation, will be prepared and sent to
the Actuarial Computers for computation.

\(3\) Upon return of the VA Form 29-320, an MTST letter with a paragraph
as provided in subparagraph a (2) above will be prepared and released to
the insured.

\(4\) If the insured is incompetent, a dictated letter will be released
to the Chief Attorney of the appropriate regional office. The amount of
paid-up insurance available through the prospective premium month in
which the surrender will be processed will be included in the letter.

\(5\) When the condition preventing the calculation of paid-up insurance
is lapsed insurance (including extended insurance), action type
indicates impending automatic surrender or how paid code is zero, a
dictated letter will be prepared, explaining to the insured why the
information cannot be furnished him.

d\. When an acceptable application for paid-up insurance is received,
the following action will be taken:

\(l\) If there is no change of address on the application, VA Form
29-323 or the RPO will be the input document. The transaction type is
665 and the returned check history code and the postmark date (cash
surrender date) is completed. If the master record is frozen, the input
will be rejected.

\(2\) If there is a change of address on the application, the Policy
Service Clerk will prepare VA Form 29-323 or 29-8521. When VA Form
29-323 is used, VA Form 29-322, Disbursement Address or Trailer Input,
will also be prepared. In addition to identifying information, the
document will be prepared as stated in subparagraph a above. In
addition, the address portion will be completed. The mail control block
will be left blank.

\(3\) The computer system will generate a VA Form 29-8348 for release to
the insured with the following paragraph:

THE REQUEST TO SURRENDER YOUR POLICY IDENTIFIED ABOVE HAS BEEN APPROVED.
THE RESERVE OF\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_PLUS
\_\_\_\_\_\_\_\_\_\_\_\_DIVIDEND DEPOSIT BALANCE (MINUS INDEBTEDNESS)
WAS USED TO PURCHASE \_\_\_\_\_\_\_\_\_\_ (PAID-UP INSURANCE) OR
(PAID-UP ENDOWMENT) EFFECTIVE \_\_\_\_\_\_\_\_\_\_\_\_- PLEASE ATTACH
THIS INFORMATION TO YOUR POLICY AS A PERMANENT RECORD OF THIS CHANGE.

\(4\) If any of the following conditions exist, the input will be
rejected and an RPO, reason code 665, will be generated. Clerical
processing will be necessary.

\(a\) Not a how paid 9.

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February 13,1979 M29-1, Partll\
Change 15

\(b\) Pending transactions are on the master record for the policy being
surrender for paid-up insurance.

\(c\) Temporary master record.

\(d\) Incompetent.

\(e\) Policy frozen.

\(f\) 5LPT or WL 745.

\(g\) Next month due not paid prior to submission of application for
paid-up insurance.

\(h\) Reserve to be furnished by \[Philadelphia VA Center Actuarial
Staff (299)\] for NSLI-RH or USGLI

Endowment-at age 96.

\(i\) Automatic surrender date.

\(j\) Returned mail bit on.

\(k\) Indebtedness exceeds reserve.

\(l\) Unable to calculate reserve.

\(m\) RPO generated for other reasons.

\(n\) Other indebtedness bit on.

\(o\) Dividends due for 2 years.

\(p\) Unable to convert effective date to binary.

\(g\) Interest adjustment on loan, lien, dividend credit/deposit.

\(r\) TDIP segment.

\(5\) If a refund is to be made due to unearned premiums or dividend
credit, and it is to be mailed to an address other than the address on
the master record, the case will be processed clerically.

\(6\) When an application is processed clerically, a VA Form 29-320 will
be prepared and sent to the Actuarial computers for computation. When it
is returned, the Policy Service \[Technician\] will have an \[AT
(automatic typewriter) letter prepared and release it to the insured
with a completed VA Form 29-1546a, Notice-Surrender for Paid-Up
Insurance Approved, enclosed.

\(7\) All cases processed mechanically or clerically, whether or not a
refund is due, will be forwarded to the Voucher Audit \[activity\] for a
special batch number. Cases will be routed to the Voucher Audit
\[activity\] in two batches:

\(a\) All cases processed clerically will be sent with the insurance
folder.

\(b\) All cases processed mechanically will be sent in a separate batch.

9.09 APPLICATION FOR CASH SURRENDER OF LIMITED PAYMENT LIFE POLICY WITH
ALL PREMIUMS PAID AND EARNED

When an application for cash surrender of a limited payment life policy
on which premiums have been paid and earned through the premium-paying
period is received, the application will be processed as provided below:

a\. When an informal request for cash surrender is received and the
request expresses an urgent need for funds, it will be sent to the
Policy Service Section for approval to accept it as an informal loan
application. When

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M29-1, Part II February 13, 1979

Change 15

approval is given, it will be processed for the maximum loan amount. A
conservation type letter will be released to the insured, explaining
that the maximum amount of loan has been granted instead of surrendering
the policy. (VA Form 29-1546 will be enclosed for \[the insured\'s\] use
should he or she prefer to surrender the insurance.) The letter will
stress:

\(1\) Surrendered insurance may not be reinstated or replaced;

\(2\) Loan and cash values will continue to increase if policy remains
in force; and

\(3\) Dividends will be paid as declared on participating policies
continued in force.

b\. If the request does not indicate an urgent need of funds, process as
follows:

\(l\) If applicable, release VA Form 29-5772 to the insured.

\(2\) If VA Form 29-5772 is not appropriate, a conservation type letter
similar to that provided in subparagraph a above will be released,
including a reference to any indebtedness that must be collected from
the cash value. (VA Form 29-1546 and VA Form 29-1547, Application for
Policy Loan, will be enclosed.)

\(3\) A diary will not be established since processing of the request is
dependent upon the insured.

\(4\) If the insured renews the request for surrender, the effective
date of cash surrender will be determined

as follows:

\(a\) If the request is renewed within 31 days from the date the VA Form
29-5772 or conservation letter was released, the effective date will be
based on the date of the original request.

\(b\) If the request is renewed more than 31 days from the date the VA
Form 29-5772 or conservation letter was released, the effective date
will be based on the date of the current request.

\(5\) If the insured withdraws the request for cash surrender and
applies for a loan, by formal application or letter, the effective date
of the loan will be based on the date the loan check is drawn by the
Treasury Department.

c\. When a formal application is received, if in order, it will be
processed without delay except when one of

the following conditions is present:

\(I\) Disability waiver is in force; or

\(2\) Claim for disability benefits is pending; or

\(3\) Total permanent disability benefits are being paid.

d\. Upon receipt of an application for cash surrender and one of the
exceptions as provided in subparagraph c above is present, the insured
will be informed of the seriousness of the act and provided information
on the valuable coverage he or she is losing. The surrender will not be
processed unless \[the insured\] confirms he or she still wants the cash
value of the policy.

\[9.10 PROCESSING CASH SURRENDERS WITHOUT INSURANCE FOLDER

a\. Upon receipt of an application for a cash surrender, formal or
informal, which has been associated with an RPO, and there is no record
of the folder or it is charged out, a search will be made to locate the
folder. If it cannot be located within l workday, the material will be
noted accordingly and forwarded to the Voucher Audit activity for
processing of the cash surrender.

b\. A search slip will be prepared showing the type of action pending
and the date the material was forwarded for processing. The search for
the folder will be continued.

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February 13,1979 M29-1, Part ll\
Change 15

c\. When the folder is located, it will be held until the material is
returned. If the material is received prior to locating the folder, it
will be held until the folder is located. When the material has been
associated with the folder, the case (material and folder) will be
returned to the unit that processed the cash surrender for review and
any additional action necessary.

d\. If the check is to be sent to an address that is different from the
one of record, the signature of the insured on the application must be
verified prior to processing.

e\. In those instances when the signature of the insured must be
verified and the folder has not been located, every effort will be made
to obtain a microfilm print or photocopy of documents available to the
local office bearing the insured\'s signature. Microfilm prints are
available from the following sources:

\(l\) Beneficiary and option designations if beneficiary designation
reel number is in the master record.

\(2\) Remittances.

f\. If verification of the signature cannot be made, FTS (Federal
Telecommunications System) may be used to contact the insured to
authenticate the request. The application will be appropriately noted.

g\. After action has been completed, a VA Form 3230, Reference Slip,
will be noted in red, \"SPECIAL MAIL- ATTACH FOLDER,\" attached to the
material and routed to the Voucher Audit activity for review or
Insurance Files Section for filing in the insurance folder, as
appropriate.\]

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