United States 

-'~ Office of 

·-1·.·'· ..· ,"'.'~".' . ).. " PersOnnel 

I

'11' 

Management 

Office o/the Inspector General 

'/ 

Final·Audit Report 

Subject: . ". 

REP.ORTONTHE AUDIT OF 


METROPOLITAN LIFE INSURANCE COMPANY 


JERSEY CITY, NEW JERSEY 


Prepared By: 


OFFICE OF AUDITS 


Report No. 2A..n-OO~OS-045 

Date: January 31? 2006 


-,-CAUTION-­

This audi, ..·"or, b.s. be'n dislribul.ell 10 Feller.land non-Federal offici.ls ..ho ar. responsible for Ihe administration "ftbe audiledconiracl. This alldi. 

roporl nl3J conlain proprietar)' data which;s prolecled by Federal law (18 USC 1905); Iberefore', while lhis audit reporl is a,ailalile under Ibe Freedom of 

Information Ari, raution should be exercised before reliasing Ihe reporllo Ibe gener.1 public. 
UNITED STATES 


OFFICE OF PERSONNEL MANAGEMENT 


WASHINGTON, DC 20415-1100 

OFFICE OF 

THE INSPECTOR GENERAL 

AUDIT REPORT 


Federal Employees' Group Life Insurance Program 


Contract Number 17000-G 


Metropolitan Life Insurance Company 


Jersey City, New Jersey 


REPORT NO. 2A-II-OO-05-045 DATE: January 31. 2006 

~~-~ll Ikv Harvey D. Thorp 

r- Assistant Inspector General 

for Audits 

OIG-Ol 

May 1999 
UNITED STATES 


OFFICE OF PERSONNEL MANAGEMENT 


WASIDNGTON. DC 20415-1100 

OFFICE OF 

THE INSPECTOR GENERAL 

EXECUTIVE SUMMARY 

Federal Employees' Group Life Insurance Program 


Contract Number 17000-G 


Metropolitan Life Insurance Company 


Jersey City, New Jersey 


REPORT NO. 2A-II-00-05-045 DATE: .January 3J, 2006 

This final audit report on the Federal Employees' Group Life Insurance (FEGLI) Program 

operations at Metropolitan Life Insurance Company (MetLife) in Jersey City, New Jersey 

questions $1,273,1541 in administrative expense overcharges and $180,354 in net under draws 

from the letter of credit (LOC) account. MetLife agreed (AJ with all questioned amounts. Lost 

investment income on the questioned costs amounted to $23,787. 

Our audit was conducted in accordance with Government Auditing Standards. The audit covered 

claim payments for fiscal year 2004, as well as claim overpayments and administrative expenses 

for fiscal years 2000 through 2004 as reported in the FEGLI Program financial statements. In 

addition, we reviewed MetLife's policies and procedures related to cash management ofFEGLI 

Program funds for fiscal years 2000 through 2004. 

Questioned items are summarized, as follows: 

1 Since the actual administrative expenses incurred by MetLife for the FEGLI Program exceeded the contract 

expense limitations for fiscal years 2000 through 2004 by approximately $2 million, no monetary adjustments are 

required by MetLife for these overcharges. 

OIG-Ol 

May 1999 
BENEFIT CHARGES 

The audit disclosed no findings pertaining to benefit charges. Overall, we concluded that 

MetLife correctly paid claims in fiscal year 2004 and properly processed overpayment 

recoveries in fiscal years 2000 through 2004. 

ADMINISTRATIVE EXPENSES 

• Pension Costs (A) $1,249,584 

MetLife did not calculate pension costs in accordance with the Federal regulations. The 

regulations limit the amount of pension costs that may be charged to a government contract to 

the lower of any cash contribution to the pension fund trustee, or the amount of expense 

calculated in accordance with Cost Accounting Standards (CAS) 412 and 413, whichever is 

lower. MetLife did not calculate pension costs based on the lesser of cash contributions or 

CAS amounts. As a result, MetLife over allocated pension costs to the FEGLI Program in 

fiscal years 2001 through 2004. 

• Limits on Executive Compensation (A) $23,570 

MetLife overcharged the FEGLI Program for executive compensation in fiscal years 2000 

through 2004. 

CASH MANAGEMENT 

• Letter of Credit Drawdown Reconciliations (A) ($180,354) 

MetLife under drew a net amount of$180,354 from the LOC account for administrative 

expenses and service charges for fiscal years 2002 through 2004. Specifically, MetLife over 

drew $141,100 and $94,105 from the LOC account for fiscal years 2002 and 2003, 

respectively, and under drew $415,559 for fiscal year 2004. . 

LOST INVESTMENT INCOME ON AUDIT FINDINGS 

As a result of the audit findings presented in this report, the FEGLI Program is due lost 


investment income of$23,787 through September 30,2005. 


ii 
CONTENTS 

PAGE 


EXECUTIVE SUMMARy............................................................................................ i 


I. INTRODUCTION AND BACKGROUND ...................................................................1 


ll. OBJECTIVES, SCOPE, AND METHODOLOGy .......................................................2 


ill. AUDIT FINDINGS AND RECOMMENDATIONS .................................................... .4 


A. BENEFIT CHARGES ........................................................................................4 


B. ADMINISTRATIVE EXPENSES ....................................................................... .4 


1. Pension Costs ...............................................................................................4 


2. Limits on Executive Compensation .............................................................5 


C. CASH MANAGEMENT ......................................................................................6 


1. Letter of Credit Drawdown Reconciliations ................................................6 


D. LOST INVESTMENT INCOME ON AUDIT FINDINGS ..................................8 


IV. MAJOR CONTRIBUTORS TO THIS REPORT ..........................................................9 


V. SCHEDULES 

A. Contract Charges and Questioned Charges 

B. Questioned Charges 

C. Lost Investment Income Calculation 

APPENDIX 	 (Metropolitan Life Insurance Company reply, dated September 20, 2005, 

to the draft audit report) 
I. INTRODUCTION AND BACKGROUND 


INTRODUCTION 


This final audit report details the findings, conclusions, and recommendations resulting from our 

audit of the Federal Employees' Group Life Insurance (FEGLI) Program operations at 

Metropolitan Life Insurance Company (MetLife). MetLife's FEGLI Program operations are 

located in Jersey City, New Jersey. 

The audit was performed by the Office of Personnel Management's (OPM) Office of the Inspector 

General (OIG), as established by the Inspector General Act of 1978, as amended. 

BACKGROUND 

The FEGLI Program was created in 1954 by the Federal Employees' Group Life Insurance Act 

(P.L. 83-598). OPM's Center for Retirement and Insurance Services (CRIS) has overall 

responsibility for administering the Program, including the publication ofprogram regulations 

and agency guidelines; and the receipt, payment, and investment of agency withholdings and 

contributions. CRIS contracts with MetLife to provide life insurance coverage to employees, 

annuitants, and their family members (Contract No. 17000-G). Employing agencies are 

responsible for emolling, informing and advising employees ofprogram changes, determining 

eligibility, maintaining insurance records, withholding premiums from pay, remitting and 

reporting withholdings to OPM, and .certifying salary and insurance coverage upon separation or 

death. 

MetLife's responsibilities under the contract are carried out by the Office ofFEGLI (OFEGLI), a 

separate unit ofMet Life, which is located in Jersey City, New Jersey. OFEGLI is supervised by 

MetLife's Group Insurance Department. OPM's Insurance Services Programs administers the 

contract with OFEGLI. 

Compliance with laws and regulations applicable to the FEGLI Program is the responsibility of 

MetLife's management. Also, management of MetLife is responsible for establishing and 

maintaining a system of internal controls. 

Our previous audit ofMet Life (Report Number II-OO-99-018, dated July 14, 1999), covering 

administrative expenses for fiscal year 1998, disclosed no questioned costs. 

The results of our audit were provided to MetLife in written audit inquiries; were discussed with 

MetLife officials throughout the audit and at an exit conference; and were presented in detail in a 

draft report, dated August 23, 2005. MetLife's comments offered in response to the draft report 

were considered in preparing our final report and are included as the Appendix to this report. 

1 

II. OBJECTIVES, SCOPE, AND METHODOLOGY 

OBJECTIVES 

The objectives of our audit were to determine whether MetLife charged costs to the FEGLI 

Program and provided services to FEGLI Program subscribers in accordance with the terms of 

the contract. Specifically, our objectives were as follows: 

Benefit Charges 

• 	 To determine whether MetLife complied with the contract provisions relative to 

benefit payments. 

• 	 To determine whether overpayment recoveries were returned promptly to the FEGLI 

Program. 

Administrative Expenses 

• 	 To determine whether administrative expenses charged to the contract were actual, 

necessary and reasonable expenses incurred in accordance with the terms ofthe 

contract, contractual expense limitations, and applicable regulations. 

Cash Management 

• 	 To determine whether MetLife handled FEGLI Program funds in accordance with 

applicable laws and regulations concerning cash management in the FEGLI Program. 

SCOPE 

Our performance audit was performed in accordance with Government Auditing Standards, 

published by the United States General Accounting Office, and with the terms of the contract. 

Accordingly, the audit included tests ofthe accounting records and other aUditing procedures as 

considered necessary in the circumstances. 

We reviewed the FEGLI Program financial statements for fiscal years 2000 through 2004. During 

this period, benefit charges totaled approximately $9.8 billion and administrative expenses totaled 

$41.2 million. (See Schedule A) Specifically, we reviewed claim payments in fiscal year 2004 for 

proper adjudication. We also reviewed claim overpayments, administrative expenses, and cash 

management activities for fiscal years 2000 through 2004. 

In planning and conducting our audit, we obtained an understanding of MetLife's internal control 

structure to help determine the nature, timing, and extent of our auditing procedures. This was 

determined to be the most effective approach to select areas of audit. For those areas selected, 

we primarily relied on substantive tests of transactions and not tests of controls. Based on our 

2 

testing, we did not identify any significant matters involving MetLife's internal control structure 

and its operation. However, since our audit would not necessarily disclose all significant matters 

in the internal control structure, we do not express an opinion on MetLife's system of internal 

controls taken as a whole. 

We also conducted tests to determine whether MetLife had complied with the contract, the 

applicable procurement regulations (i.e., Federal Acquisition Regulations and Federal Employees 

Group Life Insurance Federal Acquisition Regulations, as appropriate), and the laws and 

regulations governing the FEGLI Program. The results of our tests indicate that, with respect to the 

items tested, MetLife did not comply with all provisions ofthe contract and federal procurement 

regulations. Exceptions noted in the areas reviewed are set forth in detail in the "Audit Findings 

and Recommendations" section ofthis audit report. With respect to the items not tested, nothing 

came to our attention that caused us to believe that MetLife had not complied, in all material 

respects, with those provisions. 

The audit was performed at MetLife's OFEGLI in Jersey City, New Jersey from April 11, 2005 

through May 13,2005. 

METHODOLOGY 

To test MetLife's compliance regarding the FEGLI Program benefit provisions, we selected and 


reviewed a judgmental sample of200 claims from fiscal year 2004. For the claims in this 


sample, we reviewed the case files and determined if the necessary documents were provided and 


if these claims were correctly calculated and paid. 


To test MetLife's compliance regarding claim overpayments, we selected a judgmental sample of 


80 overpayment recoveries from fiscal years 2000 through 2004, and reviewed MetLife's 


accounting records to determine if these recoveries were properly processed. 


We judgmentally reviewed the administrative expenses charged to the FEGLI Program for 


contract years 2000 through 2004. We used the FEGLI Program contract; the Federal 


Acquisition Regulations; and the Federal Employees Group Life Insurance Federal Acquisition 


Regulations to determine the allowability, allocability, and reasonableness of charges. 


In addition, we reviewed MetLife's cash management to determine whether MetLife handled 

'FEGLI Program cash in accordance with Contract No. 17000-G and applicable laws and 

regulations. 

3 

III. AUDIT FINDINGS AND RECOMMENDATIONS 


A. 	BENEFIT CHARGES 

The audit disclosed no findings pertaining to benefit charges. Overall, we concluded that 

MetLife correctly paid claims in fiscal year 2004 and properly processed overpayment 

recoveries in fiscal years 2000 through 2004. 

B. 	ADMINISTRATIVE EXPENSES 

1. 	 Pension Costs $1,249,584 

MetLife did not calculate pension costs in accordance with the Federal regulations. The 

regulations limit the amount ofpension costs that may be charged to a government 

contract to the lower of any cash contribution to the pension fund trustee, or the amount 

of expense calculated in accordance with Cost Accounting Standards (CAS) 412 and 413, 

whichever is lower. MetLife did not calculate pension costs based on the lesser of cash 

contributions (funded) or CAS amounts. As a result, MetLife over allocated pension 

costs of$1,249,584 to the FEGLI Program in fiscal years 2001 through 2004. 

48 CFR 31.205-60)(2) states, " ... The cost of all defined-benefit pension plans shall be 

measured, allocated and accounted for in compliance with the provisions of 48 CFR 

9904.412, Cost accounting standard for composition and measurement ofpension cost, 

and 48 CFR 9904.413, Adjustment and allocation ofpension cost. The costs of all 

defined-contribution pension plans shall be measured, allocated, and accounted for in 

accordance with the provisions of48 CFR 9904.412 and 48 CFR 9904.413. Pension 

costs are allowable subject to the referenced standards ..." 

The Federal Acquisition Regulations (FAR) limit the amount ofpension costs that may 

be charged to a government contract. Only the following may be charged: 

• 	 the amount of any cash contribution to the pension fund trustee, or 

• 	 the amount of expense calculated in accordance with CAS 412 and 413, 

whichever is lower. 

For fiscal years 2000 through 2004, MetLife calculated pension costs according to 

Financial Accounting Standard 87 and allocated $2,053,842 to the FEGLI Program. 

MetLife charged these pension costs as indirect expenses to the FEGLI Program. 

However, MetLife did not calculate these pension costs according to FAR, nor limit 

pension costs to the lower of cash contributions or CAS amounts. After receiving our 

Audit Inquiry, MetLife recalculated pension costs based on the lesser ofthe funded or 

CAS amounts for fiscal years 2000 through 2004. Based on MetLife's recalculations, the 

FEGLI Program was over allocated $1,249,584 ($208,150 in 2001, $300,632 in 2002, 

4 

$583,699 in 2003, and $157,103 in 2004) for pension costs in fiscal years 2001 through 

2004. 2 We reviewed and accepted MetLife's recalculations. 

MetLife's Response: 

MetLife agrees with this finding. In the future, MetLife will limit the pension costs 

allocated to the FEGLI Program in accordance with FAR. 

OIG Comments: 

We reviewed the FEGLI Program financial statements and noted that MetLife exceeded 

the administrative expense limitations by $1,983,886 ($128,198 in 2000, $373,340 in 

2001, $304,988 in 2002, $730,122 in 2003, and $447,238 in 2004) for fiscal years 2000 

through 2004. 

Recommendation 1 

We recommend that the contracting officer disallow $1,249,584 in pension costs that 

were over allocated to the FEGLI Program for fiscal years 2001 through 2004. However, 

since MetLife exceeded its administrative expense ceiling in each year by more than the 

amount questioned for that year, no monetary adjustments are required. 

2. Limits on Executive Compensation $23,570 

MetLife overcharged the FEGLI Program $23,570 for executive compensation in fiscal 

years 2000 through 2004. 

48 CFR 31.205-6(p) limits the allowable compensation costs for senior executives to a 

benchmark amount established each year by the Office ofFederal Procurement Policy. 

For 2000 through 2004, this limit is applicable to the five most highly compensated 

employees in management positions at each home office and each segment of the Plan, 

whether or not the home office or segment reports directly to the Plan's headquarters. 

The benchmark compensation amounts were $353,010 for 2000, $374,228 for 2001, 

$387,783 for 2002, $405,273 for 2003, and $432,851 for 2004. 

MetLife allocated executive compensation indirectly to the FEGLI Program. To 

determine the allowability of the amounts charged to FEGLI for executive compensation, 

we reviewed the Plan's allocations for contract years 2000 through 2004 and determined 

if the executive compensation amounts were limited to the benchmark amounts as 

required by 48 CFR 31.205-6(p). We found that the Plan did not limit the executive 

compensation amounts in the 2000, 2001, 2003, and 2004 allocations. As a result, the 

FEGLI Program was overcharged $23,570 ($91 in 2000, $204 in 2001, $11,212 in 2003, 

and $12,063 in 2004) for executive compensation in fiscal years 2000 through 2004. 

2 MetLife allocated the funded amount to the FEGLI Program in 2000, which was less than the CAS amount. 

5 

MetLife's Response: 

MetLife agrees with this finding. In the future, MetLife will limit the executive salaries 

allocated to the FEGLI Program in accordance with FAR. 

OIG Comments: 

We reviewed the FEGLI Program financial statements and noted that MetLife exceeded 

the administrative expense limitations by $1,983,886 ($128,198 in 2000, $373,340 in 

2001, $304,988 in 2002, $730,122 in 2003, and $447,238 in 2004) for fiscal years 2000 

through 2004. 

Recommendation 2 

We recommend that the contracting officer disallow $23,570 in executive compensation 

costs that were over allocated to the FEGLI Program for fiscal years 2000 through 2004. 

However, since MetLife exceeded its administrative expense ceiling in each year by more 

than the amount questioned for that year, no monetary adjustments are required. 

C. CASH MANAGEMENT 

1. Letter of Credit Drawdown Reconciliations ($180,354) 

MetLife under drew a net amount of $180,354 from the letter of credit (LOC) account for 

administrative expenses and service charges for fiscal years 2002 through 2004. 

Specifically, MetLife over drew $141,100 and $94,105 from the LOC account for fiscal 

years 2002 and 2003, respectively, and under drew $415,559 for fiscal year 2004. 

48 CFR 31.20 1-2( d) states, "A contractor is responsible for accounting for costs 

appropriately and for maintaining records ..." 

For each month during fiscal years 2002 through 2004, MetLife withdrew an estimated 

amount from the LOC account for administrative expenses and service charges. As ofthe 

completion of our on-site audit (May 13,2005), MetLife had not reconciled these LOC 

drawdowns to the actual chargeable expenses. Subsequently, MetLife reconciled the 

LOC drawdowns for these estimated expenses to the actual chargeable expenses for fiscal 

years 2002 through 2004. Based on these reconciliations, MetLife under drew a net 

amount of$180,354 from the LOC account for administrative expenses and service 

charges. 

6 

The following is a summary ofMet Life's reconciliations. 

Fiscal Year 2002 

Total Charged through Monthly LOC Drawdowns 

Less: 

Chargeable Administrative Expenses 

Less: 

Service Charge 

Difference (Over drew) 

Fiscal Year 2003 

Total Charged through Monthly LOC Drawdowns 

Less: 

Chargeable Administrative Expenses 

Less: 

Service Charge 

Difference (Over drew) 

Fiscal Year 2004 

Total Charged through Monthly LOC Drawdowns 

Less: 

Chargeable Administrative Expenses 

Less: 

Service Charge 

Difference (Under drew) 

$8,352,388 

7,586,288 

625,000 

$141,100 

$8,518,299 

7,749,194 

675,000 

$94.105 

$8,518,299 

8,213,858 

720,000 

($415.559) 

The administrative expenses incurred by MetLife exceeded the contract expense 

limitation for each year. Therefore, the chargeable administrative expenses for each year 

equal the contract expense limitation (including approved exceptions). 

We reviewed and agreed with MetLife's reconciliations. 

MetLife's Response: 

MetLife agrees with this finding. 

7 

Recommendation 3 

We recommend that the contracting officer allow MetLife to withdraw an additional 

$180,354 from the LOC account for fiscal years 2002 through 2004 administrative 

expenses and service charges. 

D. LOST INVESTMENT INCOME ON AUDIT FINDINGS $23,787 

As result ofthe audit findings presented in this report, the FEGLI Program is due lost 

investment income (LIT) of$23,787 from January 1, 2003 through September 30,2005. 

48 CFR 2152.210-70 requires the contractor to invest and reinvest all excess FEGLI Program 

funds on hand, and to credit all investment income earned on those ftinds to the FEGLI 

Program. When the carrier fails to comply with these requirements, the carrier shall credit 

the FEGLI Program with investment income that would have been earned at the rates 

specified by the Secretary of the Treasury. LIT payable on questioned costs is compounded 

semianrtually. 

We computed investment income that would have been earned using the semiannual rates 

specified by the Secretary of the Treasury. LIT is only computed on the LOC overdraws for 

the 2002 and 2003 administrative expenses and service charges (see "Letter of Credit 

Drawdown Reconciliations" finding on page 6). Our computations show that the FEGLI 

Program is due LIT of$23,787 from January 1, 2003 through September 30,2005 on these 

LOC overdraws for 2002 and 2003 (see Schedule C). 

MetLife's Response: 

The draft audit report did not include a finding that computed LIT on audit findings. Therefore, 

MetLife did not address this item in its reply. 

Recommendation 4 

We recommend that the contracting officer direct MetLife to credit $23,787 (plus interest 

accruing after September 30, 2005) to the FEGLI Program for LIT on audit findings. 

8 

IV. MAJOR CONTRIBUTORS TO THIS REPORT 

Experience-Rated and Special Audits Group 

Auditor -In-Charge 

Auditor 

Auditor 

Auditor 

Group Chief 

Senior Team Leader 

9 

V. SCHEDULES 

METROPOLITAN LIFE INSURANCE COMPANY 

JERSEY CITY, NEW JERSEY 

CONTRACT COSTS AND QUESTIONED CHARGES 

SCHEDULE A 

CONTRACT COSTS 2000 2001 2002 2003 2004 TOTAL 

A. BENEFIT CHARGES I $1,853,725,419 $1,805,525,690 $1 978,867 147 $1,989,896,360 $2,137;054,075 $9,765,068691 

B. ADMINISTRATIVE EXPENSES I $7,762,060 $7,479,730 $7,586,288 $7749194 $10,581,858 $41,159,130 

QUESTIONED CHARGES 2000 2001 2002 2003 2004 2005 TOTAL 

A. BENEFIT CHARGES 

B. ADMINISTRATIVE EXPENSES 

C. CASH MANAGEMENT 

D. LOST INVESTMENT INCOME ON AUDIT FINDINGS 

$0 

91 

0 

0 

$0 

208,354 

0 

0 

$0 

300,632 

141,100 

0 

$0 

594,911 

94,105 

5,250 

$0 

169,166 

(415,559) 

10,327 

$0 

0 

0 

8,210 

$0 

$1,273,154 

($180,354) 

$23,787 

TOTAL QUESTIONED CHARGES $91 $208,354 

itk.iii'4iJ 

$441,732 i w$694,266 M%IJw ~$236,066~ $8,210 

0lIIII ' 

$1,116,587 &t !ii_~m~~~ II
METROPOLITAN LIFE INSURANCE COMPANY 

JERSEY CITY, NEW JERSEY 

QUESTIONED CHARGES 

SCHEDULEB 

QUESTIONED CHARGES 2000 2001 2002 2003 2004 2005 TOTAL 

A. BENEFIT CHARGES I $0 $0 $0 $0 $0 $0 $O~

B. ADMINISTRATIVE EXPENSES 

1. Pension Costs * $0 $208,150 $300,632 $583,699 $157,103 $0 $1,249,584 

2. Limits on Executive Compensation * 91 204 0 11,212 12,063 0 23,570 

TOTAL ADMINISTRATIVE EXPENSES I $91 $208354 %$300632 $594911 $169166 $0 $1273154 !II 

C. CASH MANAGEMENT 

1. Letter of Credit Drawdown Reconciliations ** $0 $0 $141,100 $94,105 ($415,559) $0 ($180,354) 

TOTAL CASH MANAGEMENT 	 I $0 $0 $141,100 $94105 ($415559) $0 ($180354 II 

D. 	 LOST INVESTMENT INCOME ON AUDIT FINDINGS I $0 $0 $0 $5250 $10327 $8210 $23787 Ii 

TOTAL QUESTIONED CHARGES I $91 $208354 $441732 $694266 ($236066) $8210 $1 116587 I!! 

* 	 The administrative expenses incurred by the MetropOlitan Life Insurnace Company exceeded the contract expense limitations for 2000 through 2004. Therefore, this audit finding is not subject to the lost investment income calculation. 

** Only the over draws Jor 2002 and 2003 are subject to the lost investment income calculation. 

--	 - -- - -_._._--­
2000 2001 2002 2003 2004 2005* TOTAL 

A. QUESTIONED CHARGES (Subject to Lost Iuvestment Income) 

Letter of Credit Drawdown Reconciliations $0 $0 $141,100 $94,105 $0 $0 $235,205 

TOTAL I $0 $0 $141,100 $94,105 $0 $0 $235,205 

B. LOST INVESTMENT INCOME CALCULATION - Compounded Semi-Annually 

a. Prior Years Total Questioned (principal) $0 $0 $0 $141,100 $94,105 $0 

b. Cumulative Total (k) $0 IQ IQ $0 $146,350 $250,782 

c. Total $0 $0 $0 $141,100 $240,455 $250,782 

d. Treasury Rate: January 1 - June 30 6.750% 6.375% 5.500% 4.250% 4.000% 4.250%

e. Interest (d*c) $0 $0 $0 $2,998 $4,809 $5,329 $13,136

f. Total (c) $0 $0 IQ $141,100 $240,455 $250,782 

g. Total $0 $0 $0 $144,098 $245,264 $256,111 

h. Treasury Rate: July 1 - December 31 7.250% 5.875% 5.250% 3.125% 4.500% 4.500% 

I 

i. Interest (h*g) $0 $0 $0 $2,252 $5,518 $2,881 $10,651! 

j. Total (g) $0 $0 $0 $144,098 $245,264 $256,111 

k. Cumulative Total (Principal + Interest) $Q $Q $Q $]46,350 $250,182 $258,222 

Total Interest By Year (e+i) $0 $0 $5,250 $10,327 

di'i@WWil I $0 $8,210 ;. Wiii1 .. i ~2;,;:71 :dUiMttt h: 

* Calculated lost investmen.t income through September 30, 2005 

-- ----

SCHEDULEC 

METROPOLITAN LIFE INSURANCE COMPANY 

JERSEY CITY, NEW JERSEY 

LOST INVESTMENT INCOME CALCULATION 
APPENDIX 


September 20, 2005 

Experience - Rated and Special Audits Group 

Office of Inspector General 

U.S. Office of Personnel Management 


1900 E. Street NW, Room 6400 


Washington, DC 20415-1100 


Re: FEGLI Audit Draft Report 

The following is our response to the four audit inquiries contained in the draft audit report dated August 

23,2005. 

Audit Inquiry #1 - Pension Costs 

After receiving the audit inquiry, we recalculated the questioned pension costs in accordance with the 

guidance provided. Our recalculated pension costs have now been reviewed and accepted. Going 

forward we will limit pension costs allocated to the FEGLI program in accordance with applicable 

regulation . 

.Audit Inquiry #2 - 2004 Open Season Expenses 

Since Audit Inquiry #2 has been dropped, we need not respond to it. 

Audit Inquiry #3 - Letter of Credit Drawdown (LOC) Reconciliation 

We are in agreement with the recommendations regarding the LOC drawdown. We will contact the 

contracting office to request a withdrawal of $180,354 from the Letter of Credit, reflecting the reconciled 

amounts for FY 2002, 2003, and 2004. 

Audit Inquiry #4 - Executive Compensation 

We agree with the recommendations presented. Going forward we will limit the executive salaries 

allocated to the FEGLI program in accordance with applicable regulation. 

If you have any question, please let me know. 

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