US OFFICE OF PERSONNEL MANAGEMENT 

OFFICE OF THE INSPECTOR GENERAL 

OFFICE OF AUDITS 

Final Audit Report 

Subject: 

AUDIT OF THE FEDERAL EMPLOYEE GROUP
 

LIFE INSURANCE PROGRAM
 

OPERATIONS AT METROPOLITAN LIFE
 

INSURANCE COMPANY
 

Report No. 2A-U-OO-07-017 

Date: December 15, 2008 

--CAUTION-­

This :lIIdit report has bCCll dislrilmtcd to Federal onicials who arc I·cs[lo"~jblc fOI"lhc admitlistnltion of the ;ludill'd progr:lnJ. Thi.~ audit 

I'CPOI"t may conl:tilllll'upri("tary dalll which is Ilrotected by Federal law (18ll.S.C. 1905); tll(',"('fo'"c. while this :lIulit l"rJlort is ,Ivailahle 

under the 1"l'ccdolll of Ilifor mation Act. caution needs to be cxcl'cis('d bcfflH rcll':lsillg the '"C1}(J!"t tu the general public. 
UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
 

Washington, DC 20415
 

Office of the 

. Inspector General 

AUDIT REPORT
 

Federal Employee Group Life Insurance Program
 

Contract No. 17000-G
 

Metropolitan Life Insurance Company
 

Jersey City, New Jersey
 

Report No. 2A-II-OO-07-017 Date: December 15, 2008 

Michael R. Esser 

Assistant Inspector General 

for Audits 

www.opm.goY www.usajobs.goY 
UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
 

Washington, DC 20415
 

Office of the 

Inspector General 

EXECUTIVE SUMMARY
 

Federal Employee Group Life Insurance Program
 

Contract No. 17000-G '.
 

Metropolitan Life Insurance Company
 

Jersey City, New Jersey
 

Report No. 2A-II-OO-07-017 Date: December 15,2008 

This repOli details the results of our audit ofthe Federal Employees Group Life Insurance 

(FEGLI) Program operations at the Metropolitan Life Insurance Company (MetLife). The audit 

covered claim benefits payments for fiscal year 2006, and miscellaneous payments and 

administrative expenses for fiscal years 2005 and 2006 as repOlied in the FEGLI Program 

financial statements. The report questions $465,336 in administrative expenses. Lost investment 

income on the questioned costs subject to lost investment income amounts to $72,I29. 

Additionally, MetLife is commingling FEGLI cash and investment funds with its corporate cash 

and investment funds. 

The questioned items are summarized below. 

ADMINISTRATIVE EXPENSES 

• Depreciation Adjustment $292,367 

MetLife did not credit FEGLI with a portion ofthe gain made on the sale of a building that 

housed FEGLI operations from 1954 through 1993. 

www.opm.gov www.usajobs.gov 
• Pension Expense $151,885 

MetLife did not calculate pension costs in accordance with the Federal regulations for 2005. 

• Limits on Executive Compensation $21,084 

MetLife overcharged the FEGLI Program $21,084 for executive compensation in 2005. 

CASH MANAGEMENT 

• Commingling of Funds 

MetLife is commingling FEGLI cash and investment funds with its corporate cash and 

investment funds. 

LOST INVESTMENT INCOME 

The FEGLI Program is due $72,129 for lost investment income on the findings presented in 

the report that are subject to the recovery of lost investment income. 

II 
CONTENTS
 

PAGE
 

EXECUTIVE SUMMARy i
 

I. INTRODUCTION AND BACKGROUND	 1
 

II.	 OBJECTIVES, SCOPE, AND METHODOLOGY 2
 

III.	 AUDIT FINDINGS AND RECOMMENDATIONS 5
 

A. BENEFITS CHARGES	 5
 

B. ADMINISTRATIVE EXPENSES	 5
 

1. Depreciation Adjustment	 5
 

2. Pension Expense	 6
 

3. Limits on Executive Compensation	 7
 

C. CASH MANAGEMENT	 7
 

1. Commingling of Funds	 7
 

D. LOST INVESTMENT INCOME	 9
 

IV.	 MAJOR CONTRIBUTORS TO Tl-IIS REPORT 10
 

SCHEDULES
 

A. CONTRACT CHARGES AND QUESTIONED CHARGES 

B. QUESTIONED CHARGES 

C. LOST INVESTMENT INCOME CALCULATION 

APPENDIX	 (Metropolitan Life Insurance Company's September 10, 2008 comments 

on the draft report) 
I. INTRODUCTION AND BACKGROUND
 

INTRODUCTION 

This repmi details the results of bur audit of the Federal Employees' Group Life Insurance 

Program (FEGLI or Program) operations at the Metropolitan Life Insurance Company (MetLife) 

in Jersey City, New Jersey. The audit was performed by the Office of Personnel Management's 

(OPM) Office ofthe 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 of program 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 fanlily members (Contract No. 17000-G). Employee agencies are 

responsible for em-oIling, 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 ofMetLife, which is located in Jersey City, New Jersey. OFEGLI is supervised by 

MetLife's Group Insurance Department. OPM's Insurance Services Programs office 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 intemal controls. 

Our previous audit of MetLife (Report Number 2A-II-00-05-045, dated January 31, 2006), 

covered claim payments for fiscal year 2004, claim overpayments, administrative expenses and 

cash management policies and procedures for fiscal years 2000 through 2004. All findings 

questioned in this repmi were satisfactorily resolved. 

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: 

Benefits Charges 

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

benefit payments. 

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

Program. Also, to determine whether MetLife made diligent efforts to recover 

overpayments. 

Cash Management 

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

applicable laws and regulations concerning cash management in the FEGLI. 

Program. 

Administrative Expenses 

o	 To determine if the administrative expenses charged to the FEGLI Program were 

actual, necessary, and reasonable expenses incurred in accordance with the terms of 

the contract and applicable regulations. 

SCOPE 

We conducted this perfornlance audit in accordance with generally accepted government 

auditing standards. Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our audit findings and 

conclusions based on the audit objectives. We believe that the evidence obtained provides a 

reasonable basis for our findings and conclusions based on our audit objectives. 

We reviewed the FEGLI Program financial statements for fiscal years 2005 and 2006. During 

this period, benefit charges totaled approximately $4.4 billion and administrative expenses 

totaled $16.9 million. Specifically, we reviewed claim payments in fiscal year 2006. We also 

reviewed claim overpayments, administrative expenses, and cash management activities for 

fiscal years 2005 and 2006. 

In conducting the audit, we reviewed approximately $29,268,800 in claim payments made fl.'om 

October 1,2005 through September 30,2006, for proper adjudication. We also reviewed 

$3,645,572 in claim overpayments, $16,797,628 in administrative expenses and $850,151,372 in 

letter of credit (LaC) drawdowns for compliance with cash management policies and 

procedures. 
We obtained an understanding of MetLife's internal control structure to help detennine the 

nature, timing, and extent of our auditing procedures. This was detennined to be the most 

effective approach to select areas of audit. For those areas selected, we primarily relied on 

substantive tests oftransactions and not tests of controls. Based on our 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 ofinternal 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 appropIiate), and the laws and 

regulations governing the FEGLI Program. 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 mateIial respects, with those provisions. 

In conducting our audit, we relied to varying degrees on computer-generated data provided by 

MetLife. Due to time constraints, we did not verify the reliability ofthe data generated by 

MetLife's information systems. However, while utilizing the computer-generated data during 

audit testing, nothing came to our attention to cause us to doubt its reliability. We believe that 

the data was sufficient to achieve the audit objectives. 

The audit was pelformed at MetLife's office in Jersey City, New Jersey from April 2, 2.007 

through ApIi127, 2007. 

METHODOLOGY 

To test MetLife's compliance with the contract provisions relative to claim payments, we 

selected and reviewed a judgmental sample ofthe 100 highest dollar value claims from a 

universe of96,147 claims. Ofthe $2,233,934,034 in claim payments made from October 1, 

2005 through September 30, 2006, we reviewed a total of $29,268,800. We also reviewed 

MetLife's case files and determined ifthe necessary documents were provided and ifthese 

claims were conectly calculated and paid. 

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

ofthe 35 highest overpayment recovelies in fiscal years 2005 and 2006 (for a total of70 

overpayment recoveIies), and reviewed MetLife's accounting records to determine ifthese 

recoveries were properly processed and timely returned to the FEGLI Program. The 70 

overpayment recoveIies we reviewed represented $3,645,752 of a total of $4,308,787 in 

recovenes. 

To detennine if administrative expenses were actual, necessary, and reasonable, we selected 15 

natural accounts out of98 natural expense accounts for potential review. Natural accounts are 

expense accounts (i.e. Rent, Utilities, etc.) that support the FEGLI program cost centers. The 

accounts were selected based on highest dollar amount and account name. From the 15 natural 

3
 
accounts, we selected 30 invoices for a detailed review based on the highest monthly transaction 

amounts. For each natural account, the month with the highest transaction amount was 

reviewed. We also reviewed each account description to ensure that only allowable costs were 

charged to the account. The 15 accounts represented $2,824,165 ofthe $11,225,947 charged to 

98 natural expense accounts for fiscal years 2005 and 2006. 

In addition, we selected and reviewed MetLife's LOC drawdowns to detelmine whether MetLife 

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

regulations. To accomplish this, we selected and reviewed 92 LOC drawdown transactions that 

occurred during the months ofMarch and June of2005, and March and August of2006. The 92 

LOC drawdown samples represented $850,151,402 ofthe total of $4,394,936,299 in LOC 

drawdown transactions occurring during fiscal years 2005 and 2006. 

Because the samples we selected and reviewed in performing the audit were not statistically 

based, the results could not be projected to the universe since it is unlikely that the results are 

representative ofthe universe taken as a whole. 

We used the FEGLI Program contract; the Federal Acquisition Regulations; and the Federal 

Employees Group Life Insurance Federal Acquisition Regulations to determine allowable, 

allocable, and reasonable administrative expenses charged against the contract. 

The results ofthe audit were provided to MetLife in written inquiries and were discussed with 

MetLife officials throughout the audit and at the exit conference. In addition, a draft report, 

dated April 17,2008, was provided to MetLife for review and comment. MetLife's comments to 

the draft report were considered in preparing the final report and are included as an Appendix to 

this report. 

4
 
III. AUDIT FINDINGS AND RECOMMENDATIONS
 

A.	 BENEFITS CHARGES 

The results of our review showed that MetLife: 

•	 Properly calculated and paid claims in fiscal year 2006; and 

•	 Properly processed overpayment recoveries and timely retumed the funds to the 

FEGLI program during fiscal years 2005 and 2006. 

B.	 ADMINISTRATIVE EXPENSES 

1.	 Depreciation Adjustment $292,367 

MetLife did not credit FEGLI with a portion ofthe gain made on the sale ofa building 

that housed FEGLI operations from 1954 through 1993. During this period FEGLI was 

charged depreciation for the occupied space. According to federal regulations, a gain 

from such a sale requires an adjustment of depreciation costs previously charged to the 

contract. FEGLI is due $292,367 for tins adjustment. 

Starting in 1954 and continuing through 1993, MetLife's FEGLI operations were 

conducted at One Madison Avenue in New York City. FEGLI occupied 10,000 square 

feet ofthe building's 1.4 million square feet. Although MetLife had fully depreciated the 

building before 1954, several improvements were made to the building while occupied by 

FEGLI. Part ofthe depreciation for these improvements was charged to FEGLI. 

In 2005, MetLife sold One Madison Avenue for a gain. According to federal regulations, 

FEGLI is entitled to recover the depreciation it was charged during its period of 

occupancy. Specifically, 48 CFR 31.205-16 states that gains and losses from the sale, 

retirement, or distribution of depreciable property shall be included in the year it occurs 

as credits or charges to the cost grouping in which the depreciation or amortization 

applicable to those assets was included. It further states that gains and losses are 

considered to be adjustments of depreciation cost previously recognized. At the time of 

our audit, MetLife had not reimbursed FEGLI for the depreciation it was charged for the 

building. 

MetLife perfOlmed an analysis, based on available infonnation, to detennine the amount 

of depreciation charged to FEGLI from 1954 through 1993. The estimate is based on 

FEGLI's percentage ofoccupancy (0.71 percent) at One Madison Avenue, applied 

against the total amount depreciated in each year. Based on our review ofMetLife's 

calculations, we agree that FEGLI was charged $292,367 for depreciation during its 

period of occupancy. Therefore, we believe MetLife should credit FEGLI for this 

amount. 

5
 
MetLife Comments: 

MetLife contends that an adjustment to a previously closed accounting period is 

inconsistent with FEGLI regulations and contract provisions. However, it will not contest 

the audit finding. 

OIG Comments: 

We maintain our position that MetLife must credit the Program $292,367 for depreciation 

charged to the FEGLI Program during its periods of occupancy. 

Recommendation 1 

We recommend that the contracting officer require MetLife to credit the FEGLI Program 

$292,367 for depreciation expense charged to the program from 1954 through 1993. 

2. Pension Expense	 $151,885 

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

fiscal year 2005. As a result, FEGLI was overcharged $151,885. 

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 of pension cost, 

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

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

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

costs are allowable subject to the referenced standards and the cost limitations and . 

-exclusions set forth in paragraph 0)(2)(i) and paragraph 0)(3) through (8) ofthis 

subsection." The regulations limit the amount of pension costs that may be charged to a 

government contract to: 

•	 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. 

lfthe cash contributions exceed the amount ofexpense calculated according to CAS 412 

and 413, the excess contribution is considered a pre-funding ofthe pension plan. 

Amounts pre-ftmded may not be charged in future years when the cash contlibution is 

lower than the CAS 412 and 413 expense calculation. 

MetLife allocated a net amount of $381,243 ($529,652 less an adjustment of $148,409) 

for pension expenses to the FEGLl Program in 2005. We recalculated the pension costs 

by multiplying the lesser of the funded or CAS amount by the FEGLI's corporate 

allocation percentage (0.46%) and detennined that only $229,358 should have been 

6
 
allocated to the Program. Therefore, the FEGLI Program was overcharged $151,885 in 

fiscal year 2005. 

MetLife Comments: 

MetLife agrees with this fInding. In the future, it will limit pension costs allocated to the 

program in accordance with the applicable regulation. 

Recommendation 2 

We recommend that the contracting officer ensure that MetLife retums $151,885 in 

pension costs that were over-allocated to the FEGLI Program for fiscal year 2005. 

3. Limits on Executive Compensation $21,084 

MetLife overcharged the FEGLI Program $21,084 for executive compensation in 2005. 

48 CFR 31.205-6(p) limits the allowability of compensation for certain contractor 

personnel and limits the allowable compensation costs for senior executives to a 

benchmark amount established each year by the OftIce of Federal Procurement Policy. 

For 2005, the benchmark compensation amount limit was $473,318 and was applicable to 

the five most highly compensated employees in executive positions. 

We reviewed the executive compensation MetLife charged to FEGLI in 2005 to determine 

ifthe allocated amount exceeded the benchmark compensation limit set by the Office of 

Federal Procurement Policy. We found that the charges exceeded the limit by $21,084. 

MetLife Comments: 

MetLife agrees with this finding. In the future, it will limit executive compensation costs 

allocated to the program in accordance with the applicable regulation. 

Recommendation 3 

We recommend that the contracting officer ensure that MetLife retums $21,084 in 

executive compensation costs charged to FEGLI in 2005. 

C. CASH MANAGEMENT 

1. Commingling of Funds 

MetLife is commingling FEGLI cash and investment funds with its corporate cash and 

investment funds. As a result, FEGLI assets are not separately identifiable from the other 

assets controlled by MetLife. 

7 
According to 48 CFR 2152.232-71, Non~commingling ofFEGLI Program funds, "(a) 

The Contractor must maintain FEGLI Program funds in such a manner as to be separately 

identifiable from other assets of the Contractor." However, if accounting techniques have 

been established to clearly measure FEGLI cash and investments, the regulations provide 

that a contractor can request the contracting officer to approve a modification of this 

provision. 

In an April 12, 1996 letter, OPM informed MetLife that it concun-ed with its practice of 

investing FEGLI monies in an investment pool with other MetLife funds. OPM stated 

that it did not intend to preclude the procedures MetLife used to invest FEGLI funds and 

that the allocation of investment income appeared reasonable and equitable. 

MetLife's investment objective is to provide liquidity and generate income while 

minimizing the erosion of the principal. MetLife's FEGLI investments generally mature 

within a year and are maintained in a money market pool that is not specific to FEGLI. 

Income from the investments represents allocations from MetLife's general account 

based on FEGLI's proportionate investment contribution balance for each investment 

year. The allocated amounts do not represent separately identifiable assets as called for in 

the FEGLI regulations. In addition, FEGLI cash is in a commingled MetLife investment 

pool. Confirming FEGLI cash with an independent source is also not possible. 

MetLife's independent auditors also reported a concern with the commingling ofFEGLI 

investment funds with other MetLife assets. In a management letter to MetLife 

concerning its audit ofthe FEGLI financial statements for fiscal year 2006, the auditors 

stated that "The short-term investment liquidity pool is not specific to the Program but 

represents cumulative daily cash transactions for the company allocated using prorates 

established to asceliain that total ledger debits equals credits for the line of business. As 

a result, these allocated amounts do not represent separately identifiable assets of the 

- ..Program as required by the Life Insurance Federal Acquisition Regulations." 

According to MetLife, establishing separately identifiable bank accounts and money 

market pools for FEGLI would diminish the flexibility ofth~ investment manager and 

possibly result in diminished returns. While we agree that this could happen, we are 

generally opposed to the commingling ofOPM and contractor assets. 

In responding to an audit inquiry on this issue, MetLife said that it should have either 

established "separately identifiable segments within bank accounts and money market 

pools for cash and short-term investments ofthe Program and establish procedures to 

reconcile to bank statements and supporting documentation on a periodic basis," or 

obtained the contracting officers conCUlTence that a contract deviation is wan-anted. 

MetLife Comments: 

MetLife said that they are cun-ent1y reviewing its management of FEGLI assets. In 

addition, they added that they will discuss this issue with the FEGLI Program Contracting 

Officer and take whatever appropriate action is directed ,by them. 
OIG Comments: 

We believe that OPM's contracting officer should reevaluate MetLife's investment 

procedures that were approved in 1996, in light of the situation existing today, to 

detennine if approval ofthe procedures is still warranted. In addition, MetLife should 

take steps to change its procedures to ensure FEGLI funds are not commingled with the 

MetLife investment pooL 

Recommendation 4 

We recommend that the contracting officer analyze MetLife's procedures for handling 

FEGLI cash and investments to determine ifOPM's approval of the procedures is still 

walTanted. If the procedures are acceptable, the contracting officer should determine if a 

modification of the regulation requiring a contractor to maintain FEGLI funds in a 

manner as to be separately identifiable from other contractor assets is needed. 

D. LOST INVESTMENT INCOME $72,129 

The FEGLI Program isdue $72,129 for lost investment income on the findings subject to the 

recovery of lost investment income. 

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

Program ftmds on hand, and to credit all investment income earned on those funds to the 

FEGLI Program. When the contractor fails to comply with these requirements, the 

contractor shall credit the FEGLI Program with investment income that would have been 

earned at the rates specified by the Secretary of the Treasury. 

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

specified by the Secretary of the Treasury. The computations show that the Program is due 

$72,129 for lost investment income, calculated for the period from January 1,2006 through 

September 30, 2008, on the applicable questioned costs. 

OIG Comments: 

The draft report did not include a section covering lost investment income on the audit 

findings. Therefore, MetLife did not address lost investment income in commenting on the 

draft report. 

Recommendation 5 

We recommend that the contracting officer direct MetLife to credit the FEGLI Program 

$72,129, plus interest accming after September 30,2008, for lost investment income. 

9
 
IV. MAJOR CONTRIBUTORS TO THIS REPORT 

Special Audits Group 

Auditor 

Auditor-In-Charge 

Auditor 

Jill S. Henderson, Deputy Assistant Inspector General for Management 

SAG Group Chief 

Senior Team Leader 

10
 
CONTRACT COSTS 

A. BENEFITS CHARGES

B. ADMINISTRATiVE EXPENSES 

TOTAL CONTRACT CHARGES 

QUESTiONED CHARGES 

A. BENEFITS CHARGES 

B. AD,\llNISTRATIVE EXPENSES 

C. CASH MANAGEMENT 

D. LOST INVESTMENT INCOME 

TOTAL QUESTIONED CHARGES 

METROPOLITAN LIFE INSURANCE COMPANY 

JERSEY CITY, NEW JERSEY 

SCHEDULE A 

CONTRACT COSTS AND QUESTiONED CHARGES 

2005 2006 TOTAL 

$2,139,015,234 52,271,582,494 $4,410,597,728 

$8,430,859 $8,461,553 $16,892,412 

$2,147,446,093 52,280,044,047 54,427,490,140 

2005 2006 2007 2008 TOTAL 

SO 

S465,336 

SO 

50 

SO 

$0 

$0 

$25,645 

SO 

SO 

SO 

$27,374 

$0 

SO 

SO 

SI9,110 

SO 

S465,336 

SO 

$72,129 

S465,336 525,645 527,374 $19,llO $537,465 
Schedule B 

METROPOLITAN LIFE INSURANCE COMPANY 

.JERSEY CITY, NEW JERSEY 

QUESTIONED CHARGES 

FY FY FY FY Total 

QUESTIONED CHARGES 2005 2006 2007 2008

A. BENEFITS CHARGES SO SO SO SO SO 

B. ADMINISTRATIVE EXPENSES 

1. Depreciation Adj lIstmellt S292,367 SO SO SO S292,367

2. Pension Expense S151,885 SO SO SO SI51,885

3. Limits on Executive Compensation S21,084 SO SO SO S21,084 

TOTAL ADMINISTRATIVE EXPENSES S465,336 SO SO SO S465,336

C. CASH MANAGEMENT 

1. Commingling of Funds (Procedural) SO SO SO SO SO 

TOTAL CASH MANAGEMENT SO SO SO SO SO 

D. LOST INVESTMENT INCOME 

TOTAL QlIESTIONED CHARGES 

SO 

S465,336 

S25,645 S27,374 SI9,110 S72,129 

S25,645 527,374 519,110 5537,465 
SCHEDliLE C 

METROPOLITAN LIFE INSURANCE CO"IPA"iY 

.JERSEY CITY, NEW .JERSEY 

LOST I"iYESTiI'JENT INCOME CALCULAnON 

(from January 2006 through September 30, 20(8) 

I·····;····;·.·····;;·;··;·.· ;.; ..... ;......;.... ;.. ;. ...;..>.•....••••;.......• > 
 

QlJESTIONED CHARGES (Subject to Lost Investment Income) 

ADMINISTRt;.nYE EXPENSE CHARGES 

L Depreciation Adjustment S292,367 SO SO SO S292,367 

2. Pension Costs S151,885 SO SO SO S151,~85

3. Limits on Executive Compensation S21,084 SO SO SO S21,084 

TOTAL I S465,336 SO SO SO S465.336 

LOST INVESTMENT INCOME CALctiLAnON 

a. Prior Yellr's Total Questionell (Principal) SO S465,336 SO SO S465,336 

b. Cumulative Total (Ii.) SO SO 490,981 518,355 

l', Tut;}l SO S465,336 S490,981 $518,355 

~~,..", d. Tl'caslIl')' Rate: January 1 - June 30 :.i., .•'> " .. ·,;i";· ',i.' 

e. Interest (t1 .;, c) SO 511,924 5I2,888 S12,311 537,123 

f. Total (l') SO S465,336 5490,981 $518,355 

g. Total (c + f) SO 5477,260 5503,869 S530,666 

>, 'f h. Treasury Rate: July 1 • December 31 ••occ 

i. Interest (il * g) SO SI3,721 S14,486 S6,799 S35,006 

j. Total (g) SO S477.260 S503.869 S530.666 

k. CUll1uhltive Total (Principal + Interest) SO S490,981 S518,355 S537,465 

TotallntC"l'C'st by Year (c + i) I SO S25,645 S27,374 S19,1I0 572,129 
Appendix 

etLif
 

Melmpolitan Life Insurance Company
 

2 Montgom~y Street. 3rd Roor, J~sey City. NJ 07302
 

Tel 201 395-7936 Fax 201 395-7940
 200a SEP 24 AM 7: 10 rwall~1@metlife.com
 

Director 

-

Client Services

September 10, 2008 

ie - peaa A its Group
 

V,S. Office ofPersonnel Management
 

1900 E Street NW, Rm. 6400
 

Washington, DC 20415-1100
 

RE: .FEGU Audit Draft Report 

Dear Ms. May: 

The following is our response to thefour audit findings contained in the draft report dated April 17, 

2008. 

1. Depreciation Adjustment: 

As discussed, we believe that an adjustment to a previously dosed accounting period is 

inconsistent with FEGLI regulations and contract provisions. However, we would not contest the 

Contracting Officer's recommendation for Metlife to reimburse the FEGLI program for these 

costs. 

2.. Pension Expense/Costs: 

We are in agreement with the recommendation presented and going forward we will limit 

pension costs allocated to the FEGLI program in accordance with the applicable regulation. 

-"'3, Executive Compensation: 

We are in agreement with the recommendation presented and going forward we will limit 

executive compensation costs allocated to the FEGLI program in accoroance with the 

applicable regulation. 

4. Commingling of Funds: 

MetLife is currently reviewing its management of FEGU assets. We will be discussing this issue 

with the FEGU Program Contracting Officer and will take whatever appropriate action as 

directed by them. 

If you have any questions, please let me know.