burden, the non-moving party cannot simply rest on the allegations in the pleadings,
but "must set forth specific facts showing that there is a genuine issue for trial." Fed.
R. Civ. P. 56(e). A "genuine issue" in the context of a motion for summary judgment
is not simply a "metaphysical doubt as to the material facts," Matsushita Elec. Indus.
Co., Ltd, v. Zenith Radio Corp., 475 U.S. 574, 586 (1986); rather, "[a] genuine issue
exists when the evidence is such that a reasonable jury could find for the non-movant,"
Buscaglia v. United States, 25 F.3d 530, 534 (7th Cir. 1994). When reviewing the
record we must draw all reasonable inferences in favor of the non-movant; however,
"we are not required to draw every conceivable inference from the record--only those
inferences that are reasonable." Bank Leumi Le-Israel, B.M. v. Lee, 928 F.2d 232, 236
(7th Cir. 1991).
DISCUSSION

The dispute between the parties turns upon our interpretation of the relevant
provisions of FEGLIA. Ultimately our resolution will turn on whether the reduction
in value of a life insurance policy is considered a “cost” under the terms of the statute.
Plaintiff urges us to conclude that the monthly 2% reduction in the value of a retired
employee’s life insurance plan, where the retiree is paying no monthly premiums,
amounts to a “cost” that violates section 8707(b)(2). This conclusion defies common

sense, a plain reading of the statute and the legislative history. Common sense dictates

-4-


decline each month at the rate of 2% of the original face value of the policy until 25%
of the original value remained. See id.

As the decades passed and FEGLIA remained unchanged, its progressiveness
faded. See id. Enrollment dropped as employees, especially the younger ones, found
more appealing and cost-effective alternatives in the private insurance industry. See
id. at *3. The decline in the enrollment of younger employees proved especially
nettlesome as their actuarial value could help keep costs down. See id. The more
young employees declined enrollment due to the high expenses, the more those
expenses rose. See id.

In 1980 the House Committee on Post Office and Civil Service set about
rehabilitating FEGLIA. The Committee introduced a bill that identified two main
problems with FEGLIA, one of which was the continuing insurance feature that had
been so attractive decades ago. See id. at *3. The Committee identified the
continuing insurance feature as the culprit behind the high cost of life insurance
through FEGLIA. According to the Committee,

The only reason for this high cost is that the insurance may be continued
after retirement without cost to the employee and a minimum death
benefit is payable to the retired employee’s beneficiary. This guaranteed
payment causes the cost of the federal insurance policy to be about twice
the cost of ordinary term insurance. Although this costly feature makes
the insurance attractive to older employees, younger employees, who are

not considering retirement, frequently decline coverage and purchase term
insurance in the private sector at a lower cost. The federal program

-9-


less than 50 percent of the amount of insurance in force before the first
reduction remains.

§ 8706(b)(3)(B). Thus, according to the plain language of the statute, an employee
who retired on or before December 31, 1989 can continue to hold without cost a life
insurance policy other than the “no reduction” or “50% reduction” plan. The only
other available type of basic life insurance policy is the “75% reduction” plan.
Accordingly, pre-December 31 retirees can continue to hold without cost a life
insurance policy based on the 75% reduction plan. Correspondingly, pre-December
31 retirees who hold policies based on the “no reduction” or “50% reduction” plans
do not enjoy the “without cost” modifier, implying that they must pay additional costs
to enjoy the additional benefits contained in their policies. This interpretation accords
with the plain meaning of the statute as well as the legislative history.

Where, as in Ms. Hart’s case, an employee initially elects the “no reduction”
option and then later changes her mind, she may cancel that election and her life
insurance coverage will continue “as if [she] had originally elected coverage under
subparagraph (A) of paragraph (3) of this subsection [the “75% reduction”].”

§ 8706(b)(4). As the savings clause provides, those who originally elected coverage
under the 75% reduction carry the insurance without cost. § 8706(b)(2).
Defendants argue that the monthly percentage reduction of the value of the life

insurance policy amounts to a “cost” levied in violation of section 8707(b)(2). The

-6-


that no insurance provider, federal or otherwise, would offer basic life insurance
coverage to retirees while requiring neither premium payments nor a reduction in the
policy’s value on a monthly basis. Furthermore, our plain reading of the statute reveals
a clear distinction between costs and reductions. Moreover, even if we found the
relevant statutory language ambiguous and turned to the legislative history for
guidance, that too mandates the same result.

1. Plain Language of the Statute

Where a federal employee carrying a life insurance policy under FEGLIA retires
on or before December 31, 1989, as Ms. Hart did, FEGLIA provides that

[nJotwithstanding paragraph (1) of this subsection, insurance shall be so

continued without cost (other than as provided under section

8706(b)(3)(B)) to each employee who so retires, or commences receiving

compensation, on or before December 31, 1989.
§ 8707(b)(2). In order to qualify for this savings clause, an employee must have retired
by December 31, 1989, and must hold a life insurance policy other than what is
described by section 8706(b)(3)(B). See id. Section 8706(b)(3)(B) defines the “no
reduction” and “50% reduction” options:

in addition to any deductions which would be required if the insurance

were continued as provided under subparagraph (A) of this paragraph, the

employee may elect continuous withholdings from annuity or

compensation in amounts determined by the Office, and the employee’s

life insurance coverage shall be either continued without reduction or
reduced each month by no more than 1 percent of its face value until no

-5-


of those employees who retire subsequent to that date. Those post-December 31
retirees enjoy the absence of deductions only after they reach the age of 65.
§ 8707(b)(1). The difference carries significance, as a pre-December 31 retiree whose
age is under 65 would not have to continue paying premiums upon retirement, but a
post-December 31 retiree would until (s)he reached the age of 65. In that sense,
section 8707(b)(2) “saves” the pre-December 31 retirees from an additional cost
imposed on the post-December 31 retirees. This distinction defeats Defendants’
contention that the savings clause is superfluous.

Even if we found the statutory language to be ambiguous, which we do not, the
legislative history mandates the same result. As the House Report relates, with the
passage of the Federal Employees’ Group Life Insurance Act of 1954 (“FEGLIA”)
group life insurance became available for nearly all federal employees. See H.R. Rep.
No. 96-1280, at *2 (1980), reprinted in 1980 U.S.C.C.A.N. 3867. At the time,
FEGLIA represented a “model of progressive fringe benefit legislation” which was
later emulated by many private sector employers. Id. Among the statute’s most
progressive features was its continuing insurance provision. See id. Under that
provision, an employee who retired on an immediate annuity could continue his

insurance without payment. See id, That is, the amount of the insurance began to


mate Order Form (06/97)

United States District Court, Northern District of Mlinois

~ Name of Assigned Judge Charles P. Kocoras Sitting Judge if Other
or Magistrate Judge . than Assigned Judge
CASE NUMBER 00 C 7934 DATE 9/4/2001
CASE ' Metropolitan Life Ins Co., Inc. vs. Charles Hart et al
TITLE
[In the following box (a) indicate the party filing the motion, c.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented. ]
DOCKET ENTRY:
(1) (a) Filed motion of [ use listing in “Motion” box above.]
(2) im Brief in support of motion due
(3) Oo Answer brief to motion due . Reply to answer brief due,
(4) i) Ruling/Hearing on set for at
(5) oO Status hearing[held/continued to] [set for/re-set for] on set for at
(6) a Pretrial conference[held/continued to] {set for/re-set for] on set for at
(7) Qo Trial{set for/re-set for] on at
(8) QO [BenclyJury trial] [Hearing] held/continued to at
(9) o This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to}
OOERCP4(m) CO General Rule21 CFRCP41(a)(1) [) FRCP41(a)(2).

ao) =f [Other docket entry] ENTER MEMORANDUM OPINION: We grant MetLife’s motion (Doc

8-1) for summary judgment and deny Defendants’ cross-motion (Doc 12-1) for summary judgment.

Plaintiffs are entitled to recover from Defendants $25,782 in overpayment plus any applicable interest.

We also deny each party’s motion for attorneys’ fees.
ai [For further detail see order attached to the original minute order.]

No notices required,

Mail AO t form.

No notices required, advised in open court.
Notices mailed by judge's staff.
Notified counsel by telephone.

Docketing to mail notices.

Copy to jptbe/magistrate judge,

courtroom
deputy’s
initials

Date/time received in
central Clerk's Office



CONCLUSION

For the foregoing reasons, we grant MetLife’s motion for summary judgment

and deny Defendants’ cross-motion for summary judgment. Plaintiffs are entitled to
recover from Defendants $25,782 in overpayment plus any applicable interest. We also

deny each party’s motion for attorney’s fees.

RiGoo Pboeror

Charles P. Kocoras
United States District Judge

Dated: September 4, 2001

-ll-


suffers because of the actuarial experience which younger employees
would contribute to the overall system.

HLR. Rep. No. 96-1280, at *3. In light of this cost problem, the Committee
recommended certain changes to the reduction in life insurance that occurs after
retirement.

This legislative history makes clear that since the inception of FEGLIA a
distinction has existed between reduction in policy value and costs imposed on retirees.
The very first continuing coverage plan featured a minimum death benefit payable to
the retired employee’s beneficiary “without cost to the employee.” Id. That minimum
death benefit was guaranteed despite the monthly reduction in the face value of the
policy following retirement. By characterizing that benefit as “without cost to the
employee,” despite the monthly reductions that could potentially whittle it down to
25% of its value at the time of retirement, Congress evinced its clear intent to
distinguish reduction in value from cost to the employee.

3. Application

Applying this interpretation to the case at bar compels the conclusion that
MetLife could properly have made post-retirement deductions from Hart’s pension and
reductions in the value of her life insurance policy. Accordingly, we grant their motion

for summary judgment.

-10-


plain language of the statute does not support this argument. The position of the
“without cost” language is important. It appears in subsection (b)(2) of section 8707,
which modifies subsection (b)(1). Subsection (b)(1) describes the deductions that may
properly be withheld from employees’ compensation or annuities to pay for life
insurance. Subsection (b)(2) then modifies that statement, providing that
“notwithstanding” those allowable deductions insurance shall be continued “without
cost” to employees who retired on or before December 31, 1989. Juxtaposed as it is
against the deductions permitted by subsection (b)(1), the “without cost” language
refers specifically to the absence of deductions — not generally to any lack of reduction
of the face value of the policy as Defendants maintain.

Defendants also contend that divorcing costs from reduction renders the savings
clause superfluous. It does not. Important distinctions remain that “save” those
employees retiring on or before December 31, 1989, from the slightly harsher
consequences of the statutory amendments to sections 8707(b)(1) and 8796(b)(3)(A)
and (B). According to the plain language of the savings clause, employees who retire
on or before December 31, 1989 pursuant to the 75% reduction option enjoy the
continuation of insurance without cost. § 8707(b)(2). No mention is made of the age
at which employees must retire in order to trigger this “without cost” provision, so the

reasonable assumption is that it is triggered upon retirement. The same cannot be said

-7-


$12,304.65 and Defendant Goeske $12,255.00. OPM later discovered through an audit
that Defendants had been paid pursuant to the “No Reduction” option originally elected
by Hart. Her subsequent change to 75% Reduction was not reflected on the original
certification of insurance used to calculate the amount of insurance proceeds paid by
MetLife on behalf of OFEGLI. According to the audit, Defendants should only have
received life insurance benefits totaling $11,082.07 based upon the 75% Reduction
Hart subsequently elected. The overpayment calculates to $25,500 plus interest of
$282.23 for a total of $25,782.23.
LEGAL STANDARD

Summary judgment is appropriate only if there is no genuine issue of material
fact and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ.
P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). In seeking a
grant of summary judgment the moving party must identify "those portions of 'the
pleadings, depositions, answers to interrogatories, and admissions on file, together with
the affidavits, if any' which it believes demonstrate the absence of a genuine issue of

material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting

Fed.R.Civ.P. 56(c)). This initial burden may be satisfied by presenting specific
evidence on a particular issue or by pointing out "an absence of evidence to support the

non-moving party's case." Celotex, 477 U.S. at 325. Once the movant has met this

-3-


regarding the continuation of their life insurance coverage after retirement: 75%
Reduction, 50% Reduction, or No Reduction. Under the 75% Reduction election, after
an employee reaches the age of 65 and retires, the amount of basic life insurance
coverage reduces at the rate of 2% per month until it reaches 25% of the basic life
insurance amount at the time of retirement. § 8706(b)(3)(A). Under the 50%
Reduction election, the amount of coverage reduces at the rate of 1% per month until
it reaches 50% of the basic life insurance amount at the time of retirement.
§ 8706(b)(3)(B). Under the No Reduction election, no reduction occurs in the amount
of basic life insurance coverage. See id. Premiums vary according to the level of
coverage selected.

About six weeks prior to her retirement, Ms. Hart elected “No Reduction” in her
life insurance policy. On December 31, 1989, she retired from her position. Over the
next several months, the monthly premiums became financially burdensome on
Ms. Hart. After several letters and telephone calls from Hart, the Office of Personnel
Management reduced Ms. Hart’s FEGLIA coverage. As of May 25, 1990, premiums
were no longer deducted pursuant to the “No Reduction” election.

Ms. Hart passed away on October 13, 1996. The following January, OFEGLI
paid life insurance benefits to Defendants, who were Hart’s designated beneficiaries

totaling $36,864.30. Defendant Mahany received $12,304.65, Defendant Hart

-2-


UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
METROPOLITAN LIFE INSURANCE )
COMPANY, INC., )
)
Plaintiff, )
)
vs. ) 00 C 7934

)
CHARLES HART, BARBARA GOESKE _)
and CHRISTINA MAHANY, )
)
Defendants. )

MEMORANDUM OPINION

CHARLES P. KOCORAS, District Judge:

Before the Court are the Cross-Motions for Summary Judgment of Plaintiff
Metropolitan Life Insurance Company (“MetLife”) and Defendants Charles Hart,
Barbara Goeske and Christina Mahany. For the following reasons, we grant MetLife’s
motion and deny Defendants’ motion.

BACKGROUND

The facts in this case are largely undisputed. Ms. Bridie Hart worked for the
United States Court of Appeals for the Seventh Circuit. As a federal employee, she
was eligible for life insurance coverage under the Federal Employees’ Group Life

Insurance Act (“FEGLIA”). FEGLIA furnishes federal employees with three choices

oy