[Federal Register Volume 87, Number 134 (Thursday, July 14, 2022)]
[Proposed Rules]
[Pages 42118-42126]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-14942]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 8

RIN 2900-AR53


National Service Life Insurance--Veterans Affairs Life Insurance 
(VALife) Program Amendments

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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

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

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

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

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

1. Definition of Part 8 Terms

Guardian

    Current 38 CFR 8.0(e) defines the term ``guardian'' to mean ``any 
representative certified by the appropriate Veterans Service Center 
Manager, under [38 CFR 13.55], to receive benefits in a fiduciary 
capacity on behalf of the insured or the beneficiary, or to take the 
actions listed in [38 CFR] 8.32.'' We note that Sec.  13.55 was removed 
in 2018, see 83 FR 32716, 32738 (July 13, 2018), but current Sec.  
8.0(e) essentially refers to a VA-appointed fiduciary, as defined in 
current Sec.  13.20 (defining the term ``fiduciary'' as ``an individual 
or entity appointed by VA to receive VA benefits on behalf of a 
beneficiary for the use and benefit of the beneficiary and the 
beneficiary's dependents''). The current definition of ``guardian,'' 
therefore, only allows a VA-appointed fiduciary to take the actions 
that are enumerated in Sec.  8.32. Some of these actions include 
applying for a life insurance policy, reinstating a lapsed policy, and 
cash surrendering a policy. 38 CFR 8.32(a), (b), (f). Private insurers 
allow state-appointed guardians and attorneys-in-fact who hold power of 
attorney for an individual as their principal to take these same 
actions. VA proposes to revise Sec.  8.0(e) to include within the

[[Page 42119]]

definition of the term ``guardian,'' not only VA-appointed fiduciaries, 
but also state-appointed guardians and conservators, as well as 
attorneys-in-fact (i.e., persons holding power of attorney). However, 
VA also proposes to clarify that if a VA-appointed fiduciary and either 
a state-appointed guardian/conservator or attorney-in-fact are not the 
same individual and both attempt to take conflicting actions on an 
incompetent insured's policy, the VA-appointed fiduciary shall have the 
exclusive authority to take actions on the policy. In that scenario, VA 
would not allow the state-appointed guardian/conservator or attorney-
in-fact to take actions on the insurance policy unless VA removes the 
policyholder's fiduciary or the state-appointed guardian/conservator or 
attorney-in-fact is appointed as the VA fiduciary. These amendments 
would align VA procedures with commercial insurance practices and would 
afford those caring for incompetent insureds--whether they are VA-
appointed fiduciaries, state-appointed guardians/conservators, or 
attorneys-in-fact--greater authority over VA life insurance actions. 
The amendments would also resolve potential conflicts between a VA-
appointed fiduciary and either a state-appointed guardian/conservator 
or an attorney-in-fact.

Veterans' Affairs Life Insurance (VALife)

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

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

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

Beneficiary

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

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

    Current 38 CFR 8.1(b) states that the effective date of an 
insurance policy that is issued under 38 U.S.C. 1922(a) is the date 
that a valid application and premium payment are delivered to VA. VA 
proposes to amend the heading of current 38 CFR 8.1 to clarify that 
insurance policies issued under VALife would have the same effective 
date as policies issued under SDVI. This amendment is consistent with 
the longstanding VA practice of determining the effective date of 
coverage for other Government life insurance programs based on the 
delivery of an application and an initial premium payment. However, we 
propose to revise Sec.  8.1(a) to clarify that benefits due under an 
SDVI policy are payable any time after the effective date, but benefits 
due under a VALife policy are payable any time two years after the 
effective date.
    VA also proposes to add a note 3 to current paragraph (b) that 
would state that when veterans apply for insurance coverage through an 
electronic medium, the date of delivery of the premium payment shall be 
the date of the valid authorization of the premium payment. The note 
would also state that in cases where the authorization does not result 
in the required premium payment because there were insufficient funds 
to cover the full initial premium amount, the delivery date of the 
premium payment shall be the date that the full initial premium amount 
is received by VA.
    Current paragraph (c) provides three different options for SDVI 
policyholders to choose as an effective date other than the date of 
delivery described in paragraph (b). VA proposes to clarify that the 
effective date options for SDVI would not be available for VALife, and, 
therefore, VA would amend paragraph (c) to state that it does not apply 
to VALife.

3. Provisions During Waiting Period

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

[[Page 42120]]

4. Calculation of Time Period and Veteran's Age

    Current Sec.  8.6 establishes the rules for calculating the time 
period for applying and reinstating life insurance coverage and paying 
premiums. VA proposes to revise the title of Sec.  8.6 to read 
``Calculation of Time Period; Veteran's Age,'' designate the current 
text as paragraph (a), and make some technical edits to the text in re-
designated paragraph (a). Section 1922B(a)(3)(A) requires that veterans 
apply for VALife coverage prior to age 81, except in limited 
circumstances described in subparagraph (B). VA proposes to add new 
paragraph (b) to Sec.  8.6 to state as follows: ``For VALife, the 
premium will be determined using the age of the veteran at his or her 
nearest birthday on the effective date of the policy.'' If the 
veteran's next birthday is within six months of the effective date of 
the policy, his or her premium will be calculated at one year older 
than the current age. If the veteran's birthday is more than six months 
after the effective date of the policy, his or her current age will be 
used to calculate the premium. For example, if the veteran's birthday 
is February 16, 1980, and the effective date of the policy is June 1, 
2022, the premium age is 42. However, if the same veteran's policy's 
effective date is December 1, 2022, the premium age is 43. When VA 
developed VALife, VA actuaries established the premium table for the 
insurance program using this standard because it is consistent with 
commercial life insurance practices and with VA's currently 
administered programs. However, VA proposes, for the purposes of 
determining a veteran's eligibility for insurance under section 
1922B(a)(3), to use the age of the veteran at his or her last birthday 
prior to application because it would provide a veteran approaching age 
81 with additional time to elect insurance coverage and still be 
consistent with the VALife statute (38 U.S.C. 1922B(a)(3)(B)). VA 
proposes to add a new paragraph (c) to make this clarification. 
Although these proposed amendments contain different standards, it is 
common in the private insurance market for the term ``age'' to have a 
variety of meanings for insurance calculations (see 12A Couch on Ins. 
Sec.  179:13, n.1.), and VA is explaining in this proposed rulemaking 
how it would calculate the insured's age for different purposes.
    VA also proposes to add a new paragraph (d) that would clarify 
under what conditions a veteran who is beyond age 81 would be eligible 
to receive VALife coverage. The VALife statute states that ``[t]he 
Secretary may not grant insurance to a veteran . . . unless . . . the 
veteran submits the application for such insurance before the veteran 
attains 81 years of age [or] . . . with respect to a veteran who has 
attained 81 years of age . . . the veteran filed a claim for 
compensation under chapter 11 of this title before attaining such age . 
. . [and] based on such claim, and after the veteran attained such age, 
the Secretary first determines that the veteran has a service-connected 
disability.'' 38 U.S.C. 1922B(a)(3). VALife was created to replace 
SDVI, and under SDVI, a veteran can be granted insurance if he or she 
applies within two years following an initial service-connection 
determination for any disability. 38 U.S.C. 1922(a). However, 
eligibility for SDVI is not restricted to the two-year period following 
the veteran's first service-connection determination. VAOPGCPREC 77-90 
(finding of service connection for a disability on a secondary basis 
establishes a new period for filing an application for SDVI). Although 
veterans are not eligible for SDVI by reason of an increase in a 
rating, see id., a grant of individual unemployability under 38 CFR 
4.18, or a finding of incompetency under 38 CFR 3.353, the two-year 
period to apply for SDVI is not limited by age, and a veteran who 
receives a grant of service connection for a new and different 
disability becomes eligible again to apply for SDVI. Consistent with 
Congressional intent in allowing issuance of SDVI coverage at advanced 
ages following an initial determination of service connection for a 
disability, VA proposes to allow any veteran who applies for service 
connection for a disability, either on a primary or secondary basis, 
before attaining age 81 but receives an initial grant on that claim 
after attaining age 81 to apply for VALife if the veteran otherwise 
meets the criteria of 38 U.S.C. 1922B(a)(3)(B). For example, a veteran 
who applies for service connection for a disability at age 79, but does 
not receive an actual grant of service connection on that claim until 
the age of 82, would have a two-year time period to apply for VALife 
and would receive full VALife coverage if they paid their premiums 
throughout the requisite two-year waiting period. VA's interpretation 
of this section of the VALife statute would encourage participation in 
VALife and provide life insurance coverage to veterans who are unlikely 
to be able to purchase life insurance in the private, commercial market 
due to their age and disabilities.
    VA also proposes to limit the issuance of a VALife policy under 38 
U.S.C. 1922B(a)(3)(B) to a maximum age of 95. This proposal aligns the 
maximum issue age for a VALife policy with the maximum issue age of an 
SDVI ordinary life policy, as determined by VA in line with common 
industry practice to ensure financial soundness and based on the 1941 
Commissioners Standard Ordinary Table of Mortality, which is referenced 
in 38 U.S.C. 1922. VALife's guaranteed acceptance whole life coverage 
most closely mirrors ordinary life policies issued under the SDVI 
program, which is being closed and replaced with the new program.

5. Reinstatement Period

    Current 38 CFR 8.7 allows a policyholder to reinstate coverage 
within five years of the date of lapse of coverage if the policyholder 
submits all outstanding premiums and evidence of good health and pays 
interest on the arrearage if not reinstated within six months from 
lapse. VA proposes to revise Sec.  8.7(a) to indicate that the 
paragraph does not apply to VALife policies. In conjunction with that 
change, VA proposes to add a new paragraph (e) to Sec.  8.7 to state 
that coverage issued under VALife that lapses for non-payment of 
premiums may only be reinstated if the former policyholder submits all 
premiums in arrears from their respective due dates, plus interest, to 
reinstate the coverage within two years of the date of the lapse and 
has not yet attained the age of 81. This two-year period is consistent 
with the two-year enrollment and waiting period from the effective date 
of a VALife policy until the coverage can pay a death benefit (38 
U.S.C. 1922B(c)(2)) and is intended to incentivize policyholders with 
lapsed policies to reinstate coverage as soon as possible after 
lapsing. VA believes that a shorter reinstatement period is also 
warranted because VA would not require policyholders to submit proof of 
insurability to reinstate coverage. Veterans who do not reinstate 
VALife coverage within this two-year period would remain eligible to 
reapply for VALife but would be required to wait two years between 
their re-enrollment date and the date the full VALife coverage amount 
takes effect.
    VA is proposing in new Sec.  8.7(e) to make the maximum age for 
reinstatement age 80, which is our publicized maximum issue age for 
VALife. This is consistent with the practice of the commercial 
insurance industry, in which most companies do not allow reinstatement 
beyond the maximum issue age for their products.

[[Page 42121]]

While we are allowing issues up to age 95 for VALife, that is only for 
the category of veterans who applied for service connection for a new 
condition prior to age 81 but did not receive notification of an 
initial award for that new condition until after attaining age 81. 
Given that we are not requiring proof of satisfactory health as a 
condition for reinstatement, the maximum age limitation, in addition to 
the two-year time limit after lapse to apply, will mitigate the risk of 
anti-selection.
    For clarity, VA also proposes to revise the heading of Sec.  8.7 
from ``Reinstatement of National Service Life Insurance except 
insurance issued pursuant to section 1925 of title 38 U.S.C.'' to 
``Reinstatement.''

6. New Program of Insurance Is Not Participating

    Paragraph (a)(3) of 38 CFR 8.10 states that Government life 
insurance programs issued under 38 U.S.C. 1904(c) and 1922(a) do not 
pay dividends. VALife is only authorized to issue coverage on a non-
participating basis (38 U.S.C. 1922B(a)(5)(A)(i)), which means that the 
new insurance program would not issue policies that pay dividends to 
its policyholders. See 5 Couch on Ins. Sec.  69:46 n.1 (participating 
plan provides for a refund of a portion of the premium as a dividend at 
the end of the policy period). For purposes of clarity, VA proposes to 
revise paragraph (a)(3) by adding a reference to section 1922B.

7. Surrender of VALife Coverage; Development of VALife Cash Values

    VA proposes to clarify that Sec.  8.11(a) and (b), which provides 
that cash value, paid-up insurance, and extended term insurance, except 
as provided in Sec.  8.14(b), shall become effective at the completion 
of the first policy year on certain NSLI plans and explains the process 
for requesting a cash surrender, respectively, would not apply to 
VALife.
    VA also proposes to amend Sec.  8.11 to add a new paragraph (j) 
stating that cash values for VALife would be developed using the 1941 
Commissioners Standard Ordinary Mortality Table (1941 CSO Table) and an 
interest rate of 3.5 percent per annum. The 1941 CSO Table is the same 
mortality basis as that prescribed for cash values in SDVI (38 U.S.C. 
1922(a)(1)).
    VA would also state in the new paragraph (j) that VA would not be 
obligated to pay cash value in the event of lapse or surrender during 
the two-year waiting period prior to VALife coverage becoming payable 
for a death benefit because cash value does not begin to accrue until 
the two-year waiting period elapses. Additionally, if an insured 
enrolls in VALife for an amount less than the statutory maximum and 
elects to apply for additional coverage at a later date, the cash value 
on the additional amount of coverage would not begin accruing until the 
end of the two-year waiting period for the additional coverage. Full 
coverage would not be in force under VALife until the two-year waiting 
period has been completed. See 38 U.S.C. 1922B(c)(2). And consistent 
with other life insurance programs currently administered by VA, VA 
would transfer any premiums paid for coverage that lapses or is 
surrendered, to the credit of the VALife revolving fund that is 
established under 38 U.S.C. 1922B(a)(5)(A)(i) to support the financial 
health of VALife.
    VA would also explain in new paragraph (k) the process for an 
insured to cash surrender a policy and the process to issue the 
surrender value of the policy to the insured. VA would apply a process 
similar to cash surrenders under existing policies as explained in 
Sec.  8.11(b), with the following differences: (1) applications would 
be primarily through an electronic medium in order to decrease 
administrative costs; and (2) indebtedness and paid up additions would 
not apply as the VALife program does not initially plan to provide 
policy loans and is a non-participating program without dividends. 
Dividends are required in order to issue paid up additions.
    For clarity, VA also proposes to revise the heading of this section 
from ``Cash value and policy loan'' to ``Cash value.''

8. Policy Loans

    Section 1906 of title 38, United States Code, permits VA to 
establish regulations pertaining to loans. VA has implemented that 
authority in 38 CFR 8.13, and paragraph (a) of that section requires VA 
to lend to an insured monies borrowed against the security of the cash 
value of his or her insurance coverage, subject to the insured meeting 
various criteria. VALife is designed to be completely self-supporting, 
unlike other programs of NSLI which receive an annual subsidy to cover 
excess claims expenses. See 38 U.S.C. 1919(a) (authorizing 
appropriation for NSLI), 1922(a)(5) (authorizing appropriations in part 
for SDVI). Because VA has determined that it would not be actuarially 
sound to offer loans under VALife at its inception on January 1, 2023, 
VA proposes to amend Sec.  8.13 by adding a new paragraph (e) that 
would state that the United States shall only issues loans to VALife 
policyholders if VA determines that doing so is administratively and 
actuarially sound for the VALife Program.

9. Extended Term and Paid-Up Insurance

    Under 38 CFR 8.14 and 8.15, insureds who fail to pay premiums do 
not go into lapse status and instead remain covered under their 
policies according to the extended term value of their coverage, or 
their coverage amount is reduced to a level that is consistent with the 
policyholder's accrued cash value. Both regulations were promulgated to 
prevent life insurance coverage from lapsing and are consistent with 
the intent of preventing policyholders from going into lapse status. 
However, VA proposes to add language to each section stating that, for 
purposes of VALife, such extended term or reduced paid-up insurance 
would not be available to veterans during the VALife two-year waiting 
period. VA also proposes to add language clarifying that as soon as the 
two-year waiting period ends, VALife policyholders would enjoy the 
protection of extended term and reduced paid-up insurance coverage that 
both sections provide to policyholders covered under other Government 
life insurance programs.

10. Slayer's Rule Exclusion

    The Federal common-law slayer's rule is a public policy that 
precludes killers from benefitting from their victims' deaths. 76 FR 
77455 (Dec. 13, 2011). The statutes governing the NSLI programs of life 
insurance are silent regarding whether a beneficiary who killed the 
decedent, or a family member of such a beneficiary, may receive the 
proceeds of the victim's insurance coverage. Some courts have applied 
the slayer's rule to claims for NSLI proceeds. Shoemaker v. Shoemaker, 
263 F.2d 931 (6th Cir. 1959). However, there are a variety of different 
requirements for applying the slayer's rule depending on the state 
where the killing occurred. See Annot., 26 A.L.R.2d 987 (1952 & 1998 
Supp.); 4 Couch on Ins. Sec.  62:19. Therefore, VA believes it is 
necessary to establish a uniform Federal rule for applying the slayer's 
rule to Government life insurance death proceeds for all NSLI policies, 
including VALife. VA has previously codified a slayer's rule in 38 CFR 
9.5 that pertains to the payment of death proceeds under 
Servicemembers' Group Life Insurance. For purposes of consistency, VA 
proposes to amend 38 CFR 8.19 to designate the existing text as 
paragraph (a) and to create a new paragraph (b)

[[Page 42122]]

that would state that where a beneficiary has been determined to have 
intentionally and wrongfully killed the insured, the provisions found 
in 38 CFR 9.5(e) shall be applied to payment of insurance. Under what 
is known as the extended slayer's rule, some jurisdictions also 
disqualify members of a slayer's family, other than individuals also 
related to the victim, from receiving the proceeds of an insurance 
policy. 76 FR 77455. Consistent with Sec.  9.5(e)(2), VA proposes to 
incorporate the extended slayer's rule into 38 CFR 8.19 in order to 
prevent killers from receiving even the indirect benefits of their 
wrongdoing by receiving or inheriting, through relatives, the financial 
benefits of the killing.

11. Eligibility for Those Insured Under 38 U.S.C. 1922(a) to Purchase 
VALife After December 31, 2025; Increases in VALife Coverage

    Veteran policyholders insured under 38 U.S.C. 1922(a) are eligible 
to maintain their insurance coverage during the initial two-year VALife 
enrollment period if they apply for VALife between January 1, 2023, and 
December 31, 2025. 38 U.S.C. 1922(d)(2)(A), (B). Although 38 U.S.C. 
1922(d)(3) states that a veteran may not be insured under both programs 
simultaneously other than as provided by paragraph (2)(B), we interpret 
subsection (d)(3) to mean that a veteran may not be insured under both 
programs simultaneously except if a veteran who is insured under SDVI 
elects to be insured under VALife during the initial two-year 
enrollment period. Also, neither this statute nor the VALife statute 
addresses whether a policyholder who is insured under 38 U.S.C. 1922(a) 
is eligible to apply for VALife after December 31, 2025, if the 
policyholder surrenders his or her life insurance policy or informs VA 
that he or she desires to terminate coverage in order to become 
eligible for VALife. VA proposes to add new Sec.  8.35 to 38 CFR part 8 
that would explain the eligibility criteria for those insured under 38 
U.S.C. 1922(a) to purchase VALife after December 31, 2025. Veterans 
would be eligible to purchase VALife coverage upon surrender or 
cancellation of the policy along with a written statement to VA that 
the policyholder desires to terminate his or her existing life 
insurance coverage in order to apply for VALife and initiate the two-
year waiting period before VALife will pay a death benefit to the 
policyholder's beneficiary. This statement would be in a form that is 
prescribed by the Secretary.

12. Issuance of Coverage Under 38 U.S.C. 1922B Following Additional 
Elections

    Under 38 U.S.C. 1922B(a)(4)(A), a veteran may elect to be insured 
for between $10,000 and $40,000, in $10,000 increments. VA proposes to 
add a new Sec.  8.36 to 38 CFR part 8 that would explain that veterans 
who do not elect the statutory maximum amount of VALife coverage may 
still apply for additional VALife coverage at a later date, but the 
two-year waiting period imposed by 38 U.S.C. 1922B(c)(2) must be 
satisfied before the additional coverage amount of VALife is in force. 
Allowing veterans to apply for additional VALife coverage would be an 
important feature of VALife for policyholders, as life circumstances 
may change, such as marriage or the birth of a child. These life events 
may create the need for additional coverage. However, the two-year 
waiting period allows for addressing any adverse selection risks while 
providing this flexibility to insureds. This is consistent with 
private, commercial insurance provider practices.

Executive Orders 12866 and 13563

    Executive Orders (E.O.) 12866 and 13563 direct agencies to assess 
the costs and benefits of available regulatory alternatives and, when 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, and other advantages; distributive impacts; 
and equity). E.O. 13563 (Improving Regulation and Regulatory Review) 
emphasizes the importance of quantifying both costs and benefits, 
reducing costs, harmonizing rules, and promoting flexibility. The 
Office of Information and Regulatory Affairs has determined that this 
proposed rule is not a significant regulatory action under E.O. 12866. 
The Regulatory Impact Analysis associated with this rulemaking can be 
found as a supporting document at www.regulations.gov.

Regulatory Flexibility Act

    The Secretary hereby certifies that this proposed rule would not 
have a significant economic impact on a substantial number of small 
entities as they are defined in the Regulatory Flexibility Act (5 
U.S.C. 601-612). This proposed rule would generally be small business 
neutral as it implements statutory provisions that only allow the 
United States to issue life insurance coverage to veterans with 
service-connected disabilities. 38 U.S.C. 1922B(a)(1) (``[T]he 
Secretary shall carry out a service-disabled veterans insurance program 
under which a veteran is granted insurance by the United States against 
the death of such individual occurring while such insurance is in 
force.''). Although there are statutes in 38 U.S.C. 1901-1988 that 
allow VA to purchase a large group life insurance policy from a private 
commercial insurer, those statutory authorities only apply to the 
Servicemembers' Group Life Insurance Program, which provides life 
insurance coverage to Service members and their dependents and former 
Service members, and they do not provide VA with the authority to 
purchase a group life insurance policy from a private insurer for 
purposes of providing VALife coverage. As such, the overall impact of 
this proposed rule would be of no benefit or detriment to small 
businesses, because these insurance policies would only be issued by 
the United States to veterans with service-connected disabilities. 
Therefore, pursuant to 5 U.S.C. 605(b), the initial and final 
regulatory flexibility analysis requirements of 5 U.S.C. 603 and 604 do 
not apply.

Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 
1532, that agencies prepare an assessment of anticipated costs and 
benefits before issuing any rule that may result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any one year. This proposed rule would have no such 
effect on State, local, and tribal governments, or on the private 
sector.

Paperwork Reduction Act

    This proposed rule includes provisions constituting new collections 
of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501-3521) that require approval by the Office of Management and Budget 
(OMB). Accordingly, under 44 U.S.C. 3507(d), VA has submitted a copy of 
this rulemaking action to OMB for review and approval.
    OMB assigns control numbers to collections of information it 
approves. VA may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a 
currently valid OMB control number. If OMB does not approve the 
collection of information as requested, VA will immediately remove the 
provisions containing the collection of

[[Page 42123]]

information or take such other action as is directed by OMB.
    Comments on the new collections of information contained in this 
rulemaking should be submitted through www.regulations.gov. Comments 
should indicate that they are submitted in response to ``RIN 2900-AR53; 
National Service Life Insurance--Veterans Affairs Life Insurance 
(VALife) Program Amendments'' and should be sent within 60 days of 
publication of this rulemaking. The collections of information 
associated with this rulemaking can be viewed at: www.reginfo.gov/public/do/PRAMain.
    OMB is required to make a decision concerning the collections of 
information contained in this rulemaking between 30 and 60 days after 
publication of this rulemaking in the Federal Register. Therefore, a 
comment to OMB is best assured of having its full effect if OMB 
receives it within 30 days of publication. This does not affect the 
deadline for the public to comment on the provisions of this 
rulemaking.
    The Department considers comments by the public on new collection 
of information in--
    <bullet> Evaluating whether the new collections of information are 
necessary for the proper performance of the functions of the 
Department, including whether the information will have practical 
utility;
    <bullet> Evaluating the accuracy of the Department's estimate of 
the burden of the new collection of information, including the validity 
of the methodology and assumptions used;
    <bullet> Enhancing the quality, usefulness, and clarity of the 
information to be collected; and
    <bullet> Minimizing the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology, e.g., permitting 
electronic submission of responses.
    The collections of information associated with this rulemaking 
contained in 38 CFR 8.0(g), 8.7, 8.11, 8.19, 8.35 and 8.36 are 
described immediately following this paragraph, under their respective 
title.

    Title: Application for Veterans' Affairs Life Insurance (VALife).
    OMB Control No: 2900-XXXX (New/TBD).
    CFR Provision: 38 CFR 8.0(g) and 8.36.
    <bullet> Summary of collection of information: The new collection 
of information in proposed 38 CFR 8.0(g) and 8.36 would require 
individuals applying for or increasing VALife coverage to provide 
certain information to VA.
    <bullet> Description of need for information and proposed use of 
information: The information would be used by VA to determine the 
eligibility of veterans with service-connected disabilities who elect 
to apply for, or increase, VALife coverage.
    <bullet> Description of likely respondents: Veterans, veterans' VA-
appointed fiduciaries, and veterans' state-appointed guardians and 
custodians and attorneys-in-fact.
    <bullet> Estimated number of respondents: 185,000 annually.
    <bullet> Estimated frequency of responses: One time per 
application.
    <bullet> Estimated average burden per response: 10 minutes.
    <bullet> Estimated total annual reporting and recordkeeping burden: 
Based on a projected 185,000 annual respondents and an average burden 
per response of 10 minutes, VA estimates a total annual reporting and 
recordkeeping burden of 30,833 hours.
    <bullet> Estimated cost to respondents per year: VA estimates the 
total information collection burden cost to be $863,632 per year 
(30,833 burden hours for respondents x $28.01 per hour).*

* To estimate the total information collection burden cost, VA used the 
Bureau of Labor Statistics (BLS) median hourly wage for hourly wage for 
``all occupations'' of $28.01 per hour. This information is available 
at https://www.bls.gov/oes/current/oes_nat.htm#13-0000.

    Title: Veterans' Affairs Life Insurance (VALife) Policy Maintenance 
Form.
    OMB Control No: 2900-XXXX (New/TBD).
    CFR Provisions: 38 CFR 8.7, 8.11, and 8.19.
    <bullet> Summary of collection of information: The new collection 
of information in proposed 38 CFR 8.7 would require an individual to 
use the new form to request reinstatement for VALife. The new 
collection of information in proposed Sec.  8.11(k) would require an 
individual to use the new form to surrender the VALife policy and 
request payment of the cash value. An individual could also use the new 
form to request beneficiary changes on a VALife policy under proposed 
Sec.  8.19(a).
    <bullet> Description of need for information and proposed use of 
information: The information would be used by VA to reinstate a VALife 
policy or to complete a insured's request to surrender coverage under 
VALife.
    <bullet> Description of likely respondents: Veterans, veterans' VA-
appointed fiduciaries, and veterans' state-appointed guardians and 
custodians and attorneys-in-fact.
    <bullet> Estimated number of respondents: 26,672 annually.
    <bullet> Estimated frequency of responses: One action per form.
    <bullet> Estimated average burden per response: 5 minutes.
    <bullet> Estimated total annual reporting and recordkeeping burden: 
Based on a projected 26,672 annual respondents and an average burden 
per response of 5 minutes, VA estimates a total annual reporting and 
recordkeeping burden of 2,223 hours.
    <bullet> Estimated cost to respondents per year: VA estimates the 
total information collection burden cost to be $62,266 per year (2,223 
burden hours for respondents x $28.01 per hour).*

* To estimate the total information collection burden cost, VA used the 
Bureau of Labor Statistics (BLS) median hourly wage for hourly wage for 
``all occupations'' of $28.01 per hour. This information is available 
at https://www.bls.gov/oes/current/oes_nat.htm#13-0000.

    Title: Veterans' Affairs Life Insurance (VALife) Surrender/
Conversion Form.
    OMB Control No: 2900-XXXX (New/TBD).
    CFR Provisions: 38 CFR 8.35.
    <bullet> Summary of collection of information: The new collection 
of information in proposed 38 CFR 8.35 would require an individual to 
confirm their surrender of any current SDVI coverage at the time they 
apply for VALife.
    <bullet> Description of need for information and proposed use of 
information: The information would be used by VA to surrender an 
existing SDVI policy so that a Veteran can apply for VALife.
    <bullet> Description of likely respondents: Veterans, veterans' VA-
appointed fiduciaries, and veterans' state-appointed guardians and 
custodians and attorneys-in-fact.
    <bullet> Estimated number of respondents: 26,672 annually.
    <bullet> Estimated frequency of responses: One action per form.
    <bullet> Estimated average burden per response: 5 minutes.
    <bullet> Estimated total annual reporting and recordkeeping burden: 
Based on a projected 26,672 annual respondents and an average burden 
per response of 5 minutes, VA estimates a total annual reporting and 
recordkeeping burden of 2,223 hours.
    <bullet> Estimated cost to respondents per year: VA estimates the 
total information

[[Page 42124]]

collection burden cost to be $62,266 per year (2,223 burden hours for 
respondents x $28.01 per hour).*

* To estimate the total information collection burden cost, VA used the 
Bureau of Labor Statistics (BLS) median hourly wage for hourly wage for 
``all occupations'' of $28.01 per hour. This information is available 
at https://www.bls.gov/oes/current/oes_nat.htm#13-0000.

Assistance Listing

    The Assistance Listing number and title for the program affected by 
this document is 64.103, Life Insurance for Veterans.

List of Subjects in 38 CFR Part 8

    Life insurance, Veterans.

Signing Authority

    Denis McDonough, Secretary of Veterans Affairs, approved this 
document on June 30, 2022, and authorized the undersigned to sign and 
submit the document to the Office of the Federal Register for 
publication electronically as an official document of the Department of 
Veterans Affairs.

Jeffrey M. Martin,
Assistant Director, Office of Regulation Policy & Management, Office of 
General Counsel, Department of Veterans Affairs.

    For the reasons stated in the preamble, VA is proposing to amend 38 
CFR part 8 as set forth below:

PART 8--NATIONAL SERVICE LIFE INSURANCE

0
1. The authority citation for part 8 continues to read as follows:

    Authority:  38 U.S.C. 501, 1901-1929, 1981-1988, unless 
otherwise noted.

0
2. Amend Sec.  8.0 by:
0
a. Revising paragraph (e); and
0
b. Adding paragraphs (f), (g), and (h).
    The revision and additions read as follows:


Sec.  8.0   Definitions of terms used in connection with title 38 CFR, 
part 8, National Service Life Insurance.

* * * * *
    (e) What does the term ``guardian'' mean? The term guardian means 
any state-appointed guardian or conservator, attorney-in-fact, or VA-
appointed fiduciary, as defined in Sec.  13.20, who is responsible for 
receiving VA benefits in a fiduciary capacity on behalf of the insured 
or the beneficiary, or to take the actions listed in Sec.  8.32.

    Note to paragraph (e):  If a VA-appointed fiduciary and either a 
state-appointed guardian/conservator or attorney-in-fact are not the 
same individual and both attempt to take conflicting actions on an 
incompetent insured's policy, the VA-appointed fiduciary shall have 
the exclusive authority to take actions on the policy.

    (f) What does the term ``Veterans' Affairs Life Insurance 
(VALife)'' mean? The term Veterans' Affairs Life Insurance, or VALife 
in its abbreviated form, means a policy of insurance that is issued 
under section 1922B of title 38 U.S.C.
    (g) What does the term ``application for VALife'' mean? The term 
application for VALife means a properly completed application form 
submitted online or through another medium prescribed by the Secretary.
    (h) What does the term ``beneficiary'' mean? The term 
``beneficiary'' means a principal or contingent beneficiary designated 
by the insured.
0
3. Amend Sec.  8.1 by:
0
a. Revising the heading;
0
b. Revising paragraph (a);
0
c. Adding Note 3 in paragraph (b);
0
d. Removing ``Yes,'' and adding in its place ``For insurance other than 
VALife,'' in paragraph (c).
    The revisions and addition read as follows:


Sec.  8.1   Effective date for an insurance policy issued under section 
1922(a) or 1922B of title 38 U.S.C.

    (a) What is the effective date of the policy? The effective date is 
the date policy coverage begins. Benefits due under a policy issued 
under section 1922(a) are payable any time after the effective date. 
Benefits due under a policy issued under section 1922B are payable any 
time two years after the effective date.
    (b) * * *

    Note 3 to paragraph (b): If you apply for insurance coverage 
through an electronic medium, the date of delivery of the premium 
payment will be the date you authorize payment of the initial 
premium. In cases where the authorization does not result in the 
required premium payment because there were insufficient funds to 
cover the full initial premium, the delivery date of the premium 
payment will be the date your full initial premium is received by 
VA.

* * * * *
0
4. Amend Sec.  8.2 by adding paragraph (e) to read as follows:


Sec.  8.2   Payment of premiums.

* * * * *
    (e) If a policyholder enrolls in VALife for an amount less than the 
statutory maximum and elects to apply for additional coverage at a 
later date and dies before completing the two-year waiting period for 
the additional VALife coverage amount, the beneficiary shall be 
refunded premiums that were paid for the additional VALife coverage, 
plus interest, in accordance with 38 U.S.C. 1922B(c)(3)(A). If a 
policyholder surrenders or cancels a VALife policy during the two-year 
waiting period imposed by 38 U.S.C. 1922B(c)(2) before coverage is in 
force, the United States shall not return to the policyholder the 
premiums that were paid to purchase the coverage.
0
5. Revise Sec.  8.6 to read as follows:


Sec.  8.6   Calculation of Time Period; Veteran's Age.

    (a) If the last day of a time period specified in Sec.  8.2 or 
Sec.  8.3, or the last day allowed for filing an application for 
National Service Life Insurance or for applying for reinstatement 
thereof, or paying premiums due thereon, falls on a Saturday, Sunday, 
or legal holiday, the time period will be extended to include the 
following workday.
    (b) For VALife, the premium will be determined using the age of the 
veteran at his or her nearest birthday on the effective date of the 
policy.
    (c) For purposes of determining a veteran's eligibility for VALife 
under 38 U.S.C. 1922B(a)(3)(A), the age of the veteran at his or her 
last birthday prior to the date of application will be used.
    (d) For purposes of determining a veteran's eligibility for VALife 
under 38 U.S.C. 1922B(a)(3)(B), with respect to a veteran who has 
attained 81 years of age, an initial grant of service connection for a 
new or secondary condition for which the veteran applied for disability 
compensation before attaining 81 years of age will satisfy the 
eligibility criteria; however, VA will not grant insurance to such a 
veteran based on an increase in an existing disability rating, a grant 
of individual unemployability under 38 CFR 4.18, or a finding of 
incompetency under 38 CFR 3.353. VA will not issue a VALife policy to a 
veteran over age 95.
0
6. Amend Sec.  8.7 by:
0
a. Revising the heading;
0
b. Removing ``Any policy'' and adding in its place ``Subject to 
paragraph (e), any policy'' in paragraph (a); and
0
c. Adding paragraph (e).
    The revisions and addition read as follows:


Sec.  8.  7 Reinstatement.

* * * * *
    (e) Coverage issued under VALife that lapses for non-payment of 
premiums may only be reinstated if the former policyholder submits all 
premiums in arrears from their respective due dates, plus interest, to 
reinstate the coverage within two years of the date of the lapse and 
has not yet reached age 81.


[[Page 42125]]


(The Office of Management and Budget has approved the information 
collection provisions in this section under control number 2900-
XXXX.)
0
7. Amend Sec.  8.10 by revising paragraph (a)(3) to read as follows:


Sec.  8.10   How paid.

    (a) * * *
    (3) Issued under sections 1904(c), 1922(a), and 1922B of title 38 
U.S.C.
* * * * *
0
8. Amend Sec.  8.11 by:
0
a. Revising the heading;
0
b. Adding at the end in paragraph (a) ``This paragraph shall not apply 
to VALife.'';
0
c. Removing ``Upon'' and adding in its place ``For insurance other than 
VALife, upon'' in paragraph (b); and
0
d. Adding paragraphs (j) and (k).
    The revisions and additions read as follows:


Sec.  8.11   Cash value.

* * * * *
    (j) Cash values that accrue for VALife will be developed using a 
multiple of the 1941 Commissioners Standard Ordinary Mortality Table 
and an interest rate of 3.5 percent per annum. Cash values will not 
accrue and will not be payable until the completion of the two-year 
waiting period imposed by 38 U.S.C. 1922B(c)(2). If a VALife policy 
lapses or is surrendered before completion of the two-year waiting 
period, then any amounts that VA has collected, such as premium 
payments, shall be returned to the credit of the VALife revolving fund 
that is established under 38 U.S.C. 1922B(a)(5)(A)(i). If a veteran 
enrolls in VALife for an amount less than the statutory maximum and 
elects to apply for additional coverage at a later date, the cash value 
on the additional amount of coverage would not begin accruing until the 
end of the two-year waiting period for the additional coverage.
    (k) The United States will pay the cash value, in full or in part, 
of any VALife policy, subject to the limitations in Sec.  8.11(j), to 
insureds upon request through electronic medium or other method 
prescribed by the Secretary. Unless otherwise requested by the insured, 
a surrender will be deemed effective as of the end of the premium month 
in which the application for cash surrender is delivered to the 
Department of Veterans Affairs, or as of the date of payment for the 
cash value, whichever is later.

(The Office of Management and Budget has approved the information 
collection provisions in this section under control number 2900-
XXXX.)
* * * * *
0
9. Amend Sec.  8.13 by adding paragraph (e) to read as follows:


Sec.  8.13   Policy loans.

* * * * *
    (e) For VALife, the United States shall only issue policy loans if 
the Secretary determines that offering loans is administratively and 
actuarially sound.
0
10. Amend Sec.  8.14 by adding paragraph (d) to read as follows:


Sec.  8.14   Provision for extended term insurance--other than 5-year 
level premium term or limited convertible 5-year level premium term 
policies.

* * * * *
    (d) VALife shall not be extended automatically as term insurance 
until the insured has paid the required premiums during the two-year 
waiting period that is imposed by 38 U.S.C. 1922B(c)(2) before VALife 
coverage is in force.
0
11. Revise Sec.  8.15 to read as follows:


Sec.  8.15   Provision for paid-up insurance; other than 5-year level 
premium term or limited convertible 5-year level premium term policies.

    (a) If a National Service Life Insurance policy on any plan other 
than 5-year level premium term or limited convertible 5-year level 
premium term plan has not been surrendered for cash, upon written 
request of the insured and complete surrender of the insurance with all 
claims thereunder, after the expiration of the first policy year and 
while the policy is in force under premium-paying conditions, the 
United States will issue paid-up insurance for such amount as the cash 
value less any indebtedness, and a charge for administrative cost for 
insurance issued under 38 U.S.C. 1925, will purchase when applied as a 
net single premium at the attained age of the insured. For this purpose 
the attained age is the age on the birthday anniversary nearest to the 
effective date of the policy plus the number of years and months from 
that date to the date the paid-up insurance becomes effective. Such 
paid-up insurance will be effective as of the expiration of the period 
for which premiums have been paid and earned; and, any premiums paid in 
advance for months subsequent to that in which the application for 
paid-up insurance is made shall be refunded to the insured. The paid-up 
insurance, if eligible to participate in and to receive dividends, 
shall be with the right to dividends. The insured may at any time 
surrender the paid-up policy for its cash value or obtain a loan on 
such paid-up insurance.
    (b) The United States shall not issue paid-up insurance under 
VALife until the insured has paid premiums during the two-year waiting 
period imposed by 38 U.S.C. 1922B(c)(2) before VALife coverage is in 
force.
0
12. Revise Sec.  8.19 to read as follows:


Sec.  8.19   Beneficiary and optional settlement changes.

    (a) The insured shall have the right at any time, and from time to 
time, and without the knowledge or consent of the beneficiary to cancel 
or change a beneficiary and/or optional settlement designation. A 
change of beneficiary or optional settlement to be effective must be 
made by notice in writing signed by the insured and forwarded to the 
Department of Veterans Affairs by the insured or designated agent, and 
must contain sufficient information to identify the insured. A 
beneficiary designation and an optional settlement selection, but not a 
change of beneficiary, may be made by last will and testament duly 
probated. Upon receipt by the Department of Veterans Affairs, a valid 
designation or change of beneficiary or option shall be deemed to be 
effective as of the date of execution. Any payment made before proper 
notice of designation or change of beneficiary has been received in the 
Department of Veterans Affairs shall be deemed to have been properly 
made and to satisfy fully the obligations of the United States under 
such insurance policy to the extent of such payments.
    (b) If a beneficiary has been determined to have intentionally and 
wrongfully killed the insured, the provisions found in 38 CFR 9.5(e) 
shall be followed.
0
13. Add Sec.  8.35 to read as follows:


Sec.  8.35   Eligibility for those insured under 38 U.S.C. 1922(a) to 
purchase insurance under 38 U.S.C. 1922B after December 31, 2025.

    An insured under a Legacy Service Disabled Veterans' Insurance 
policy shall be eligible to purchase VALife coverage after December 31, 
2025, upon cancellation of his or her Legacy Service Disabled Veterans' 
Insurance policy and surrender of any cash value that his or her 
coverage has accrued in accordance with 38 CFR 8.11. The policyholder 
must also submit a statement in a form that is prescribed by the 
Secretary, which clearly indicates that the policyholder desires to 
terminate his or her existing life insurance coverage in order to apply 
for VALife and initiate the two-year waiting period imposed by 38 
U.S.C. 1922B(c)(2) before such VALife coverage is in force.

(Authority: 38 U.S.C. 501, 1901-1929, 1981-1988)

(The Office of Management and Budget has approved the information 
collection

[[Page 42126]]

provisions in this section under control number 2900-XXXX.)
0
14. Add Sec.  8.36 to read as follows:


Sec.  8.36   Issuance of coverage under section 1922B of title 38 
U.S.C. following additional elections.

    An insured who elects less than the maximum amount of VALife 
coverage under 38 U.S.C. 1922B(a)(4)(A) shall remain eligible to 
purchase additional VALife coverage up to the VALife statutory maximum. 
Any insured who elects to apply for additional VALife coverage shall be 
subject to the two-year waiting period imposed by 38 U.S.C. 1922B(c)(2) 
before such additional VALife coverage is in force.

(Authority: 38 U.S.C. 501, 1901-1929, 1981-1988)

(The Office of Management and Budget has approved the information 
collection provisions in this section under control number 2900-
XXXX.)

[FR Doc. 2022-14942 Filed 7-13-22; 8:45 am]
BILLING CODE 8320-01-P