To amend chapter 87 of title 5, United States Code, to provide that the reduction in additional optional life insurance for Federal retirees shall not apply if the beneficiary is permanently disabled.

SECTION 1. EXCEPTION FROM PROVISIONS REQUIRING REDUCTION IN ADDITIONAL 
              OPTIONAL LIFE INSURANCE.

    (a) In General.--Subsection (c) of section 8714b of title 5, United 
States Code, is amended by adding at the end the following:
    ``(3)(A) The amount of additional optional insurance continued 
under paragraph (2) shall be continued, without any reduction under the 
last two sentences thereof, if--
            ``(i) at the time of retirement, there is in effect a 
        designation under section 8705 under which the entire amount of 
        such insurance would be paid to an individual who is 
        permanently disabled; and
            ``(ii) an election under subsection (d)(3) on behalf of 
        such individual is made in timely fashion.
    ``(B) Notwithstanding subparagraph (A), any reduction required 
under paragraph (2) shall be made if--
            ``(i) the additional optional insurance is not in fact paid 
        in accordance with the designation under section 8705, as in 
        effect at the time of retirement;
            ``(ii) the Office finds that adequate arrangements have not 
        been made to ensure that the insurance provided under this 
        section will be used only for the care and support of the 
        individual so designated; or
            ``(iii) the election referred to in subparagraph (A)(ii) 
        terminates at any time before the death of the individual who 
        made such election.
    ``(C) For purposes of this paragraph, the term `permanently 
disabled' shall have the meaning given such term under regulations 
which the Office shall prescribe based on subparagraphs (A) and (C) of 
section 1614(a)(3) of the Social Security Act, except that, in applying 
subparagraph (A) of such section for purposes of this subparagraph, 
`which can be expected to last permanently' shall be substituted for 
`which has lasted or can be expected to last for a continuous period of 
not less than twelve months'.''.
    (b) Continued Withholdings.--Subsection (d) of such section 8714b 
is amended by adding at the end the following:
    ``(3)(A) To be eligible for unreduced additional optional insurance 
under subsection (c)(3), the insured individual shall be required to 
elect, at such time and in such manner as the Office by regulation 
requires (including procedures for demonstrating compliance with the 
requirements of subsection (c)(3)), to have the full cost thereof 
continue to be withheld from the former employee's annuity or 
compensation, as the case may be, beginning as of when such 
withholdings would otherwise cease under the second sentence of 
paragraph (1).
    ``(B) An election made by an insured individual under subparagraph 
(A) (and withholdings pursuant thereto) shall terminate in the event 
that--
            ``(i) the insured individual--
                    ``(I) revokes such election; or
                    ``(II) makes any redesignation or other change in 
                the designation under section 8705 (as in effect at the 
                time of retirement); or
            ``(ii) the Office finds, upon the application of the 
        insured individual or on its own initiative, that any of the 
        requirements or conditions for unreduced additional optional 
        insurance under subsection (c)(3) are, at any time, no longer 
        met.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        take effect on the date of the enactment of this Act.
            (2) Election for certain individuals not otherwise 
        eligible.--The Office of Personnel Management shall prescribe 
        regulations under which an election under section 
        8714b(d)(3)(A) of title 5, United States Code (as amended by 
        this Act) may be made, within 1 year after the date of the 
        enactment of this Act, by any individual not otherwise eligible 
        to make such an election, but only if such individual--
                    (A) separated from service on or after the first 
                day of the 50-month period ending on the date of 
                enactment of this Act; and
                    (B) would have been so eligible had the amendments 
                made by this Act (and implementing regulations) been in 
                effect as of the individual's separation date (or, if 
                earlier, the last day for making such an election based 
                on that separation).
            (3) Withholdings.--
                    (A) Prospective effect.--If an individual makes an 
                election under paragraph (2), withholdings under 
                section 8714b(d)(3)(A) of such title 5 shall thereafter 
                be made from such individual's annuity or compensation, 
                as the case may be.
                    (B) Earlier amounts.--If, pursuant to such 
                election, benefits are in fact paid in accordance with 
                section 8714b(c)(3) of such title 5 upon the death of 
                the insured individual, an appropriate reduction 
                (computed under regulations prescribed by the Office) 
                shall be made in such benefits to reflect the 
                withholdings that--
                            (i) were not made (before the commencement 
                        of withholdings under subparagraph (A)) by 
                        reason of the cessation of withholdings under 
                        the second sentence of section 8714b(d)(1) of 
                        such title; but
                            (ii) would have been made had the 
                        amendments made by this Act (and implementing 
                        regulations) been in effect as of the time 
                        described in paragraph (2)(B).
            (4) Notice.--The Office shall, by publication in the 
        Federal Register and such other methods as it considers 
        appropriate, notify current and former Federal employees as to 
        the enactment of this Act and any benefits for which they might 
        be eligible pursuant thereto. Included as part of such 
        notification shall be a brief description of the procedures for 
        making an election under paragraph (2) and any other 
        information that the Office considers appropriate.

Summary: Amends Federal civil service law to permit a retired Federal employee over age 65 to continue additional optional life insurance coverage when the beneficiary is permanently disabled.  Requires such retiree to pay the entire premium for such insurance through withholdings from the retiree's annuity or compensation.