[Federal Register Volume 77, Number 227 (Monday, November 26, 2012)]
[Rules and Regulations]
[Pages 70374-70376]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-28611]



38 CFR Part 9

RIN 2900-AO30

Servicemembers' Group Life Insurance--Stillborn Child Coverage

AGENCY: Department of Veterans Affairs.

ACTION: Final rule.


SUMMARY: This final rule amends the Department of Veterans Affairs (VA) 
Servicemembers' Group Life Insurance (SGLI) regulations in order to 
provide that, if a stillborn child is otherwise eligible to be insured 
by the SGLI coverage of more than one servicemember under SGLI 
dependent child coverage, the child would be insured by the coverage of 
the child's SGLI-insured biological mother. This final rule will 
provide consistency in payment determinations involving SGLI stillborn 
child coverage.

DATES: Effective Date: This final rule is effective December 26, 2012.
    Applicability Date: This final rule will apply to claims for SGLI 
proceeds filed on or after December 26, 2012.

FOR FURTHER INFORMATION CONTACT: Monica Keitt, Attorney-Advisor, 
Department of Veterans Affairs Regional Office and Insurance Center 
(310/290B), P.O. Box 8079, Philadelphia, Pennsylvania 19101, (215) 842-
2000, Ext. 2905. (This is not a toll free number.)

SUPPLEMENTARY INFORMATION: On January 31, 2012, VA published in the 
Federal Register (77 FR 4734) a proposed rule to provide that, if a 
stillborn child is insured by the SGLI coverage of more than one 
servicemember, the SGLI proceeds would be paid to the child's SGLI-
insured mother. We provided a 60-day public-comment period, which ended 
on April 2, 2012, and received comments from five individuals.
    Section 1967(a)(4)(B) of title 38, United States Code, prohibits an 
insurable dependent who is a child from being insured at any time under 
the SGLI coverage of more than one member, i.e., more than one SGLI-
insured parent. If a child is otherwise eligible to be insured by the 
coverage of more than one member, under section 1967(a)(4)(B) the child 
is insured by the coverage of the member whose eligibility for SGLI 
occurred first, ``except that if that member does not have legal 
custody of the child, the child shall be insured by the coverage of the 
member who has legal custody of the child.'' Congress, however, did not 
indicate whether this provision is applicable to a stillborn child. VA 
therefore proposed to fill the gap left by Congress subjecting the 
coverage of a stillborn child to the limitation that an insurable 
dependent who is a child may not be insured at any time by the 
insurance coverage of more than one member. We further proposed that a 
stillborn child of two SGLI-covered parents will always be insured 
under the mother's coverage because state laws do not address legal 
custody of a stillborn.
    Two commenters wrote in support of the proposed rule. Three of the 
commenters raised issues regarding the proposed rule.
    One commenter stated that the rule does not take into account a 
case in which a stillborn child's parents are the same sex and urged 
flexibility in the rule so as not to prejudice homosexual couples. The 
premise of this comment, that a stillborn child could have parents of 
the same sex, is mistaken. VA has

[[Page 70375]]

defined the term ``member's stillborn child'' in 38 CFR 9.1(k)(1) to 
mean ``a member's natural child'' who meets other criteria not relevant 
to this discussion. The term ``natural child'' refers to a biological 
child. Black's Law Dictionary 272 (9th ed. 2009); see Luke v. Bowen, 
868 F.2d 974, 978 (8th Cir. 1989). As a result, this rule is applicable 
only if both biological parents of the stillborn child are SGLI-
insured. There can be only two biological parents of a child: The 
mother who provided the ovum that was fertilized and the father who 
provided the semen that fertilized the ovum. Black's Law Dictionary 
1222 (defining ``biological parent'' as woman who provides egg or man 
who provides sperm to form zygote that becomes embryo). Thus, there 
cannot be two biological parents of the same sex. We make no change 
based on this comment.
    Other commenters inquired about a case in which a stillborn child 
is born to a surrogate for a SGLI-insured. As explained above, in 
accordance with 38 U.S.C. 1967, this rule is only applicable if the 
stillborn's biological parents are both insured under SGLI. Generally, 
there are two types of surrogacy: (1) A surrogate is inseminated with 
sperm which fertilizes her own ovum, resulting in a child who is 
biologically related to her; and (2) a surrogate is impregnated with an 
embryo that is not the product of her ovum, resulting in a child who is 
not biologically related to her. If a surrogate is the biological 
mother of a stillborn and if both the surrogate and the stillborn's 
biological father are SGLI-insureds, the SGLI proceeds would be payable 
to the surrogate under this rule. Again, this outcome would be 
consistent with one reason provided for the proposed rule, i.e., the 
stillborn child was exclusively in the surrogate's physical custody. 77 
FR 4734. If however a surrogate is not the biological mother of the 
stillborn and if both of the stillborn's biological parents are SGLI-
insureds, the SGLI proceeds would be payable to the stillborn's 
biological mother under this rule. To ensure the clarity of the rule in 
this regard, we are changing the reference to ``the child's insured 
mother'' to read ``the child's insured biological mother.''
    One commenter stated that, generally with regard to life insurance, 
if an insured mother dies prior to the stillborn or seconds after 
giving birth to a stillborn, the proceeds would become part of the 
mother's estate and that, if she dies intestate, the proceeds would 
pass in accordance with intestacy laws. This situation is covered by 38 
U.S.C. 1970(i), which directs that, if a member dies before payment can 
be made on account of the member's insurable dependent's death, the 
SGLI proceeds payable on account of the insurable dependent's death are 
payable to the person or persons entitled to the proceeds payable on 
account of the member's death. Therefore, if an insured mother gave 
birth to a stillborn and died before payment on account of the 
stillborn child could be made to her, the SGLI proceeds payable on 
account of the stillborn would be payable to the person or persons 
entitled to the proceeds payable on account of the mother's death. Only 
if the mother had no designated beneficiary, surviving spouse, child, 
or parent would the proceeds be paid to the executor or administrator 
of the insured mother's estate. 38 U.S.C. 1970(a).
    One commenter also noted that the rule might eliminate the 
opportunity for notifying the stillborn child's father about the 
stillbirth in some circumstances. This comment is beyond the scope of 
the rulemaking, which is intended to explain which member's SGLI would 
insure a stillborn who is otherwise eligible to be insured by the SGLI 
coverage of more than one member.
    This commenter also stated that the rule would impose on the mother 
additional burdens associated with insurance coverage on the birth of a 
stillborn child. The commenter referenced paperwork to be filled out to 
initiate a claim and other fees, deductibles, or administrative 
requirements, all of which would have to be borne by the birth mother, 
regardless of her preferences or the family's preferences regarding 
insurance coverage. As explained in the preamble to the proposed rule, 
77 FR 4734, this amendment will obviate the need to establish paternity 
following the birth of a stillborn child, which we believe would impose 
far more onerous burdens than completing a claim to recover the SGLI 
proceeds. Further, there are no fees, deductibles, or other 
administrative requirements necessary to file a claim for SGLI family 
coverage that would impose a burden on the mother of the stillborn 
child. We also believe that this rule will have the beneficial effect 
of providing clear, definite guidance to members and their families as 
to how SGLI family coverage will be paid in the event of a stillbirth. 
We therefore make no change based upon this comment.
    Another commenter stated that the rule ignores the fact that the 
stillborn child's parents may choose that the father of the child 
receive payment of SGLI proceeds instead of the mother. In such 
circumstances, the stillborn's mother can simply give the proceeds to 
the stillborn's father. We therefore do not believe this rule needs to 
be amended to address this situation.
    A commenter disagreed with VA's assessment that the rule does not 
require a cost-benefit analysis. The commenter stated that, as required 
by Executive Orders 12866 and 13563, before promulgating the rule, VA 
should complete a cost-benefit analysis of the rule regarding its 
effect on same sex couples who use a surrogate. The commenter's premise 
is mistaken. In the notice of proposed rulemaking, VA did not state 
that a cost-benefit analysis was not required. In fact, VA's analysis 
of the proposed rule is publicly available on the VA Web site at http://www.va.gov/ORPM/VA_Regulations_Published_From_Fiscal_Year_FY_2004.asp. Rather VA stated that ``VA has examined the economic, 
interagency, legal, and policy implications of this proposed rule and 
has determined it not to be a significant regulatory action under 
Executive Order 12866.'' 77 FR 4735. We therefore make no change based 
on this comment.
    Based on the rationale set forth in the proposed rule and upon 
consideration of the public comments submitted, we adopt the provisions 
of the proposed rule as a final rule, with the changes noted above.
    We are also making one non-substantive change to the regulations 
governing the birth of a stillborn child. We are substituting the word 
``biological'' for the word ``natural'' in the definition of ``member's 
stillborn child'' in Sec.  9.1(k)(1). We are not altering the 
substantive content of the definition by making this change but rather 
are substituting a more current term for an outdated one.

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 an 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 rule would have no such effect on 
State, local, and tribal governments or on the private sector.

Paperwork Reduction Act

    This final rule contains no provision constituting a collection of 
information under the Paperwork Reduction Act (44 U.S.C. 3501 et seq.).

Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and

[[Page 70376]]

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). 
Executive Order 13563 (Improving Regulation and Regulatory Review) 
emphasizes the importance of quantifying both costs and benefits, 
reducing costs, harmonizing rules, and promoting flexibility. Executive 
Order 12866 (Regulatory Planning and Review) defines a ``significant 
regulatory action,'' which requires review by the Office of Management 
and Budget (OMB), as ``any regulatory action that is likely to result 
in a rule that may: (1) Have an annual effect on the economy of $100 
million or more or adversely affect in a material way the economy, a 
sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, or tribal 
governments or communities; (2) create a serious inconsistency or 
otherwise interfere with an action taken or planned by another agency; 
(3) materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
this Executive Order.''
    VA has examined the economic, interagency, legal, and policy 
implications of this final rule and has determined that it is not a 
significant regulatory action under Executive Order 12866.

Regulatory Flexibility Act

    The Secretary hereby certifies that this final rule will 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 et 
seq. This final rule will directly affect only individuals and will not 
directly affect small entities. Therefore, pursuant to 5 U.S.C. 605(b), 
this final rule is exempt from the initial and final regulatory 
flexibility analysis requirements of sections 603 and 604.

Catalog of Federal Domestic Assistance

    The catalog of Federal Domestic Assistance Program number and the 
title for this regulation is 64.103, Life Insurance for Veterans.

Signing Authority

    The Secretary of Veterans Affairs, or designee, approved this 
document 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. John R. 
Gingrich, Chief of Staff, approved this document on November 20, 2012, 
for publication.

List of Subjects in 38 CFR Part 9

    Life insurance, Military personnel, Veterans.

    Dated: November 20, 2012.
Robert C. McFetridge,
Director of Regulation Policy and Management, Office of the General 
Counsel, Department of Veterans Affairs.

    For the reasons stated in the preamble, the Department of Veterans 
Affairs is amending 38 CFR part 9 as follows:


1. The authority citation for part 9 continues to read as follows:

    Authority:  38 U.S.C. 501, 1965-1980A, unless otherwise noted.

Sec.  9.1  [Amended]

2. Amend Sec.  9.1(k)(1) by removing ``natural'' and adding, in its 
place, ``biological''.

3. Amend Sec.  9.5 by adding paragraph (f) and revising the authority 
citation at the end of the section to read as follows:

Sec.  9.5  Payment of proceeds.

* * * * *
    (f) If a stillborn child is otherwise eligible to be insured by the 
Servicemembers' Group Life Insurance coverage of more than one member, 
the child shall be insured by the coverage of the child's insured 
biological mother.

(Authority: 38 U.S.C. 501(a), 1965(10), 1967(a)(4)(B))

[FR Doc. 2012-28611 Filed 11-23-12; 8:45 am]