Assignment
DEFINITION
What Is an Assignment?
An assignment is the transfer of ownership of your life insurance to another individual (s), corporation, or trustee.
You are still the insured person, but you no longer own the insurance on your life. You continue to pay the FEGLI Premiums from your employee salary or retirement annuity.
An assignment is irrevocable. You may not later change your mind or cancel the assignment.
What Coverage Is Affected?
When you make an assignment, you assign your Basic insurance, and Option A and Option B, if you have that coverage. An assignment applies to all of this coverage; you cannot assign only part of this coverage.
You cannot assign Option C; nor can you assign your Accidental Dismemberment coverage (which is part of Basic insurance and Option A).
You may not assign only part of your insurance or assign only one type of insurance.
Living Benefits
If you elect a partial living benefit, you may later assign all remaining insurance (Basic and/or Optional if applicable). If you elect a full living benefit, you may later assign Optional insurance.
You may not elect a living benefit if you have already assigned your insurance.
REASONS FOR ASSIGNING
To Comply with a Court Order
You may assign your insurance to comply with an order issued by a divorce court requiring that a former spouse and/or children from a previous marriage be named as the beneficiary of FEGLI proceeds.
If a court order requires you to make an assignment, you must still complete an assignment form for the assignment to take place. A court order requiring an assignment is not, itself, a valid assignment.
For Inheritance Tax Purposes
Provisions of Federal and/or State laws may give certain advantages when insurance has been assigned. When you die, the Internal Revenue Service (IRS) determines whether FEGLI proceeds are included in your gross estate. If you wish to make an assignment for tax advantages, you should consult with a competent estate tax advisor.
To Obtain Cash before You Die
You may assign your insurance to a viatical settlement company. Under this arrangement you would assign your Basic, Option A, and Option B to a viatical settlement company and that company would pay you cash in exchange. A living benefit only allows Basic insurance to be paid before your death and is available only if you have a medical prognosis that you have nine months or less to live. Viatical settlement companies have their own guidelines to determine who they are willing to accept assignments from and may be able to pay cash in other circumstances. Any agreement made with a viatical settlement company is a private agreement between you and the company.
To Pay off Debts
You may assign your insurance to pay off a debt; however, you cannot cancel the assignment once the debt is paid. Under this arrangement you would have to find a company or person willing to accept your assignment in exchange for canceling your debt.
Tax Implications
You may wish to consult a tax attorney and consider getting a ruling from the Internal Revenue Service (IRS) before you assign your life insurance.
This is especially important if you want to make an assignment to a trust or want to avoid inheriting the FEGLI coverage upon the death of your assignee.
A tax attorney has specific information about tax laws and IRS regulations and can make a determination about the tax effect of an assignment.
HOW TO MAKE AN ASSIGNMENT
Assignment Form
You may make an assignment by completing an Assignment, Federal Employees' Group Life Insurance (RI 76-10). Only the insured (or an assignee re-assigning the insurance) may assign the insurance. No one may make an assignment on the insured's or assignee's behalf. The assignment form must be signed by two witnesses. An assignee cannot be a witness to the assignment.
An assignment is effective on the date your employing office receives the properly completed, signed, and witnessed form.
The assignment must specify percentages or fractions of the insurance to go to each assignee. The percentages must total 100 Percent (or fractions must equal 1.0). You cannot name conditional assignees in the event the primary assignee(s) predeceases you.
You cannot assign dollar amounts, and you cannot assign specific types of coverage.
Multiple Assignees
An assignment can be made to more than one individual, corporation, or trustee.
If you have multiple assignees, no assignee can cancel coverage unless all assignees agree.
Unacceptable Assignments
Your employing office may return your Assignment (RI 76-10) if it is not completed properly. These are some of the things that may cause an assignment to be invalid:
- You have already assigned your insurance, and your assignee(s) has(have) not assigned ownership back to you.
- You have elected a full living benefit and have no optional coverage.
- You have named more than one assignee, but they are connected by the word "or."
- Your name, as shown in the body of the assignment, is significantly different from your signature. The difference is not significant if initials of first and middle names are used in one place and full names in the other place.
- Your date of birth is not shown or is obviously wrong.
- Shares of assignees are not stated correctly (e.g., the shares total less than or more than 100 Percent, or they are given in dollar amounts, rather than percentages or fractions).
- You did not sign the assignment form. (A guardian or someone with power of attorney cannot make an assignment on your behalf.)
- The assignment form does not have the signatures of two witnesses
- An assignee is a witness.
- The employing office does not receive the assignment until after you die.
Please note that any erasures or corrections made on the assignment form may have the effect of invalidating the assignment.
If your assignment is unacceptable, your employing office will "VOID" the form, and return it to you with an explanation of why it is unacceptable. However, your employing office's failure to return an incorrect Assignment (RI 76-10) does not make your assignment valid.
Withholdings and Contributions after an Assignment
After making an assignment, you continue to pay the premiums. Your employing office must continue to withhold the premiums from your salary or annuity or compensation and must continue to make the Government contribution. The assignee may not pay the premiums. (However, you may wish to negotiate privately to have the viatical settlement company reimburse you. This is a private transaction between you and the company. Neither your agency nor OPM is a party to any arrangement you make with a viatical settlement company.)
AFTER ASSIGNMENT
Your Rights as the Insured
After making an assignment, you still have the right to:
- Continue Option C coverage, if you have it;
- Elect more insurance (during a FEGLI open season, by providing satisfactory medical information, or with a life event). Note: All of the new insurance - except Option C - comes under the existing assignment;
- Elect a post-65 reduction at retirement for Basic insurance (however, if you elect other than 75 Percent Reduction, you cannot later change to 75 Percent Reduction); and
- Elect a post-65 reduction at retirement for Options B and C (however, if you elect No Reduction for Option B, you cannot later change to Full Reduction).
After making an assignment, you cannot:
- Revoke that assignment;
- Cancel or reduce insurance;
- Designate a beneficiary;
- Convert to a private policy when FEGLI terminates;
- Elect a living benefit;
- Change your post-65 reduction election for Basic insurance from No Reduction or 50 Percent Reduction to 75 Percent Reduction;
- Make another assignment (unless your insurance has been reassigned back to you); or
- Change your post-65 reduction election for Option B from No Reduction to Full Reduction.
Rights of the Assignee
After you assign your insurance, the assignee has the right to:
- Cancel or reduce insurance;
- Change a post-65 reduction election for Basic insurance to 75 Percent Reduction (unless you had previously elected a partial living benefit);
- Designate and change beneficiaries;
- Convert to a private policy when FEGLI terminates; (See exception on page 10).
- Reassign the insurance; and
- Change your post-65 reduction election for Option B from No Reduction to Full Reduction.
An assignee cannot:
- Increase the amount of insurance;
- Elect a living benefit;
- Make the original post-65 reduction elections;
- Take any action regarding your Option C coverage, if you have it; or
- Change your post-65 reduction election for Option B from Full Reduction to No Reduction.
Current Address
Each assignee is responsible for keeping your employing office aware of his/her current address. Employing offices must attach an assignee's change of address notice to the assignment form in your Official Personnel Folder.
DESIGNATIONS OF BENEFICIARY
Your Designation
An assignment automatically cancels your prior designation(s) of beneficiary. (However, the agency must continue to retain the cancelled designation(s) in your Official Personnel Folder (or its electronic equivalent), in case the assignment is later found to be invalid.)
Once an assignment is effective, you no longer have the right to designate a beneficiary.
Assignee's Designation
Assignees can designate beneficiaries. An assignee's beneficiary(ies) will receive the designated amount of assigned insurance upon your death. Your assignee is the beneficiary if he/she does not designate a different beneficiary.
An assignee can designate him/herself as the primary beneficiary and name some other person(s) as contingent beneficiary(ies) in case he/she dies before you. By naming a contingent beneficiary, your assignee can simplify life insurance payment.
PAYMENT OF BENEFITS
If You Die before Your Assignee
When you die, benefits will be paid to your assignee's beneficiary(ies) or to the assignee if there are no living designated beneficiaries.
If Your Assignee Dies before You
If your assignee dies before you, your assignee's heir(s) become the new owners of your insurance and therefore the new assignee(s). These heirs have the same right as the original assignee to designate a beneficiary.
If the new assignee did not designate a beneficiary, but the previous assignee did designate a beneficiary, benefits will still be paid to the original assignee's designated beneficiary.
Example:
Sue assigned her insurance to her brother, Todd. Todd designated his girlfriend, Tracy, as his beneficiary. Todd died before Sue, and his son, Vincent, inherited all of Todd's property, including ownership of Sue's insurance. Vincent, however, did not designate a beneficiary; so when Sue died, benefits were paid to Tracy, the beneficiary designated by the original assignee, Todd.
If the original assignee did not designate a beneficiary, and he/she dies before you, benefits will be paid to the new assignee (i.e., the person(s) who inherits the original assignee's property), according to the laws of the state in which your assignee lived at the time of his/her death. The new assignee may also designate a beneficiary in which case the benefits will be paid to the new assignee's beneficiary.
Example:
Vera assigned her insurance to her brother, Warren. Warren died before Vera, and he had not designated a beneficiary. Warren's widow, Wendy, inherited all of Warren's property, so Wendy became the new owner/assignee. When Vera dies, benefits will be paid to Wendy. If Wendy chooses to designate a beneficiary, then the benefits will be paid to Wendy's beneficiary.
VIATICAL SETTLEMENTS
Information about Viatical Settlement Companies
When you want to assign your insurance to a viatical settlement company, the company may ask your employing office to provide information about your FEGLI coverage.
Your employing office must have a signed release from you before it can provide the information; the viatical settlement company should give you the necessary release form. Your employing office will file copies of the release and the information disclosed to the viatical settlement company in your Official Personnel Folder (or its electronic equivalent).
Some of the items that a viatical settlement company may request are:
- Group Policy Number - This number is 17000-G, with the Metropolitan Life Insurance Company.
- Certificate Number - There is no certificate number for FEGLI.
- Copy of the Group Certificate - Your certificate of insurance is a copy of your most recent Life Insurance Election (SF 2817), or open season election form along with a copy of the FEGLI Program Booklet (FE 76-21 , or FE 76-20 for U.S. Postal Service Employees).
- Total Death Benefit - This is the amount of your Basic insurance, plus any Optional insurance. If you are under age 45, this would also include information about the Extra Benefit age multiplication factor. If you are retired and over age 65, this would include any post-65 reductions that have occurred.
- Waiting Period before the Employee Can Make an Assignment - There is no waiting period.
- Bi-weekly or Monthly Premium
- Whether the Policy Has Accelerated Benefits - Yes, but only Basic insurance can be accelerated (i.e., only Basic insurance can be taken as a living benefit). Only employees, not retirees, can elect a living benefit.
- Whether Partial Acceleration Is Permitted - Yes, i.e., employees (but not retirees) can elect a partial living benefit.
- Whether the Viatical Settlement Company Can Pay the Premiums - No. Premiums must continue to be withheld from your salary, annuity, or compensation. You can negotiate privately to have the viatical settlement company reimburse you. (This is a private transaction between you and the company. Neither your agency nor OPM is a party to any arrangement you make with a viatical settlement company.)
- Whether There Are Any Assignments Against the Policy - The employing office must check to see whether you have already assigned your insurance and whether that assignment still appears to be valid.
- Whether the Policy Has a Disability Waiver - There is no disability waiver under FEGLI.
- Whether the Policy Can Be Converted - The group insurance can be converted if it terminates, other than by voluntary cancellation. If the insurance has been assigned, only the assignee(s) can convert it.
- EXCEPTION: If the annuity or compensation of an insured individual is terminated, or if the Department of Labor finds that an insured compensationer is able to return to duty, his/her FEGLI coverage held as an annuitant or compensationer stops on the date of the termination or finding. There is no 31-day extension of coverage or conversion right.
- Whether the Employee Must Have a Minimum Amount of Insurance to be Eligible to Make an Assignment - No.
- Whether an Irrevocable Beneficiary Can Be Designated - No. Designations can be changed at any time. Only an assignment is irrevocable.
Tax Treatment of Viatical Settlement Payments
Qualified payments from viatical settlement companies received on or after January 1, 1997, are not subject to Federal income tax (Pub. L. 104-191, the Health Insurance Portability and Accountability Act of 1996, Subtitle D, Treatment of Accelerated Death Benefits). Payments received from a viatical settlement company before that date were subject to Federal income tax.
This law sets qualification standards for viatical settlement providers, terminally ill insured persons, chronically ill insured persons, and in the case of chronically ill insured persons, how the payment may be spent. If you are considering assigning your insurance to a viatical settlement company, you should consult a tax advisor to determine if you and the viatical settlement company meet the qualification standards. Under this law, to be considered terminally ill, a person's life expectancy can be no more than 24 months.
This law amends the Federal Internal Revenue Code, which directly affects Federal income taxes, not state taxes. However, many states have laws, regulations, or rulings concerning the taxability of payments received from viatical settlement companies. You may wish to consult a tax advisor or your state's tax department for specific information concerning state income tax laws.
EMPLOYING OFFICE RESPONSIBILITIES
General
It is your employing office's responsibility to make information available to employees about how to make an irrevocable assignment and of the permanence of the assignment. However, employees are still responsible for knowing about their benefits.
Prohibited Actions
If you assign your insurance, you cannot make another assignment (unless your assignee reassigned your insurance back to you), designate a beneficiary, elect a living benefit, or cancel or reduce insurance. Therefore, whenever you want to take any of these actions, your employing office must verify whether you are eligible to do so by determining whether you have a valid assignment on file.
If you are hired after a break in Federal service of less than 31 days, your employing office must check your Official Personnel Folder (or its electronic equivalent) to determine whether there is a valid assignment on file. Your assignment remains valid unless your break in service is 31 days or more.
Notification to Assignee
When you make an assignment, your employing office will notify each assignee that you have assigned ownership of your life insurance. The notice will include the types of insurance you assigned and will give the percentage of the total insurance that the assignee now owns. The notice will also inform the assignee of his/her responsibility for notifying the employing office of any change of address. See below for a sample notice.
Your employing office must also provide each assignee a copy of the FEGLI Program Booklet (FE 76-21 or FE 76-20 for U.S. Postal Service employees), a copy of the completed form Assignment, Federal Employees' Group Life Insurance Program (RI 76-10), and a blank Designation of Beneficiary (SF 2823).
Sample Notice
This is a sample notice that your employing office can use:
Dear (assignee's name):
This is to notify you that (employee's name) has assigned _____ Percent ownership of his/her coverage in the Federal Employees' Group Life Insurance (FEGLI) Program to you. (Employee's name) has Basic insurance (as applicable: plus Option A-Standard and Option B-Additional at _____ times his/her annual pay). The enclosed booklet explains the features of the different types of insurance.
You are the beneficiary of the life insurance coverage, and you will be entitled to the benefit upon (employee's name)'s death. However, we urge you to designate a contingent beneficiary to receive the benefits in the event that you die before (employee's name). To do this, complete the attached Designation of Beneficiary form and return it to (name and address of employing office). To designate a contingent beneficiary, name yourself as primary beneficiary and another person to receive benefits in case you die before the insured person. See example 3 on the Back of Part 1 of the Designation of Beneficiary form.
It is important that you tell us when your address changes, so that we can notify you if events occur that affect the life insurance coverage that has been assigned to you. When you write to tell us about a change of address, be sure to include the name and Social Security number of the insured employee. Whenever your named beneficiary's address changes, please submit a new designation of beneficiary form showing the updated address.
Sincerely,
Employing Office Official
When You Die
When you die, your employing office will send a Claim for Death Benefits (FE-6) to each assignee at the last known address. If an assignee has designated a beneficiary, the FE-6 will be sent to the assignee's beneficiary(ies).
When You Separate
When you separate from service (when the Nature of Action Code for SF 50 (Notification of Personnel Action) begins with a "three"(3), your employing office will include on your separation SF 50 Remark B69: "Employee has assigned ownership of life insurance coverage."
ANNUITANTS AND COMPENSATIONERS
Assignment Remains in Effect
When you retire or become insured as a compensationer and you are eligible to continue FEGLI coverage, your assignment remains in effect, unless your assignee(s) choose(s) to convert your insurance to a private policy.
Your employing office will transfer the assignment form to OPM with the rest of your FEGLI documents.
Conversion vs. Continuation
When you have assigned your insurance and you retire or become insured as a compensationer, your employing office will send a Notice of Conversion Privilege (SF 2819) to each assignee. Your employing office must also send each assignee a copy of the Agency Certification of Insurance Status (SF 2821) and a copy of the Assignment (RI 76-10) by which you made the assignment.
When there are multiple assignees, some may choose to let their share of the FEGLI coverage continue and some may choose to convert their share to a private policy. The amount of insurance continued or converted depends on the assignee's share of the total; if the amount is not a multiple of $1,000, it is rounded up to the next thousand dollar amount.
Example
Yolanda has Basic and Option A. She assigns her insurance to 3 assignees as follows: Zachary gets 50 Percent, Adrian gets 30 Percent, and Arlene gets 20 Percent. At the time Yolanda retires, her Basic Insurance Amount is $90,000.
Zachary wants to let his share of the insurance continue into retirement; Adrian and Arlene want to convert their shares.
Yolanda will carry $45,000 of Basic insurance and $5,000 of Option A into retirement (Zachary's share [$90,000 x 50 Percent and $10,000 x 50 Percent]). Withholdings from her annuity will be based on these amounts.
Adrian can convert up to $27,000 of Basic insurance and up to $3,000 of Option A ($90,000 x 30 Percent and $10,000 x 30 Percent). Arlene can convert up to $18,000 of Basic insurance and $2,000 of Option A ($60,000 x 20 Percent and $10,000 x 20 Percent).
If your assignee(s) choose(s) to continue FEGLI coverage, rather than convert, you must make a post-65 reduction election on the Continuation of Life Insurance Coverage As an Annuitant or Compensationer (SF 2818). If you choose other than 75 Percent Reduction for Basic insurance, the assignee(s) can change to 75 Percent Reduction (unless you previously elected a partial living benefit). You must also make a post-65 reduction election for Option B, if you have it. If you choose No Reduction, the assignee(s) can change to Full Reduction.
Assignments by Annuitants and Compensationers
Annuitants and compensationers can assign their insurance in the same manner as employees.
If you are an annuitant and wish to make an assignment, you must contact OPM's Retirement Operations Center, P.O. Box 45, Boyers, PA 16017-0045. The phone number is 1-888-767-6738 and 202-606-0500 in the DC Metro Area. The phone lines are open from 7:15 AM to 7:45 PM EST.
If you are a compensationer still insured as an employee and wish to make an assignment, you must contact your employing office. If you are insured as a compensationer (you have separated or completed 12 months in nonpay status), you must contact OPM.
TERMINATION AND CONVERSION
Termination
Your assignment terminates 31 days after your FEGLI coverage terminates, unless you are reemployed during the 31-day period in a position in which you are eligible for life insurance.
Once terminated, an assignment is not reinstated if you get FEGLI again at a later date. If you still want the insurance to be assigned, you must complete a new Assignment (RI 76-10)
Conversion
When your assigned insurance terminates (other than by voluntary cancellation by all assignees), each assignee has the right to convert his/her share of the insurance to a private policy on you. If an assignee's share is not a multiple of $1,000, it is rounded up to the next thousand dollar amount.
EXCEPTION: If the annuity or compensation of an insured individual is terminated, or if the Department of Labor finds that an insured compensationer is able to return to duty, his/her FEGLI coverage held as an annuitant or compensationer stops on the date of the termination or finding. There is no 31-day extension of coverage or conversion right.
When your assigned insurance terminates, your employing office will send a Notice of Conversion Privilege (SF 2819), a copy of the Agency Certification of Insurance Status (SF 2821), and a copy of your Assignment (RI 76-10) to each assignee.
If you also have Option C coverage, your employing office will send you a Notice of Conversion Privilege (SF 2819) and a copy of the Agency Certification of Insurance Status (SF 2821). You can use these forms only to convert your Option C coverage.
HISTORICAL INFORMATION
Federal judges are allowed to assign their FEGLI coverage beginning July 10, 1984.
All other Federal employees, annuitants, and compensationers are allowed to assign their FEGLI coverage beginning October 3, 1994.
U.S. Office of Personnel Management 1900 E Street NW, Washington, DC 20415 | (202) 606-1800 | TTY (202) 606-2532