FEGLI Payout Arrangement Targeted

Several members of Congress have said that they will push for a change in the default payout option for claims paid under federal life insurance programs, including FEGLI, following press reports regarding problems with military life insurance benefits that have similar payout arrangements. Under current FEGLI policy, a beneficiary may elect to receive the entire amount as one payment, and full payments are automatic for benefits under $5,000. However, for payments of $5,000 or more, unless a full payment is elected an account is established on the beneficiary’s behalf and the beneficiary may draw on that account by writing checks of up to the amount in the account. The proposal would make a full immediate payment the default option, rather than one that must be elected for benefits of $5,000 or more. The House Oversight and Government Reform Committee plans a hearing after Congress reconvenes in September.