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or conversion of such insurance must necessarily lessen the dividends and other interests which would otherwise accrue to such policyholders from such funds.

The Veterans' Administration has no data upon which to base an estimate of the cost of the bill, if enacted.

Because of the adverse effect which the provisions of the bill might have upon the mentioned insurance funds, it is my belief that enactment of the bill would not serve the best interests of the policyholders for whom such funds are maintained.

The Bureau of the Budget recommends against favorable consideration of this legislation. Sincerely yours,

CARL R. GRAY, Jr., Administrator.

(No. 58)

COMMITTEE ON VETERANS' AFFAIRS, HOUSE OF REPRESENTATIVES

VETERANS' ADMINISTRATION,

Washington 25, D. C., May 14, 1953. Hon. Edith NOURSE ROGERS, Chairman, Committee on Veterans' Affairs,

House of Representatives, Washington 25, D. C. DEAR MRS. ROGERS: This is in reply to your request for a report on H. R. 4599, 83d Congress, a bill to further amend section 622 of the National Service Life Insurance Act of 1940.

Existing provisions of section 622 of the National Service Life Insurance Act of 1940, as amended, authorize, upon written application by the insured, a waiver of all premiums on 5-year level premium term national service or United States Government life insurance and that portion of any permanent insurance premiums representing the cost of the pure insurance risk becoming due after June 1, 1951, or the first day of the second calendar month following entry into active service whichever is the later date, and during the remainder of such continuous active service and 120 days thereafter.

The proposed legislation, with respect to persons in the active service who were determined to have been in a missing or similar status (as provided in the Missing Persons Act, as amended) at any time after April 25, 1951, and before April 26, 1952, would (1) grant an automatic waiver of all 5-year term premiums due or paid after June 1, 1951, and continue such waiver during the remainder of continuous active service and for 120 days thereafter, in the absence of a request in writing for termination of such waiver; and (2) authorize a waiver for the same period of time of that portion of any permanent insurance premiums representing the cost of the pure insurance risk which were due or paid after June 1, 1951, if (a) the insured makes application for such waiver within 120 days after the date of enactment of the proposal or the date of his return to military jurisdiction from such missing or similar status, whichever is the later date; or (6) if the insured dies or is declared dead while in such missing status or if the insured dies on or prior to the last day upon which he may apply for such waiver as set forth in (a) above.

Service as a cadet or midshipman at the service academies at the present time is not considered “active service” within the meaning of that term as used in the National Service Life Insurance Act. Accordingly, such persons who have secured Government insurance while in a different status may not now, as cadets or midshipmen, take advantage of the waiver provisions of section 622. The proposed legislation would provide that service as a cadet or midshipman at the service academies shall be deemed “active service” within the meaning of that term as used in section 622. Further, if the insured was a cadet or midshipman at a service academy, at any time after April 25, 1951, and before the date of enactment of the bill, all premiums due or paid after June 1, 1951, on 5-year level premium term insurance and that portion of any permanent insurance premiums due or paid after June 1, 1951, which represents the cost of the pure insurance risk would, during the period of such status and during the remainder of his continuous active service and 120 days thereafter, be waived unless the insured requests in writing that such waiver be terminated.

Under section 622 of the act, if the policy matures while subject to the premium waiver provision, liability for payment of benefits under such insurance is borne

by the United States in an amount which, when added to any reserve of the policy at the time of maturity, will equal the then value of such benefits. This provision would, be applicable to the cases within the purview of the bill. However, because of the unknown factors involved it is not possible to estimate the cost to the Government of the proposed legislation, if enacted.

As to administrative cost, the proposal would require premium refunds to be calculated and made, recalculation of the period for which dividends have been paid, and recovery of overpayment of dividends, etc. The amount of such costs cannot be estimated but it is believed they would not be heavy.

The proposal represents a part of the Department of Defense legislative program for 1953 and was coordinated with the Veterans' Administration. It is understood that the Bureau of the Budget advised the Department that there was no objection to the transmittal of the proposal to the Congress for its consideration. Sincerely yours,

CARL R. GRAY, Jr., Administrator.

[No. 61]

COMMITTEE ON VETERANS' AFFAIRS, HOUSE OF REPRESENTATIVES

VETERANS' ADMINISTRATION,

Washington 25, D. C., May 14, 1953. Hon. Edith NOURSE ROGERS, Chairman, Committee on Veterans' Affairs,

House of Representatives, Washington 25, D. C. DEAR MRS. ROGERS: This is in reply to your request for a report on H. R. 1859, 83d Congress, a bill to provide for the waiver of premiums on the national service life insurance and United States Government life (converted) insurance issued to certain former servicemen who are disabled.

The purpose of the bill is to amend section 602 (n) of the National Service Life Insurance Act of 1940, as amended, to provide a waiver of premiums during any period when an insured is entitled to compensation for a disability rated as 30 percent or more disabling under part I or part II of Veterans Regulation No. 1 (a). In addition, the bill would amend section 306 of the World War Veterans' Act, 1924, as amended to provide a waiver benefit under United States Government life insurance identical with the national service life insurance waiver benefit as provided in the bill. All benefits provided by the bill would be available on and after the date of its enactment.

H. R. 1859 is identical with H. R. 6548, 82d Congress, on which the Veterans' Administration submitted a report to your committee June 20, 1952 (Committee Print No. 295).

Section 602 (n) of the National Service Life Insurance Act presently provides that upon application by the insured and under such regulations as the Administrator may promulgate, payment of premiums on such insurance may be waived during the continuous total disability of the insured which continues or has continued for six or more consecutive months, if such disability commenced (1) subsequent to the date of his application for insurance, (2) while the insurance was in force under premium-paying conditions, and (3) prior to the insured's 60th birthday.

The purpose of section 602 (n) is to save the insurance protection for those who, because of total disability, have lost their earning capacity and may be unable to pay premiums becoming due thereon. Many persons having a 30 percent or more partial disability can and do follow substantially gainful occupations and are financially able to continue payment of insurance premiums. The premiums for national service life insurance are calculated the American Experience Table of Mortality without any loading for waiver of premiums.

Section 607 of the National Service Life Insurance Act provides that the United States shall bear the excess mortality cost and the cost of waiver of premiums on account of total disability traceable to the extra hazards of military or naval service as such hazard may be determined by the Administrator. The waiver of premiums for a 30 percent or more partial disability as provided by the bill would involve a very considerable expense and it will be noted that the bill does not contain any provisions similar to those contained in section 607 to provide that the United States shall bear the cost of waiver of premiums on account of 30 percent or more service-connected partial disability traceable to the extra

hazards of military or naval service. Accordingly, the cost of waiver of premiums proposed by the bill would have to be borne by the national service life insurance fund or the United States Government life insurance fund which are maintained for the benefit of all policyholders.

All persons who are rated as having a 30 percent or more service-connected partial disability and who have national service life insurance or United States Government life insurance would be eligible for waiver of premiums under provisions of the bill and those having disabilities of a permanent nature would be entitled to waiver of premiums for the rest of their lives. On the other hand, there are many persons carrying national service life insurance or United States Government life insurance who have been discharged from service for many years and who have no disability, or disability rated as less than 30 percent disabling. There is but little probability that such persons will hereafter be found to have 30 percent or more service-connected disability; such persons will rarely, if ever, receive any benefit under the provisions of the bill, if enacted. This group will, however, have to bear a proportionate share of the cost of the benefits proposed.

The World War Veterans' Act, 1924, as amended, presently does not contain any authorization for waiver of premiums. Section 306 of the World War Veterans' Act speaks of premiums waived thereunder, but such premiums are not waived in the usual sense of the word, inasmuch as they create an indebtedness against the policy which must be repaid with interest or deducted from the proceeds of the policy at the time of maturity. The bill would add to such policies a waiver of premiums for total disability whether due to service or not, as well as waiver of premiums for 30 percent or more service-connected disability. As the issue of United States Government life insurance to those in active military and naval service was terminated by Public Law 801, 76th Congress (October 8, 1940), and as a great ma:ority of those who secured insurance prior to that date have long since been discharged from service, it is apparent that few, if any, such persons who have not previously been rated as 30 percent or more disabled, will be able to establish such service-connected disability in the future. The bill will, therefore, rarely if ever provide any benefit for such persons. On the other hand, a large number of persons carrying United States Government life insurance who now have a 30 percent or more service-connected disability, will remain more or less static for life and will in effect be given a paid-up insurance policy. As there is no provision in the World War Veterans' Act of 1924, as amended, that the Government shall bear the cost of waiver of premiums for total or partial disability, the cost of the benefit proposed by the bill would fall chiefly upon policyholders who would derive no benefit therefrom.

Attention is invited to the fact that sections 620 and 621 of the National Service Life Insurance Act, as added by Public Law 23, 82d Congress (April 25, 1951), authorize the issue of national service life insurance to those who are separated from active service on or after April 25, 1951. Section 620 authorizes the issue of insurance to any such person released from active service under conditions other than dishonorable, and who is found by the Administrator to be suffering from a disability or disabilities for which compensation would be payable if 10 percent or more in degree, and except for which such persons would be insurable according to the standards established by the Administrator for qualifying under the good health provisions of the act, as amended, if application therefor is made in writing within 1 year from the date service connection of such disability is determined by the Veterans' Administration. This section provides that, as to insurance issued under its provisions, waiver of premiums pursuant to section 602 (n) shall not be denied on the ground that the service-connected disability became total prior to the effective date of such insurance. As insurance issued under sections 620 and 621 is on a nonparticipating basis, the cost of waiver of premiums on insurance issued under these sections would be borne entirely by the Government.

While provision is made in the National Service Life Insurance Act that the Government shall bear the cost of waiver of premiums where the total disability of the insured is traceable to the extra hazard of military or naval service, there is no provision covering the cost of waiver of premiums for total disability or a 30 percent or more disability which is service connected but not traceable to the extra hazard of military or naval service. A waiver of premiums as proposed by the bill, if enacted, would greatly increase the cost of both insurance programs, and, if not borne by the Government, would seriously impair both insurance funds.

It will be noted that there is no provision in section 620 with respect to waiver of premiums for a 30 percent or more service-connected disability and that section 602 (n) as proposed by the bill limits waiver of premiums to cases in which the required disability commenced subsequent to the application for insurance.

A person granted insurance under section 620 might have an injury or disease less than 30 percent disabling at the time he applied for insurance which thereafter became more than 30 percent disabling; or his disability might be totally disabling when he applied, but less than totally disabling at a later date. It would be possible to construe the bill as terminating waiver in the latter case when the disability ceased to be total, even though the insured continued to be 30 percent or more disabled. If not so intended, the provisions of the bill should be clarified.

At the present time about 3 percent of all World War I veterans and persons who served after World War I and prior to October 8, 1940, have service-connected disabilities rated between 30 and 90 percent. The total annual premiums paid in the United States Government life-insurance fund by all of these veterans is about $30 million, so that the total amount waived under the provisions of the bill would amount to approximately $900,000 annually. This amount would probably remain constant for about 15 years after which it would decrease. In all, the total cost would be from $15 to $20 million.

About 4 percent of World War II veterans (those who carry national service life insurance) have service-connected disabilities rated at from 30 to 90 percent. The total national service life insurance premiums paid by all such veterans is about $330 million a year so that the immediate cost of the proposal would be about $13.2 million each year. Since the large part of the national service life insurance in force is on the term plan, and since it is greatly to the advantage of the policyholder whose premiums are being waived to convert to a more expensive plan, it would be reasonable to anticipate severe antiselection by the insureds. Even if such antiselection resulted in only a threefold increase, it would mean an annual cost of some $40 million. This annual cost would remain constant for about 20 years after which it would decrease slowly. It is estimated that the overall cost would exceed a billion dollars. This amount could seriously jeopardize the solvency of the national service life insurance fund unless provision is made for the Government to defray the costs.

As the national service life insurance fund and the United States Government life insurance fund are trust funds maintained for the mutual benefit of policyholders, and as the charging of such funds with the cost of providing the additional benefits proposed by the bill would adversely affect the mutual interests of policyholders, I do not recommend favorable consideration of the bill.

Advice has been received from the Bureau of the Budget that there is no objection to the report of the Veterans' Administration and, further, that the proposal is not in accord with the program of the President. Sincerely yours,

Carl R. GRAY, Jr., Administrator.

(No. 62]
COMMITTEE ON VETERANS' AFFAIRS, HOUSE OF REPRESENTATIVES

VETERANS' ADMINISTRATION,

Washington 25, D. C., May 14, 1953. Hon. EDITH NOURSE ROGERS, Chairman, Committee on Veterans' Affairs,

House of Representatives, Washington 25, D. C. DEAR MRS. ROGERS: This is in reply to your requests for reports by the Veterans' Administration on H. R. 148 and H. R. 1538, identical bills of the 83d Congress, each entitled, “A bill to restore the right of certain veterans to apply for insurance.'

The bills, if encated, would restore the eligibility (in effect_prior to April 25, 1951) of persons who served between October 6, 1917, and July 2, 1921, both dates inclusive, to apply for and be granted United States Government life insurance under section 310 of the World War Veterans' Act, 1924, as amended, and would restore the eligibility (in effect prior to April 25, 1951) of persons who served between October 8, 1940, and September 2, 1945, both dates inclusive, to apply for and be granted national service life insurance under section 602 (c) (2) of the National Service Life Insurance Act of 1940, as amended.

H. R. 148 and H. R. 1538, 83d Congress, are identical with H. R. 4412, 82d Congress, upon which the Veterans' Administration rendered a report to your committee under date of September 6, 1951 (Committee Print No. 174).

Part I, Public Law 23, 82d Congress, approved April 25, 1951 (Servicemen's Indemnity Act of 1951), provides for the payment of a maximum of $10,000

indemnity, reduced by the amount of any national service life insurance or United States Government life insurance in force at the time of death, for death in active service and under other specified conditions. Part II, Public Law 23, supra (Insurance Act of 1951), added section 619 to the National Service Life Insurance Act of 1940, as amended, which section provides, among other things, that on and after April 25, 1951, with certain exceptions not here pertinent, "no national service life insurance or United States Government life insurance shall be granted to any person under the provisions of the National Service Life Insurance Act of 1940, as amended, or the World War Veterans' Act, 1924, as amended.” The bills, if enacted, would restore the right to apply for insurance under section 310 of the World War Veterans' Act, 1924, as amended, and section 602 (c) (2) of the National Service Life Insurance Act of 1940, as amended.

One of the purposes of Public Law 23 was to terminate issue of insurance under the World War Veterans' Act, 1924, as amended, or the National Service Life Insurance Act of 1940, as amended, insofar as appeared practicable. Section 310 was added to the World War Veterans' Act, 1924, as amended, by the act of May 29, 1928. World War I veterans therefore had over 22 years within which to apply for insurance available under that act. Section 602 (c) (2) was added to the National Service Life Insurance Act of 1940, as amended, by the act of August 1, 1946. Accordingly, World War II veterans had more than 4 years within which to apply for national service life insurance. Whether the right to apply for insurance under either or both acts should now be restored and extended indefinitely as proposed by the bills is a matter of policy for determination by the Congress.

As both of the mentioned acts provide that the United States shall bear the cost of administration, enactment of the bills would result in additional cost to the Government. Such additional administrative cost would depend, of course, on the extent to which veterans would take advantage of the privilege to apply for insurance.

Advice has been received from the Bureau of the Budget that the enactment of the proposed legislation would not be in accord with the program of the President, Sincerely yours,

CARL R. GRAY, Jr., Administrator,

or more.

[No. 63]
COMMITTEE ON VETERANS' AFFAIRS, HOUSE OF REPRESENTATIVES

VETERANS' ADMINISTRATION,

Washington 25, D. C., May 14, 1953. Hon. Edith NOURSE ROGERS, Chairman, Committee on Veterans' Affairs,

House of Representatives, Washington 25, D. C. DEAR MRS. ROGERS: This is in reply to your request for a report by the Veterans' Administration on H. R. 1546, 83d Congress, a bill to provide paid-up insurance for certzin aged veterans.

The purpose of the bill is to provide that every United States Government life insurance, national service life insurance, or converted insurance policy shall be considered fully paid and no further premiums collected thereon in all cases where the insured has attained the age of 70 years and has paid premiums for 25 years

The bill would provide paid-up insurance at age 70 for all insureds who have paid or will hereafter pay premiums for 25 years or more on insurance heretofore or hereafter issued by the Government under the World War Veterans' Act, 1924, as amended, or the National Service Life Insurance Act of 1940, as amended. Although the bill does not specifically so state, it is assumed from the use of the word "insured,” that it is intended to require that such insurance be in force upon attainment of age 70.

Due to the eligibility requirements of age 70 and payment of premiums for 25 years or more the only important classes of policyholders to be benefited would be holders of 5-year-level-premium term and ordinary life policies. Those with 20-payment life, 20-year endowment, and endowment at 60, 62, or 65 policies would receive no benefit whatever. Holders of 30-payment life and 30-year endowment policies would benefit only in the event their policies were issued after age 40 and then only for a few years (not to exceed 5). Further, since national service life insurance was not issued prior to October 8, 1940, no holder of such insurance could qualify under the bill prior to October 1965.

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