5 U.S.C. § 8706 — Termination of insurance; assignment of ownership

(a) A policy purchased under this chapter must contain a provision approved by the Office of Personnel Management stating that an employee’s insurance stops when the employee separates from service or 12 months after the employee’s pay stops, whichever happens first. The policy must also provide for temporary continuation of life insurance and conversion to an individual life insurance policy under conditions approved by the Office. For this chapter, United States justices and judges described in section 8701(a)(5)(ii) and (iii) are treated as continuing in active employment.
(b)
(1) An employee who retires on an immediate annuity may continue life insurance, without accidental death and dismemberment insurance, under conditions set by the Office if the employee was insured under this chapter throughout either—
(A) the five years of service immediately before retirement; or
(B) the full period or periods of service during which the employee was entitled to be insured, if that period was shorter than five years.
(2) An employee who becomes entitled to compensation under subchapter I of chapter 81 of this title because of the employee’s disease or injury may continue life insurance, without accidental death and dismemberment insurance, under conditions set by the Office if the employee was insured under this chapter throughout either—
(A) the five years of service immediately before becoming entitled to compensation; or
(B) the full period or periods of service during which the employee was entitled to be insured, if that period was shorter than five years.
The coverage under this paragraph may continue only during the period when the employee is receiving compensation and the Secretary of Labor, or the Secretary’s delegate, holds that the employee is unable to return to duty.
(3) For insurance continued under paragraph (1) or (2), after the employee reaches age 65 and is retired or is receiving compensation for disease or injury, the amount of life insurance is continued, with or without reduction, at the end of each full calendar month. The employee’s written election made when eligibility to continue insurance during retirement or receipt of compensation begins controls. The choices are—
(A) The employee may elect to have the deductions required by section 8707 withheld from the annuity or compensation. The life insurance is then reduced each month by 2 percent of its face value until 25 percent of the amount in force before the first reduction remains; or
(B) in addition to deductions required under subparagraph (A), the employee may elect continuous deductions from the annuity or compensation in amounts set by the Office. The life insurance may then continue without reduction, or be reduced each month by no more than 1 percent of its face value until at least 50 percent of the amount in force before the first reduction remains.
(4) If an employee chooses the option in paragraph (3)(B) when eligibility to continue insurance during retirement or receipt of compensation for disease or injury begins, the employee may later cancel that choice. The life insurance then continues as if the employee had originally chosen paragraph (3)(A).
(c) Despite subsections (a) and (b), an employee who begins approved leave without pay to serve as a full-time officer or employee of an organization made up mainly of employees defined in section 8701(a) may, within 60 days after beginning that leave, elect to continue insurance. The employee must arrange, through the employing agency, to pay currently into the Employees’ Life Insurance Fund both the employee and agency contributions starting when the leave begins. The employing agency must send the premium payments to the Fund. If the employee does not make this election, insurance continues during nonpay status and stops as subsection (a) provides.
(d)
(1) An employee who begins approved leave without pay in the circumstances described in paragraph (2) may elect to continue life insurance beyond the 12 months of coverage provided under subsection (a) for an additional 12 months. The employee must arrange, through the employing agency, to pay currently into the Employees’ Life Insurance Fund both the employee and agency contributions starting when that additional 12-month coverage begins. The employing agency must send the premium payments to the Fund. If the employee does not make this election, insurance continues during nonpay status and stops as subsection (a) provides. The employee may cancel the election at any time. If the employee cancels, insurance stops as subsection (a) provides or when the Fund receives notice of cancellation, whichever is later.
(2) This subsection applies to an employee who—
(A) is a member of a reserve component of the armed forces and is called or ordered to active duty under a call or order that does not specify a period of 30 days or less; and
(B) begins approved leave without pay to perform active duty under that call or order.
(e) If an employee’s insurance stops because of separation from service or suspension without pay, and the separation or suspension is later officially found to have been erroneous, the employee is treated as having been insured during the period of the erroneous separation or suspension. Deductions otherwise required by section 8707 may not be withheld from backpay awarded for that period unless the employee dies or suffers accidental dismemberment during that period.
(f)
(1) Under regulations prescribed by the Office, every policy purchased under this chapter must provide that an insured employee or former employee may make an irrevocable assignment of the employee’s or former employee’s incidents of ownership in the policy.
(2) A court decree of divorce, annulment, or legal separation, or a court-approved property settlement agreement connected with such a decree, may direct an insured employee or former employee to make an irrevocable assignment of the employee’s or former employee’s incidents of ownership in insurance under this chapter, if there has been no earlier assignment, to the person named in the court order or approved settlement.
(g) If insurance of a former employee receiving a disability annuity under section 8337 stops because the annuity ends, and the annuity is later restored under the second or third sentence of section 8337(e), the former employee may, under Office regulations, elect to resume the insurance coverage that stopped.
(h) Insurance under a policy purchased under section 8709 is not invalidated because an employee was erroneously insured or erroneously continued insurance after retirement or after becoming entitled to compensation under subchapter I of chapter 81, if the finding of error occurs after the erroneous insurance and required withholdings have been in force for two years during the employee’s lifetime.