VA Rule: Fiduciary Duty – InsuranceNewsNet

WASHINGTON, May 14 — The US Department of Veterans Affairs issued a rule (38 CFR Part 13), published in the Federal Register on May 16, 2022titled “Fiduciary Duty”.

The rule was issued by Luvenia Pottsregulatory development coordinator Office of Regulatory Policy and Management to General Counsel’s Office.

DATES: This rule is effective June 15, 2022.

FOR MORE INFORMATION, CONTACT: Kevin BaresichProgram Analyst, Pension and Trust Service (21PF), Veterans Benefits Administration, Department of Veterans Affairs, 810 Vermont Avenue N.W., washington d.c. 20420, (202) 632-8863. (This is not a toll-free number.)

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the Department of Veterans Affairs (VA) amends its regulations that govern fiduciary activities.

Specifically, the Amendments revise specific procedures for exempting a Virginia– appointed trustee who also acts as a court appointed trustee to file multiple bonds and also exempt a Virginia– appointed trustee who is also a state agency with existing state mandated liability insurance or general surety having to obtain additional surety payable to the secretary of veterans affairs (Secretary).

ADDITIONAL INFORMATION:

In a document published in the Federal Register on September 29, 2021at 86 FR 53913, Virginia proposed to amend its regulations on fiduciary activities by providing an exception to certain eligibility conditions to exempt a Virginia– an appointed trustee who is also a court-appointed trustee, or a state agency with existing state-mandated liability insurance or general surety obtaining a separate surety payable to the secretary. The 60-day public comment period ended on November 29, 2021. Virginia received comments from two people.

The first commenter was entirely in favor of the proposed rule. The other commenter was not in favor of the proposed rule. Neither commentator recommended any revisions to the proposed rule. However, the second commenter expressed general concerns about the intent of the regulations. The commenter opposed the exemption of a Virginia bonding obligation, even redundant, to protect a Virginia beneficiary’s funds. The intervenor was not convinced that a bond payable to the secretary is not necessary when Virginia Funds under management are also protected by court-ordered bonds, state-mandated liability insurance, or global bonds. The commentator believed that a Virginia-specific bail provides an extra layer of protection and protects a vulnerable person’s funds Virginia Beneficiary. However, the commentator did not explain how removing the redundant cover would increase the risk for beneficiaries. We do not agree that our proposed settlement would disadvantage a Virginia beneficiary or limit the protections provided and not make any changes based on this comment.

In 2018, Virginia amended the rules of its fiduciary program. 83 FR 32716 (July 13, 2018). Virginia promulgated new regulations intended to establish a national standard for the appointment and supervision of Virginia trustees. Specifically, Virginia implemented a requirement that certain potential Virginia the trustees obtain a bond payable to the secretary to ensure that Virginia would be able to recover misappropriated funds from a surety company instead of initiating collections against a fiduciary. 38 CFR 13.230(d). However, as explained in the proposed rule, we recognize that the purpose for which this requirement was imposed would be defeated in cases where a court-appointed trustee or state agency already had a surety in place. We noted that in these cases, bond would generally be payable to the state where the court is located, and for this reason Virginia would not be able to claim this deposit directly. This circumstance highlighted a potential problem with GO practice of requiring multiple sureties, whereby if one surety company has already paid a claim for abuse of benefits under a state court surety, another surety company would not pay on a Virginia surety for the same fault. Therefore, a second obligation would not serve its purpose. Moreover, it would not make sense to weigh down a Virginia beneficiary to pay a second bond premium where adequate protection is already in place. Indeed, it would be contrary to GO main task of ensuring that a Virginia the beneficiary’s benefits are managed in their best interests. A Virginia the beneficiary would not be financially disadvantaged by the removal of a duplicate bonding requirement because Virginia is now required to reimburse a beneficiary for any misappropriation of funds. 38 U.S.C. 6107.

Finally, the same commentator has stated that if a fiduciary breaches his duties as a fiduciary, that individual should be held liable both by the state and Virginia.

Changes made under this rule do not waive GO legal obligation to hold a fiduciary who has abused Virginia services liable for such abuse. 38 CFR 13.400, 13.500.

Virginia adopts the rule as proposed without modification.

Executive Orders 12866 and 13563

Executive Orders 12866 and 13563 direct agencies to evaluate the costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential effects on the economy). , environment, public health and safety, and other benefits; impacts and equity). Executive Order 13563 (Regulatory Improvement and Scrutiny) emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. The Office of Information and Regulatory Affairs has determined that this rule is not a significant regulatory action under Executive Order 12866. The regulatory impact analysis associated with this regulation can be viewed as a supporting document at www.regulations.gov.

PAPER REDUCTION Act

This Final Rule includes provisions constituting a revised collection of information under the Red Tape Reduction Act of 1995 (44 USC 3501-3521) that require the approval of the Office of Management and Budget (OMB). Accordingly, under 44 USC 3507(d), Virginia has submitted a copy of this regulatory action to the OMB for review and approval.

Regulatory Flexibility Act

The Secretary certifies that this final rule will not have a significant economic impact on a substantial number of small entities as defined in the Regulatory Flexibility Act, 5 USC 601-612. This regulation has the potential to impact the 2,350 small entities of the North American Industry Classification System code 524126 (accident and surety insurance companies). There is an expected revenue loss of $66,989 per company, resulting in a revenue loss of 0.16% for each entity. Based on this analysis, the Secretary certifies that the adoption of this final rule will not have a significant economic impact on a significant number of small entities as defined in the Regulatory Flexibility Act. Therefore, pursuant to 5 USC 605(b), the initial and final regulatory flexibility analysis requirements of 5 USC 603 and 604 do not apply.

Unfunded mandates

The Unfunded Warrants Reform Act of 1995 requires, at 2 U.S.C. together, or by the private sector, $100 million or more (adjusted annually for inflation) in a year. This final rule would have no such effect on state, local and tribal governments, or the private sector.

Support list

The assistance list program number and title for the programs affected by this rule are as follows: 64.104, Non-Service Related Disability Pension for Veterans; 64.105, Pension to surviving spouses and children of veterans; 64.109, Compensation of Veterans for Service-Related Disability; and 64.110, Veterans Dependency and Compensation for Service-Related Death.

Congressional Review Act

Pursuant to Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (known as the Congressional Review Act) (5 USC 801 and after. ), the Office of Information and Regulatory Affairs designated this rule as not being a major rule, as defined by 5 USC 804(2).

List of topics in 38 CFR Part 13

* Guarantees

* Trusts and Trustees, and Veterans

[FR Doc. 2022-10388 Filed 5-13-22; 8:45 am]

BILLING CODE 8320-01-P

The document was published in the Federal Register: https://www.federalregister.gov/documents/2022/05/16/2022-10388/fiduciary-bond

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