Eligibility Requirements for Certain Nonprofit Standard Mail Material

AGENCY:

Postal Service.

ACTION:

Proposed rule.

SUMMARY:

The Postal Service proposes revisions to Domestic Mail Manual (DMM) E670.5.5, which sets forth guidelines for determining whether the coverage provided by an insurance policy offered by an authorized nonprofit organization to its members is not generally otherwise commercially available.

DATES:

Submit comments on or before July 15, 2004.

ADDRESSES:

Mail or deliver written comments to the Manager, Mailing Standards, U.S. Postal Service, 475 L'Enfant Plaza SW., Room 3436, Washington DC 20260-3436. Copies of all written comments will be available for inspection and photocopying at USPS Headquarters Library, 475 L'Enfant Plaza SW., 11th Floor N, Washington DC, between 9 a.m. and 4 p.m., Monday through Friday. Comments may not be submitted via fax or e-mail.

FOR FURTHER INFORMATION CONTACT:

Jerry Lease, Mailing Standards, U.S. Postal Service, (202) 268-7264; or Garry A. Rodriguez, Mailing Standards, U.S. Postal Service, (202) 268-7281.

SUPPLEMENTARY INFORMATION:

Authorized organizations are entitled to mail their qualifying materials at the Nonprofit Standard Mail rates (“nonprofit rates”), which are significantly lower than the regular Standard Mail rates. However, the Postal Service Appropriations Act of 1991 limits the types of material that may be sent at the nonprofit rates (originally called the “special bulk third-class rates”). Among the provisions is one restricting promotional materials for insurance from being mailed at the nonprofit rates unless, among other things, the coverage provided by the policy is “not generally otherwise commercially available” (39 U.S.C. 3626(j)(1)(B)).

On June 25, 1992 (57 FR 28464), the Postal Service adopted standards defining the phrase, “not generally otherwise commercially available,” for purposes of determining the eligibility of promotional insurance mailed at the nonprofit rates. Those standards, as currently stated in DMM E670.5.4 and 5.5, state that promotional materials pertaining to the coverage provided by insurance policies may not be mailed at the nonprofit rates, “unless the organization promoting the purchase of such policy is authorized to mail at the Nonprofit Standard Mail rates at the entry post office; the policy is designed for and primarily promoted to the members, donors, supporters, or beneficiaries of that organization; and the coverage provided by the policy is not generally otherwise commercially available.”

DMM E670.5.5 explains, “The term not generally otherwise commercially available applies to the actual coverage stated in an insurance policy, without regard to the amount of the premiums, the underwriting practices, and the financial condition of the insurer. When comparisons are made with other policies, consideration is given to policy coverage benefits, limitations, and exclusions, and to the availability of coverage to the targeted category of recipients. When insurance policy coverages are compared for determining whether coverage in a policy offered by an organization is not generally otherwise commercially available, the comparison is based on the specific characteristics of the recipients of the piece (e.g., geographic location or demographic characteristics).”

The standard further explains that the types of insurance considered generally commercially available include, but are not limited to, homeowner's, property, casualty, marine, professional liability (including malpractice), travel, health, life, airplane, automobile, truck, motorhome, motorbike, motorcycle, boat, accidental death, accidental dismemberment, Medicare supplement (Medigap), catastrophic care, nursing home, and hospital indemnity insurance.

Several years after these standards were issued, the Postal Service was challenged in the United States District Court for the District of Columbia by two organizations authorized to mail qualifying matter at nonprofit rates. Each organization offered insurance to its respective members. In each case, the Postal Service had determined that the organization's mailings promoting insurance were not eligible for nonprofit rates. The organizations asked the District Court to reverse those decisions.

One of the nonprofit organizations was a fraternal benefit organization that offered life, medical, disability, and long-term care insurance to its members. The policies were underwritten by the organization itself. The other nonprofit organization gave charitable grants for legal research funded through tax-deductible donations of dividends that otherwise would be payable to its members, donors, supporters, or beneficiaries who are insured through group insurance policies that the organization offers. In that case, the policies were underwritten by major insurance carriers.

The District Court held that the Postal Service's regulations constituted an incorrect reading of 39 U.S.C. 3626(j)(1)(B). The Postal Service appealed the District Court's decisions to the United States Court of Appeals for the District of Columbia Circuit, which consolidated the appeals and affirmed the District Court's decisions.

In light of the courts' rulings, the Postal Service proposes to amend DMM E670.5.5 to allow, under certain circumstances, the mailing of promotional material offering general types of insurance, such as homeowner's, property, casualty, marine, professional liability, and so forth. In doing so, the Postal Service is taking into account the courts' rulings, the Postal Service Appropriations Act of 1991, and the related legislative history. As explained in previous rulemakings concerning this statute, the Postal Service's obligation in establishing regulations is to adhere to the intent of Congress.

Under the proposal, mailings permitted at nonprofit rates in effect since 1991 continue to be eligible for the nonprofit rates. In addition, the Postal Service finds that Public Law No. 101-509 does not restrict the use of the nonprofit rates for mailings of an authorized fraternal benefit society or any other nonprofit organization when the material advertises, promotes, or offers insurance that is underwritten by the nonprofit organization itself.

The Postal Service also finds that Public Law No. 101-509 does not restrict the use of the nonprofit rates for mailings of an authorized organization's material that advertises, promotes, or offers insurance, if the coverage is provided or promoted by the nonprofit organization to its members, donors, supporters, or beneficiaries in such a way that those parties may make tax-deductible donations to the organization of their proportional shares of income in excess of costs that the nonprofit organization receives from the purchase of the coverage by its members, donors, supporters, or beneficiaries.

The position of the Postal Service regarding the second type of insurance is similar to view of the Postal Service on charitable gift annuities (CGAs), which in many ways are similar to commercial annuities sold by life insurance companies. In a 1997 administrative ruling (Customer Support Ruling PS-294, Charitable Gift Annuities—Nonprofit Standard Mail, November 1997), the Postal Service found that CGAs are not generally otherwise commercially available because they differ from commercial insurance in a number of regulatory contexts—including that the federal tax code expressly provides that CGAs are not commercial-type insurance. Therefore, the Postal Service concluded that material regarding CGAs could be entered at the nonprofit rates.

Organizations continue to bear the burden of proof, as they have done historically, in substantiating that their mailings qualify for the nonprofit rates of postage. For example, upon request, they must provide evidence to support any claim that the coverage provided by a particular policy is not generally otherwise commercially available within the meaning of revised DMM E670.5.5.

Additionally, the Postal Service has historically viewed, and continues to view, provisions regarding the mailing of promotional materials concerning insurance as supplementary to, rather than a change to or replacement for, the existing standards that restrict cooperative mailings. Mailings that are ineligible under the cooperative mailing provisions remain ineligible for the nonprofit rates, regardless of whether or not they violate the newly adopted standards related to insurance.

Although exempt from the notice and comment requirements of the Administrative Procedure Act, 5 U.S.C. 553(b), (c), regarding proposed rulemaking by 39 U.S.C 410(a), the Postal Service invites comments on the following proposed revisions to the Domestic Mail Manual (DMM), which is incorporated by reference in the Code of Federal Regulations. See 39 CFR 111.

List of Subjects in 39 CFR Part 111

• Administrative practice and procedure
• Postal Service

PART 111—[AMENDED]

1. The authority citation for 39 CFR part 111 continues to read as follows:

Authority: 5 U.S.C. 552(a); 39 U.S.C. 101, 401, 403, 404, 414, 416, 3001-3011, 3201-3219, 3403-3406, 3621, 3626, 5001.

2. Revise the Domestic Mail Manual (DMM) as set forth below:

E Eligibility

E600 Standard Mail

E670 Nonprofit Standard Mail

5.0 ELIGIBLE AND INELIGIBLE MATTER

5.5 Definitions, Insurance

[Revise 5.5 to read as follows:]

For the standard in 5.4b:

a. Except as specified in 5.5c, the phrase not generally otherwise commercially available applies to the actual coverage stated in an insurance policy, without regard to the amount of the premiums, the underwriting practices, and the financial condition of the insurer. When comparisons are made with other policies, consideration is given to coverage benefits, limitations, and exclusions, and to the availability of coverage to the targeted recipients. When insurance policy coverages are compared to determine whether coverage in a policy offered by an organization is not generally otherwise commercially available, the comparison is based on the specific characteristics of the mailpiece recipients (e.g., geographic location or demographics).

b. Except as specified in 5.5c, the types of insurance considered generally commercially otherwise available include, but are not limited to, homeowner's, property, casualty, marine, professional liability (including malpractice), travel, health, life, airplane, automobile, truck, motorhome, motorbike, motorcycle, boat, accidental death, accidental dismemberment, Medicare supplement (Medigap), catastrophic care, nursing home, and hospital indemnity insurance.

c. Coverage is considered not generally otherwise commercially available if either of the following conditions applies:

(1) The coverage is provided by the nonprofit organization itself (i.e., the nonprofit organization is the insurer).

(2) The coverage is provided or promoted by the nonprofit organization in a mailing to its members, donors, supporters, or beneficiaries in such a way that the members, donors, supporters, or beneficiaries may make tax-deductible donations to the nonprofit organization of their proportional shares of any income in excess of costs that the nonprofit organization receives from the purchase of the coverage by its members, donors, supporters, or beneficiaries.

An appropriate amendment to 39 CFR part 111 will be published if the proposal is adopted.