General Administrative Regulations; Good-Performance Refunds, 718-721 [2011-14]

Agencies

• DEPARTMENT OF AGRICULTURE
• Federal Crop Insurance Corporation

[Federal Register Volume 76, Number 4 (Thursday, January 6, 2011)]
[Proposed Rules]
[Pages 718-721]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-14]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 76, No. 4 / Thursday, January 6, 2011 / 
Proposed Rules

[[Page 718]]



DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 400

RIN 0563-AC28


General Administrative Regulations; Good-Performance Refunds

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Proposed rule with request for comments.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) proposes to 
amend the General Administrative Regulations by adding a new subpart Y 
to provide a Good-Performance Refund (GPR) to producers who have 
demonstrated favorable crop insurance performance evidenced by a very 
limited number of claims experienced over a specified number of years 
participating Federal crop insurance programs. The GPR will recognize 
an individual producer's contributions to favorable program performance 
as authorized under section 508(d)(3) of the Federal Crop Insurance Act 
(Act). In addition, new or beginning producers demonstrating favorable 
crop insurance performance may also be recognized for initial 
participation in the program.

DATES: Written comments and opinions on this proposed rule will be 
accepted until close of business January 21, 2011 and will be 
considered when the rule is to be made final.

ADDRESSES: Interested persons are invited to submit comments, titled 
``Good-Performance Refund Proposed Rule'', by any of the following 
methods:
     By Mail to: Leiann Nelson, Product Management, Risk 
Management Agency, United States Department of Agriculture, Beacon 
Facility--Mail Stop 0801, P.O. Box 419205, Kansas City, MO 64141-6205.
     By Express Mail to: Leiann Nelson, Product Management, 
Risk Management Agency, United States Department of Agriculture, Beacon 
Facility, Stop 0801, 9240 Troost Avenue, Kansas City, MO 64131-3055.
     E-Mail: DirectorPDD@rma.usda.gov.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
    A copy of each response will be available for public inspection and 
copying from 7 a.m. to 4:30 p.m., CST, Monday through Friday, except 
holidays, at the above address.

FOR FURTHER INFORMATION CONTACT: Leiann Nelson, Senior Underwriter, 
Product Management, Risk Management Agency, United States Department of 
Agriculture, Beacon Facility, Stop 0801, P.O. Box 419205, Kansas City, 
MO 64141-6205, telephone (816) 926-7394.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be significant for the purposes of 
Executive Order 12866 and, therefore, it has been reviewed by the 
Office of Management and Budget (OMB).

Regulatory Impact Analysis

    A Regulatory Impact Analysis has been completed and is available to 
interested persons from the Kansas City address listed above. In 
summary, the analysis finds that the benefits of Good Performance 
Refunds will outweigh the expenses of the program. Good Performance 
Refunds will return a portion of producer paid premium back to 
producers who purchase crop insurance for their risk management needs, 
pursue loss prevention and loss reduction methods, and demonstrate good 
farming practices, providing, in effect, a premium discount to 
individual producers demonstrating a series of good years with very few 
losses in their insurance history.
    The Good Performance Refund program will specifically encourage 
sound management practices as well as encouraging insured producers to 
continue participation in the crop insurance program. Benefits to 
insured's who qualify for the program based on their individual number 
of insured years and losses, will be cash refunds of premium based on 
their out-of-pocket premium amount. Cash refunds are estimated on 
average to be slightly over $1,000 for the 2011 refund and will vary 
annually depending on the number of producers qualifying, and, once 
qualified, the individual insured's number of years of insurance 
history and amount of insurance purchased. The return of some 
previously paid premium dollars may be used to offset anticipated 
increases in the costs of production inputs or higher crop insurance 
premiums due to higher crop prices and, in some cases, higher 
volatility of prices. With these higher anticipated costs, these 
benefits allow producers to continue purchasing higher levels of crop 
insurance.
    The GPR program will, additionally, encourage insureds not to claim 
small or insignificant losses so they may qualify for a refund later. 
Small losses present administrative costs to insurance providers, the 
government, and taxpayers that can add up program-wide. Any reduction 
of these types of losses can result, long-term, in decreases in 
administrative costs of the program as well as possible decreases for 
future premium rates and corresponding subsidy amounts, thus benefiting 
insureds, insurance providers, the government and taxpayers.
    GPR costs to the government are estimated at $75 million annually.

Paperwork Reduction Act of 1995

    Pursuant to the provisions of the Paperwork Reduction Act of 1995 
(44 U.S.C. chapter 35), there are no paperwork implications involved 
with this rule.

E-Government Act Compliance

    FCIC is committed to complying with the E-Government Act of 2002, 
to promote the use of the Internet and other information technologies 
to provide increased opportunities for citizen access to Government 
information and services, and for other purposes.

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) 
establishes requirements for Federal agencies to assess the effects of 
their regulatory actions on State, local, and tribal governments and 
the private sector. This rule contains no Federal mandates (under the 
regulatory provisions of title II of the UMRA) for State, local, and 
tribal governments or the private sector. Therefore, this rule is not 
subject to the requirements of sections 202 and 205 of UMRA.

[[Page 719]]

Executive Order 13132

    It has been determined under section 1(a) of Executive Order 13132, 
Federalism, that this rule does not have sufficient implications to 
warrant consultation with the States. The provisions contained in this 
rule will not have a substantial direct effect on States, or on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.

Executive Order 13175

    This rule has been reviewed in accordance with the requirements of 
Executive Order 13175, Consultation and Coordination with Indian Tribal 
Governments. The review reveals that this regulation will not have 
substantial and direct effects on Tribal governments and will not have 
significant Tribal implications.

Regulatory Flexibility Act

    FCIC certifies that this regulation will not have a significant 
economic impact on a substantial number of small entities. GPR payments 
for the Federal crop insurance program are calculated using the same 
method for all producers regardless of the size of their farming 
operation. The amount of work required of the insurance companies will 
not increase because the information must already be collected under 
the present regulations, policies and procedures approved by the FCIC 
and by the Risk Management Agency of the United States Department of 
Agriculture (RMA), and the GPR payments will be issued by RMA on behalf 
of FCIC. A Regulatory Flexibility Analysis has not been prepared since 
this regulation does not have an impact on small entities, and, 
therefore, this regulation is exempt from the provisions of the 
Regulatory Flexibility Act (5 U.S.C. 605).

Federal Assistance Program

    This program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.450.

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372, which requires intergovernmental consultation with State and 
local officials. See the Notice related to 7 CFR part 3015, subpart V, 
published at 48 FR 29115, June 24, 1983.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988 on civil justice reform. The provisions of this rule will preempt 
State and local laws to the extent such State and local laws are 
inconsistent herewith. With respect to any direct action taken by FCIC, 
the administrative appeal provisions published at 7 CFR part 11 must be 
exhausted before any action against FCIC for judicial review may be 
brought.

Environmental Evaluation

    This action is not expected to have a significant economic impact 
on the quality of the human environment, health, or safety. Therefore, 
neither an Environmental Assessment nor an Environmental Impact 
Statement is needed.

Background

    Section 508(d)(3) of the Federal Crop Insurance Act (Act) 
authorizes the Federal Crop Insurance Corporation (FCIC) to provide a 
performance-based premium discount to a producer of an agricultural 
commodity who has good insurance or production experience relative to 
other producers of that agricultural commodity in the same area and as 
determined by the FCIC.
    The proposed rule will implement a GPR program to producers meeting 
the qualifications for years of participation in the Federal crop 
insurance program combined with a limited number of losses, 
demonstrating favorable program performance. In addition, any new or 
beginning producers may be recognized for initial participation in the 
program who also demonstrated favorable program performance.
    GPR payments will not exceed $75 million unless FCIC makes an 
announcement of an alternative amount in a notice published in the 
Federal Register. Based on the net paid premium of qualifying producers 
and the total amount designated for GPR payments, a premium percentage 
will be determined to apply to all producers who meet the program 
qualification requirements.
    Good cause is shown to provide a shortened comment period because 
the provisions of this rule are straight-forward, so a shortened 
comment period still allows enough time for the public to provide 
meaningful comments.
    While the premium to purchase buy-up levels of coverage in the 
Federal crop insurance program already receive substantial subsidies, 
these subsidies are not tied to an individual producer's performance. 
The good performance refund will provide a tool to encourage producers 
to mitigate small losses.
    Producers will soon be making decisions regarding the upcoming crop 
year so knowing and understanding the benefits of this rule will allow 
producers to take more timely actions to purchase the necessary buy-up 
levels of coverage required for qualification for a good performance 
refund, and to reduce or prevent small losses that could otherwise 
jeopardize their future qualifications for such refund. To the extent 
losses are mitigated or reduced in the Federal crop insurance program, 
premium rates also may be lower, in turn reducing program costs to 
producers, the government, and taxpayers.
    A longer comment period, such as a 60 day period, would delay the 
implementation of this rule and the payment of any refunds hereunder, 
until well after the normal spring planting season for most 2011 crops. 
By delaying these refunds, producers will not be able to use them to 
help finance their 2011 spring operations. In addition, in the coming 
weeks, producers will be making decisions regarding the upcoming crop 
year so knowing and understanding the benefits of this rule will allow 
producers to take more timely actions to purchase the necessary buy-up 
levels of coverage required for qualification for a good performance 
refund, and to reduce or prevent small losses that could otherwise 
jeopardize their future qualifications for such refund. To the extent 
losses are mitigated or reduced in the crop insurance program, premium 
rates also may be lower, in turn reducing program costs to producers, 
the government, and taxpayers.
    The agency believes that requirements governing the payment of a 
good performance refund are straight-forward. There are a limited 
number of ways that such refunds can be provided within the context of 
the Federal crop insurance program. Therefore, a lengthy delay of 
implementation of the program is unnecessary and contrary to providing 
the benefits to producers receiving these refunds in time for them to 
be used to help finance their spring 2011 operations. For the reasons 
stated above, good cause is shown to limit the comment period to 15 
days for this rule as a lengthy comment period is not practicable and 
would be contrary to the public interest.
    The GPR is applicable to the 2011 and succeeding calendar years as 
long as funds are available for GPR payments.

List of Subjects in 7 CFR Part 400

    Administrative practice and procedure, Crop insurance.

Proposed Rule

    Accordingly, as set forth in the preamble, the Federal Crop 
Insurance Corporation proposes to add a new

[[Page 720]]

subpart Y to 7 CFR part 400 to read as follows:

PART 400--GENERAL ADMINISTRATIVE REGULATIONS

Subpart Y--Good-Performance Refunds
Sec.
400.800 Basis and applicability.
400.801 Definitions.
400.802 Eligibility requirements.
400.803 New or beginning producers.
400.804 Payments.
400.805 GPR announcements.

    Authority: 7 U.S.C. 1506(1), 1506(o).

Subpart Y--Good-Performance Refunds


Sec.  400.800  Basis and applicability.

    (a) The regulations contained in this subpart describe the 
eligibility requirements, rules, and criteria for receiving a Good-
Performance Refund (GPR).
    (b) GPR payments will be made annually generally during the first 
quarter of the calendar year, provided funds are available.


Sec.  400.801  Definitions.

    Base period. A period of crop insurance program performance used to 
determine an individual producer's net paid premium including the base 
year and nine years prior to the base year. For example: If the base 
year is 2009, the base period includes years 2000 through 2009.
    Base year. The last crop year that has been completed and all 
claims would normally have been paid. The base year is used to 
establish the base period. For example: A payment for the 2011 calendar 
year will be based on information containing the producer's crop 
insurance experience with a base year of 2009 because claims for the 
2010 crop year would not all have been finalized. For a 2012 calendar 
year payment the base year would be 2010.
    Buy-up coverage level. A level of coverage greater than 
catastrophic risk protection. This level of insurance may also be 
referred to as ``additional coverage.''
    FCIC. Has the same meaning as contained in section 1 of the Common 
Crop Insurance Policy Basic Provisions (Basic Provisions) (7 CFR Sec.  
457.8).
    Net paid premium. For the base period, total premium for all crops 
and units insured by the producer less the total premium subsidy and 
any indemnities received. Indemnities will include all payments for all 
claims except those designated as replant payments.
    New or beginning producers. A producer who has not participated in 
any farming or ranching operation, either as a primary entity or as a 
person having a SBI in the operation, for any crop year prior to the 
two crop years immediately preceding the base year. Example: New or 
beginning producers for a GPR payment authorized for the 2011 crop year 
could have been involved as a primary operator or a SBI in any farm or 
ranch in 2007, 2008, and 2009 but could not have been a primary 
operator or have a SBI in any farm or ranch for any crop year prior to 
2007.
    Percentage of net paid premium. A percentage determined by FCIC and 
used to calculate the GPR, based on the total funds determined by FCIC 
to be available for the GPR program and the total net paid premium of 
all qualified producers. The percent of net paid premium will not 
exceed 15 percent. (The percentage of net paid premium is adjusted to 
account for the minimum and maximum allowable payments and new or 
beginning producer payments.)
    Positive net paid premium. When the net paid premium is greater 
than one.
    Substantial beneficial interest (SBI). Has the same meaning as 
contained in section 1 of the Basic Provisions and any applicable 
procedures.


Sec.  400.802  Eligibility requirements.

    To be eligible for a GPR payment, a producer must:
    (a) Have been a participant in any Federal crop insurance program 
at the buy-up coverage level for at least one insurance policy that 
earned premium for the base year.
    (b) Not be determined to be ineligible in accordance with the Basic 
Provisions or subpart U of this part, for the crop year subsequent to 
the base year. For example, if the 2009 crop year is the base year, the 
insured must not be determined to be ineligible for the 2010 crop year.
    (c) Have used the same social security number or employer 
identification number to identify the primary insured entity throughout 
the base period.
    (d) Meet the following good-performance requirements of:
    (1) In the case of a producer with seven to ten years of program 
participation during the base period:
    (i) Not more than 1 year with a reported loss, and
    (ii) Have a positive net paid premium for the program participation 
period; or
    (2) In the case of a program with four to six years of program 
participation during the base period of having no years with a reported 
loss.


Sec.  400.803  New or beginning producers.

    (a) New or beginning producers will be eligible for a GPR payment 
for any given year when GPR payments are made, unless FCIC publishes an 
announcement, as specified in Sec.  400.805, stating otherwise.
    (b) New or beginning producers must meet the requirements of 
Sec. Sec.  400.802(a), (b), and (c).
    (c) New or beginning producers will be required to sign a 
certification statement that they meet the requirements to be 
designated as a new or beginning producer in order to be eligible for a 
GPR payment.
    (d) New or beginning producers must demonstrate favorable program 
performance by participating in the Federal crop insurance program for 
the most recent one to three years of the base period, and have a 
positive net paid premium for that period of participation.


Sec.  400.804  Payments.

    (a) Aggregated premium and indemnity for all crops insured in all 
counties under a qualifying producer's social security number or 
employer identification number will be used to calculate the GPR.
    (b) Except as provided herein, in the case of a new or beginning 
producer, the net paid premium percentage will be reduced by 50 percent 
of the percentage paid to producers who are not new or beginning. For 
example: If the percent of net paid premium is 8 percent for producers 
who are not new or beginning producers, then new and beginning 
producers will receive a GPR of 4 percent of net paid premium, unless 
an adjustment is needed due to a larger number of certifying new or 
beginning producers than is anticipated.
    (c) GPR payments under this section will not exceed $75 million. If 
amounts to be paid exceed $75 million due to a larger than anticipated 
number of producers that certify they are new or beginning, then FCIC 
will adjust the percentage refund for new or beginning producers, 
contained in paragraph (b) of this section, downward.
    (d) Subject to paragraph (e) of this section, GPR payments will be 
calculated as follows:
    (1) For producers, other than new or beginning producers, multiply 
the percent of net paid premium by the individual producer's net paid 
premium; and
    (2) For new and beginning producers, multiply the percent of net 
paid premium by .50, unless adjusted in accordance with paragraph (c) 
of this section, and then multiply the result by the individual 
producer's net paid premium.
    (e) A GPR payment will:

[[Page 721]]

    (1) Not be made unless it is at least $25; and
    (2) Be capped at $25,000 for calculated GPR payments larger than 
$25,000, regardless of the calculated payment.
    (f) All GPR payments will be considered final with no adjustments, 
modifications, additions or deletions, except as specified in 
paragraphs (g) and (h) of this section, and will be based on data 
contained in the RMA crop insurance database as of the end of the first 
full week in January of the year the GPR payment is authorized, unless 
FCIC publishes an announcement in accordance with Sec.  400.805 
providing a different date. For example: For GPR payments made for the 
2011 calendar year, the data used would be as of the end of the first 
full week in January 2011.
    (g) Any qualifying producer involved in arbitration, litigation, or 
mediation will not receive a payment until the legal proceedings have 
been resolved.
    (h) If a producer receives a GPR payment under this subpart and is 
determined to be ineligible for the crop year subsequent to the base 
year or is at any time determined to not meet the requirements of Sec.  
400.803, the GPR payment must be repaid to FCIC in accordance with 
section 24 of the Basic Provisions and any applicable procedures.


Sec.  400.805  GPR announcements.

    FCIC will post information on the RMA Web site, at https://www.rma.usda.gov or a successor Web site, to provide the public with 
information regarding the GPR for a calendar year.

    Signed in Washington, DC, on January 3, 2011.
William J. Murphy,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 2011-14 Filed 1-4-11; 11:15 am]
BILLING CODE 3410-08-P