On August 5, 2020, the Risk Management Agency (RMA) published Managers Bulletin: MGR-20-021 and a National Press Release announcing that additional time is being provided to producers to pay premium and administrative fees without interest. https://www.rma.usda.gov/en/Policy-and-Procedure/Bulletins-and-Memos/2020/MGR-20-021; https://www.rma.usda.gov/en/News-Room/Press/Press-Releases/2020-News/USDA-Extends-Deadlines-Defers-Interest-Accrual-Due-to-COVID-19. RMA states that interest starts to accrue on the first day of the month following the issuance of the notice of premium due as long as that a minimum of 30 days has passed from the premium billing date. RMA states that it recognizes the challenges the crop insurance industry and America’s farmers and ranchers face in light of the COVD-19 pandemic and will provide flexibilities to help farmers and ranchers while also ensuring the Federal crop insurance program continues to serve as a vital risk management tool.
In the Action section, RMA states that approved insurance providers (AIPs) are authorized to provide additional time for policyholders to make payment of premium and administrative fees. RMA states that interest accrual on premium payments and administrative fees will be waived to the earliest of an additional 60 days of the scheduled payment due date or the termination date on policies with premium billing dates between August 1, 2020, and September 30, 2020. RMA states that AIPs will begin to accrue interest after this additional period for unpaid premium and administrative fees and that AIPs should promptly notify potentially affected policyholders of said relief.
RMA states that to assist the AIPs and provide relief from the requirements of the Standard Reinsurance Agreement and Livestock Price Reinsurance Agreement that all uncollected premium be paid to the Federal Crop Insurance Corporation, RMA will also defer collection of any unpaid producer premium and administrative fees and waive all associated interest from AIPs accordingly beginning with the September monthly accounting reports.
RMA also states that AIPs are also authorized to provide additional time for policyholders to make payment for Written Payment Agreements due between August 1, 2020, and September 30, 2020. RMA states that payments may be extended up to 60 days of the scheduled payment due date and considered a timely payment and such extension of time will not be considered a modification of the Written Payment Agreement, and the AIP may waive any additional interest for the payment during this 60-day period.
ANALYSIS – As stated in response to MGR-20-016 on May 28, 2020, where RMA authorized a similar waiver, RMA is waiving or modifying a policy codified in the Code of Federal Regulations that states it is not subject to waiver and it has the force of law. Therefore, RMA needs to explain its rational basis for violating the law. RMA simply states it is providing flexibility, which could apply to any action, and cannot justify a waiver of codified policy provisions. The simple rationale would be the financial hardship facing producers in this pandemic. However, it is up to RMA to explain and justify its actions.
Similarly, like with MGR-20-016, it is not completely clear whether RMA is giving an additional 30 or 60 days before interest starts to accrue. The AIP provides a notice of premium due. Interest starts to accrue on the first day of the month as long as there is 30 days since the premium billing date. Now RMA is waiving interest to the earliest of an additional 60 days of the scheduled payment due date or the termination date on policies with premium billing dates between August 1, 2020, and September 30, 2020. It is not clear if the scheduled payment due date is the same as the premium billing date or if it is 30 days after the premium billing date just before interest starts to accrue. It makes a difference because if they are considered the same, only an additional 30 days of interest is waived. If the scheduled payment due date is the date before interest would normally start to accrue (at least 30 days after billing), then interest for an additional 60 days has been waived. This again may need clarification.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.