Now that the Federal Employees Health Benefits program open season is finally wrapping up–it was extended through the end of this month–it’s time to talk about another important benefit available to federal employees and retirees: the Federal Employees’ Group Life Insurance program. Because there are four parts to FEGLI — Basic, Option A-Standard, Option B-Optional, and Option C-Family — I’ll discuss the features of each in a separate article.
Basic Insurance — Employees
As long as you are appointed to a FEGLI-eligible position, you are covered automatically for Basic insurance when you get your first federal civilian job. And that coverage is provided to you without the need for a medical exam. While you are given an opportunity to decline that coverage, few employees do so.
Your Basic insurance amount is equal to your annual basic salary rounded up to the next higher $1,000 plus $2,000. For example, if your basic salary is $69,475, your coverage would be $72,000 ($70,000+$2,000). The cost of the bi-weekly premiums is split between you and the government. You pay two-thirds and the government pays the rest.
In practical terms, your share of the Basic insurance premiums is 15 cents biweekly per $1,000 of coverage or 32.5 cents per month. If you are under age 45, the amount of that coverage is increased at no additional cost to you. At age 35 or younger, the coverage is doubled. However, beginning at age 36 the multiplier used to determine the additional coverage declines by 10 percentage points until it reaches zero at age 45.
In addition, your policy includes coverage for accidental death and dismemberment. AD&D pays the full amount of your Basic coverage if you die or lose two or more body parts — for example, a hand, foot, eye, etc. — and half that amount for the loss of one part. If you die, this payment is over and above the amount of your Basic coverage. Although AD&D coverage doesn’t decline while you are still employed, it stops when you retire.
Basic Insurance — Retirees
To be eligible to carry your FEGLI coverage into retirement, you must either have been enrolled in it for the five consecutive years immediately before you retire or from your first opportunity to enroll in the program.
If you are eligible to carry your coverage into retirement, you’ll be given some choices. You can keep the full value of the coverage you had on the day you retired, allow it to decline to half its value or let it decline to 25 percent. If you chose the latter option, when you reach age 65 you will no longer have to pay any premiums; however, your coverage will decrease by 2 percent per month until it hits the 25 percent level. That’s where it will stay until you die.
If you choose the 50 percent option, your annuity will decline by only 1 percent per month until it reaches the halfway point. The cost to you would be $0.925 per month per $1,000 of coverage until the month after you reach age 65 and $0.60 per $1,000 thereafter.
If you choose the no reduction option, your premiums would be higher still. You’d pay $2.155 per month per $1,000 of coverage until the month after you reach age 65 and $1.83 per $1,000 thereafter.
As a retiree, you can’t increase the amount of your Basic coverage; however, you can reduce the amount if you elected either the 50 percent option or no reduction. For example, if you chose the maximum reduction, you would no longer have to pay any premiums. There is an exception to this rule, which involves the assignment of benefits. I’ll discuss that in a future column.
A word to the wise. If you are covered by Basic insurance and you die, the proceeds will be paid to the beneficiary you designated on a Standard Form 2823. So be sure to keep that designation current. The person you designated when you were first hired may not be the one you want to receive that money now.