During the past three weeks, I’ve explained the five-year rule, which determines your eligibility to carry your FEHB coverage into retirement, and spelled out the circumstances under which that requirement may be waived. I’ve also explained how health benefits coverage continues unchanged into retirement, and how FEHB and Medicare interact. Then I went over the rules governing the continuation of health benefits coverage for a widow(er).
That leaves me with one more statement for you to check out. Is it true, sometimes true, or false?
As a retiree, you pay the same premiums in retirement as you did while employed.
Depending on where you are employed, you either said true or false. That makes this statement one that is sometimes true. Let me explain. For all employees other than those employed by the U.S. Postal Service, the premiums you’ll pay in retirement are identical to the ones you’d pay as an employee. The premiums would be deducted from your monthly annuity payments rather than your bi-weekly pay checks. So, if you want to know what your monthly payment as a retiree would be, multiply your bi-weekly rate by 26 and then divide by 12.
On the other hand, through union agreements, the Postal Service pays a higher percentage of the premiums for its employees than the government does for other employees. As a result, when a Postal Service employee retires, his health benefits premiums go up slightly—and again, are paid on a monthly basis rather than a bi-weekly basis.
In both cases, the premiums will effectively cost you more in retirement, though, because retirees aren’t eligible for to pay FEHB premiums with pre-tax money under the "premium conversion" arrangement that applies to active employees. There is a limited exception for retired firefighters and law enforcement officers, who should check with their tax advisers regarding that benefit.
Note: To keep their premiums down, couples employed by the Postal Service need to make sure that if one of them will be retiring before the other, the one carrying the FEHB enrollment should be the one who will still be an employee. Fortunately, the Postal Service’s offer of early retirement to thousands of its employees falls at a good time of year. With a separation date falling late in the year, those who need to switch coverage can do so during the upcoming Open Season, which runs from Monday, November 10 through Monday, December 8.
Well this wraps the subject of FEHB in retirement for now. However, as I indicated in my opening article three weeks ago, if there’s anything I didn’t make clear, you know where to find me. The same goes if there’s something that didn’t get addressed in this series.