There are always rumors floating around that federal employees fall for. It isn’t because they are stupid but because they want them to be true. One of the oldest goes back to the 1987 when the FERS system came on line. That whopper says that CSRS employees will be given an exclusive opportunity to retire early because the government wants to get them off the books. ‘Taint true and can’t be done within existing law. Any opportunity to retire early would have to apply to CSRS and FERS employees alike.
A slightly more recent rumor says that when agencies offer early retirement, any employee who doesn’t have the right combination of age and service to retire, but is close to it, will be given five years of age or five years of service to make him eligible to retire. ‘Taint so and can’t be done within existing law. You either meet the age and service requirement or you don’t.
A much more recent rumor says that under the Patient Protection and Affordable Care Act of 2010, in 2011 federal employees and retirees who are enrolled in the Federal Employees Health Benefits program will be subject to the so-called "Cadillac health plan" tax. Once again, ‘taint so. Yet there’s a kernel of truth in that rumor.
Beginning in 2011, the W-2s of all employees and the 1099s of all retirees and survivors will show the real cost of their FEHB plan enrollments. In other words, the amount you pay in premiums and the amount the government chips in to cover the cost of your enrollment. The actual application of the Cadillac tax won’t occur until 2018.
To refresh your memory, a 40 percent tax will be applied to any plan that exceeds a specific dollar threshold: $10,200 for individuals or $27,500 per family. While the tax is to be paid by the plan, it stands to reason that the cost would be passed on to enrollees.
So the big question is, are any FEHB plans or options going to be hit by this tax. While one can’t predict what the world will look like in eight years. I can show you that there isn’t a single FEHB plan that would come close to those dollar thresholds in 2011. Let me illustrate with a sampling of popular fee-for-service plans.
APWU
High Self $ 5,144.64
High Family $11,632.44
Blue Cross and Blue Shield
Standard Self $ 5,871.84
Standard Family $13,445.64
Basic Self $ 4,437.12
Basic Family $10,391.16
GEHA
High Self $ 6,425.88
High Family $13,985.40
Standard Self $ 3,564.60
Standard Family $ 8,101.08
Mail Handlers
Standard Self $ 5,516.16
Standard Family $12,511.68
NALC
High Self $ 5,298.90
High Family $12,102.96
The same is true of HMOS, group and individual practice and mixed model prepayment plans, along with "consumer-driven" options and high-deductible health plans.
Moral: When you hear a rumor that’s sounds too good to be true (or that scares the daylights out of you), it’s probably false.