Expert's View

Last week I wrote about the decisions employees need to make about coverage under the Federal Employees Health Benefits (FEHB) program both on first being hired and afterward, and rules for carrying that coverage into retirement.

This time I want to focus on similar considerations in the Federal Employees’ Group Life Insurance (FEGLI) program.

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When you were first hired, you were automatically enrolled in Basic life insurance—with no underwriting (that is, check of your health) required—unless you declined it by the end of your first pay period.

Basic insurance is equal to your base pay rounded up to the next higher thousand, plus $2,000. The cost of the insurance, including accidental death and dismemberment (AD&D), is shared by you and the government. If you are under age 45, the amount of your Basic insurance is increased at no additional cost to you. That increase depends on your age. If you died at or before age 35, the value of that insurance would be twice the amount for which you were insured at the time of death. The increase phases out starting at age 35 until it ends at age 45.

If you declined Basic and later want to enroll in it, you can do so only during one of the rare FEGLI open seasons, if you experience a life event such as marriage (which we’ll discuss later in this series) or if you apply and undergo the type of underwriting that is typical with life insurance.

When you were hired, you were also offered three forms of optional coverage, for which you’d pay the entire cost, and which can be elected only if you are enrolled for Basic.

The first was Standard Optional, an additional $10,000 of coverage. Second was Additional Optional, an amount equal to up to five times the amount of your current rate of base pay, rounded up to the next $1,000. Third was Family Optional, coverage on your spouse in an amount equal to up to five multiples of $5,000 and each eligible child for up to five multiples of $2,500.

If you declined optional insurance, you can add it (or increase it, if you are enrolled for less than the maximum) only in the circumstances described above.

Life Insurance After Retirement
As under the FEHB program, you must have been enrolled in FEGLI for the five years before retirement (or from your first opportunity to enroll) in order to carry it into retirement.

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The premiums you pay for your insurance coverage will continue until age 65 (or when you retire if it’s after age 65). At that point, Optional Insurance automatically declines in value by 2 percent for each full calendar month until it reaches $2,500. It will continue to hold that value until you die, when it will be paid to whomever you designated to receive it.

Basic Insurance provides you with three options. You can allow it to decline at a rate of 2 percent per month until it reaches 25 percent of its face value. Or you can elect either a 50 percent reduction or no reduction at all. In either case, you will have to pay the appropriate premiums for that level of coverage until you either cancel it or die.

As for Additional Optional insurance, you can cancel that coverage at any time. If you decide to keep it, you won’t have to pay premiums for that coverage when you reach age 65. At that point it starts to decrease at a rate of 2 percent per month until it ends after 50 months. However, you have the option of keeping it at full value or reducing the number of multiples.

Regardless of what you decide, you’ll have to continue paying the appropriate amount of premiums for that coverage. When you die, the proceeds will be paid to the beneficiary or beneficiaries you designated to receive them, or under a standard order of precedence if you had made no designation.

Decisions, Decisions on Insurance – FEHB

How Not to Lose your FEHB in Retirement

OPM Sets Policies on Verifying FEHB Eligibility for Family Members

More Flexibility Coming to Flexible Spending Accounts, OPM Says

2021 Has a Quirk in the Calendar for Picking a Fed Retirement Date

ask.FEDweek.com: FEGLI Coverage After Retirement

ask.FEDweek.com: FEGLI Coverage Changes

FERS Retirement Guide 2021

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