When you retire, you’ll be offered three choices: the 75 percent reduction in your Basic insurance, a 50 percent reduction, or no reduction. Image: ssguy/Shutterstock.com
By: FEDweek StaffWhen you retire you’ll have to make some decisions about life and health insurance coverage, assuming that you are enrolled in one or both of these programs. First, which benefits do you want to keep? Second, how much are you are willing to pay for them?
When you were first hired you were automatically covered by Basic insurance, unless you waived that coverage. The amount of that coverage is equal to your base salary rounded up to the next $1,000 plus $2,000. As your salary increases so does the amount of your coverage. The government pays two-thirds of the premiums and you pay the other third.
When you retire, you’ll be offered three choices: the 75 percent reduction in your Basic insurance, a 50 percent reduction, or no reduction. If you chose the 75 percent reduction, you will continue to pay the same premiums for that insurance that you did while an employee, until age 65. The value of your Basic insurance then will decline at a rate of 2 percent per month until it reaches 25 percent of its face value. You won’t pay any premiums for that insurance after age 65.
If you choose the 50 percent reduction, it will reduced by 1 percent per month starting at age 65 until it reaches 50 percent of its face value. For that additional benefit, you will pay higher premiums.
If you chose no reduction, you’ll pay even higher premiums.
Option A – Standard Insurance
If you are covered by Basic insurance and bought an additional $10,000 worth of coverage at your own expense, the premiums you pay will stop at the end of the calendar month in which you reach your 65th birthday. At that point, your Option A insurance will automatically decline by 2 percent per month until it reaches 25 percent of its face value.
Option B – Additional
If you elected to be covered by Option B, you bought an amount equal to one, two, three, four or five times your annual basic pay, after rounding it up to the next $1,000. At retirement, you’ll be offered the opportunity to retain the same coverage you had as an employee. If you do, you’ll continue to pay the full cost of that coverage, which will continue to increase as you grow older.
You’ll also have the option of reducing that cost by either changing the number of multiples or by allowing the dollar value of that coverage to decline beginning at age 65 at a rate of 2 percent per month for 50 months until it reaches zero.
Option C – Family
Option C allows you to provide coverage for your spouse and eligible dependent children under one policy at your own expense. Just like Option B, you can elect up to five multiples of coverage, with each multiple equaling $5,000 for your spouse and $2,500 for each of your children. The premium cost per multiple is a function of your age. However, that coverage is free after age 65 when it will automatically decline at a rate of 2 percent per month for 50 months until it reaches zero.
As you go through these choices, bear in mind that while FEGLI is a very stable program and provides coverage at group rates even to those who might not qualify for other life insurance due to their health conditions, it isn’t the only option available to you. In advance of retirement, examine the other life insurance options available to you on the open market.
Also note that there are other ways to prepare for the future, including Thrift Savings Plan and in other ways, and long-term care insurance through the federal FLTCIP program or other insurers. Your FEGLI decisions should be made in that broader context.
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See also,
Legal: How to Challenge a Federal Reduction in Force (RIF) in 2025
The Best Ages for Federal Employees to Retire
Alternative Federal Retirement Options; With Chart
Primer: Early out, buyout, reduction in force (RIF)
Retention Standing, ‘Bump and Retreat’ and More: Report Outlines RIF Process
