Over the last three weeks, I answered the most commonly asked questions about the CSRS and FERS systems and about carrying FEHB health insurance into retirement.
This time I’ll answer the fourth question I raised at the outset, addressing what happens with Federal Employees’ Group Life Insurance (FEGLI) coverage at retirement?
To carry your FEGLI into retirement, you’ll have to be enrolled in the program for the 5 consecutive years before you retire or from your first opportunity to enroll in the program. If you meet that requirement, when you retire you’ll be offered three choices: a 75 percent reduction in your Basic insurance, a 50 percent reduction, or no reduction.
If you chose the 75 percent reduction, you’ll continue to pay the same premiums that you did while an employee, and you’ll do that until age 65. The value of your Basic insurance will decline at a rate of 2 percent per month until it reaches 25 percent of its face value, and you won’t pay any premiums for that coverage after age 65. If you choose the 50 percent reduction, it will reduced by 1 percent per month until it reaches 50 percent of its face value. For that enhanced benefit, you will pay higher premiums. If you chose no reduction, you’ll pay even higher premiums.
Option A – Standard Insurance
If you also signed up for an additional $10,000 worth of coverage at your own expense, the cost of those premiums will have increased over time. While you can drop that coverage at any time, if you decide to keep it, those deductions will stop at the end of the calendar month in which you reach your 65th birthday. Then 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 Option B coverage, you were able to elect an amount equal to one, two, three, four or five times your annual basic pay, after rounding it up to the next $1,000. When you retire, you can retain the coverage you had as an employee. If you do, you’ll continue to pay the full cost of the premiums, which will continue to rise as you grow older. You can reduce that cost by reducing 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
If you elected Option C, you were able to provide coverage for your spouse and eligible dependent children under one policy at your own expense. Just as with Option B, you could 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 was a function of your age. Although that coverage will be free after you reach age 65, it will automatically decline at a rate of 2 percent per month for 50 months until it reaches zero.
So there you have it. If you know nothing more about federal retirement than what we have covered in this series, make sure you know at least that.