While the premium rates are modest for younger employees, they increase over time. Image: Alex_Po/Shutterstock.com
By: Reg JonesIn my last two articles in this series on understanding federal insurance benefits I wrote about the Federal Employees Health Benefits program, first in general and then specifically its retirement-related considerations. This time I want to focus on the Federal Employees’ Group Life Insurance program.
Basic insurance
When you were first hired you were automatically covered by Basic insurance, unless you declined that coverage. The amount of that coverage is equal to your base pay – the amount from which retirement deductions are taken – 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 rest.
When you retire, you’ll be offered three choices: a 75 percent reduction in your Basic insurance, a 50 percent reduction, or no reduction at all. If you chose the 75 percent reduction, you’ll continue to pay the same premiums for this coverage that you did while an employee, and you’ll do that until you reach age 65. At that point, you won’t have to pay any premiums for that insurance and its value will decline by 2 percent per month until it reaches 25 percent of its original face value.
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 have to pay higher premiums.
If you chose no reduction option, you’ll pay even higher premiums.
Option A – Standard Insurance
If you are covered by Basic insurance, you can buy an additional $10,000 worth of coverage at your own expense. While the premium rates are modest for younger employees, they increase over time. Premium deductions 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
Option B allows you 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.
At retirement, you’ll be offered the opportunity to retain the coverage you had as an employee. If you do, you’ll continue to pay the full cost of that coverage, 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
Option C allows you to provide coverage for your spouse and eligible dependent children under one policy at your own expense. Just as with 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. 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.
In summary
I wouldn’t be surprised if the name or names you long ago designated to receive your life insurance benefits aren’t the one(s) you would choose today. If you don’t take steps to change your designation(s), the name(s) you put down (or their heirs) will be the one(s) who will get those benefits. And they may not be the ones you would choose today. For example, if you originally designated your parent(s)and later got married, that original designation might not be the way you’d like to have your life insurance benefits be paid out if you passed away tomorrow.
To change a previous FEGLI designation, you’ll have to fill out a Standard Form 1823, which is available from your personnel office or online at www.opm.gov/forms.
If you didn’t fill out a designation of beneficiary form, your life insurance benefit will be distributed according to the standard order of precedence:
• to your spouse, or if none
• to your child or children in equal shares, with the share of any deceased child distributed among the descendants of that child, or if none
• to your parents in equal shares or the entire amount to the surviving parent, or if none
• to the duly appointed executor or administrator of your estate, or if none
• to your next of kin under the laws of the place you were living at the time of your death. Of course, if you are divorced, what happens to those benefits may have been settled by a court order.
To find out who you’ve designated as a beneficiary or beneficiaries, check your Official Personnel File (OPF). That way you can make sure that the designation(s) you originally made are still the ones you want to receive the benefits in the event of your death. If they aren’t, now’s the time to change them.
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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
