There’s one benefit program for federal employees and retirees that doesn’t get much attention: Federal Employees’ Group Life Insurance. It comes in four parts – Basic Insurance, Option A (Standard Optional Insurance), Option B (Additional Optional Insurance), and Option C (Family Optional Insurance). Over the next few weeks, I’ll describe the features of each. In this article, I’ll fill you in on Basic.
Basic Insurance – Employees
As a rule, when you get your first federal civilian job, you are covered automatically by Basic insurance. And you get it without having to get a medical exam. While you can decline that coverage, few employees do.
Your Basic insurance amount is equal to your annual basic salary rounded up to the next higher $1,000 plus $2,000. For example, if your basic salary is $30,577, your coverage would be $32,000 ($30,000 + $2,000). For that coverage, you’ll pay two-thirds of the bi-weekly premiums and the government will pay the rest.
Your share of the Basic insurance premiums is 15 cents biweekly for every $1,000 of coverage or 32.5 cents per month. If you are under age 45, the amount of that coverage is increased at no additional cost to you. If you are age 35 or younger, the coverage is doubled. However, beginning at age 36 the multiplier used to determine your additional coverage declines by 10 percent per year until it reaches zero at age 45.
In addition, your Basic policy includes coverage for accidental death and dismemberment. AD&D pays the full amount of your Basic coverage if you die or lose two or more body parts – for example, a hand, foot, eye, etc. – and half that amount for the loss of one part. If you die, this payment is over and above the amount of your Basic coverage. Although AD&D coverage doesn’t decline while you are still employed, it stops when you retire.
Basic Insurance – Retirees
To carry your FEGLI Basic coverage into retirement, you must either have been enrolled in it for the five consecutive years immediately before you retire or from your first opportunity to enroll in the program.
If you are eligible, you’ll have a decision to make. You can 1) decide to keep the full value of the coverage you had on the day you retired, 2) allow it to decline to half its value, or 3) let it decline to 25 percent. If you choose the 25 percent option, the upside is that you won’t have to pay any more premiums when you reach age 65. The downside is that your coverage will decrease by 2 percent each month until it hits the 25 percent level. That’s where it will stay until you die.
If you choose the 50 percent option, your annuity will be reduced by only 1 percentage point per month until it reaches half its value. The cost to you would be $0.965 per month per $1,000 of coverage until the month after you reach age 65. From that point forward, it would be $0.64 per $1,000.
If you choose the no reduction option, your premiums would be higher still. You’d pay $2.265 per month for each $1,000 of coverage until the month after you reach age 65 and $1.94 per $1,000 thereafter.
As a retiree, you can’t increase the amount of your Basic coverage; however, you can reduce the amount if you elected either the 50 percent option or no reduction. For example, if you chose the maximum reduction, you’d no longer have to pay any premiums. Note: There is an exception to this rule, which involves the assignment of benefits. I’ll fill you in on that in a future column.
A final thought. If you are covered by Basic insurance when you die, the proceeds will be paid to the beneficiary you designated on a Standard Form 2823. So be sure to keep that designation current. The person you chose when you were first hired may not be the one you want to receive that money now. You can get a copy of that form from your personnel office or download a copy at www.opm.gov/forms. After you’re done filling it out, make sure it gets into your official personnel folder (OPF).