Currently, FEGLI operates much like term life insurance by not allowing the type of cash accumulation available in whole life insurance. Image: RAGMA IMAGES/Shutterstock.com
By: FEDweek StaffA union representing federal employees in a number of agencies has recommended changes to the FEGLI life insurance program that it says would further help shore up the Federal Long-Term Care Insurance Program by making it more affordable.
The International Federation of Professional and Technical Engineers says that FEGLI add a feature that will allow cash balances to accrue; currently, the program operates much like term life insurance by not allowing the type of cash accumulation available in whole life insurance.
With such a feature, it recommends that on retirement federal employees be given the option of continuing FEGLI coverage; transferring the cash value into an annuity or a different life insurance policy; or using the cash value toward a long-term care policy. Those choosing one of the latter two should be allowed to use a tax code “exchange option” under which the transfer would be tax-free, since it represents money that already has been taxed, it said.
It said that would “help millions of federal workers offset the increases in health care and elder care costs by giving federal retirees and their families increased flexibility and allow them to afford appropriate care and retirement options. IFPTE believes that this is a win-win for both federal employees and taxpayers, as it provides options for long-term care for retirees, which the vast majority of Americans are expected to need after age 65,” it said.
The FLTCIP program currently is not accepting applications to newly enroll or to increase coverage under a current enrollment, pending a review of the program’s finances in light of lower than expected enrollment rates and higher than expected payouts.
That suspension period is expected to last at least through the end of next year and likely will result in another round of premium increases—potential affecting both current and future enrollees—and/or reductions in benefits available for future enrollments.
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