By Dallen Haws, for Haws Financial Planning
Health insurance is an important part of just about everyone’s life and financial plan. Because health insurance costs are growing so rapidly (some sources say about 9 percent a year!) it becomes paramount that you and your spouse (if you have one) stay eligible for FEHB in retirement.
So there are a couple of rules that you must follow to remain eligible for FEHB once you stop working.
1. You must have been enrolled in FEHB (regardless of what plan within FEHB) for a minimum of five years.
2. You must retire with an immediate annuity (or pension) under the FERS or CSRS systems.
Will My Spouse Keep FEHB In Retirement?
As long as you are eligible for FEHB yourself, then your spouse will be eligible.
One thing that is essential to understand is that your spouse may not be eligible for FEHB once you (the federal employee) pass away. He or she will only be able to keep this benefit if you chose a survivor benefit on your pension when you retired.
Let me explain how this works. When you fill out your retirement paperwork. You have an option to take a 5% or 10% decrease to your own pension but if you were to die before your spouse, your spouse will continue receiving either 25% or 50% of your pension amount.
This option is not mandatory and some people opt out of it. Just understand that if you choose to opt out of this survivor benefit and you (the federal employee) were to die first, your spouse would no longer be eligible for FEHB. This one decision can make a big impact on your retirement so make sure to think it through carefully.
What if I Retire With a Postponed Retirement?
If you retire under the MRA+10 (under FERS) retirement option and are eligible for FEHB when you retire, you are not eligible for FEHB until you begin receiving your pension. If you are in this situation, you might want to have some other type of insurance to fill the gap between when you retire and when you begin receiving your pension.
What Will FEHB Cost In Retirement?
Assuming you don’t change what plan you are on within FEHB, the cost will be the same as it was when you were working. Open enrollment doesn’t change in retirement either so you are able to make changes as you see fit.
I personally know individuals that work in the private sector who are working late into their sixties because they can’t afford to pay their insurance premium and retire. Take advantage of the benefits you enjoy as a federal employee and make sure you educate yourself so you know how to get the most out of them and not leave any money on the table.