Retirement & Financial Planning Report

Federal employees planning to retire around the turn of the year–there always is a surge of retirements in that period–should be aware of the impact of the end of “premium conversion” on their FEHB premiums.

Premium rates are the same for employees and retirees, with the exception that retirees pay them monthly while employees pay them biweekly, in almost all cases. Further, almost all employees pay premiums from pre-tax money through premium conversion. After retirement, though, eligibility for premium conversion ends, effectively making the premiums more expensive.


The same applies in the FEDVIP program, with the difference that premium conversion is required for active employees in that program while it is only voluntary in the FEHB.

Retirees who will be immediately eligible for Medicare, or who will soon become eligible, and who choose to enroll in its Part B (physicians and related services) and pay those premiums further should note that FEHB premiums will not be reduced, even though Medicare takes over as the first payer.

Enrollment in Medicare Part D (prescription drugs) is also voluntary and many federal retirees choose not to enroll on grounds that their FEHB plan already provides prescription drug coverage. However, some choose to have both, especially if their income is low enough that they would qualify for subsidies available in the Medicare program.

More on FEHB premium conversion at