Retirement & Financial Planning Report

While the vast majority of federal employees have not joined the Federal Long Term Care Insurance Program, many consider joining the program when they leave federal employment, either at retirement or for a separation before retirement eligibility. However, they should be aware that various complications can arise for those who pursue such a strategy. An applicant must remain a member of an eligible group for coverage to take effect. If he or she becomes ineligible between the date that the application is submitted and the coverage effective date, he or she will no longer be eligible for coverage.

This may happen when the applicant separates from service without retiring or when he or she loses qualified relative status, such as through divorce. There are two exceptions to this rule: If the separation from service is involuntary, such as through a reduction in force, the application (and the application of any qualified relatives) will proceed. If the application is approved, the applicant will be enrolled for coverage. However, if the individual had not applied for coverage before separation, he or she is no longer eligible at separation. Qualified relatives also lose their eligibility at the same time.

If an applicant’s involuntary separation is due to misconduct or a dishonorable discharge, then he or she immediately becomes ineligible, regardless of whether the applicant had applied for coverage prior to separation. This is consistent with temporary continuation of coverage requirements under the FEHB program, which do not allow for continued enrollment if the separation is due to misconduct. When an applicant loses qualified relative status through the death of a workforce member.

If the person through whom the applicant is qualified for coverage dies after the applicant has submitted an application but before the application is approved, he or she does not lose eligibility. If the application is approved, he or she will be enrolled for coverage. Eligibility status may change between the time of application for coverage and the coverage effective date. The applicant may have retired or separated from service under FERS MRA +10 provisions. Or, the applicant may have separated from service but still may be eligible because he or she is the qualified relative of an employee or annuitant.

The applicant must reapply for coverage in these instances, submitting to the underwriting requirements specified for the eligible group of which he or she is now a part. For example, if an applicant separates from active service, but is also the spouse of an employee, he or she remains eligible for coverage. But, he or she will have to resubmit the application with the additional underwriting required of employees’ spouses. If you have coverage as an active employee and have premiums withheld through payroll deduction as most employees do, when you retire you must contact the carrier to make other arrangements; deductions will not automatically transfer from your agency to your retirement system.

Most retirees set up premium deductions from the annuity, although paying premiums directly such as through bank account automated withdrawal also is an option. One complication is that premiums for FLTCIP cannot be deducted from your annuity while you are receiving “interim payments” which are payments that come before the final decision is made on the amount of the monthly annuity. This means that until OPM finalizes your annuity, LTC Partners must bill you directly for the premiums due. Once your annuity is finalized, LTC Partners can begin to deduct premiums from your annuity. Annuity deductions are not adjusted to “catch up” uncollected premiums, so it’s important for you to pay the direct bills promptly when you receive them to keep your FLTCIP coverage current.