Retirement & Financial Planning Report

The interlocking and somewhat overlapping features of FEDVIP, FEHB and the flexible spending account program take time to sort out. Factors that should be considered in deciding whether or not to enroll in FEDVIP include: coverage of these services in a FEHB plan; likelihood of using services covered by the plans; and whether it would be better to put the same dollar amount that would be used toward dental and/or vision benefits premiums in an FSA while an active employee.

Remember, however, that FSAs are available only to employees and not to annuitants. Thus, a decision reached while an active employee regarding the best mix of benefits for an individual might not be the best arrangement once retired. Guides to these benefits are at www.opm.gov/insure.

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Current coverage in FEHB–Under FEDVIP, any coverage provided by an individual’s FEHB health plan is primary, and the FEDVIP plans are the secondary payers. However, generally, the nationally available FEHB plans have limited dental and vision coverage. In contrast, some of the FEHB HMO-type plans offer more comprehensive dental and vision benefits. Some high-deductible plans also provide some coverage. It is important to compare FEHB coverage to determine if also enrolling in FEDVIP is beneficial.

Likelihood of using dental/vision services–While some enrollees know that they will use services, such an individual who wears glasses or a dependent who will need orthodontics, some services cannot be as easily predicted, such as an individual needing a root canal. Individuals must weigh their expected benefits against the premiums. For example, an individual who wears glasses, has a yearly eye exam, and uses a provider in-network may find that paying the premium will result in lower costs than paying for each of these services separately, even with pre-tax FSA funds for employees.

On the other hand, an individual who does not wear glasses may not benefit from vision supplemental insurance. There is not, however, a one-to-one correlation between buying any insurance and the expectation of using the services. There is still a large share of unknown risk that any insurance protects against, so that some individuals may find themselves using services that they did not anticipate using.

FEDVIP, FSA, or both–Both FEDVIP premiums and FSA contributions are pre-tax for employees, so that they may decide to enroll in one, none, or both. (Annuitants can not contribute to an FSA or pay premiums with pre-tax dollars.) Enrollees who choose both can use funds in the FSA for any copayments, coinsurance amounts, deductibles, amounts exceeding annual or lifetime maximums, or amounts above the plan’s payment for out-of-network services.

Some individuals may decide that they prefer to only contribute to an FSA and not enroll in either the dental or vision plan, and instead use their FSA funds to pay for any dental or vision expenditures. While using FSA funds provides the most flexibility, it may be that the dental and vision premiums cover more than the same dollars in the FSA. Individuals who are not sure they will use the services provided under FEDVIP can “wait and see,” and if they do not use dental or vision services, they can use the FSA dollars for other qualified medical expenses. Others may choose to enroll only in FEDVIP and minimize their out-of-pocket expenditures by staying in-network.