Retirement & Financial Planning Report

One of the best features of the FEHB program is that almost all employees can carry the coverage into retirement, the premium rates you’ll pay in retirement are identical to the ones you’d pay as an employee.

However, the premiums will effectively cost you more in retirement because retirees aren’t eligible for to pay FEHB premiums with pre-tax money under the “premium conversion” arrangement that applies to active employees. Almost all active employees pay premiums that way–you can elect not to, but there are only limited situations, typically involving very low-income employees who pay no federal income tax, where that makes sense. The tax-related difference in premiums will depend on your tax bracket in retirement.

There is a limited exception for retired firefighters and law enforcement officers to pay part of health insurance (and long-term care insurance) premiums pre-tax. If you think you might qualify, check with your tax adviser.

Also remember that in retirement, premiums deducted from your monthly annuity payments rather than your bi-weekly pay. Don’t make the mistake of simply doubling your biweekly premium as an employee and thinking that will be your monthly premium in retirement; the monthly premium will be slightly more than that because there are 26 biweekly periods in a calendar year, not 24. So, you must multiply your bi-weekly rate by 26 and then divide by 12.