Ensuring a Healthy Retirement

Maintaining adequate health care coverage is a very important element in retirement planning. The Federal Employees Health Benefits Program is designed to cover not just federal employees and their families, but retirees and their family members as well. Employees and survivor annuitants may continue FEHBP coverage through their CSRS or FERS retirement or survivor benefit.

Of course, as with all other federal benefits, there are a series of rules related to FEHBP. To continue coverage into retirement, you must:

• Have retired on an immediate annuity (that is, an annuity that begins to accrue no later than one month after the date of your final separation).
• Have been continuously enrolled (or covered as a family member) in any FEHBP plan (not necessarily the same plan) for the five years of service immediately preceding retirement--or if less than five years, for all service since your first opportunity to enroll.

The annuity part of the equation sounds pretty simple, but it raises some questions. For example, what kinds of employees get an immediate annuity? The short answer is those who are eligible for the following kinds of retirement: "regular;" early optional, discontinued service, disability, Minimum Retirement Age+10 and even postponed MRA+10 retirements. Those who have taken deferred retirement are not eligible. A deferred retirement is one that is paid to an employee who has left federal service before having met the age and service requirement for immediate benefits.

Let's look at a couple of examples: Suppose Alice is a 42-year-old FERS employee with 17 years of federal service. She's not eligible to retire with immediate benefits. But if she resigns, she may apply for a deferred annuity later. Under CSRS and FERS, the deferred benefit is payable at age 62. Alice could choose to take a reduced payment as early as her FERS minimum retirement age. But she would not be eligible to reinstate her FEHBP coverage.

Now let's take the case of Tony, who is 57 and has 15 years of service. He's eligible for an MRA+10 retirement under FERS. If he applies to receive this benefit immediately, he will be subject to a penalty of 5 percent for every year he is under age 62. To avoid the penalty, Tony postpones receiving the retirement until he's 62. He is eligible to reinstate his FEHBP when he begins receiving his postponed FERS retirement.

Enrollment Issues

The rules on continuous FEHBP enrollment before retirement usually cause more concern. Here are some of the questions I routinely receive in the retirement seminars I conduct:

• Do I have to be in the same FEHBP plan for five years?

  No. You can switch plans every open season if you feel like it, as long as you remain under the FEHBP umbrella.

• Do I have to be in family coverage for five years before I retire?

  No. Employees and retirees can change to self and family coverage during any open season. Retirees also have open seasons in the same way as employees. When there is a qualifying life event (such as marriage, birth or adoption of a child or a family member losing health coverage through their employer), a change from self only to self and family coverage can be made outside of an open season, within 60 days of the qualifying event.

• Does coverage under my spouse's FEHBP plan or under the Uniformed Services Health Benefits Program (known as TRICARE or CHAMPUS) count toward the five-year test?

  Yes. For purposes of continuing FEHBP coverage into retirement, "service" means time in a position in which you were eligible to be enrolled. You are not required to have been an enrollee continuously, but you must have been continuously covered by an FEHBP enrollment. This includes time you are covered as a family member under another person's FEHBP enrollment or time covered under the Uniformed Services Health Benefits Program--as long as you were covered under an FEHBP enrollment at the time of your retirement. You must enroll in FEHBP within 60 days after you lose coverage under the Uniformed Services Health Benefits Program for that time to be considered as part of continuous FEHBP coverage.

• Do the five years have to be the last five years of my career?

  Yes (or if less than five years, for all service since your first opportunity to enroll). An employee who was covered under FEHBP earlier in their career does not meet the five-year test unless they have continuous coverage in the last five years preceding their retirement. Employees who return to federal service and work less than five years before they retire may use the service from their last appointment to meet the five-year test. Breaks in service are not counted as interruptions in the requirement, as long as you re-enroll within 60 days after your return to federal service.

  Here's an example: Suppose Edwin elected FEHBP coverage on March 5, 1982. He had a break in service from Jan. 1, 1994, through Jan. 1, 2005. Upon his return, he again elected to enroll. He will retire Dec. 31, 2006. He is eligible to continue his health benefits coverage into retirement, since he has been continuously enrolled for the five years of service prior to retirement.

• What about my survivors? Can they continue FEHBP coverage?

  For your surviving family members to continue your health benefits enrollment after your death, you must have been enrolled in self and family coverage at the time of your death. Also, at least one of your family members must be entitled to a survivor's annuity under CSRS or FERS. The annuity does not have to be enough to cover the premium. Survivor annuitants may pay the premium directly to the Office of Personnel Management. Under FERS, your surviving spouse who is entitled to a basic employee death benefit, or your surviving children whose benefits are offset by Social Security, may continue your health benefits enrollment by paying premiums directly to OPM.

• Can retirees cancel their FEHBP coverage and re-enroll later?

  No. Cancellation of FEHBP coverage is a one-way ticket out. So a retiree who has coverage under a new employer's nonfederal plan generally should not cancel his or her FEHBP coverage. If the new coverage later ends, the retiree may not re-enroll in FEHBP. Instead, the retiree should choose an inexpensive plan or ask their new employer for compensation instead of health coverage since they already have adequate coverage under FEHBP.

  Some retirees can suspend their FEHBP coverage and later re-enroll. An annuitant or survivor annuitant may suspend FEHBP participation to enroll in a Medicare-sponsored health plan; in Medicaid; in the military's CHAMPVA, TRICARE or TRICARE-for-Life plans; or a plan through the Peace Corps while performing volunteer service.

• Health Benefits Cancellation/Suspension Confirmation form
• Life Events and Your Retirement
• FEHBP Information for Retirees and Survivor Annuitants

• Human Resources: Be sure your personnel records reflect continuous coverage in FEHBP for five years prior to retirement. If you have been covered under a family member's FEHBP plan, include a copy of their enrollment form in your personnel folder.
• At Home: If you are married and covered under your spouse's non-FEHBP plan, consider enrolling in an FEHBP plan five years prior to retirement in case your spouse loses health coverage when he or she retires.

• Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.