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What You Need to Know about Health and Life Insurance

Planning ahead is critical if you want to avoid unpleasant (and potentially life-altering) surprises.

This week, I want to focus on some of the complexities surrounding the continuation of health and life insurance benefits in retirement and answer some readers’ questions, but first I want to clarify a point from last week’s Retirement Planning column.

There was some confusion about the number of pay dates in 2015. Some payroll offices will have 27 pay dates in 2015 and others will have 26. My point was that if there are 27 pay dates in any given year, FERS employees may need to adjust their contributions so that they will not contribute the maximum annual elective deferral limit ($18,000 for 2015 and 2016) before the last pay date so they don't miss out on agency matching contributions. Employees should check with their payroll system or their human resources office to find out if this is an issue for them in 2015. For those employees paid through the Defense Finance and Accounting Service, there will be 27 pay dates in 2015. The last pay date is Dec. 31, for the pay period that ends Dec. 26 (the pay date would normally fall on Jan. 1, 2016, but employees will be paid one day early).

Retirement Health Benefits

If you want to maintain health coverage under the Federal Employees Health Benefits program into retirement, you need to be sure you meet the requirements—and for some, that can be complicated.

Here are the eligibility requirements from OPM, stipulating that you need 5 years of service continuous coverage under FEHB immediately prior to receiving your annuity. For purposes of continuing FEHB 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 FEHB enrollment. This includes:

  • Time you are covered as a family member under another person's FEHB enrollment;
  • Time you are covered under the Uniformed Services Health Benefits Program (also known as TRICARE or CHAMPUS), as long as you were covered under an FEHB enrollment at the time of your retirement. (You must enroll in FEHB within 60 days after you lose coverage under the Uniformed Services Health Benefits Program for that time to be considered as part of continuous FEHB coverage.)

Coverage under Medicare does not count in determining continuous coverage.

Service as a non-appropriated Fund employee does not count in determining continuous coverage since it is not Federal service and not subject to FEHB coverage.

What about a spouse covered by her husband's FEHB for more than five years before retirement...can she now elect self-only FEHB coverage in retirement?

Yes, see the first bullet in the above reference that allows coverage under a family member's enrollment.  Keep in mind that OPM will need to see proof that you were covered under your spouse's FEHB enrollment. You can show this by including a copy of the spouse’s FEHB enrollment showing "self and family" or " self plus one" enrollment with your retirement application. Your agency retirement benefits specialist should include this proof when preparing your retirement package for submission to OPM.

My spouse works for the state and I have always had health insurance through her plan. At age 55 I enrolled in a Self Only FEHB plan because of the 5-year rule. This made my plan primary and my wife’s plan secondary for me. The state plan is better and they pay a higher percentage for the employee than the federal plan. Can I elect to drop my federal plan at the time of retirement and still have the option of picking it back up if for some reason I lost coverage through my spouse’s plan? This would save the government their contribution.

If you cancel your FEHB coverage, you will not be permitted to re-enroll in retirement.  You also will need to meet the five-year test in order to maintain this coverage in retirement.  Some readers suggested that you suspend your FEHB coverage, however, you will not be permitted to suspend FEHB unless you are retired and have coverage under Tricare (military health care), Medicare Advantage (Medicare Part C), or health coverage under the Peace Corps.  Here is more information about suspending FEHB.  

Retirees and former spouses can apply to suspend their coverage at any time. Annuitants can call OPM's Retirement Information Office at 1-888-767-6738 to obtain a suspension form. Callers within the local Washington metro area must call 202-606-0500. Former spouses can get the form from the employing office or retirement system maintaining their enrollment. Eligible individuals must submit a completed suspension form and provide all necessary documentation to show eligibility for TRICARE or CHAMPVA during the period beginning 31 days before and ending 31 days after the date they designate as using TRICARE or CHAMPVA instead of FEHB coverage.

Here is the form that describes the election to suspend (or cancel) FEHB enrollment as a retiree.

Continuing Your Life Insurance Benefits

Life insurance is another issue to watch. The premiums jump quickly in 5-year increments and it can become quite expensive—or some plans are potentially free. Do not pass up the free life insurance even if you don’t think you need it.

It’s true that premiums for Federal Employees’ Group Live Insurance Option B are going to increase every 5 years until reaching age 80. In addition, there will be a change in premiums for FEGLI that will take effect on Jan. 1, 2016.  There will also be a rare FEGLI open election season in September 2016. This is something I will be writing about in the near future. In the meantime, here is a Benefits Administration Letter published earlier this year from OPM and the new premium rates. You can also check out my previous columns about FEGLI, “Need Money? Rethink Life Insurance,” and “Life Insurance Basics.”

(Image via Vucicevic Milos/Shutterstock.com)

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