And how not to lose it in retirement.
Working for the government has its perks and the generous benefits are definitely among them. Many feds may consider their retirement pension or investment in the Thrift Savings Plan to be the most important. While these are great benefits, I would argue that the Federal Employees Health Benefits program may be the most valuable.
FEHB is the largest employer-sponsored plan in the world, covering almost 9 million people. And when it comes to most insurance, the larger the group plan, the more affordable it becomes per person. Having access to this benefit in retirement is incredibly important.
There are a couple of reasons why having FEHB is so rare and valuable.
First, very few employers offer comparable coverage. It is difficult for many companies to compete with the sheer size and cost savings of the FEHB program, not to mention the fact that federal employees only have to cover about 28% of the premium with the government picking up the rest. This means that if you pay $400 a month in FEHB premiums, the total premium cost is around $1,400 a month. It would cost much more than that to find comparable coverage on your own.
Second is the ability to keep FEHB in retirement. While many employers offer health insurance and some pay a portion or all of the premium for employees, just 18% allow their employees to stay in the plan after retirement, according to one study. And having great health insurance in retirement makes a big difference. Health problems tend to become more prevalent after retirement and relying solely on Medicare can be inconvenient at best and simply not sufficient at the most.
How to Keep FEHB in Retirement
There are two big requirements to keep FEHB into retirement:
- You must be eligible to retire on an immediate retirement.
- You must be covered under FEHB for the last 5 years before retirement.
For retired military federal employees enrolled in TRICARE, you can often continue FEHB into retirement if you were covered under TRICARE for at least 5 years before civilian retirement and were covered under FEHB on the date you retire.
Because one of the requirements is to be eligible for an immediate retirement, those leaving under a deferred retirement are not eligible to continue FEHB into retirement. Those retiring under postponed retirement are eligible to continue FEHB once they start drawing a pension. This is the big difference between deferred retirement and postponed retirement.
All your benefits play an important part in helping you create the retirement you want. Don’t overlook what may turn out to be one of the most important aspects of that future—a good health care plan.