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Working and retiring in tandem

Married feds have some unique issues to consider.

Federal couples, or tandem couples as they are called in the Foreign Service and the CIA, are spouses that serve in the same federal agency. They have some unique issues when it comes to federal retirement and insurance benefits. The two most common questions I receive from federal employees who are married are: 

  • Should we carry two self only plans under the Federal Employees Health Benefits program or one self plus one plan if we don’t need to cover children?
  • Do we need to provide survivor annuities for each other?

Health Coverage

The answer to the question about health plans depends on the working situation of the couple. Are both spouses retired, or are they still employed? Is one spouse retired while the other is still employed?

The benefit of two self only plans is that it allows each spouse to choose the health plan that works best for them. For example, one spouse might be over 65, retired, and needing a plan that will work well with Medicare Parts A and B. The other spouse might be retired, but younger than 65, and might want to contribute to a health savings account by using a high deductible health plan. Two self only plans also could be less expensive than one self plus one or self and family enrollment.

On the other hand, when one spouse retires, it may be more cost effective for the working spouse to maintain health benefits for both spouses, since employees can pay premiums with pre-tax funds. 

Remember, If one spouse is not planning or eligible to retire at the time they separate from federal service, then it’s important to transfer health insurance coverage to the spouse who is eligible to maintain insurance in retirement. The spouse who is covered under self plus one or family enrollment can enroll in FEHB on their own because this situation is a qualifying life event for changing insurance coverage.

Survivor Benefits

The issue of survivor benefits is related to health benefits, because it involves the question of whether it’s necessary to provide a survivor benefit in order for a surviving spouse to continue health benefits coverage. 

As long as both spouses have individual entitlement to FEHB (if both stay employed long enough to qualify for an immediate retirement benefit), there is no need to provide a survivor's annuity to maintain health benefits. If one spouse loses entitlement when the other spouse who had self plus one or self and family enrollment dies, then the surviving spouse can elect to have coverage via their own retirement benefit.

Although your spouse may not need the survivor annuity to provide continuation of FEHB coverage, it may be important to provide additional income to a surviving spouse when the retiree dies. It boils down to this basic question: If you’re covered under the Federal Employees Retirement System, can you live on the higher of your two Social Security retirement benefits and one FERS retirement benefit if your spouse dies? 

Remember that while both of you are living, you get two Social Security retirement payments every month, along with two FERS retirement benefits. You also presumably have investments in one or two Thrift Savings Plan accounts, but the balances might be small due to the need for long term care or other unforeseen expenses later in life.

There is no way of knowing for certain how long you or your spouse will live. A survivor annuity can serve as insurance against the loss of income due to the death of your spouse. If the insurance is no longer needed in the event of your spouse’s death, you can restore your FERS retirement benefit to its full, unreduced amount. 

Remember, your spouse is entitled by law to a survivor annuity when you retire from federal service. If you want to choose not to provide a full or partial survivor annuity to your spouse, you have to get their notarized consent, regardless of whether they are entitled to their federal retirement benefit.