Ensuring a Healthy Retirement

By Tammy Flanagan

June 16, 2006

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:

Annuity Eligibility

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:

Resources To Do

By Tammy Flanagan

June 16, 2006