Life Insurance Options, Part One

By Tammy Flanagan

September 15, 2006

During the next two weeks, we'll look at options to consider in weighing how to factor life insurance into your retirement planning efforts. Here are the top 10 questions commonly asked about the Federal Employees' Group Life Insurance program: Some of these questions are simple; others are pretty loaded. This week, I'll focus on the basics, outlined in the first four questions. Next week, I'll explore the others, which sometimes create a lively discussion during pre-retirement seminars.

How much FEGLI coverage do I currently have?

If you are organized, you could probably find out by looking in the three-ring binder that you have at home or in your desk where you file all of your copies of your personnel records. You will find your last FEGLI coverage selections on Standard Form 2817.

If you're not that organized, then look at your last leave and earnings statement. You will see the withholding for FEGLI and also a code or possibly a brief description of your coverage. For example, code J1 means you are covered by Basic + Option B (1x) + Option A + Option C (1x). Here are what some of those terms mean:

You can find a full list of FEGLI codes in the Office of Personnel Management's FEGLI Handbook. Once you know which FEGLI coverage you have, you can use OPM's FEGLI calculator to determine the value of the coverage that you maintain. The calculator will show the premiums that you pay now, and also will show you how much this will cost as you get older.

How much am I allowed to keep in retirement?

The amount of basic FEGLI you will carry into retirement is based on your salary on the day you retire. You are eligible to continue basic insurance -- or have it reinstated -- if you meet all the following requirements:

If you are eligible to continue or have reinstated basic insurance, you also are eligible to continue or reinstate optional insurance, as long as you meet the requirements listed above. Your optional insurance initially will be the same value as you had on the last day of employment.

For example, suppose Anne added three multiples of Option B coverage in 2004, and intends to retire at the end of 2009. Since her additional coverage took effect in September 2005 (one year after the open season ended), she will not have maintained this coverage for five years until September 2010. Anne will not be eligible to continue her Option B coverage if she retires in 2009. She may, however, keep the basic insurance and any other optional coverage she had in effect prior to the 2004 change.

How much will it cost to keep it?

OPM deducts FEGLI premiums from your CSRS or FERS retirement payment each month. (Monthly budgeting may take a little getting used to after receiving biweekly pay checks during your federal career.)

Here are your choices:

Where do I sign up?

Life insurance open seasons are held quite infrequently, and you should not count on one occurring any time soon. You will receive plenty of notice if and when there is an open season. The most recent FEGLI Open Seasons were held in 2004 and 1999.

When you retire, you will make your choices on the Continuation of Life Insurance Coverage form (SF 2818).

If at least one year has passed since the effective date of your last waiver of life insurance coverage (if you did not select particular coverage it is considered waived), you may get a physical exam at your own expense using SF 2822. You and your human resources office must complete part of the form. You then take the form to your physician. He or she will then complete the rest of the form and send it to the Office of Federal Employees' Group Life Insurance. If the office approves your request, they will notify your agency's human resources office. If you have an event such as marriage, divorce, death of a spouse, or birth of a child, you may increase coverage under Option B and Option C. That choice must be made within 60 days after the event.

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.

By Tammy Flanagan

September 15, 2006