Delivered on: Thursday, June 27, 2024
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FEHB in Retirement
What federal employees need to know to keep FEHB for themselves and their families:
- ELIGIBILITY: A breakdown of the 3 criteria you must meet to be eligible to keep FEHB
- DUAL FEDS: Choices that 2 federal employees married to each other may have for keeping coverage
- FAMILY: How to retain (and add) coverage for family members in retirement
- CHANGES: Modifications to carriers, plans, and who is covered under FEHB in retirement
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Prefer to read instead? A transcript of this webinar is below:
Hello and welcome everyone to the FedImpact webinar today on FEHB in retirement. I know there are a lot of topics that really tend to draw federal employees in, and FEHB is one of them.
Because it’s such a great benefit that you have while you’re working that many of you are curious what changes happen as you step into retirement, how do you keep this coverage for yourself, for your eligible family members? What are the things that we should expect to change, what are some things that we don’t expect to change and how we bring all that together so that it makes sense. I’m super glad that you’re here and ready to learn more about how this important benefit works in retirement.
You guys know me. I’m Chris Kowalik, the founder of ProFeds. Of course, we’ve got our retirement workshop, that’s our flagship program where we go out and train thousands of federal employees every year on their retirement, all of the different benefits, of course, FEHB being a huge part of that. And we’re excited to bring some of what we have in the workshop to you and then adding some other kind of perspective here as well in today’s webinar.
FEHB in Retirement
What federal employees need to know to keep FEHB for themselves and their families. The FEHB program is quite large. We are not going to go through all of the different programs and different carriers and plans at all of that, that would not be good use of our time today. But there are a number of things that we get questions time and time again on FEHB and how it works in retirement, and those are the things that we’re going to be covering today.
Agenda
For our agenda from an eligibility standpoint, we want you to know the three pieces of criteria that you must meet to be eligible to keep FEHB in retirement.
We’ll break those down a little bit more specifically than what you typically find on the OPM website, that it is more clear what needs to happen to ensure that you are eligible to keep that FEHB program once you leave federal service.
Next up, we have dual feds. These are two federal employees married to one another. We’ll talk about how they need to be looking at retaining coverage for each other, and what is required and what is not required. We hear lots of rumors about how this part works, and we’re going to set the record straight today.
Next up are family members. We want to know how to retain and add coverage for family members in retirement.
And then changes. So modifications to carriers plans and who’s under the FEHB plan in retirement. How can you still affect those changes like you do right now in the plan itself?
What this webinar will NOT cover
We are not going to be able to cover the hundreds of health insurance plans under the FEHB umbrella. We are not going to do a big dive into Medicare or all the little tentacles that FEHB really gets into. We’re going to touch on some of the highlights of those areas, but those sections really belong in another webinar or another type of training platform.
Otherwise, this thing will be four hours long and it will simply be too much to be able to absorb. We’re going to stay nice and focused on being able to retain FEHB in retirement and what some of those nuances look like as you make that transition.
3 Criteria to Keep FEHB in Retirement
Let’s start with the most critical piece of this, which are the three criteria that you must meet to keep FEHB in retirement. And keep in mind, you must meet all three. It’s not an either or, it’s an all.
- You must retire under an immediate pension. We’ll describe what that is in greater detail here in just a moment.
- You must be enrolled in the FEHB program on the day that you retire.
- You must have been enrolled in the FEHB program for five years immediately prior to your retirement date.
Let’s jump into the first one. Number one, you must retire under an immediate pension. Well, what does immediate mean? You guys have probably heard OPM takes a long time to process paperwork. So if they take too long, does that mean it’s not an immediate pension because I don’t get it right away? No, no, don’t worry. This is part of the retirement type that you are retiring under.
If you are fully eligible to retire, meaning you’ve met the age and the service year requirements to be fully eligible to go, that will be an immediate pension. There’ll be no delay. You might not get it right away because OPM has to do their part, but it’s payable right away, which is the important factor here.
Next up, if you go out under a disability retirement or an early out, those both count as immediate pensions. I do want to make a special note that deferred pensions are not considered immediate, and what I mean by a deferred pension is, you are vested in either the CSRS or the FERS program.
Most of you are under FERS these days, but under a deferred pension you’re vested, meaning you have your five years of service. There is a pension waiting for you, but you are retiring so young that you do not have the ability, even if you wanted to, to draw the pension right away with or without penalty. You are not allowed to draw the pension as early as you are leaving service.
You must retire under an IMMEDIATE pension
Having said that, if you are going out under a deferred pension, you need to understand that you will lose FEHB permanently. If you are 45 years old and you have five years of service and you decide to leave, you can go and there’s still a pension waiting for you at 62, but you will not have any FEHB now or ever from this program. Very, very important that we understand and appreciate that very real consequence to going out under a deferred pension.
Grey Area
I’m putting MRA+10 in the gray area because depending on what choice you make will determine whether you get to keep FEHB immediately or if there may be a delay in being able to get that. With the MRA+10 scenario, I’m not going to go into great detail about how this works.
I’ll give a quick overview here, but I’m going to ask the support team to drop the link to the MRA+10 webinar that we did not all that long ago so that if you’re considering something like this, you can go do a deeper dive into that particular topic that we’re not going to get into today.
The basic concept of the MRA+10 retirement is that for a FERS employee who has met their minimum retirement age and has at least 10 years of service, but they don’t have the 30 that would be necessary to retire at their MRA, they still have the ability to leave and draw a pension immediately. It is a form of an immediate pension. If they decide that they’re going to go ahead and retire at that time, they have a choice of whether they’re going to postpone the receipt of that pension or if they’re going to draw it right away.
If they choose to postpone the pension, the reason they would do that is to avoid a penalty that’s going to happen on that pension, because they’re retiring outside of normal eligibility rules. The penalties can be pretty substantial for going out on an MRA+10 and upwards of 25%, 30%, 35% of your pension that you give up for the rest of your life.
If we had somebody who wanted to leave federal service at this time but was okay not drawing their pension just yet, they could voluntarily postpone receiving their pension until such time that they would’ve otherwise been eligible to draw. And if that’s the case, while they’re in that postponement where they are not drawing a pension, they also do not have FEHB. While it’s on pause, the pension itself while they’re waiting to get their pension, no FEHB. But once they start the pension, then the FEHB can be restored.
Once a person begins drawing their MRA+10 pension, whether it was a right away thing or a draw it later thing, then the FEHB would be activated or in this case, reactivated to begin at that time. Under MRA+10, if you are drawing your pension, you get FEHB assuming you otherwise qualify for it. If you are not drawing your pension, then that FEHB is on pause and it will be reactivated once you start drawing your pension.
You must be enrolled in FEHB on the day that you retire.
You, the employee, must be actively enrolled in the FEHB program on the day that you retire from federal service. For most of you, this is a no-brainer, you’re already enrolled, you’re going to be enrolled, you’re going to keep enrollment in retirement, it’s no problem. You will find here in a moment that there are a subset of you that may fall into this and we want to make sure that you’re squared away.
I do want to make a special note here though, that your family members do not have to be enrolled in FEHB. But remember, they’ll only have coverage if you add them later during an open season or following a qualifying life event. We’ll talk more about how to add family members, but it’s important that you realize that it’s not like if your family members are covered under, say, your spouse’s plan and you’re under a self only.
If you step into retirement with a self only plan, don’t think that you’re stuck with that type of plan, you can switch to a family or a self only later and your family members did not have to meet this rule. They don’t have to meet the five-year rule, they don’t have to meet this rule either. Let’s talk briefly about that five-year rule. This is the one that confuses most employees, and so we want to get this right.
You must have been enrolled in FEHB for five years immediately prior to your retirement date
Most of you, the vast majority of you have been covered under FEHB for a really long time, way more than five years. So you don’t really have to worry about this. If you’ve been enrolled and at least six years, you are good to go. Anybody that got kind of close, maybe you hit an open season and there was a delay or you had a qualifying life event, you’re not sure when the clock starts, we of course, want to get our hands wrapped around that and figure that piece out. But the five year rule is really, really important.
A couple of things. If you enrolled in the FEHB plan close to that five year mark, please, please make certain that you have the full five years of coverage. Get into your personnel file, make sure that you know when that FEHB became activated, not when you enrolled in it, when it became active and count five years from there.
Military’s Tricare Program
I also want to mention for those of you under the military’s TRICARE program, their health program over there, if you have coverage under TRICARE and say two years ago you decided to come into FEHB from TRICARE, the five years includes both the TRICARE and the FEHB time. And so that combined, as long as that reaches five years of continuous coverage under one or both of those plans, then you are good to go.
The same thing if we have two federal employees married to one another. You may be under your spouse’s FEHB plan, the government could care less whose plan you are under, you can flip-flop between the two of them in each open season if you feel like, as long as you’re covered under the FEHB umbrella, that’s all OPM cares about.
And so we want to make sure that that five-year rule stands for two feds married to one another. We’ll talk more about that group here in just a moment, but definitely important that we understand that time on TRICARE and time under a spouse’s FEHB plan counts.
During this five-year period that we’re talking about, you are still allowed to change carriers. If you go from Blue Cross to Aetna or from a family plan to a self plus one or vice versa, none of that affects this five year rule. You are a free to move around to different plans from the high option to the low option or the other way around. The government does not care. All they care about is, were you in the FEHB plan for five years, either yourself or you enrolled as a family member. It’s all they care about. It will not restart your five-year clock.
This is by far the biggest worry that people have with respect to FEHB. Because frankly, most people have already been in for five years. They’re not worried about that, but they’re thinking, “Oh man, that change I made two years ago, is that going to affect this?” And I assure you it will not. I’m going to rewind a little bit and talk about that TRICARE program.
If we have some of you on the call today who are under the military’s TRICARE health program, that can satisfy that five-year rule for continuing FEHB in retirement, it is important though, remember there are three criteria. The five-year rule is just one of them. So you still had to have been enrolled in FEHB on the day that you retire from federal service in order to have the option to have FEHB in retirement.
If you’re already eligible for TRICARE, chances are you’re a retired military, and so that part doesn’t change, you’re going to retain your access to TRICARE. The question is, do you also want to retain the right to keep FEHB in retirement alongside TRICARE or to be able to toggle between the two of them? You have that ability as long as you have met the other two requirements.
Therefore, TRICARE can help you meet the five-year rule, but you still have to be enrolled in FEHB on the day that you retire and you still must retire under an immediate pension like we mentioned in the first two pieces of criteria. A lot of people ask, “Well, TRICARE is pretty great. Why would I want FEHB? TRICARE is way less expensive than FEHB and it’s worked really great for me and my family.”
And all of that might be true. It might not be true in the future. If you happen to live in an area where there are a lot of providers who accept TRICARE, then you probably have no problem getting care in your network. But if you happen to move to an area that maybe isn’t as military friendly and they don’t have that participating network of providers, you may find that the FEHB plan is a better alternative for you to be able to use during that season of your life.
And if later, either the providers change or you happen to move again or a slew of other things that might happen, you might find that moving back to TRICARE makes more sense. And you have the freedom in retirement to toggle between these two programs back and forth, as long as you retain your eligibility for TRICARE and you have met the three criteria for keeping FEHB in retirement.
You would simply what we call suspend your FEHB to go to TRICARE and then you do the same to return back. You re-enroll in FEHB to flip the switch back on and you can go on off, on off for the rest of your life if you choose to for FEHB, at least you have the ability to retain that coverage if it’s needed. Many people don’t ever come back to FEHB in this scenario, but they like the idea that they have the freedom to do so if necessary.
Federal Couples
The other group of people that we mentioned in the five-year rule was, if you have a spouse who is also a federal employee, how does that work? So two federal employees married to one another can be under two separate self only plans. They could be under a self plus one or under a self plus family plan. The government does not care.
If there are no eligible children, it’s typically cheaper for two federal employees married to one another to be under two self only plans, simply because that’s the way the premiums are structured, it’s a little bit cheaper. Because the government doesn’t realize if you’re under a self plus one plan that both of you are feds. So they’re not giving you a discount of whatever it would’ve been if you were under two self only plans.
If you want those premiums, you have to enroll in those plans. We get that question a fair amount of, well do I need to combine? If we’re under two self only plans, how does the other person retain FEHB coverage? Or if we’re in a combined family plan or self plus one plan, does it mean I have to do something special for my surviving spouse even though they’re also a fed?
Those are the types of questions that we get. Here’s the deal, as long as each of you are enrolled in FEHB, either together or separately, government doesn’t care. As long as you are enrolled for five years prior to your own retirement from federal service and you have that immediate pension, then you are eligible to keep FEHB because you are a federal retiree, not because you are a spouse.
You might be under your spouse’s FEHB plan, which is fine, but you have retained your own right to FEHB because you’re a federal retiree. And that way if your spouse were to pass whose coverage you are on, you will immediately be able to pick up your own FEHB again as if nothing happened. Here’s the deal though.
If we have two feds married to one another, this is that box down at the bottom here, we would want them to consider putting the FEHB coverage under the person who will retire later so that you all are able to take advantage of this tax break called premium conversion for as long as possible.
I’m going to have a couple of slides on premium conversion here in a minute. If you’re not terribly familiar with that, hold the phone, I promise that we’ll get there so that you can see that the real dollar amounts that you’re going to be affected by from a tax standpoint once you don’t have premium conversion.
This will really apply to everyone, not just two feds married to each other, but there’s some special considerations for federal couples who are married to one another, because you have some opportunity to be able to extend the tax break for a little longer than the average person does.
Again, we’ll come back to premium conversion here in a moment, but definitely a big consideration for federal couples.
FEHB cost in retirement.
The government right now while you are still working, covers roughly 72% of your overall premium in retirement. The amount that you see yourself paying for FEHB is equal to roughly 28% of the actual cost of that plan. The government is picking up a boatload of that premium for you right now while you are still employed. They’re going to continue to do that in retirement.
Sometimes we’ll hear these rumors that say, “Oh, in retirement you have to pay the full amount. The government doesn’t contribute to that anymore.” And that is completely false. I don’t know where that started. That has never been the case. This 72% roughly number is set, and you’ll continue to reap the rewards of the government paying part of your premium even when you step foot in retirement.
It’s worth noting though that FEHB premiums, the actual amount that you are paying is the same for you while you’re employed and while you are retired. And you might ask yourself like, “Man in retirement, why do I pay the same amount as employees?” Maybe you need coverage a whole lot more, maybe you think it should probably be more expensive.
Well, I’ll tell you who thinks it should be more expensive for older retirees, is the young person that just joined federal service, they’re 23 years old and they’re paying the same premium as you as a 65, 70, 80, 90-year-old in retirement. And they’re wondering like, “Hey, what gives?” But that’s how the group health plan works. They’ve spread out those premiums across the entire class of people and everyone pays the same amount for that particular plan regardless of their age, regardless of whether they’re employed or retired.
We just need to understand it’s the way it works. We don’t have to like it, but we do have to understand that that is the way the FEHB plan is structured.
In some cases for our lower paid employees who end up having by default, lower pensions, if your FEHB premium, the actual cost of having your FEHB plan each pay period, if that ever exceeds the amount of your federal pension, you will have to pay the difference directly to OPM. We don’t see this all that often, but we do have plenty of people that have a lot of obligations coming out of their federal pension check.
If you have the Federal Employees Group Life Insurance, if you have a large survivor benefit that you’re protecting on your pension, if you have the federal long-term care program and that’s being deducted out of your pension eventually you might not have enough dollars left over in your pension to pay your FEHB premium, but don’t worry, it’s still due and they’re going to find you and demand that you pay that difference directly to OPM each month in retirement.
I do have a special note here at the bottom. Normally in our workshops we get more into the weeds on Medicare and all of that. Today, really the only comment I’m going to make on Medicare because it’s a whole can of worms guys, but the only comment I’m going to make on Medicare is that if you decide to enroll in Medicare as a retiree, typically 65 or later, you simply need to understand that your premiums for FEHB will not change.
The premiums are what they are, and remember, everybody pays the same, employees or retirees. Very, very important that we understand if you enroll in Medicare, you don’t get a break on your FEHB premiums. There are some plans, I will say some, that offer a premium reimbursement for those who also enroll in Medicare because the plans want you to enroll in Medicare.
Therefore there may be a little bit of a kickback of some of your premium, but the actual premium itself is still the same and you’re going to have to sort that out with the provider of whether your particular plan might qualify for a Medicare reimbursement.
It’s not a set deal, this is not something that is required by OPM, it’s something set at the carrier level and the plan level to determine whether they want to do that. If it’s enough of an incentive for the insurance carrier to get people onto Medicare, then they may very well incentivize their plan participants to do just that.
Putting FEHB Cost into Perspective for 2024
When we’re thinking about costs of FEHB, we have to give a little perspective for how this really works. I’ve put four columns next to one another to show you historically how things have changed from a financial standpoint for federal employees and federal retirees. Over the last 10 years, we have the FEHB increases, the employee pay raises. This is while you’re still employed, those January pay raises that you receive.
And then we have the cost of living adjustments for our two different classes of retirees, either on the CSRS side or the FERS side so that you can see how their pension changes over time. They don’t get pay raises anymore, they get changes to their pension called COLAs. And I wanted to put these side by side so that you could understand the difference in how these numbers change over time. You’ll notice that the FEHB premium increases considerably faster than your pay as an employee or your pay as a retiree through COLAs.
What this should mean to you is that you have to have an appreciation for the fact that your FEHB premium is going to keep gobbling up more and more and more of your pension as time goes on. The percentage of your pension that your FEHB premium consumes will get larger and larger the longer that you live in retirement. Because they’re not growing at the same rate.
I hope that by showing you these numbers, we can give you a little perspective to how this is going to change over time so that you can appreciate why we need to look very carefully at the amount of money that you are spending in retirement and how that’s going to change over a long period of time while you’re living in retirement and carve out enough of that to cover healthcare costs, FEHB premiums being part of that cost, but you still have copays and deductibles.
Then we have Medicare and we’ve got a lot of working parts in all of this that tend to gobble up a lot of a retiree’s paycheck whether you’re a federal employee or otherwise.
Definitely this slide I know is not one that probably makes any of you happy, but it is important to realize that the numbers are there and we have to face them or suffer the consequences of being surprised that we don’t have enough money hitting our bank account after we’ve paid for all of our expenses.
Premium Conversion
I mentioned this a few slides ago with respect to two feds married to one another, but this particular slide and the next one affect everyone, regardless whether you’re married, whether you’re married to another fed, doesn’t matter, this is going to apply to everyone.
This concept called premium conversion is a huge tax perk while you are working. Here’s how it works. I’m going to show you an example here in just a second. While you are working, you pay your FEHB premiums with pre-tax dollars, meaning that the money that you pay to say Blue Cross Blue Shield doesn’t get reported as income to you for tax purposes. It’s like you are never paid that money, so you don’t owe tax on the amount of money that is going to the FEHB carrier.
That’s what the pre-tax is. In retirement though, you will pay your FEHB premiums with after tax dollars, meaning that premium before it goes to the carrier, it’s coming to you first as the retiree, you have to claim it as income, and then you stroke the check to go out to the carrier. And you don’t literally stroke a check, it’s going to automatically come out of your check, but you now have to claim that as income on your tax return.
In order to put some numbers to this, I want to give you an example. There’s going to be a lot going on on this slide, so hang on with me. On the right hand side, let’s walk through this logic.
Let’s say you’re in a 24% tax bracket. You’ve got the Blue Cross Blue Shield, the high self plus one plan. It’s the standard plan, which is the high plan, you can go to out network providers in-network providers, all that good stuff. And it’s you and your spouse covered. Your premium is $87,58 per year. That’s the current 2024 rate for the Blue Cross Blue Shield high self plus one.
While you are working that $87,58 bounces off of you, it is not reported as income and it goes to Blue Cross. But once you step into retirement, that money that’s coming to you, the $87,58 now has to be claimed as income. In order to have $87,58 a year to pay to Blue Cross, you have to have 24% more than that or $11,524, which means that there is a $2,766 tax increase to you because you now owe tax on this money.
This is something a lot of people don’t even know is happening right now while you’re employed, but it’s such a big perk, and I wish the government would make it a bigger deal, because this is a really cool feature that you have and I don’t know that many people appreciate what it’s doing. It’s insulating a big chunk of money from being taxed year over year over year to you, but most people don’t understand is how that changes in retirement.
If I take that $11,524 that I’m receiving in my pension or any other method that I might be receiving it in order for me to have $87,58 afterwards, I have to start with that $11,524 because my 24% tax bracket’s going to take 24% off of that, and that’s the $27,66. It’s going to take a bigger chunk of your money to satisfy the same premium because Uncle Sam wants his part in the transaction.
You’re going to pay all that when it comes time to pay your taxes in April when you go to file. But at the same time, you need to realize it’s like, “Man, I thought… Why did my taxes go up so much this year?” This is one of those just hidden pieces that you don’t even really understand what’s happening, but it is very real that you are going to have a bigger tax burden because you are stepping into retirement.
Just remember, the premium itself did not change. It just feels more expensive because now it’s taxable money that you’re paying those dollars with versus pre-tax money. Hopefully that’s helpful.
Premium conversion is a big deal. And my reference to federal couples, so feds married to one another is, putting the FEHB coverage under the person who’s going to retire last because man, if you can avoid paying taxes for maybe another couple of years, if one of you are going to stay on and work a little bit longer, you might as well do that.
Move over to the person who’s going to retire last to their FEHB plan and then later, once both of you’re retired, if you want to separate back out into two self-onlys or whatever you want to do, you’re welcome to do that, but at least get away from this tax burden for the time being that one of you is still employed.
FEHB Open Seasons
You guys know every November, December there is an open season that happens in the FEHB plan. You’re dealing with that now as an employee and it’s the exact same open season that you will have as a retiree. During that time, you are able to sign up or cancel coverage. You are able to change who’s covered by changing from a self only, to a self plus one, to a self plus family plan, and you’re also able to change carriers or plans themselves.
You might go from that Blue Cross Blue Shield plan, to the GEHA plan to whomever, whomever that might be that you want to move to. You’re welcome to do that in open season now and you will be welcome to do all of those things in retirement. There is one rule though, that’s very important. And that is that retirees are not able to enroll in FEHB.
Remember, you already had to have been enrolled when you stepped into retirement, you have to stay enrolled in FEHB, but once you’re in there, you can move around to all these different features just like every other open season that you’ve had. Just don’t leave FEHB. If you do, you can’t come back. We’ll talk about an exception here in just a second, but very, very important that we realize that that leaving has pretty dire consequences.
Keeping Family Members on FEHB in Retirement
As long as you, the federal employee meet the criteria for keeping FEHB in retirement, all of your family members, your spouse, any eligible children that are already covered will simply remain covered under your FEHB plan. You’re not going to have to re-enroll them or anything crazy like that. If they’re already on your plan now and you meet all the rules, you guys just keep on trucking with your normal FEHB plan the way that it is.
The only time that family members will lose coverage is if you change the plan type. For instance, if you had a family plan and you move to a self only plan, of course any eligible families would move from that plan at that time. That’s keeping family members on FEHB and retirement.
Adding Family Members on FEHB in Retirement
Let’s say that throughout these years you’ve had a spouse who had a pretty amazing employer sponsored plan. Maybe they got some free coverage or it seemed better than FEHB, and so your spouse and your children have been covered under your spouse’s employer sponsored plan and meanwhile, you had a self only plan for FEHB. No problem. As long as you meet all the requirements, those three criteria that we talked about at the beginning, you’re able to keep FEHB in retirement.
And later, you’re able to add those other family members if you choose. Maybe your spouse’s employer sponsored plan goes away, maybe they also retired from their employer and so now they no longer get that free coverage or that really great priced coverage.
And so now it makes more sense for you as a family to have everybody come over to the FEHB plan while you’re in retirement. And that’s absolutely doable as long as you’re living. If the retiree are still living, your family members can be enrolled either during the annual open season that happens each November, December, or if you have a qualifying life event. You get married, divorced, your spouse passes or the birth or adoption of a child. I don’t see too many people exercising the last qualifying life event in retirement.
The birth or adoption of a child in retirement tends to change retirement plans pretty quickly. But the idea that there’s still a chance to be able to add family members is comforting to a lot of people, especially if they’re in a scenario like I described.
It is important to know the other side of this though, and that is, if that was your plan, meaning you had a spouse who had a great employer sponsored plan, the rest of the family was covered under them, and it was your intention to move them all over to FEHB, but you don’t do it by the time that you die, your family will not have an opportunity to join FEHB at that time. Your death is not a qualifying life event for your family with respect to coming into the FEHB plan. The real key is yes, it is possible and it has to happen before you die.
From a planning standpoint, all of the decisions that we ever make with money, with federal retirement, with survivor benefits or life insurance or health insurance or any of these, these would all be way simpler if we all knew the day that we were going to die. But that is just not reality.
And so I want you to keep this in mind and don’t delay bringing your family members over if this is really the long-term play that you want for them. You might save a little bit of money for a couple more years maybe in that other plan, but the idea that if you die and they are not under your FEHB plan and that is catastrophic to them, we can solve that problem by making it happen while you’re still here with us. So very, very important thinking of adding family members onto your FEHB in retirement.
Current Spouse
If your current spouse wishes to retain FEHB coverage after you die, there are two things that must be true. Your spouse must already be enrolled in the FEHB plan on the day that you die, and you the employee must have elected at least the minimum survivor benefit option for them at the time that you retire.
This survivor benefit (find that webinar here), we did a whole webinar on this, I’ll ask the team to drop that link into the chat as well so that you can dig into that if you’ve got some questions there. But the survivor benefit is the protection of the pension for your spouse, but if you aren’t leaving them any of your pension, you cannot leave them your FEHB. In that case, if we said no thanks to protecting any of the pension for a surviving spouse, it also means that your FEHB coverage that they were covered under goes away.
All these programs are just connected in these weird ways. I wish these were a little bit more separated to make things more cut and dry, and we’re not obviously going to get in the survivor benefit here in this section.
But it’s such a critical piece to make sure that if in fact you want your spouse to be able to keep health insurance, that you also do what is required of you in the survivor benefits section on your retirement application to make sure that they’re still going to get a pension after you die. That is what is really allowing them to stay under the FEHB plan.
Again, you still had to meet all the other requirements for you to keep FEHB in retirement. Then once you die, as long as your spouse was under your plan, and you made them at least a minimum survivor into a 10 for your pension, then they are good to go to retain your health insurance after you’re gone.
We hear this confused all the time. People think that if you don’t select a survivor benefit, then your spouse loses health insurance right away while you’re still living in retirement. That’s not true. That is just a rumor. That’s something that people leave out important facts and they say things a little bit the wrong way and then the wrong people hear it and then that spreads.
We hear that all the time, but it’s important to us to lay out these facts of how your current spouse can retain health insurance after you die so that there’s no confusion. Again, we’re going to drop that link of the survivor benefit webinar that we did into the chat so that you have that as well.
Wrap Up & Next Steps
FEHB is a super important benefit that you have right now as an employee and it’s even more important to you as a retiree because we know our health tends to need more attention once we retire.
Please take great care to ensure that you are eligible to keep it. Make sure that you have those three criteria.
- First, making sure that you retire on an immediate pension.
- Second, that you are enrolled in FEHB at the time that you retire.
- Third, that you meet the five-year rule that you are enrolled in FEHB for at least five years immediately prior to retirement to be able to keep that coverage.
Very, very important. And then of course, looking to your family members of who needs to have that coverage and doing the steps required to make certain that they get to keep that coverage as well.
Quick reminder, FEHB premiums for employees and retirees are the exact same, but keep in mind that retirees have to pay tax on their premium, which makes it feel way more expensive. We have to be prepared for that as we’re thinking about that bigger retirement spending plan that we have.
Next up, you are able to continue to change your coverage in retirement. You can switch around different plans, change who’s covered, which type of plan you’re under, what carrier you’re under. All of those things are open primarily during open season, unless you have one of those qualifying life events in retirement.
Last up, continued FEHB coverage for your spouse after you die is dependent on the selection of the right survivor benefit option when you retire. We have to at least leave them something under the survivor benefit plan. Some part of your pension, for all of our FERS employees listening, that’s 25% of your pension that you have to leave for a surviving spouse to be able to keep that health insurance.
You might want to leave more than that, which makes this kind of a moot point. But if you have some other plan to leave money to them and you say, “Nah, I don’t want to do it through the government plan.” You just need to be fully aware that if you say no thank you to the survivor benefit plan, your spouse will immediately lose FEHB when you die. Very, very important that we get that straight.
You guys know we are all about helping federal employees retire with confidence. We know that there is a lot that goes into this. We try to bring some light to all of these things through our webinars and podcasts. But the full scope of all of the benefits is really covered in our workshops. These are in-person training sessions. We’ve got them all over the country.
There is no cost for you to attend, that cost has already been picked up by our sponsors. And so during that session, you’re going to be able to be surrounded by your peers of people who are in the same boat as you trying to figure out all those same decisions. And it will be an instructor led program that you’re going to be able to see the bigger picture of how all these benefits work and start to come up with the questions that you have about how things apply to you.
My favorite part of the workshop is the one-on-one help that’s available after the session. In the weeks following the workshop, there’s an opportunity for you to be able to meet one-on-one to get your questions answered. You’ll get a benefits report. It will all be laid out for you of what your numbers are going to look like, which gives you more of a foundation to ask better questions so that you can get better answers on what retirement’s going to look like for you.
You can see all the details, the cities, the locations, the dates that we have available by visiting FedImpact.com/attend, and you’ll see a map. You can either click on that or scroll down. You’ll see a long list of workshops in all these different locations, and I hope that you’ll make the time to join us at one of those workshops.
Thank you all so much for joining us. I hope that you’ll stay tuned with us on our webinars, our podcasts, our newsletter.
You can do all of that. Please find a workshop at FedImpact.com/attend and the next webinar at FedImpact.com/webinar. We’ll see you on our next session and look forward to seeing you at a workshop soon.
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