PODCAST EPISODE 128:
Rules for Keeping FEHB in Retirement

Are you a federal employee covered under the FEHB program for your health insurance and you’re curious what you have to do to make sure you can keep this coverage when you retire? Well, this episode will cover just that.

Hi, Chris Kowalik of ProFeds here, and welcome to the FedImpact Podcast, where we offer candid insights on your federal retirement. This show is all about helping you to get clear on what you want retirement to look like and taking action to make it happen. Now, as far as federal employees go, thinking about retirement, health insurance is top of mind. So we knew this would be a perfect episode for today.

As feds, you have an amazing health plan. And although it might seem expensive to you, compared to what most plans look like out in the private sector with cost and quality, you are getting quite the steal. While the rules on what needs to happen to keep the FEHB coverage in retirement appear to be relatively straightforward, you’d be surprised how many questions we get about this very topic. And because there’s so much confusion about this, we wanted to hone in on these rules with you in this episode.

Losing FEHB could be a huge blow to your retirement. So you want to make sure you know exactly what is required of you to keep this coverage before you leave federal service. This episode will focus solely on you keeping the FEHB in retirement. We’re not talking about your kids keeping it, your spouse keeping it, that’s for a different episode, but just for you as the federal employee.

We’re going to cover the three parts of the rule, and break down each one of them so that you are crystal clear on what needs to happen. We will also have a little bit of bonus coverage on feds who are married to other feds, and those with Tricare, that’s the military’s health program, and how all of that works.

Any of the resources that I mentioned, like we do on all of our podcasts, we’ll be sure to put those in the show notes. For anyone that is not watching from our website, but perhaps from a traditional podcast platform, we’ll give you instructions on how to get those show notes and links to all of the resources that we mentioned today. And of course, if you decide you want some of our onsite training, want to learn a little bit more about what it is that we do for federal employees and different topics that we explore, we’ll make sure that you know how to get that as well.

Background

All right, so a little bit of background. The FEHB program is by far one of the most coveted benefits that are afforded to federal employees. Let’s make sure that you know how you can keep this coverage when you retire. That’s our whole goal here on today’s episode so that you don’t end up leaving federal service before you’re actually eligible to keep this coverage and take it with you.

Again, we’re going to talk about how you, the employee, keep FEHB in retirement. There’s tons of offshoots of material connected to this topic that I’m not going to be covering today. Things like, well, how do I keep FEHB in retirement for my spouse? That’s an incredibly important question that I’m glad that you’re asking yourself, but it won’t be covered in today’s episode. First thing I’m going to link to in the show notes is the webinar that we did on this very topic just a while back. It’s called The Strategy of the Survivor Benefit Plan. So if you need to know how that works and how FEHB for your spouse is connected to the survivor benefit plan decision, that is the webinar to watch.

Some topics are easier to cover in a podcast form because we can give easy examples and just the audio portion. Other topics are more complicated and need some visuals, which we put in our webinar platform. Again, we’ll link to that in the show notes. Great webinar. We got tons of feedback on it, that feds were finally clear on what was possible for their spouse and what they needed to do to make sure that their spouse got to keep the health insurance after the fed dies. But remember, that’s not what today’s episode is about. It’s about how you, as the employee, can qualify to keep FEHB when you retire.

The 3 Rules to Keep FEHB in Retirement

Here are the rules. Remember, I mentioned there were three parts. The first is you must be retiring on an immediate pension, and you must be enrolled in FEHB on the day that you retire, and you must have FEHB coverage for five years immediately prior to your retirement.

Those are the three rules. But like most things in government benefits, it’s not just as simple as stating a sentence, and everybody knows what we mean. So we need to break this down a little bit so that there’s no confusion.

Rule #1:

The first rule is that you must be retiring on an immediate pension. Well, what is an immediate pension? What would be something that’s not an immediate pension? An immediate pension is one that you are allowed to get right away. That’s if you’re fully eligible, if you take an early out, if you have a discontinued service retirement, all of these count.

And if you’re eligible under MRA+10 rules (this is you’ve reached your minimum retirement age, and you have at least 10 years of service but not the 30 needed to be fully eligible), this still counts to help you retain your FEHB in retirement, but you can only have the coverage while you’re drawing your pension. So this MRA+10 type of retirement comes with a penalty. And often what folks do is they voluntarily postpone taking their pension to avoid the penalty, and that’s okay. If you’re in postponement of that pension (to avoid the penalty), you will not have FEHB during that time, but it will be restored later when you come back to draw the pension. But fully eligible, early outs, discontinued service retirements, and even MRA+10, those are all considered an “immediate pension.”

An example of an employee who would not be retiring under an immediate pension would be someone who’s retiring under a deferred pension. This is different than the MRA+10 scenario we talked about. This is someone who does not have the option to draw the pension right away. That is an involuntary delay in being able to draw the pension. So deferred retirees never, ever are able to take that FEHB in retirement. All right, so that covers the first rule.

Rule #2:

The second rule is that you must be enrolled in FEHB on the day that you retire. Let me be clear on this specific part of the topic, because it causes so much confusion for so many people. The government does not care how you are covered under FEHB, just that you are covered.

Rule #3:

This kind of bleeds into the 5-year rule, which is the third part of the rule that is that during those five years, you can move around between the different carriers. So you move from Blue Cross to Aetna, to Kaiser, back to Blue Cross; the government doesn’t care what kind of plan you are under.

They also don’t care what the family member coverage looks like. Is it a “self only” to a “self plus family” or moving from a “self plus family” to a “self plus one” – the government doesn’t care. And know that you can switch between your own FEHB coverage and your spouse’s FEHB coverage. This would be for two feds married to one another. You can switch back and forth. The government doesn’t care. For all of that time, you’re still covered under FEHB and meet that rule.

To kind of expand on that five year part of the rule; for most employees, this is your last five years that you were working in a federal position. If you plan to retire at the end of this year, so December of 2022, you would’ve had to have been enrolled in the FEHB plan since January 1st of 2018. So very, very important that you make sure that you have that coverage in place before you walk out the door.

That part’s easy. For feds who work right up to the time that they retire and they’ve been in FEHB, no breaks in service, this is a pretty simple calculation of five years. But if you had a break-in-service during your last five years of work, then the five years would exclude the break-in-service that you had. Again, if you plan to retire at the end of this year, so again, December of 2022, but you had a break-in-service for the full year of 2019 for whatever reason, then you’ll need to go back an extra year than in our previous example. So now you would need to be covered from January 1st of 2017.

So by this standard, for the last five years of service that were possible for you to be enrolled in FEHB, you were. After all, you aren’t eligible to be enrolled in FEHB during a break-in-service. So in this case, since you had a break in service of one year, we had to look back for six years to ensure that you were covered for the required five.

Not many feds are dealing with a break-in-service right at the end of their career. That’s actually quite unusual. But every once in a while, we’ll see that and want to make sure that everybody’s super clear on what that is.

If You Voluntarily Leave FEHB While Still Employed

I want to be very, very clear on something that seems to cause some folks confusion. If you were continuously employed as a federal employee during the last five years of service and you voluntarily left FEHB (say you went on your spouse’s private employer or plan, maybe they got it for free, or they’re a teacher and have free benefits, whatever that might look like), if you voluntarily leave FEHB while you’re still employed, when you come back and want to rejoin FEHB, your five year clock starts over.

So in the break-in-service example that we covered a moment ago, that was where you actually left service and then returned back to service and re-enrolled in FEHB. That part’s no problem. But if you’re continuing to be employed and you voluntarily leave the FEHB program for whatever reason, the clock is going to start over when you come back to FEHB. So you’re going to have to start five years counting from that point.

Coverage Under TRICARE

All right, so I would be remiss if I didn’t talk about TRICARE, the military health program. We have so many veterans in federal service, so many military veterans, that it stands to reason that we should discuss this program. For feds who are eligible for TRICARE, time in the TRICARE program can count to meet that five year rule that we talked about, but you must still meet the other two requirements. You have to be enrolled in FEHB on the day that you retire, and you must be entitled to an immediate pension. TRICARE’s great. It can help you to satisfy the five year rule, but you still have to meet the other two requirements.

So before you retire, please, please, please make sure that you meet all of the rules to keep this coverage in retirement. If it’s your plan to keep FEHB, you’re not getting to keep it if you don’t meet those three rules.

If You Are Married

I would highly, highly encourage you to watch the webinar on the survivor benefit plan if you are married. That way, you can see what the requirements will be to allow your spouse to keep FEHB after you die. Again, that link is right in the show notes. We’ll make sure that you have that.

Wrap-Up

Now, speaking of show notes, if you are listening from a traditional podcast platform like iTunes, and you want access to the resources that we mentioned today, for instance, the link to the survivor benefit webinar, so that you don’t have to hunt and peck and try to find it, we will send it directly to you. If you pull out that phone and text the word “PODCAST” to 224-444-6144, we’ll make sure that you get the show notes and the links that we talked about today. Again, text the word “PODCAST” to 224-444-6144, and we will send that right away.

All right. So just to wrap up, here are some things to remember about FEHB and keeping it in retirement. The first is, you must be retiring on an immediate pension. Second, you must be enrolled in FEHB on the day that you retire. And third, you must have FEHB coverage for five years immediately prior to your own retirement from federal service. So please make sure that you meet these rules before you retire, so you’re sure to keep this amazing benefit.

All right, that’s it for today. Hopefully, our talk about the FEHB rules for keeping it in retirement has been helpful to you today as you think through all these crazy pieces of your benefits and how they ultimately fit into your retirement. Stay tuned to the FedImpact Podcast to get straight answers and candid insights on your federal retirement. And as always, if you haven’t done so up to this point, please subscribe so that you’re sure not to miss an episode.