PODCAST EPISODE 129:
FEGLI Option C (When You Have No Eligible Family Members)

If you’re a federal employee who has elected the FEGLI life insurance coverage on your eligible family members, this episode is for you. Today’s session focuses on what happens when you no longer have those family members to cover.

Hi, Chris Kowalik of ProFeds here and welcome to the FedImpact Podcast, where we offer candid insights on your federal retirement. As you know, 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. Most of you know we are a training organization. We deliver retirement workshops to federal employees all over the place.

And following those workshops, we facilitate some one-on-one work with the feds who attend so that they can get really clear on their specific benefits. Sometimes they’re so surprised with what they find. Nobody and I repeat, nobody, wants to pay for benefits that they can’t actually use. And certainly FEGLI coverage on family members is a big one that we find. That’s what prompted today’s episode.

FEGLI Option C

It’s actually quite common for us to find federal employees who have FEGLI Option C, remember that’s coverage on the life of your family members. If your family members were to pass, you as the federal employee would be compensated by the FEGLI program. It’s quite common for us to find feds who have this Option C coverage on their family members (that would be a spouse or any eligible children), but they don’t actually have any eligible family members still around. Yet they’re still paying the premiums.

This can happen for a lot of reasons. We might have a spouse who passes away, a spouse who’s no longer your spouse, we have a divorce situation, and children get older and they age out of this program because they’re only covered up to age 22. In this case, if you still have Option C in place and you have no spouse and you have no eligible children, nobody’s life is actually covered by the insurance. But you, the employee, have continued to pay for it. Sometimes for a short while and other times for decades.

That’s what we’re going to talk about in today’s episode to get this fixed. To give everybody a little bit of an outline of what we’re going to cover today, we’ll do a brief overview of Option C, what it is, about how much it covers, who’s eligible, all of that. The next item is what happens when you no longer have a spouse or kids who are eligible to be covered, how to fix this with your agency and then how to get your money back. The money that you paid when there was actually nobody covered.

Of course, like we do in all of our podcasts, any of the resources that I mention today (maybe other podcasts or webinars or documents), we’ll make sure to link to those in the show notes. If you’re listening to us from a traditional podcast platform like iTunes, you’ll want to be able to get to all of those notes. We’ll tell you exactly how to do that a little bit later in today’s episode.

Of course, if you’re watching from our website, you’re going to have access to the show notes right below the player. Of course, for anybody looking for training and more help on their individual situation, we’ve got you covered for that. We’ll show you how to do that here in just a bit.

Background

Most of you are relatively familiar with the FEGLI program as a whole and you likely recognize it as the program that you opt into and pay a premium for so that if you die your family gets money. But there’s a part of FEGLI that is specific for the life of your family members and that’s Option C. So, the Basic A and B coverage under FEGLI is on your life as the employee. So if you die, your family or whoever your beneficiaries are will get that money.

Option C is if your family members were to pass, then you as the fed would receive the payment from the FEGLI program. Option C is available to feds to elect and it covers the lives of all of their eligible family members under one choice. Option C covers all or none. All of your eligible family members, or none of them. You can’t pick and choose, you cannot say, I want it just to cover my spouse or just my kids, or just this one kid. It has to be the whole group or none of them.

For Option C, you can choose between one and five multiples and I’ll explain what that multiple means in a second. This is ultimately going to determine how much coverage is paid out if any one of those eligible family member dies. A spouse can be covered as a base amount of $5,000 and based on the multiples you elect (somewhere between one and five), that coverage on that spouse can go all the way to $25,000. So, $5,000, $10,000, $15,000, $20,000, $25,000.

Children can be covered up to age 22. Their base is half of what the spouse’s is, so it’s $2,500. And based again on the multiple that you’ve for Option C, it can go all the way to $12,500. Just remember the multiple that you’re choosing will affect the coverage on both your spouse and any eligible children. But life changes, right?

When you first put that FEGLI coverage in play, you might have had a spouse and lots of children still under the age of 22. But life does change, sometimes for the better sometimes for the worse. And sometimes it just changes. We need to get really clear on who can be covered and what happens when they’re no longer eligible to be covered.

Who is covered

Who is covered? Like I mentioned, either all family members or none of your family members are covered under Option C. Remember, you cannot exclude family members from being covered. If you only have a spouse, then just your spouse is covered.

If you only have children, then just your children are covered and all of them are covered under one choice and one premium. And if you have both, you have both a spouse and eligible children, so again, children under the age of 22, then both your spouse and your children are all covered under one choice under Option C.

The cost

The cost for Option C is a set amount and it’s based on the multiples that you elect. Like I mentioned, between one and five times. Somewhere between $5,000 and $25,000 for a spouse, somewhere between $2,500 and $12,500 for each child. The cost for Option C is one set premium based on the multiple that you elect. It is not determined by the number of family members that you have.

In this case, since one premium covers all of the eligible family members, the people who really make out on this deal are people who have a giant family. We’re talking probably just one spouse and then tons of kids. Because all of them are covered under one price and that price is exactly the same, whether there’s one or 15 of them covered.

When family members lose coverage

I mentioned before that if we have a spouse who passes away or you were to get divorced, that Option C coverage will go away. And the same thing for children. Once they reach age 22, they’re no longer covered. But I say that and it makes it sound like it’s a done deal. But just because they’re, “no longer covered” doesn’t mean you stop paying for the coverage.

The system knows that these children are now no longer under the age of 22 and the system likely also knows that you’re no longer married. But the premium just keeps on trucking. The agency doesn’t automatically drop that Option C and I’m sure there’s some safeguard there to make sure it doesn’t get dropped accidentally and you didn’t know and all of that and we’ll give the benefit of the doubt of why this happens.

But if you don’t catch that you need to go in and make a change, you’re going to keep paying for this until you specifically ask for it to be removed, to officially drop Option C. The question is, if you have now discovered that you no longer have any family members that can really be covered under Option C, so you’re no longer married and all of your children are grown, the question now is how do you fix it?

How to officially drop Option C coverage

There’s a couple of different parts that we need to fix. Let’s start with fixing what things look like for the future. In order to get Option C removed, and so you can stop paying premiums from this point forward, you’re going to complete the FEGLI election form. It’s the SF 2817. Again, we’ll link to this right in the show notes so that you have that nice and handy.

On this form, you simply elect the coverage that you wish to keep. We’ll make this simple. If you have basic coverage and Option C in place and you no longer have Option C, no longer family members to be covered, then you simply reelect the Basic coverage. And of course, if you had Option A or Option B, you would reelect those as well, assuming that you wanted to keep them. But that is the way that you drop it.

It’s a little bit confusing because when we’re thinking about dropping coverage, we would think we would fill out a form that says, “I want to drop Option C.” But we do the opposite. We fill out the form to say what coverage we would like to keep. And so at that point, you’re going to submit that document to your HR department. You should see your pay change and your electronic official personnel file should show the form. Once it’s been processed, you should see it appear in your eOPF.

That change that HR is helping you to make will be retroactive back to the first pay period where you no longer had any eligible family members. And so there was nobody to be covered, and so this is what the reg says, that the change is retroactive, but that’s not automatic for you.

How to get Option C refund of erroneous premiums paid

The next thing you need to do is to make sure that you get a refund of any of those premiums that you paid from the time you no longer had any eligible family members. So, both spouse and children are gone at this point. From that point forward, you did not owe anything, yet you paid a lot of premiums.

By the actual reg, your agency is required by OPM to issue a refund to you. Again, it’s retroactive back to the time that you no longer had any eligible family members, but most agencies don’t do this automatically. Most often it’s because the HR specialists simply lack experience on the part of specific types of benefits. And so it’s frustrating. Even though it’s due to you doesn’t mean the person processing the action knows to initiate an action like this.

But don’t fret, we’ve got you covered. We know what to do to get your refund. Sometimes we to help agencies know what to do. And this isn’t a knock on the agencies, they’ve got a lot going on, there’s tons of these goofy benefits that they have to deal with and all the payroll and all the other stuff that HR departments have to manage. If we are good advocates for ourselves, then we know what to do to help agencies get what we want, help them to help us.

We encourage you, if you have found yourself in the situation that you have Option C coverage in place but all of your family members are no longer eligible, we encourage you to download the letter that we have prepared for you. It cites the regulation that allows, and frankly requires, your agency to issue a refund so that whomever is processing this knows exactly what to do.

We will link to that letter in our show notes. Again, we cite the reg right in there. It’s easy for them to reference, especially for a benefit specialist that maybe just hasn’t encountered something like this before.

The next question that we logically get is, “Well, how big could a refund be?” Well, it depends on a couple of things. First, how old you are, and then how long it’s been since you no longer had any eligible family members. Was it just a couple months? Was it decades? How long was it? And then the actual amount of coverage that you had. Somewhere between one and five multiples. That determines the price, the longevity of how long you had this coverage in place will determine the total premium.

An example

If you were married … I’ll just give a quick example here. Let’s say you were married and you had children in your early 20s, and you had five times coverage. So, Option C, five multiples. And by the time you were 45, you were divorced and all of your kids are now beyond the age of 22. Then you shouldn’t technically owe anything from that point forward in this example from 45 on. But somebody didn’t catch it and so now you’re listening to this podcast and you’re like, “Oh my gosh, I have to go fix this.”

Let’s say you’re 65 now when you notice it and you go through and you complete the SF 2817 to get the coverage corrected, you give your agency the letter that says, “Hey, this is the reg that allows you to issue a refund to me.” You’re going to have a refund of over $3,000.

And that’s simply a matter of how long the coverage has been kind of dormant, meaning you didn’t actually have any family members covered, but you were paying a premium and the amount of coverage that you had. Remember in this case, you had five times Option C and so more and more coverage was in place. And of course, the older you are, the more expensive it is. We want to make sure that you get your full refund and certainly don’t continue to pay for something that no longer brings your family any value.

Taking Action on your retirement

Hopefully this helps. This is a relatively short episode, but because we see so many feds with Option C coverage still in place but no eligible family members, we knew this would be a great topic to help everybody just get their own situation squared away.

Of course, FEGLI is part of a larger discussion about life insurance and protecting income for both you, your spouse, and then any children that might be in play. Option C of course, is a subset of FEGLI where we’re talking simply on the life of the family members. But all of this really plays into the bigger retirement strategy that you have.

And so we teach retirement workshops throughout the country, and our mission is to help feds to get it situations like this under control and certainly look at the bigger aspects of the retirement that they imagine so that they can take all the steps necessary to live that retirement. If you have not been to one of our workshops or you need a refresher, please get to one of our sessions. We’ve got them all over the country.

If you are listening on a traditional podcast platform like iTunes, and you want access to the links, the form, the letter, all of that that I mentioned a little bit earlier in our episode, please pull out your phone and text the word PODCAST to (224)444-6144 and we will make sure that you get access to the show notes and of course the list of all the workshops that are available in your area. Again, text the word PODCAST to (224)444-6144 and we will send that right away.

Wrap-up

Just to wrap up, here are some things to remember about the FEGLI Option C topic. Remember that changes to your Option C premium don’t happen automatically when you no longer have those eligible family members. You need to complete the forms to get things straightened out, moving forward.

Please, please, please use the letter that we provided to make sure that you get the refund that you deserve. And of course a great perk is not just the refund, but not having to pay the premium moving forward.

That’s it for today. I hope our talk about FEGLI Option C has been helpful to you as you think through all of the various aspects of planning to retire. Stay tuned to the FedImpact Podcast to get straight answers and candid insights on your federal retirement. And of course, if you haven’t already, subscribe today so you’re sure not to miss an episode.

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