Federal Employee Insurance in Retirement: A Comprehensive Guide to FEHB, FEGLI, and Medicare

For federal employees approaching retirement, understanding your insurance options is crucial for maintaining comprehensive healthcare coverage while managing costs effectively. This guide explores the key aspects of Federal Employees Health Benefits (FEHB), Federal Employees' Group Life Insurance (FEGLI), and their coordination with Medicare.

Continuing FEHB Coverage in Retirement

Federal employees can maintain their valuable FEHB coverage throughout retirement, providing they meet two essential requirements:

Federal employees must have been continuously enrolled in any FEHB plan for the five years immediately preceding retirement or from their first opportunity to enroll. Additionally, they must be eligible for an immediate annuity under their retirement system (FERS or CSRS).

The ability to keep FEHB coverage is one of the most valuable benefits available to federal retirees. In retirement, you'll continue to receive the same government contribution toward your premiums, typically covering about 72% of the total premium cost.

FEGLI Options and Considerations

The Federal Employees' Group Life Insurance program offers several continuation options in retirement. To maintain FEGLI coverage, employees must have been enrolled for at least five years before retirement or from their first eligibility.

Basic FEGLI coverage can continue with various reduction options:

• 75% Reduction: Coverage decreases by 2% per month until reaching 25% of the basic amount
• 50% Reduction: Coverage reduces by 1% per month until reaching 50% of the basic amount
• No Reduction: Maintains full coverage amount

Optional insurance (Standard and Additional) can also continue into retirement if eligibility requirements are met. However, premiums increase significantly with age, making it essential to evaluate coverage needs carefully.

Medicare Coordination with FEHB

Understanding how Medicare works with FEHB coverage is crucial for optimizing your healthcare coverage while managing costs:

Medicare Part A

Most federal retirees should enroll in Medicare Part A (hospital insurance) when first eligible since it's premium-free for those who have paid Medicare taxes for at least 40 quarters. Part A can help cover deductibles and coinsurance that FEHB plans might charge for hospital stays.

Medicare Part B Considerations

The decision to enroll in Medicare Part B (medical insurance) requires careful analysis:

• Advantages:
• Provides additional coverage that can reduce out-of-pocket costs
• Some FEHB plans waive deductibles and copayments when Medicare is primary
• Offers greater flexibility in choosing healthcare providers
• Cost Considerations:
• Part B requires paying monthly premiums
• Higher-income beneficiaries may face additional premium charges through IRMAA
• Must weigh premium costs against potential savings in out-of-pocket expenses

Coordination Strategies

1. FEHB Plan Selection Choose an FEHB plan that coordinates well with Medicare. Some plans offer better benefits or lower costs when combined with Medicare. Review plan brochures carefully for "Medicare primary" benefits.
2. Medicare Enrollment Timing Consider these key enrollment periods:

• Initial Enrollment Period: Three months before turning 65 through three months after
• Special Enrollment Period: Available while covered under current employment
• General Enrollment Period: January through March each year

Best Practices for Insurance Planning

1. Start Planning Early Begin reviewing your insurance options at least one year before retirement. This allows time to meet continuous coverage requirements and make informed decisions.
2. Regular Coverage Review Assess your insurance needs annually during Open Season. Life changes, health conditions, and financial circumstances may warrant adjustments to your coverage.
3. Seek Professional Guidance Consider consulting with your agency's HR department or a financial advisor specializing in federal benefits. They can help analyze your specific situation and recommend optimal coverage combinations.

Conclusion

Successfully managing your federal insurance benefits in retirement requires careful planning and understanding of how different coverage options work together. By evaluating your specific needs, costs, and coverage options, you can develop a comprehensive insurance strategy that provides adequate protection while optimizing your retirement budget.

Remember to review your choices periodically and adjust your coverage as needed during annual Open Season periods. This ensures your insurance coverage continues to meet your evolving healthcare needs throughout retirement.

References

1. U.S. Office of Personnel Management. (2024). "Federal Employees Health Benefits (FEHB) Program Handbook." OPM.gov.
2. U.S. Office of Personnel Management. (2023). "Federal Employees' Group Life Insurance (FEGLI) Program Handbook." OPM.gov.
3. Centers for Medicare & Medicaid Services. (2024). "Medicare & You 2024." Medicare.gov.
4. U.S. Office of Personnel Management. (2023). "FEHB and Medicare." Retirement Information Center, OPM.gov.
5. U.S. Office of Personnel Management. (2024). "Healthcare and Insurance for Retirees." OPM.gov.
6. Centers for Medicare & Medicaid Services. (2023). "Coordination of Benefits with FEHB Plans." Medicare.gov.

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.