Myth-conception: Once I retire, I will have to pay more for my Federal Employee Health Benefits, as Uncle Sam’s contribution decreases.
Reality: With the exception of those who receive an extra agency contribution to their FEHB premiums, I will pay no more as a retiree than I do as an employee. I will, however, pay out of after-tax dollars.
Though many people believe that the costs for Federal Employee Health Benefits increase after retirement that is not the case for most employees. Why is it that many federal employees think that FEHB costs increase? Probably the fact that in the private sector (for those lucky enough to receive health insurance after retirement), premiums tend to increase, sometimes dramatically. Even many other public sector plans have costs that increase after retirement. The FEHB is unusual in that there is no change in the premium amount.
Over the course of a year, the vast majority of federal retirees will pay the same amount for FEHB as current employees pay. Retirees will pay on a monthly basis, as opposed to bi-weekly, but, at the end of the year, the amount they pay for FEHB premiums will be the same as that paid by an active employee. There is a difference though; they will be paying out of already taxed dollars. Retirees, unlike employees, are not allowed to participate in “premium conversion”, where their FEHB premiums are paid from pre-tax dollars. Retired law enforcement officers, however, are allowed to deduct up to $3,000 of health insurance premiums on their federal income tax.
Some federal employees will see an increase in what they pay for their FEHB. Those employees are employed by agencies (such as the Securities and Exchange Commission and the Postal Service) that have an extra employer contribution toward their FEHB. Upon retirement, any extra contributions (that are the result of provisions in the collective bargaining agreement) cease.
Although FEHB premiums do not increase for retirees, those retirees who elect Medicare Part B at age 65 will have to pay Part B premiums (at least $104.90 per month in 2013). Federal civilian retirees are not required to elect Part B. Military retirees who are enrolled in Tricare for Life are required to elect Part B.
John Grobe’s latest book, The Answer Book on Your Federal Employee Benefits, has just been released by LRP Publications. Order your copy at shoplrp.com. Ask your human resources office to contact Federal Career Experts about pre-retirement training.