Upon receiving the leave and earnings statement for the first full pay-period of 2016, many employees will notice that their premiums for Federal Employees Group Life Insurance (FEGLI) have increased. HR offices are used to fielding calls on this topic each January. Retirees might notice a change in FEGLI premiums in their annuity change statement.
FEGLI has changed premiums for current enrollees effective the first full pay period of 2016. The changes are minor and can be easily summarized by saying that premiums for older enrollees have gone up slightly and premiums for younger enrollees have gone down slightly.
Also, employees who have Basic FEGLI and Option B may see a slight increase in their premiums for those two types of FEGLI, as they are based upon salary. For retirees, the amount of Basic and Option B are based on their salary at the time of retirement.
The cost of basic FEGLI is $0.15 per $1,000 of coverage, and the amount of coverage is based on your salary. With a salary increase for 2016, many employees will see their premiums increase.
FEGLI Option B is also based on salary (multiples of 1 to 5 times your salary) and when salary goes up, so will the Option B premiums of many employees.
Any employee over age 30 will see an increase in their premium(s) for Option A, Option B and Option C if they have a birthday that results in their age ending in a 5 or a 0 (e.g., 35, 40, 45 etc.). All FEGLI Optional insurance is five-year renewable term insurance; in other words it will get more expensive every five years all the way up to the age of 80.
Another bit of news on FEGLI: there will be an open season in September 2016. It has been 12 years since the last open season and, I guess, FEGLI thought it was time for another one. In fact, there have been only 9 open seasons (up to now) since 1954. In an open season, an employee can enroll without having to go through underwriting. Sorry retirees, you cannot participate in FEGLI open seasons. Changes made in the open season will not be effective until the first full pay period after October 1, 2017.
If you plan on retiring before the first pay period of October in of 2022, be aware that FEGLI has a five year requirement for carrying it over into retirement. Anyone who enrolls in basic FEGLI or in Option A, in the upcoming open season will need to have it in effect for five full years in order to carry it into retirement. Regarding Options B and C, be aware that you are allowed to carry into retirement the lowest level of multiples that you have had in the five years immediately preceding retirement.
Changes outside of open season are allowed for employees and, in some instances for retirees. An employee can enroll in FEGLI or increase their coverage if they experience a qualifying life event (marriage, divorce, death of a spouse, birth or adoption of an eligible child). Employees can also enroll or increase their coverage if it has been more than one year since they have waived FEGLI coverage and they go through underwriting. Both employees and retirees are allowed to cancel their coverage or reduce their multiples (Options B and C) at any time.
How much life insurance do you need, anyhow? As with many financial questions, the answer is “it depends”. Among the items you might want to consider when you are deciding how much life insurance is necessary are:
- Is your mortgage paid off? If not, how far are you from paying it off?
- Are your children grown and out of the house? Have they completed their schooling?
- How much extra income, if any, will be needed to run the household?
- Do you have any other responsibilities for which you need to insure? Examples might be, special needs child, elderly parents, etc.
The “Theory of Decreasing Responsibility” (a general rule that applies in many situations) indicates that the further along we are in our life, the less life insurance we need.
A good source of information on life insurance is the “insurance university” of the National Association of Insurance Commissioners http://www.insureonline.org.
John Grobe’s latest book, The Answer Book on Your Federal Employee Benefits, has just been released by LRP Publications. The book is written in an easy to understand question and answer format and covers all areas of federal benefits from the perspective of an employee at various stages of their career. Order your copy at shoplrp.com.