Some of the biggest perks to working for the government are the benefits that you not only have while you are working but also the ones that carry over into retirement. The primary benefits of concern for most federal employees are their health benefits (FEHB), dental, vision, and life insurance (FEGLI).
Health Benefits (FEHB)
Federal health benefits coverage under the Federal Employees Health Benefits (FEHB) Program is some of the best and most affordable in the nation. Part of the reason it is so affordable is that the government pays around 72% of the premiums for each plan, leaving the employee to pay the remainder.
The key to being able to keep your federal health insurance in retirement is having FEHB coverage for the immediate five years before retirement and retiring on an immediate/unreduced pension.
For regular FERS, an immediate/unreduced pension refers to retiring at MRA (Minimum Retirement Age) with at least 30 years of service, age 60 with at least 20 years of service, or age 62 with at least 5 years of service. If you have reached any of these thresholds and have had your federal health insurance for the immediate five years before separating, you can carry your health benefits into retirement at no additional cost.
There are still open seasons in retirement as well to make any adjustments you want to your plan. Note that if you would like your non-government spouse to continue your health benefits should something happen to you, then you will want to choose a survivor benefit (either maximum or reduced).
For those who are looking at early retirement options, you could still qualify to keep your health insurance under 2 provisions: retiring under MRA+10 or Postponement.
MRA+10
Retiring under MRA+10 means that you have reached your minimum retirement age and have at least ten years of service. Under this provision, you qualify for a pension and there is no lapse in your health insurance going into retirement (as long as you have had them for the immediate five years before retiring). However, your pension will be permanently reduced 5% for every year you are under the age of 62.
For example, John has decided to retire from the government at age 57 with 14 years of service and a High 3 of $57,000. His pension would be penalized 25% because he is retiring 5 years before age 62 (5 (years)X 5% (Penalty)=25%). His pension therefore would be:
- $57,000 X 14% divided by 12=$665/Month
- $665 X 25%=$166.25 Reduction
- $665-$166.25=$498.75/Month
The following table shows what your MRA is based on the year in which you were born:
| If you were born | Your MRA is |
|---|---|
| Before 1948 | 55 |
| In 1948 | 55 and 2 months |
| In 1949 | 55 and 4 months |
| In 1950 | 55 and 6 months |
| In 1951 | 55 and 8 months |
| In 1952 | 55 and 10 months |
| In 1953-1964 | 56 |
| In 1965 | 56 and 2 months |
| In 1966 | 56 and 4 months |
| In 1967 | 56 and 6 months |
| In 1968 | 56 and 8 mo |
| In 1969 | 56 and 10 mont |
| In 1970 and after | 57 |
Postponement
Retiring under postponement is the other early retirement option that will allow you to keep your health benefits into retirement, however, there is a catch.
To qualify for postponing your pension you again must reach your minimum retirement age and have at least ten years of service. Once you separate from service your pension and health benefits would be suspended until you either reach age 60 (if you have at least 20 years of service at the time of separation) or age 62 (if you have less than 20 years of service at the time of separation). Unlike MRA+10, postponing your pension does not penalize you 5% for every year you are under the age of 62 when you separate.
If you defer your pension, meaning you separate from service before MRA and/or with less than 10 years of service, you can start your pension at 62 (as long as you have not withdrawn your retirement contributions) but you would not qualify to continue your health insurance at any point.
Married Dual FERS Retirees
If you and your spouse are both federal employees, there is some important information to know about your health benefits while working and in retirement.
First, if one spouse is retiring before the other, you may want to consider the working spouse covering the retired spouse because of how your health benefits are taxed.
While you are working you pay your health insurance with pretax money, meaning, if your bi-monthly paycheck is $2,000 and your health benefits are $200 for that period, you would be taxed on $1,800, not the full $2,000. Once you retire the rules change to where you are taxed on your pension first and then the health benefits come out after taxes.
The second thing to know is how survivor benefits work when both you and your spouse are FERS retirees. For a lot of people, the most important consideration in choosing a survivor benefit is to ensure that their surviving spouse can continue their health benefits if something happens to them.
If you are both federal retirees and each of you worked long enough to qualify for immediate retirement benefits, you do not have to choose a survivor benefit for your spouse to continue health benefits, even if you were carrying them on a self plus one or family plan. However, if income is a concern and you do want them to have a portion of your pension if something happens to you, then you still may want to choose a survivor benefit.
Dental and Vision
For the Federal Employees Dental and Vision Program (FEDVIP), you qualify to continue your dental and vision coverage into retirement if you are going out on an immediate retirement. This means retiring at MRA with at least 30 years of service, age 60 with at least 20 years of service, or age 62 with at least five years of service. Retiring under MRA+10 or postponement also qualifies you to keep your dental and vision coverage, whereas once again deferring your retirement does not.
Federal Employee Group Life Insurance (FEGLI)
To qualify to carry your FEGLI coverage into retirement you have to retire on an immediate pension and have had your life insurance coverage for the immediate five years before retirement or the full periods of federal service when coverage was available (if the coverage was less than 5 years). You also must not have converted your life insurance coverage to an individual policy and be enrolled in basic coverage for FEGLI when you retire.
If you are postponing your pension, your life insurance will also be suspended until your pension starts down the road when you are first eligible.
Know The Rules
By knowing the rules of how you can continue your government benefits into retirement, you will be better prepared to know the proper time for you to retire and avoid the possible pitfalls that could negatively affect you. Unfortunately, some did not know about having to have their health insurance and life insurance the immediate five years before retirement and wound up losing their benefits or some had to work longer than expected to qualify to keep them.
