How to Make the Most of Your FEGLI Coverage
Established by the Federal Government in 1954, the Federal Employees’ Group Life Insurance (FEGLI) Program is the largest group life insurance program in the world. The program provides group term life insurance, covering over 4 million federal employees and retirees, as well as many of their family members.
FEGLI Options
FEGLI is comprised of Basic life insurance coverage and three options. If you are a new federal employee, you are most likely covered by Basic life insurance automatically. Your payroll office will then deduct the premium from your paycheck unless you waive the coverage. In addition to the Basic coverage, there are three forms of Optional insurance you can elect. You must have Basic insurance in order to elect any of the options. Unlike Basic coverage, enrollment in Optional insurance is not automatic — you must take action to elect the options.
The four parts of FEGLI are: Basic, Option A, Option B, and Option C.
Basic FEGLI Option
Your Basic coverage is equal to your annual basic pay rounded up to the nearest $1,000 plus $2,000. This Basic coverage is the only part of FEGLI the government helps pay for. For most employees, the government pays a third of the premiums while the employee pays the remaining two-thirds. If you are a postal employee, however, then the USPS pays 100% of your Basic insurance premiums. And at 35 years old and younger, you have two times the normal Basic coverage. Once you are 45 or older, then you’ll have your normal coverage amount. You will pay the full cost of Optional insurance, and its cost depends on age.
A, B and C Options
Option A, or Standard Coverage, provides $10,000 of coverage, regardless of salary. Option B, or Additional Coverage, provides for anywhere between 1-5 times your basic pay, rounded up to the next even $1,000. Option C, or Family Coverage, allows you to get life insurance for your spouse and dependent children. The spouse would receive $5,000 per multiple (1, 2, 3, 4, or 5) and $2,500 per multiple (1, 2, 3, 4, or 5) for each eligible child. Eligible dependent children include those who are under 22 years old and are unmarried. Dependent children over 22 may still be eligible if they have a mental or physical disability that existed before they turned 22.
Modifying FEGLI Coverage
When you start your job, you’ll make your FEGLI enrollment decisions and can cancel your coverage at any time. If you cancel your basic coverage then your optional coverage will automatically be canceled. Increasing your coverage, however, has limitations. This usually requires a medical exam to be approved for coverage. You may make changes to your FEGLI coverage without an exam during a FEGLI open season. There are no regularly scheduled open seasons and they are quite rare (the last one was in 2016.) The cost of FEGLI varies based on age, whether or not you are retired yet, and what FEGLI options you choose to take with you into retirement.
FEGLI in Retirement
You must meet the following conditions to bring FEGLI with you into retirement:
- Retirement with an Immediate Retirement
- Be covered under FEGLI for the past five years
- Be covered under FEGLI on the date of retirement
*Breaks in service do not count against you for the five years of service requirement.
Basic Coverage for Retirement
There are several options when determining how much of your Basic coverage you can keep when you retire after the age of 65. They are: a 75% reduction, 50% reduction, or no reduction. If you elect the 75% reduction, when you turn 65 or retire (whichever is later), your Basic insurance coverage reduces by 2% each month until the amount has been reduced by 75%. When the reduction is complete, the remaining 25% of coverage will continue for life. This coverage will become free at age 65 or when you retire (whichever is later). If you elect the 50% reduction or the no reduction option, then you’ll pay a premium for as long as you want coverage.
Option A for Retirement
Carrying Option A into retirement is similar to Basic coverage, but no elections can be made. This coverage will automatically decrease by 2% per month until it has reached a 75% reduction ($2,500 left) at the age of 65 or retirement if that’s later. This coverage then becomes free.
Option B and C for Retirement
With these options, you’ll have to decide how many multiples of each you’d like to keep in retirement and if you’d like a full reduction at age 65 (or retirement if later) or no reduction.
If you select a full reduction, then your coverage will decrease by 2% each month until it has been reduced by 100%. But this option means coverage becomes free once the 2% reduction begins.
Federal Educators
At Federal Educators, we can help you better understand your federal retirement benefits. Give us a call and request your free analysis at 866-226-8160.
