Understand Your Options During FEGLI Open Season

Know Your Options For FEGLI Open Season.

This fall a unique event will give federal employees the opportunity to increase their life insurance without a qualifying life event or proof of insurability. This Open Season will be available to those interested in joining the Federal Employee’s Group Life Insurance program. FEGLI, with an enrollment of over 4 million, is the largest group insurance program in the world.

Federal employees, retirees, as well as dependents choose FEGLI for a number of reasons. However, it is not for everyone. Before you sign an agreement, it is important to look at other alternatives that will continue with you after your retirement. Keep in mind that in order to maintain your added FEGLI coverage, the coverage must remain in effect for at least five years prior to your retirement date and you must be eligible for an immediate (as opposed to deferred) retirement.

The best way to know what your options are is to speak with a federal benefit professional. Don’t guess on your retirement benefits. Speak now with one of our benefits specialists to ensure that you are covered for retirement.

Basic vs Optional Coverage

When it comes to life insurance there are two routes people take: Basic coverage and Optional coverage. Below, we break down the main points of each FEGLI option, and how they move with you into retirement.

Basic Life Insurance

Unless it was waived at the time an employee was hired, chances are he or she is enrolled in Basic FEGLI coverage. The amount of basic coverage is determined as follows:

Annual rate of base pay rounded up to the next $1,000 + an extra $2,000, or $10,000 whichever is greater.

This amount increases every time an employee receives a promotion, step increase, or other pay adjustment. If you are under age 45, you automatically have extra coverage without paying any additional premium. This Extra Benefit increases the amount of Basic insurance payable at the time of your death if you die before age 45.

In order to maintain Basic FEGLI coverage, federal employees must pay 15 cents for every $1,000 of basic coverage, which represents one third of the overall cost. The government pays the remaining two thirds. The U.S. Postal Service pays the entire cost of Basic insurance for its employees. This amount is deducted biweekly regardless of age or health.

When it comes time to retire, your basic life insurance will be determined by the amount of your basic pay, valued at the last day of employment. At retirement or age 65 whichever comes last, this coverage drops by 75% over 36 months post retirement, unless you opt to pay for a different option.

For more information about Basic coverage premiums, and how retiring employees can get no reduction in basic coverage talk to a MyFEDBenefits specialist today.

Optional Coverage

The second, less often used type of coverage offered through FEGLI is Optional Coverage. There are three optional types of coverage under FEGLI.

• Option A provides an additional $10,000 of life insurance. It is free after age 65, if you’re retired. However, following retirement the coverage will reduce at the rate of 2 percent a month until reduced to a value of $2500.
• Option B covers your life for one to five multiples of your annual basic pay (rounded up to the next $1,000). The premiums for this coverage begin to significantly escalate between beginning at age 40, and every five years after. The downside to this option is that there may come a time when the premiums become prohibitively expensive. At retirement or age 65 the post goes to zero but the coverage goes to 0 over the next four years.
• Option C covers the lives of your spouse and eligible children. You may elect up to five multiples of Option C with each multiple providing $5,000 of insurance on your spouse and $2,500 on each of your eligible dependent children. The premiums for this option increase similar to Option B, and at retirement or age 65, the coverage also drops to 0 over four years.

Each of these options require employees to make additional decisions, such as electing between no reduction or full reduction. What you decide will determine your premium before and during retirement.

If you are interested in Optional coverage and would like a more in depth look at what is required of employees who elect to use it, we recommend speaking with a specialist.

MyFEDBenefits can help you understand what is available to you, as well as find which life insurance plan is right for your situation. Contact us here.