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6 myths about federal benefits in retirement

Updated . First published March 30, 2022. Facts checked against the sources listed below.

Retirement changes your federal benefits more than many people expect. These six myths come up again and again; each is corrected here with OPM's own rules.

Myth 1: "My health insurance carries into retirement automatically."

Only if you qualify. To keep FEHB as a retiree, you must retire on an immediate annuity (including a FERS MRA+10 retirement) and have been continuously enrolled in FEHB for the 5 years of service immediately before your annuity starts, or since your first chance to enroll if that is less than 5 years. Time covered as a family member on someone else's FEHB plan, or under TRICARE, can count if you hold your own FEHB enrollment when you retire.

Myth 2: "My life insurance stays the same after I retire."

Usually it doesn't. Unless you pay extra to prevent it, most FEGLI coverage starts shrinking once you are retired and 65: Basic with the 75 Percent Reduction drops to a quarter of its value, Option A drops to a quarter, and Options B and C with Full Reduction disappear entirely. See keeping FEGLI after you retire.

Myth 3: "I can add more life insurance after I retire if I need it."

You can't. OPM's handbook is clear that you cannot increase your FEGLI coverage after retirement, and you cannot reinstate coverage you cancel. Decide how much you need before your retirement date.

Myth 4: "FEGLI premiums stay level."

Basic premiums are the same at every age, but Options A, B and C rise in five-year steps. For 5 multiples of Option B on an $80,000 salary, the cost goes from $12 every two weeks at 40 to $160 every two weeks at 60, using OPM's current rates. See FEGLI premiums at each age.

Myth 5: "If I leave before retirement, my life insurance is simply gone."

Not right away. FEGLI continues for 31 days after it would otherwise end, at no cost, and during that time you can convert it to an individual policy. Plan ahead, because the window is short.

Myth 6: "My federal benefits include disability insurance."

They don't. OPM's insurance programs cover health, dental and vision, life, long-term care and spending accounts, but none is a disability insurance plan. Sick leave and, for long-term conditions, FERS disability retirement are the federal safety nets; see disability insurance for federal employees.

The takeaway

Most of these surprises can be planned around if you look at them five or more years before you retire. A short review of your health, life and income protection now is far easier than finding a gap later.

Sources

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