Key Takeaways:
- FEGLI Option A offers a fixed additional life insurance benefit for federal employees, supplementing Basic coverage with simple eligibility and clear survivor rules.
- Cost, reduction features in retirement, and differences from other FEGLI options are essential factors to consider when evaluating your life insurance needs.
It’s estimated that over two million federal employees and retirees participate in the Federal Employees’ Group Life Insurance (FEGLI) program. Among the various choices, FEGLI Option A plays a unique role as a fixed-sum life insurance layer, but its purpose, costs, and benefits can be unclear. This article unpacks FEGLI Option A in detail—including a real-world case study—to help you understand how it fits into the broader federal benefits landscape.
What Is FEGLI Option A?
Federal life insurance overview
The FEGLI program, overseen by the U.S. Office of Personnel Management (OPM), provides group term life insurance to most federal civilian employees. Coverage typically begins with Basic Insurance, but employees can also select additional coverage via Options A, B, and C.
How Option A differs from basic
Option A, also known as “Standard Optional Insurance,” is one of three extra insurance levels you may elect beyond FEGLI Basic. While FEGLI Basic is calculated based on your annual pay (rounded to the next $1,000, plus $2,000), Option A offers a fixed death benefit regardless of your salary. Basic insurance also carries an extra government-paid cost in certain situations, while Option A is employee-paid with specific rules on coverage amounts.
Coverage amount explanation
Option A provides $10,000 of life insurance coverage. This amount remains constant during your employment, is not adjusted for inflation, and does not vary with changes in salary. This makes Option A a straightforward but limited supplement to your Basic FEGLI protection.
How Does FEGLI Option A Work?
Eligibility requirements
Most newly hired federal employees are automatically covered by FEGLI Basic and are offered a one-time opportunity to enroll in Option A, assuming they meet general federal employment eligibility requirements.
Enrollment and changes
Enrollment in Option A occurs when you first become eligible for FEGLI—typically upon hire. You may also add Option A later, but only after experiencing a qualifying life event (such as marriage, divorce, or the birth of a child) or by passing medical underwriting through a formal open season or individual request with OPM approval. Employees may cancel Option A at any time.
When coverage begins
FEGLI Option A coverage generally starts on the first day you enter pay status following your enrollment (or after approval if using medical underwriting or a qualifying event). The timing ensures you are protected soon after electing Option A, as long as all program rules are met.
What Are FEGLI Option A Benefits?
Death benefit structure
If you pass away while covered by FEGLI Option A, your beneficiaries would receive a lump sum payment of $10,000 (less applicable reductions if you’re retired and are past the reduction age). This payment is in addition to any Basic FEGLI payout.
Who receives the benefit?
The benefit is paid to the beneficiaries recorded on your official FEGLI designation form. If no valid designation exists, OPM will pay the benefit according to the order specified by established federal regulations, generally starting with your surviving spouse, then children, parents, and estate.
Survivor and family considerations
FEGLI Option A can be a straightforward way to provide your survivors with a modest cash benefit to help cover immediate expenses. However, due to its fixed amount, it may not meet larger family needs when compared to other options or private policies. Still, for many, it offers helpful—if limited—financial support in difficult times.
Case Study: Using FEGLI Option A
Federal employee profile
Consider Maria, a federal employee who joins civil service at age 42. She accepts FEGLI Basic and elects Option A because she wants an additional small benefit for her family with predictable costs.
Life event triggers
At age 51, Maria marries and names her spouse as her new Option A beneficiary. She reassesses her coverage after her first child’s birth but keeps Option A for its simplicity. Over time, she leaves the rest of her coverage unchanged, appreciating the reliability of Option A through job changes.
Coverage outcome explained
When Maria retires at age 62, she chooses to continue her FEGLI Option A into retirement. By regulation, the coverage will begin to reduce at age 65 or retirement (whichever comes later), unless she selects and pays extra to maintain full coverage. When Maria passes away at age 74, her family receives the reduced Option A benefit, providing immediate short-term support to her survivors. This demonstrates Option A’s role as a predictable, supplemental layer, especially for those seeking stability rather than a large payout.
How Does Option A Compare to Other Types?
Option A vs. Basic coverage
FEGLI Basic coverage is typically much larger, as its value is tied to your annual salary, while Option A is a static $10,000. Basic coverage usually continues into retirement with some government cost-sharing, while Option A is strictly employee-funded.
Option A vs. Option B
Option B differs fundamentally by allowing you to elect up to five multiples of your annual salary, offering much larger and customizable coverage. Option A is selected in a single fixed amount, without adjusting for individual income or family size.
Key differences summarized
In short, Option A offers predictable, modest coverage; Basic is salary-based and usually larger; Option B provides higher, adjustable protection. Your needs and preferences will determine which options make sense for you.
Can You Keep FEGLI Option A After Retirement?
Rules for continuing coverage
If you retire from federal service with an immediate annuity and have had Option A for the five years before retirement (or since you became eligible), you may continue Option A into retirement by following OPM guidelines.
Reduction and cost after retirement
By FEGLI rules, Option A coverage automatically reduces by 2% per month beginning at age 65 (or retirement, if later) until the amount reaches 25% of its pre-retirement value—meaning a final benefit of $2,500. You may elect to pay extra to keep full coverage, but many choose the automatic reduction to eliminate premiums.
Impact on survivor benefits
For retirees, the reduced payout may still fill an important niche—for example, helping survivors handle funeral costs or small debts. It’s important to weigh this against the ongoing cost and the static payout as you approach retirement age.
What Factors Affect FEGLI Option A Costs?
Age-based premium structure
FEGLI Option A premiums are determined by your age group and increase in five-year increments as you get older. These rates are set by OPM and reviewed regularly but are not income-based.
Changes over time
Premium costs generally rise as you move into higher age categories. Once you retire and your Option A coverage reduces, the cost typically drops to zero (if you accept the reduction), or remains if you opt to keep the full benefit for a longer period.
Considerations for budgeting
When deciding whether to keep or drop Option A, consider your age, current premium, and anticipated survivor needs. For some, the gradual reduction and loss of premiums in retirement provide cost certainty; for others, the small payout may no longer meet family priorities.
Frequently Asked Questions about FEGLI Option A
Can coverage be increased?
No, Option A is a fixed $10,000 policy; you cannot increase this amount. If you need more insurance, consider other FEGLI options.
How are beneficiaries updated?
You must submit a new, official FEGLI beneficiary form to make changes. Changes are not effective unless properly processed by HR or OPM.
What to know about tax status
Generally, FEGLI death benefits are paid income tax-free to your beneficiary. However, policies regarding taxation can change, so reviewing current IRS guidance is advisable to understand how federal laws may affect your situation.
