Key Takeaways
- FEGLI rules, reductions, and costs can significantly shift after retirement; understanding them is essential before making changes.
- Federal retirees should weigh the stability of lifelong FEGLI access against premium increases and natural coverage reductions.
As a current or retired federal employee, evaluating whether to continue Federal Employees’ Group Life Insurance (FEGLI) into retirement is a pivotal decision. FEGLI policies operate under precise federal regulations, and understanding the options, costs, and ongoing coverage after leaving federal service can help you make an informed, confident choice.
What Is FEGLI After Retirement?
Basic coverage explained
FEGLI is the largest group life insurance program in the world, managed by the U.S. Office of Personnel Management (OPM). After retirement, FEGLI Basic coverage typically remains available as long as you meet eligibility requirements. Basic coverage provides life insurance equal to your annual salary (rounded up to the nearest $1,000) plus an additional $2,000. This coverage structure does not change when you retire, but how it is maintained and paid for does shift.
Optional coverage changes
FEGLI also offers three levels of optional coverage—Option A, Option B, and Option C. Optional coverage allows you to carry extra insurance for yourself and your eligible family members. These options are contingent on your participation when you were an active employee and your election to continue them at retirement. Costs and features of optional coverage change after retirement, with premiums increasing over time and coverage limits adjusting, especially after age 65.
How Does FEGLI Change in Retirement?
Eligibility for continued coverage
To maintain FEGLI into retirement, you generally must have been enrolled in FEGLI for at least five years immediately before retiring or for your entire period of federal employment if less than five years. Both Basic and Optional coverages require this minimum “five-year rule.” If you meet this condition, you can elect to keep your FEGLI coverage in retirement, subject to reduction and premium rules.
Reduction choices and rules
Upon retirement, you must choose how your coverage will reduce over time. For Basic insurance, you may select:
- 75% Reduction: Coverage reduces 2% per month after age 65 (or retirement, if later), ultimately retaining 25% of the original amount. No premiums are due for the reduced portion after age 65.
- 50% Reduction: Coverage reduces 1% per month, preserving 50% of the original amount. Some premiums continue after age 65.
- No Reduction: The full amount remains, but higher premiums apply.
Optional coverages (B and C) also decrease after 65 (or at retirement if later), unless you choose to continue full coverage and pay elevated premiums. Premiums for most FEGLI options rise as you age, with significant increases after age 65 for continued full coverage.
What Are the Pros of Keeping FEGLI?
Lifetime federal life insurance access
FEGLI provides the unusual benefit of lifelong access to group life insurance for as long as you remain eligible. This coverage, designed specifically for federal employees, can be continued well into retirement, offering peace of mind to you and your loved ones.
Simplicity and administrative ease
Because FEGLI is administered by the federal government, much of the administrative burden is managed centrally. There are no medical exams required to continue existing coverage into retirement, and billing is handled efficiently via pension deduction or direct billing. The process for electing reductions and adjusting coverage is straightforward, governed by established OPM rules.
No medical exams for continued coverage
Unlike many private life insurance policies, FEGLI does not require new medical underwriting for continued coverage into retirement. If you maintain your life insurance through the five-year enrollment rule, you will not need to prove insurability or undergo health screenings to continue your Basic or Optional coverage, regardless of your health status at retirement.
What Are the Cons of Keeping FEGLI?
Premium cost considerations
One of the main drawbacks of continued FEGLI coverage in retirement is the increase in premiums, especially for Optional coverage. While premiums for Basic insurance may decrease or stop for the reduced portion after age 65, maintaining higher or full coverage means higher ongoing costs. Option B and C premiums, in particular, can rise sharply with age, sometimes outpacing comparable group or individual life insurance options.
Coverage reduction over time
By design, most FEGLI coverages decrease as you age. The 75% and 50% reduction options gradually reduce the payout available to survivors, which can impact your intended financial protection for loved ones. Optional coverages (especially Option B) are designed to dwindle or terminate unless you continue paying increased premiums for full amounts.
Benefit coordination with federal survivor benefits
Federal retirees often have access to survivor benefits under FERS or CSRS pension programs. Deciding whether to keep, change, or drop FEGLI coverage should involve weighing whether survivor annuities, TSP balances, and other federal benefits already provide sufficient financial protection. For some, the overlap may reduce the need for extensive life insurance.
Is FEGLI the Only Option for Retirees?
Alternatives within federal benefits
FEGLI is the group life policy specific to federal workers, but some may have limited access to life insurance add-ons through voluntary federal association plans or other federal benefit extensions. However, FEGLI remains the only group life insurance managed directly through OPM during retirement for federal employees.
General considerations on supplemental coverage
Some retirees consider outside life insurance or supplemental coverage from private carriers, union or association plans, or spouse-provided employer coverage. Each of these options is separate from FEGLI and may have different eligibility, pricing, and underwriting standards. When assessing need, it’s critical to weigh overall financial goals and retirement income sources.
How Do FEGLI Reductions Work After Age 65?
Automatic reduction rules
After you turn 65 (or retire, if later), FEGLI reduction rules for Basic and Optional coverages take effect based on the choices you made at retirement. Unless you elected “No Reduction,” Basic coverage diminishes by a set percentage monthly until it reaches its minimum retained amount. No premiums are due on the reduced portion, but full coverage maintenance comes with ongoing premiums.
Effect on payout and premiums
Reductions directly affect both the final insurance payout and the premiums you owe. As coverage lowers, your payroll or annuity deduction for the reduced portion may drop or disappear altogether. However, if you choose to keep higher coverage, expect to continue paying premiums that often rise sharply with each five-year age band past retirement age.
