Key Takeaways
- You have flexible options to continue, reduce, or cancel FEGLI coverage after federal retirement.
- Understanding the cost, reduction features, and your needs can help you make an informed FEGLI decision.
As you navigate retirement from federal service, it’s natural to revisit your life insurance options. The Federal Employees’ Group Life Insurance (FEGLI) program provides important coverage, but many retirees wonder if it still fits their needs. Let’s break down the rules, options, and considerations for FEGLI after you leave federal employment.
What Is FEGLI?
Overview of FEGLI program
FEGLI stands for Federal Employees’ Group Life Insurance. Established in 1954, it is the largest single group life insurance program in the world, offering term life insurance to federal employees and eligible retirees. FEGLI’s primary purpose is to protect families of federal employees by providing life insurance coverage during and after federal service, should you choose to continue it.
Basic coverage explained
When you first become a federal employee, you are automatically enrolled in Basic FEGLI coverage unless you opt out. Basic coverage offers group term life insurance, which pays a death benefit if you pass away while the coverage is in force. The amount of basic coverage equals your annual pay rounded up to the next $1,000, plus $2,000. For some, additional coverage options are available, but Basic is the foundation for most federal workers.
How Does FEGLI Work After Retirement?
Eligibility for continued coverage
To continue FEGLI into retirement, you must satisfy certain Office of Personnel Management (OPM) rules:
- You must be entitled to an immediate retirement annuity (not a deferred annuity).
- You must have been insured under FEGLI for the five years of service immediately before retirement (or for the full period since your first opportunity to enroll).
- You must not have assigned your FEGLI coverage.
Keeping FEGLI into retirement is optional, but you only have these choices if you meet the federal requirements above.
Post-retirement benefits and changes
After retiring, you can continue your FEGLI coverage, but certain components may change. For example, options for reducing coverage are available, and premiums for some parts of FEGLI may increase with age. It’s also important to remember that only Basic FEGLI may continue under the ‘no cost’ reduction option, while Optional coverage (such as Option A and B) typically terminates or requires full retiree premium payments if you elect to carry it forward.
What FEGLI Choices Do Retirees Have?
Keeping coverage after federal service
Federal retirees who continue FEGLI must elect how much coverage to keep. You might choose to retain only Basic, or also keep some or all Optional coverage if eligible. If you do nothing, Basic coverage is continued automatically, subject to OPM’s default reduction rules and the elections made at retirement. Your annuity deduction will pay FEGLI premiums each month.
Reducing, canceling, or changing coverage
You may elect to reduce or cancel some or all of your FEGLI coverage at any time in retirement. However, increases or reenrollments are generally not allowed after separation; decisions to reduce or cancel are often irrevocable. Some retirees keep a small level of Basic coverage at no cost after age 65, while others opt for higher—albeit more expensive—amounts of coverage.
What Are FEGLI Reduction Options?
75% reduction option explained
The most common FEGLI Basic reduction is the “75% reduction” option. Here’s how it works: Starting at age 65 (or retirement, if later), your Basic coverage amount begins to decrease by 2% per month until it reaches 25% of its pre-retirement value after 37.5 months. After this period, the remaining 25% stays in force for life, and no further premium payments are needed for Basic coverage. This feature makes it appealing for retirees wanting to keep a modest policy with no ongoing cost.
50% reduction and no reduction options
Alternatively, you can elect a “50% reduction” or “no reduction.” With the 50% option, coverage declines by 1% per month after age 65 (or retirement, if later) until reaching 50%. Premiums beyond age 65 are smaller than for the no reduction, but there’s still a cost. If you choose “no reduction,” your full Basic amount remains as long as you pay the associated premium, which remains higher for life compared to the other options.
How Much Does FEGLI Cost in Retirement?
Premiums after retirement
FEGLI Basic coverage premiums are typically deducted from your annuity if you continue coverage. The cost structures are outlined in federal regulations and published by OPM. For the 75% reduction option, premiums stop after age 65 (or after retirement, if later). For the 50% or no reduction options, monthly premiums continue and are higher, particularly as you age. Optional coverage (like Option B and C) also carries age-based premiums, which may increase in retirement and are always paid fully by you.
Factors affecting cost over time
Key factors influencing your FEGLI cost include your age, the reduction option you select, and the type and amount of coverage maintained. Basic coverage costs generally become more favorable for those choosing the 75% reduction after age 65, while maintaining higher levels of coverage (Basic with no reduction or keeping Optional) substantially increases your monthly premiums in retirement.
What Happens If I Cancel FEGLI?
Process and impact of cancellation
You can cancel (waive) FEGLI coverage in retirement by submitting the appropriate form to OPM. Once canceled, you immediately lose all insurance benefits under the affected portion(s), including eligibility for future coverage or accidental death protection under FEGLI.
Irrevocability and possible exceptions
Generally, canceling or reducing FEGLI in retirement is irreversible. Barring reemployment in a position eligible for FEGLI, you can’t reelect or increase coverage after cancellation. Exceptions are rare and generally include specific qualifying life events, but these are outlined in OPM regulations and are not broadly applicable.
Is FEGLI the Right Choice for Retirees?
Questions to consider before deciding
Federal retirees should evaluate their personal and family financial needs before making a FEGLI decision. Consider your current health, life expectancy, survivor needs, employer-provided benefits, and whether you have alternative sources of life insurance or savings. Determining if you still need the protection, and how much, is a key first step.
Comparing FEGLI with other options
FEGLI remains a unique government group offering, but it’s important to compare the value, flexibility, and affordability of FEGLI to those of any other retirement resources available to you—such as savings, retirement income, or private coverage if you have it. Review your circumstances along with official OPM guidance to ensure your choice suits your long-term security.
