Key Takeaways
- The FEGLI 75 percent reduction significantly lowers Basic coverage and premiums after age 65 or retirement.
- Federal retirees can choose between no reduction, 50% reduction, or 75% reduction based on their needs and preferences.
Most federal retirees rely on the 75 percent reduction for their FEGLI Basic coverage. Understanding exactly how this transition works—and what it means for your long-term financial protection—can help you plan with confidence as you approach retirement.
What Is FEGLI 75 Percent Reduction?
Overview of FEGLI Basic
Federal Employees’ Group Life Insurance (FEGLI) is the primary life insurance plan for most federal employees. The Basic coverage is the required minimum and is automatically provided (unless waived) while you’re actively employed. The amount of Basic insurance equals your annual salary, rounded up to the next $1,000, plus $2,000, and is partially subsidized by the federal government during your working years.
How Reduction Works After Retirement
When you retire, you must decide if your FEGLI Basic coverage will remain at its full value, be reduced by 50%, or be reduced by 75% over time. The 75 percent reduction means your Basic coverage will gradually decrease to 25% of its original amount, lowering your eventual life insurance benefit. This phased reduction starts at age 65 or retirement, whichever is later, and directly affects your coverage and premium costs.
How Does the 75 Percent Reduction Work?
Timing of Coverage Changes
The FEGLI 75 percent reduction doesn’t begin immediately upon retirement. It takes effect on the first day of the month after you reach age 65 or retire (if you retire after 65), whichever occurs later. From that point, your Basic coverage reduces by two percent of its original value each month, continuing for 37 months, until it reaches 25% of the retirement amount.
Calculating Reduced Coverage Amount
Here’s how the calculation works: Suppose your FEGLI Basic coverage amount at retirement is $100,000. With the 75 percent reduction, your benefit decreases by $2,000 per month for 37 months (2% per month x 100,000 = $2,000 per month). After this period, your permanent Basic coverage is $25,000—the remaining 25%—and this amount remains for life without further premium payments.
Why Choose the 75 Percent Reduction Option?
Premium Cost Changes After Retirement
The 75 percent reduction is the most popular FEGLI option largely because it becomes premium-free following the reduction period. You pay regular group rates for Basic coverage up to age 65 or retirement, then no further premiums are required for the reduced amount. For many retirees, this offers a way to maintain some life insurance with no ongoing cost, aligning with a fixed retirement income.
Common Reasons FERS and CSRS Select It
Retirees under both FERS and CSRS frequently select the 75 percent reduction to provide a modest death benefit for final expenses or as a last legacy, without ongoing insurance costs draining their retirement budget. For those whose financial obligations have decreased, such as paying off a mortgage or supporting grown children, this option often matches changing insurance needs.
What Are the Alternatives to 75 Percent Reduction?
No Reduction Choice
If you want your full FEGLI Basic amount to remain in force for life, you may choose the “No Reduction” option. With this, your coverage does not decrease, but the OPM mandates that you pay significantly higher premiums throughout retirement for as long as you retain the full amount of coverage. The federal government stops contributing to the cost of Basic insurance after you retire and choose No Reduction.
50 Percent Reduction Explained
A mid-point between the other options, the 50 percent reduction allows your Basic coverage to decrease to 50% of its original value over 37 months. Like No Reduction, you must pay additional monthly premiums to keep this higher level of coverage, though premiums are lower than the No Reduction rate. The coverage provided and associated costs reflect your choice of reduced coverage amount.
How Do You Elect Your FEGLI Reduction?
Making the Election at Retirement
You officially select your FEGLI reduction option as part of your retirement paperwork, generally using the Standard Form 2818 (Continuation of Life Insurance). This is submitted to your agency or retirement processing office. You will be asked whether you want the 75 percent, 50 percent, or No Reduction, and your choice determines both your future coverage and premium obligations.
Changing Your Election Later
In most cases, your FEGLI reduction election is final—once submitted at retirement and your annuity begins, it cannot be reversed or changed. Exceptions are rare and generally require specific circumstances outlined in OPM guidance, such as a qualifying life event or a rollback if the retirement has not yet been finalized.
What Happens If You Change Your Mind?
Eligibility to Change After Retirement
After retirement, you usually cannot increase your Basic FEGLI coverage or switch from a reduction option to a less-reduced or “No Reduction” status. The coverage elected at retirement stays in effect unless you voluntarily cancel coverage. This underscores the importance of reviewing your needs before finalizing your election.
Impact on Premiums and Coverage
If you decrease your coverage after retirement (for example, by canceling a previously elected No Reduction or 50% Reduction), you may stop paying the associated premiums, and coverage drops to the 75% reduction default. However, you cannot reinstate previously dropped coverage or increase your elected amount.
What Should Federal Retirees Consider?
Balancing Cost and Coverage
Before choosing a reduction option, carefully evaluate your priorities: how much coverage you need in retirement, whether you have other sources of financial protection or life insurance, and how premium costs may affect your retirement budget. The 75 percent reduction balances continued insurance with affordability, but may not meet every retiree’s needs.
Other Federal Benefits to Factor In
Consider how FEGLI interacts with other retirement income sources and benefits, such as your annuity, Social Security, Thrift Savings Plan (TSP), or Federal Employees Health Benefits (FEHB). Your total financial situation—not just your life insurance—should help drive your decision on FEGLI reductions.
