Key Takeaways
- The cost of healthcare premiums is rising significantly, and there are important updates to retirement savings plans that all federal employees should be aware of.
- New updates in TSP rules, Medicare coordination, and life insurance options could significantly impact your retirement planning.
Federal Employee Benefits Are Changing Again—Here’s What You Need to Know to Keep Up in 2024
- Also Read: Seven Reasons FEHB Plans Continue to Be the Gold Standard for Federal Employees in Today’s Market
- Also Read: From TSP to Pensions: How Divorce Settlements Are Impacting Federal Employees’ Long-Term Plans
- Also Read: What the Postal Service Health Benefits Program Means for Your Future Coverage
Prepare for Higher Healthcare Premiums in 2024
A significant change for 2024 is the rise in healthcare premiums under the FEHB program. On average, premiums will increase by 13.5%, with individual increases varying based on plan selection. This is nearly double last year’s increase, making it crucial to reassess your current plan and explore alternatives during the Open Season.
Open Season gives you the opportunity to review your healthcare plan options and select the one that best meets your needs. With premiums rising, now is the time to consider whether a higher deductible plan or a plan with lower out-of-pocket costs may save you money in the long run. For retirees, the transition to Medicare can also be a key factor—coordinating your FEHB plan with Medicare Part B might help reduce some of the financial burden.
Maximize Your Retirement Contributions—TSP Updates for 2024
For 2024, the Thrift Savings Plan (TSP) contribution limit has increased to $23,000, up from $22,500 in 2023. If you are aged 50 or older, you can take advantage of an additional $7,500 in catch-up contributions, allowing for a total of $30,500 in annual contributions.
The Secure 2.0 Act also brings important updates. One major change is that Roth balances in TSP accounts will no longer be subject to Required Minimum Distributions (RMDs) prior to the participant’s death, effective 2024. This means retirees with Roth balances will have more flexibility in how they manage their retirement withdrawals.
For employees nearing retirement or planning long-term, it’s critical to review how these changes impact your overall retirement strategy. Maximizing contributions, especially when eligible for catch-up provisions, is an excellent way to ensure a more secure retirement. Make sure you’re contributing at least 5% of your salary to take full advantage of matching contributions from your agency.
Social Security Considerations—Timing Matters
Social Security remains a key component of retirement planning for federal employees under FERS. You can begin receiving benefits as early as age 62, but doing so comes with a permanent reduction in your monthly benefit—up to 30% if you claim before your full retirement age, which is between 66 and 67, depending on your birth year.
On the other hand, delaying Social Security past your full retirement age increases your benefit by about 8% per year, up to age 70. This increase can make a significant difference in your monthly income during retirement, so it’s important to weigh your options carefully. Consider how your Social Security benefit will complement your TSP withdrawals and FERS pension when deciding the best time to claim.
New Postal Service Health Benefits (PSHB) Program—Get Ready for 2025
While the full transition won’t happen until 2025, postal employees should start preparing for the shift from FEHB to the Postal Service Health Benefits (PSHB) program. The PSHB will replace FEHB coverage for USPS employees and retirees, offering plans tailored specifically to their needs. Postal workers who are currently enrolled in FEHB will have until the end of 2024 to choose a PSHB plan.
If you’re a postal employee or retiree, this change will affect your healthcare options moving forward. Be sure to closely follow updates and plan details during the 2024 Open Season to ensure that you have the coverage you need when the transition occurs. It’s important to understand how this will affect your out-of-pocket costs, coverage levels, and any potential coordination with Medicare.
Life Insurance—Changes to FEGLI in 2024
The Federal Employees’ Group Life Insurance (FEGLI) program remains a valuable option for many federal employees, but the costs of maintaining this coverage increase significantly with age. If you have chosen Option B for additional coverage, your premiums could become prohibitively expensive as you near retirement.
In 2024, it’s more important than ever to evaluate whether FEGLI is the best option for your life insurance needs, especially as you approach retirement. Many employees consider reducing their coverage levels or transitioning to private life insurance plans to avoid rising costs. Be sure to assess your current needs, including any remaining financial obligations such as a mortgage or dependents’ education, to make the best decision for your situation.
Survivor Benefits—Securing Your Family’s Future
Ensuring your loved ones are financially secure in the event of your death is a critical part of retirement planning. Under both CSRS and FERS, survivor benefits can be elected at the time of retirement, but the rules differ between the two systems. For example, under FERS, your spouse can receive up to 50% of your unreduced annuity. If you’re under CSRS, different options may be available, but the maximum survivor annuity could be higher.
It’s essential to keep your beneficiary designations up to date, especially after major life changes such as marriage, divorce, or the birth of a child. This includes updating not only your FEGLI and survivor benefits but also your TSP account beneficiaries. Taking the time to review these details ensures that your family will be financially protected in case of the unexpected.
Flexible Spending Accounts—2024 Updates
For employees participating in Flexible Spending Accounts (FSAs), the contribution limit for healthcare FSAs remains at $3,050 in 2024, while dependent care FSAs have a limit of $5,000. FSAs allow you to set aside pre-tax dollars to cover eligible healthcare and childcare expenses, reducing your taxable income and saving you money in the process.
However, FSAs come with a “use it or lose it” rule, meaning that any unused funds at the end of the year could be forfeited. Some plans offer grace periods or allow small rollovers, so it’s important to review your plan details carefully. Be sure to plan your FSA contributions wisely, especially if you anticipate significant healthcare or childcare expenses in the upcoming year.
Rising Costs and Retirement Planning
As healthcare costs continue to rise and changes to federal benefits take effect, federal employees and retirees need to be more proactive than ever in managing their benefits. Rising premiums, changes in TSP rules, and potential adjustments to life insurance coverage mean that carefully reviewing your benefits each year is critical.
It’s always a good idea to consult with a financial advisor who understands federal benefits to ensure you’re making the most of your retirement savings and maximizing your benefits. With careful planning, you can avoid the pitfalls of rising costs and secure a comfortable retirement.
Plan for a Secure Financial Future in 2024
Staying informed about changes to federal employee benefits is critical as we move into 2024. Healthcare premiums are increasing, retirement savings opportunities are expanding, and life insurance costs are shifting. Whether you’re an active employee or already retired, taking the time to understand these changes and adjust your plans accordingly will help you stay financially secure in the years ahead.
