Key Takeaways:
- Federal employees often overlook benefits that can significantly enhance their retirement plans and overall financial security.
- Maximizing these underutilized perks could save you money and provide additional healthcare and insurance coverage options that boost your retirement income.
Federal Employee Benefits: The Perks You Might Be Overlooking (And Why You Shouldn’t)
- Also Read: Federal Employee Benefits You May Be Missing Out On—Here’s What to Watch For
- Also Read: Medicare Enrollment Mistakes That Federal Employees Need to Avoid This Year
- Also Read: FERS Plans Are Giving Federal Employees More Flexibility Than Ever Before
1. Flexible Spending Accounts (FSAs) – Tax Savings You Don’t Want to Miss
Federal employees have access to the Flexible Spending Accounts (FSAFEDS) program, which allows them to set aside pre-tax dollars for qualified expenses such as healthcare and dependent care. While many employees may know about this program, they might not fully realize the tax savings and budget flexibility it offers.
- Healthcare FSA: By contributing up to the annual limit, you reduce your taxable income and gain a pool of funds to cover out-of-pocket medical expenses. These can include prescription costs, co-pays, dental work, and vision care, all without dipping into your post-tax salary.
- Dependent Care FSA: If you have young children or dependents needing care, this account can be a lifesaver. Setting aside pre-tax dollars to cover daycare or other care expenses reduces taxable income while helping you manage a crucial part of your budget.
2. Federal Employees Dental and Vision Insurance Program (FEDVIP) – More Than Just Basic Coverage
Another underutilized benefit is FEDVIP. Many federal employees mistakenly assume that their Federal Employees Health Benefits (FEHB) plan covers all their healthcare needs. While FEHB offers comprehensive medical coverage, it often doesn’t provide sufficient dental or vision care.
FEDVIP fills these gaps by offering specialized plans with extensive coverage options, including preventive care, orthodontics, and vision correction procedures. Employees can tailor these plans to suit their needs, ensuring they don’t face unexpected out-of-pocket expenses for dental and vision care. This is especially important for retirees who may encounter more dental and vision issues as they age, making FEDVIP an essential supplement to standard FEHB coverage.
3. Long-Term Care Insurance (FLTCIP) – Planning for the Future Now
Federal Long Term Care Insurance Program (FLTCIP) is one of the most critical benefits that many employees overlook. This program is designed to help cover the costs associated with long-term care services, including home care, assisted living, or nursing home facilities—expenses that can add up significantly over time.
Investing in long-term care insurance early can help mitigate future healthcare costs, which may not be fully covered by FEHB or Medicare. Many people wait until retirement to consider long-term care options, but enrolling earlier means lower premiums and more comprehensive coverage. Ignoring this benefit could result in substantial out-of-pocket costs later in life.
4. Federal Employees’ Group Life Insurance (FEGLI) – Flexible Protection for You and Your Family
FEGLI is the largest group life insurance program in the world, but many federal employees fail to take full advantage of it. While basic coverage is automatically provided, FEGLI offers various options, including additional coverage (Option B) that extends beyond your basic plan.
As employees age, premiums for this extra coverage can rise, leading some to reconsider their choices. However, for younger employees or those just starting their careers, opting for additional coverage early ensures affordable rates and increased protection. It’s crucial to review these options periodically to adjust coverage based on life changes, like marriage, childbirth, or nearing retirement.
5. Thrift Savings Plan (TSP) Matching Contributions – Don’t Leave Money on the Table
The TSP is an essential component of federal employee benefits, offering a retirement savings plan similar to a 401(k). One of the greatest advantages of the TSP is the government’s matching contribution. However, many employees don’t take full advantage of this match, missing out on free money that could significantly boost their retirement savings.
For employees covered under the Federal Employees Retirement System (FERS), the government will match up to 5% of their contributions. This match is essentially free money—missing out means leaving valuable savings on the table. To maximize the TSP’s potential, employees should ensure they contribute enough to receive the full match, particularly since this is a significant portion of their overall retirement package.
6. Health Savings Accounts (HSAs) – Tax-Advantaged Healthcare Savings
While Health Savings Accounts (HSAs) are not available to all federal employees, those who choose high-deductible health plans (HDHP) through FEHB can benefit from this tax-advantaged account. HSAs offer threefold tax benefits: contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are tax-free.
For employees eligible for an HSA, this is an excellent way to save for future medical expenses while reducing taxable income. Funds can accumulate year after year, allowing for substantial growth that can be used in retirement to cover healthcare expenses.
7. Retiree Health Benefits – Coordination with Medicare
Federal employees often underestimate the value of their FEHB plan in retirement, especially when coordinating it with Medicare. For those eligible for Medicare, combining both programs can offer comprehensive healthcare coverage that minimizes out-of-pocket costs.
By maintaining FEHB into retirement and enrolling in Medicare Part B, retirees can gain access to a broader range of services and lower co-pays. While this combination might require additional planning and understanding of enrollment windows, it is an effective strategy for retirees looking to minimize healthcare expenses while maximizing benefits.
8. Special Retirement Supplement (SRS) – A Boost Before Social Security
Law enforcement officers (LEOs), firefighters, and other special category employees are often eligible for the Special Retirement Supplement (SRS), a lesser-known benefit designed to bridge the income gap between early retirement and Social Security eligibility. If you retire under special provisions, SRS can supplement your income until you qualify for Social Security, providing a financial cushion that enhances your retirement lifestyle.
Even if you are not eligible for SRS, it’s essential to understand similar provisions within the FERS system, like the Minimum Retirement Age (MRA) +10 option. These early retirement options can provide flexibility but also come with penalties that require careful consideration.
Maximize Your Benefits Now
Federal employees and retirees have access to an extensive range of benefits designed to enhance their financial and healthcare security. However, many of these perks remain underutilized, leaving employees with missed opportunities to save money and secure their futures. By taking the time to fully understand and maximize these benefits, you can gain financial advantages that extend well into retirement. Whether it’s through strategic use of your TSP, enrolling in supplemental insurance programs, or understanding the nuances of retiree healthcare, there’s a wealth of opportunity waiting to be uncovered.
