7 Federal Employee Benefits That Most Workers Don’t Take Full Advantage Of

Lisa Jordan
April 26, 2025

Key Takeaways

Many federal employees don’t maximize their benefits, leaving valuable resources on the table. Understanding how to fully utilize these programs can significantly impact your financial future.
Retirement savings, insurance options, and tax advantages offer hidden perks that can make a difference in your long-term planning. Knowing what’s available and how to leverage it is crucial.

Are You Overlooking These Federal Employee Benefits?

As a federal employee, you have access to one of the most comprehensive benefits packages available. But here’s the thing: many workers don’t take full advantage of the benefits that could significantly improve their retirement security, financial stability, and overall well-being. You might be missing out on savings, enhanced insurance coverage, and opportunities to stretch your hard-earned dollars further. Let’s dive into some of the most underutilized benefits and how you can make the most of them.

1. Federal Employees Retirement System (FERS) Annuity Enhancements

FERS provides a pension that many federal employees underestimate. While you might already know about your annuity, are you maximizing its value? The key factors affecting your pension are your High-3 average salary, years of service, and the retirement system’s formulas.

Delayed Retirement Benefits: Did you know that postponing your retirement could increase your pension? The FERS annuity supplement helps bridge the gap until you reach age 62, but it stops at 62, regardless of when you claim Social Security. However, delaying your Social Security benefits beyond your full retirement age (67 for those born in 1960 or later) can increase your monthly payments.
Survivor Benefits: If you’re married, consider how survivor benefits work. A 50% survivor annuity costs 10% of your pension, but it ensures your spouse continues to receive a portion of your benefits.

2. Thrift Savings Plan (TSP) Matching Contributions & Catch-Up Contributions

The TSP is often compared to a 401(k), but it has unique advantages that many federal employees fail to fully use.

Employer Matching: If you’re not contributing at least 5% of your salary, you’re leaving free money on the table. The government matches your contributions dollar for dollar up to 5%.
Catch-Up Contributions: If you’re 50 or older, you can contribute additional funds beyond the regular TSP limit. For 2025, the standard limit is $23,500, but catch-up contributions allow you to add another $7,500. If you’re between ages 60-63, the catch-up limit is $11,250, increasing your total contribution potential. This needs confirmation for 2025.
Roth vs. Traditional TSP: You can choose between pre-tax (Traditional TSP) and after-tax (Roth TSP) contributions. Roth TSP withdrawals in retirement are tax-free, which can provide significant tax savings.

3. Federal Employees Health Benefits (FEHB) & Coordination with Medicare

Health coverage under FEHB is a major perk, but many employees don’t realize how to optimize their benefits in retirement.

Maintaining Coverage After Retirement: If you were enrolled in FEHB for at least five years before retiring, you can keep your plan in retirement.
Medicare & FEHB Coordination: Enrolling in Medicare Part B at 65 may reduce your out-of-pocket costs, and some FEHB plans offer incentives like lower copayments and reduced deductibles for Medicare enrollees. However, not all plans provide cost savings, so it’s essential to review your options.
Flexible Options for Coverage: You can switch plans every Open Season, allowing you to choose the most cost-effective option as your healthcare needs change.

4. Federal Employees Group Life Insurance (FEGLI) Adjustments

FEGLI provides life insurance coverage, but are you managing it wisely? Many federal employees either overpay for coverage they no longer need or miss opportunities to expand their benefits.

Choosing the Right Coverage Level: Your FEGLI premiums increase with age. It’s worth reevaluating whether you need the Basic, Option A, Option B, or Option C coverage levels.
Alternatives to FEGLI: While FEGLI is convenient, its costs can rise significantly in retirement. Some retirees opt to reduce their coverage or explore private alternatives.
Post-Retirement FEGLI Reduction Choices: If you keep FEGLI into retirement, you can select 50%, 75%, or no reduction to balance your costs and coverage.

5. Federal Long Term Care Insurance Program (FLTCIP)

Long-term care is expensive, and many federal employees don’t think about it until it’s too late. The FLTCIP provides coverage for extended care needs, such as nursing homes, assisted living, and in-home care.

Enrollment Suspension: As of 2022, FLTCIP is suspended for new enrollees, meaning you currently cannot sign up. However, existing policyholders remain covered.
Protecting Your Retirement Savings: Without long-term care coverage, you could deplete your retirement funds paying for extended care services.
Spousal Coverage Available: Your spouse can also enroll if they already have an existing policy.

6. Flexible Spending Accounts (FSA) & Health Savings Accounts (HSA)

Many federal employees forget to take advantage of FSAs and HSAs, which can provide tax-free savings for medical expenses.

FSA Limits for 2025: You can contribute up to $3,300 in a Healthcare FSA, reducing your taxable income.
HSA Advantages: If you have a High Deductible Health Plan (HDHP), you qualify for an HSA, which allows tax-free contributions, growth, and withdrawals for medical expenses. The 2025 HSA contribution limit is $4,300 for individuals and $8,550 for families.
Use-It-or-Lose-It Rule for FSAs: Some plans allow limited carryover, but it’s important to use most of your funds before the year ends.

7. Social Security Strategies for Federal Employees

Many federal employees don’t optimize their Social Security benefits when planning for retirement.

FERS Employees & Social Security: Since FERS employees pay into Social Security, you should factor it into your retirement income strategy. Delaying benefits beyond age 62 results in an 8% annual increase until age 70.
Windfall Elimination Provision (WEP) Repeal in 2025: The repeal of WEP means CSRS retirees can now receive their full Social Security benefits. However, the Government Pension Offset (GPO) still applies, so some retirees may still face reductions in spousal or survivor benefits.
Understanding Spousal Benefits: If you’re married, you may be eligible for a spousal or survivor benefit, which can supplement your retirement income.

Make the Most of Your Federal Benefits Now

Your federal benefits are designed to provide financial security, but you have to take the right steps to maximize them. Whether it’s increasing your TSP contributions, adjusting your FEHB plan, or reevaluating your FEGLI coverage, small decisions can lead to significant financial gains. Don’t leave money on the table—take control of your benefits today!

Need help navigating your benefits? Get in touch with a licensed agent listed on this website to ensure you’re making the best choices for your retirement future.