Key Takeaways
- Understand how your FEGLI coverage and costs can change once you retire from federal service.
- Learn your options for adjusting, reducing, or maintaining FEGLI coverage in retirement to meet your evolving needs.
Did you know many retirees see unexpected FEGLI premium changes after leaving service? Understanding your options now can help avoid surprises and ensure the right coverage for your retirement needs.
What Is FEGLI for Retirees?
Overview of the FEGLI program
The Federal Employees’ Group Life Insurance (FEGLI) program offers term life insurance to eligible federal employees and retirees. Established to provide financial protection
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Who is eligible in retirement
To carry FEGLI coverage into retirement, you must have had coverage for at least five years immediately before retiring—or since your first opportunity to enroll. Eligibility hinges on meeting service time requirements and retiring under a qualifying federal retirement system, such as CSRS or FERS. If you meet these criteria, you maintain access to some level of FEGLI coverage after leaving government service.
Types of coverage available post-retirement
FEGLI in retirement offers continued Basic coverage along with some optional coverages (A, B, and C), provided you carried those options into retirement. However, choices about how much coverage to keep—and how much to reduce—become crucial, as costs and needs can change in retirement.
How Does FEGLI Cost Change After Retirement?
Premium structure before and after retirement
While you’re working, FEGLI premiums for Basic insurance are generally shared between you and your agency, and are deducted from your paycheck. In retirement, you (the annuitant) are responsible for the full cost, which is then taken out of your retirement annuity. Optional coverage premiums, which were always fully your responsibility, also shift to deduction from your annuity.
Factors impacting cost in retirement
FEGLI premiums for retirees depend on several key factors: the amount of coverage retained, your age, the reduction option you select, and which optional coverages you’ve elected. Premiums for some FEGLI options—especially Option B and C—may increase every five years as you age, unless you choose to reduce or cancel them upon retirement.
Managing and budgeting for FEGLI premiums
Keeping track of your FEGLI premiums is essential as you manage your retirement income. Review your retirement annuity statements regularly for FEGLI premium deductions, and consider the long-term impact as costs may rise with age. Working with a benefits specialist or counselor can help you forecast your expenses and weigh the value of continued coverage versus your changing needs.
What Are FEGLI Reduction Choices?
Understanding reduction options
When you retire, you choose among different FEGLI reduction options for your Basic coverage: No Reduction, 50% Reduction, or 75% Reduction. With Option B and C, you decide whether to keep full coverage (for a limited period) or allow it to reduce to zero over time, which eliminates ongoing premiums for those options.
When and how to elect reductions
Reduction elections are typically made as part of your retirement application—but if you don’t submit your choices on time, you may default to the standard (usually 75% Reduction for Basic). Decisions about Option B and C should be made before separation to ensure you keep the level of coverage you want and avoid unwanted premium increases.
Consequences of each reduction choice
Selecting a higher reduction percentage (like 75%) generally means your coverage amount decreases gradually, but your post-retirement FEGLI premiums are lower—and may eventually stop. Choosing No Reduction leaves you with higher ongoing premiums but maintains your full pre-retirement coverage. Make your choice based on whether you need significant coverage later in life, or if reduced coverage (with lower cost) is a better fit for your needs.
Which FEGLI Coverage Options Remain Available?
Basic coverage in retirement
Most eligible retirees carry some form of Basic coverage, which can continue for life. Depending on the reduction option you select, your benefits and costs will adjust accordingly. Basic coverage offers a straightforward way to maintain a financial safety net for beneficiaries.
Optional coverage: A, B, and C explained
- Option A (Standard): Generally provides a fixed, modest additional benefit; reduction and cost rules are straightforward.
- Option B (Additional): Lets you multiply your salary-based coverage in increments, with costs and reduction options changing significantly after retirement. You may keep all or let it reduce to zero.
- Option C (Family): Covers eligible family members; you can keep or reduce it similarly to Option B, with long-term costs dependent upon the level retained.
Timing and process for coverage changes
Decisions on keeping, reducing, or dropping FEGLI options should be made before separating from service. After retirement, coverage changes are generally limited to reducing or canceling (rather than increasing) existing coverage. Keep detailed records and submit any FEGLI election forms promptly to avoid default elections.
Can You Cancel or Adjust FEGLI After Retiring?
Steps to reduce, cancel, or change FEGLI
You have the right to decrease or cancel FEGLI coverage at any time in retirement. To do so, complete the designated OPM (Office of Personnel Management) forms and submit them directly. Coverage reductions are usually processed the month after your request is received; keep confirmation records for your files.
Deadlines and forms to consider
While reductions or cancellations can generally be done anytime post-retirement, increases or re-enrollments are not permitted. The primary form is the OPM Form 2818 (Continuation of Life Insurance Coverage), used as you retire. After retirement, written requests or OPM forms will be required for any adjustments.
Other considerations before making changes
Before reducing or dropping FEGLI, review your current and future life insurance needs. Consider any dependents, debts, or legacy goals—and remember, once you reduce or cancel FEGLI in retirement, you cannot add new coverage later.
What If Your Coverage Needs Change?
Assessing life insurance need in retirement
Your coverage needs often change as you move through retirement. Start by reviewing your income, assets, outstanding debts, and the needs of any dependents. If your family’s financial obligations are lower, you might decide less coverage is sufficient. On the other hand, those seeking to leave a legacy or cover final expenses may still want substantial insurance.
Alternatives and supplemental resources
If FEGLI no longer meets your needs, consider exploring other life insurance products that align with retirement goals. Many retired federal employees also review group plans through associations or private insurers. Remember, insurers may require medical underwriting if you look for individual policies post-retirement.
How to review your benefit choices
Regularly revisit your benefit choices—especially if your financial situation or family structure changes. Annual reviews, discussions with retirement counselors, and reading federal benefits literature will help ensure your coverage matches your current needs.
