Key Takeaways:
- Federal employee benefits are undergoing significant updates that may affect your retirement planning, healthcare coverage, and overall financial well-being.
- Staying informed about these changes is crucial to making the best decisions for your future, whether you’re still working or already retired.
What’s Changing for Federal Employee Benefits in the New Year?
- Also Read: How Federal Workers Are Finding Creative Ways to Retire Early Without Sacrificing Their Future Financial Health
- Also Read: Federal Workers Are Turning to TSP for Long-Term Growth Despite Market Volatility—Here’s Why
- Also Read: What Federal Employees Are Asking About Medicare Enrollment Deadlines This Year
Federal Employees Health Benefits (FEHB) Updates
Healthcare is a cornerstone of your benefits package, but premiums and coverage are evolving.
Rising Premiums and Deductibles
Each year, FEHB plans typically adjust their costs. This year, premiums are expected to rise by 13.5% on average, with some plans increasing more than others. If you’re retired, you’ll want to look closely at how these hikes might affect your budget. For active employees, these increases might slightly cut into your take-home pay.
Medicare Integration Considerations
If you’re approaching 65, combining FEHB with Medicare could provide better coverage at reduced out-of-pocket costs. For retirees who already have Medicare, understanding how changes to FEHB plans might complement Medicare updates is key to managing expenses effectively.
Open Season: Your Chance to Make Changes
Remember, Open Season runs from mid-November to early December each year. It’s your annual opportunity to compare plans, assess your needs, and switch to a more suitable option.
Retirement Contributions: Are You Saving Enough?
Your Thrift Savings Plan (TSP) is a critical piece of your retirement puzzle. The government has raised the 2024 contribution limit to $23,000, with an additional catch-up limit of $7,500 for those aged 50 or older.
Matching Contributions Add Up
If you’re still an active employee, ensure you’re contributing enough to take full advantage of agency matching. Missing out on these contributions is like leaving free money on the table.
The SECURE 2.0 Act Changes Are Coming
Starting in 2025, the SECURE 2.0 Act will allow higher catch-up contributions for those aged 60-63. Planning ahead for these changes could significantly boost your retirement savings.
Pension Adjustments for FERS and CSRS Retirees
If you’re a FERS or CSRS retiree, your annuity is a significant part of your retirement income.
Cost-of-Living Adjustments (COLAs)
Expect a COLA increase of around 3.2% for 2025, which helps counteract inflation. While this increase is welcome, it’s also a reminder to review your budget and ensure your income aligns with rising living costs.
Social Security Implications
For FERS employees, Social Security benefits form part of your retirement package. If you’re considering early retirement, the Earnings Test Limit for 2024 is $22,320 annually. This means your benefits could be reduced if you earn above this threshold before reaching your full retirement age.
Life Insurance Premium Increases
The Federal Employees’ Group Life Insurance (FEGLI) program remains an important benefit, but premium costs rise significantly with age.
Planning Ahead for FEGLI Costs
If you’re nearing retirement or already retired, consider whether your FEGLI coverage still fits your needs. Evaluating alternatives or reducing coverage levels might save you money while still providing adequate protection.
Postal Service Health Benefits (PSHB) Transition
Big changes are coming for postal employees. If you’re part of the United States Postal Service, you’ll transition from FEHB to the new Postal Service Health Benefits (PSHB) program by January 2025.
Key Details for Retirees
If you retired on or before January 1, 2025, and don’t already have Medicare Part B, you’re exempt from enrolling to keep your PSHB coverage. If you’re eligible but not enrolled, you’ll need to sign up for Medicare Part B to maintain your benefits.
Prepare for Open Season
Like FEHB, PSHB will offer a variety of plan options. Use Open Season to evaluate these choices and ensure you’re selecting the best plan for your family’s needs.
Long-Term Care Insurance Changes on the Horizon
The Federal Long Term Care Insurance Program (FLTCIP) is currently under a two-year suspension for new enrollments. This pause, which began in December 2022, is intended to address financial stability concerns within the program.
Existing Enrollees: What You Need to Know
If you’re already enrolled, your coverage remains unchanged. However, you may face premium increases during this review period. Keep an eye out for announcements regarding the program’s future.
Special Retirement Benefits for Law Enforcement and More
Law enforcement officers (LEOs), firefighters, and other special category employees have unique retirement benefits.
Early Retirement Eligibility
You can retire after 20-25 years of service, often at a younger age than other federal employees. These benefits come with higher contributions during your career, but they’re worth it for the earlier retirement option.
The Special Retirement Supplement
LEOs under FERS may also receive the Special Retirement Supplement (SRS), which bridges the gap until Social Security eligibility at age 62. If this applies to you, ensure you understand the eligibility requirements and how this benefit integrates with other retirement income.
Planning for a Secure Retirement: What You Can Do Now
Federal benefits offer plenty of advantages, but they require active management to maximize their value. Here’s how you can prepare for these upcoming changes:
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Review Your Benefits Annually
Whether it’s FEHB, FEGLI, or TSP, take time each year to assess your benefits. Are you contributing enough to your TSP? Are your healthcare costs manageable? -
Take Advantage of Resources
OPM provides tools and calculators to help you estimate retirement income, assess healthcare costs, and more. Use these resources to make informed decisions. -
Stay Informed About Policy Changes
Federal benefits programs are complex and frequently updated. Staying informed ensures you’re not caught off guard by changes that could affect your financial security.
Don’t Let Changes Catch You Off Guard
Federal benefits are an essential part of your compensation package, and understanding upcoming changes can help you stay ahead of the curve. Whether it’s rising healthcare costs, adjustments to retirement contributions, or new policies for specific employee groups, being proactive ensures you’ll make the most of your benefits in the new year.
