Federal Employee Retirement Benefits Including FEGLI, FEHB, Long Term Care, Thrigt Savings, and COLAs.

CSRS and FERS federal employee retirement benefits are generous, however they will cost you retirement dollars, especially for health and life insurance coverage. Uncle Sam will continue federal employee's health benefits, as long as you were enrolled in the program for the last five years, however you must pay the same monthly amount that you paid while working. You can also continue life insurance coverage and if you participated in the Thrift Savings plan you have many withdrawal options to consider.

Federal Employees Group Life Insurance (FEGLI) provides group term life insurance. As such, it does not build up any cash value or paid-up value. It consists of Basic life insurance coverage and three options. In addition to the Basic, there are three forms of Optional insurance that you can elect. You must have Basic insurance in order to elect any of the options. Unlike Basic, enrollment in Optional insurance is not automatic -- you must take action to elect the options.

The cost of Basic insurance is shared between you and the Government. You pay 2/3 of the total cost and the Government pays 1/3. Your age does not affect the cost of Basic insurance. You pay the full cost of Optional insurance, and the cost depends on your age.

The Office of Federal Employees' Group Life Insurance (OFEGLI), which is a private entity under contract with the Federal Government, processes and pays claims under the FEGLI Program. Your beneficiaries must submit a claim to the OFEGLI to collect on the policy. They can call them at 1-800-633-4542 to follow-up on submitted claims. See the Survivor's page for additional reporting procedures.

Visit OPM's web site to use their excellent FEGLI insurance calculator, their link is listed below. It calculates what your payments will be before and after retirement. You can elect to keep full coverage, 50% reduction or 75% reduction. The reductions don't start until you reach age 65 and with the 75% reduction you pay nothing from age 65 on. The SF-2801 form also lists everything you will need to know before making your selection.

Before you make an election I suggest that you review your estate first. An excellent resource for this is "Plan Your Estate." This book will help you evaluate your personal situation and this evaluation will help you determine how much insurance you will need in retirement.

When you retire your agency will automatically transfer your enrollment to OPM if you are eligible. To continue your health benefits enrollment into retirement, you must: (1) have retired on an immediate annuity (that is, an annuity which begins to accrue no later than one month after the date of your final separation); and (2) have been continuously enrolled (or covered as a family member) in any FEHB Program plan (not necessarily the same plan) for the five years of service immediately preceding retirement, or if less than five years, for all service since your first opportunity to enroll.

If you die while a compensationer, your family members can continue your enrollment if you were enrolled for Self and Family at the time of your death and at least one of your covered family members receives compensation as a surviving beneficiary under the Federal Employees' Compensation law.

For your surviving family members to continue your health benefits enrollment after your death, all of the following requirements must be met:

All of your survivors who meet the definition of "family member" can continue their health benefits coverage under your enrollment as long as any one of them is entitled to a survivor annuity. If the survivor annuitant is the only eligible family member, the retirement system will automatically change the enrollment to Self Only. Your surviving spouse should follow up with OPM to insure this action was taken. If it wasn't, your spouse will be paying considerably higher Family Option premiums.

Under FERS, your surviving spouse who is entitled to a basic employee death benefit, or your surviving children whose benefits are offset by Social Security, may continue your health benefits enrollment by paying premiums directly to OPM.

If the survivor annuity is not large enough to cover the enrollee share of the premiums for your plan, your survivors may either change to a lower-cost plan or option (one in which the enrollee share of the premium is low enough to be withheld from the annuity) or choose to pay the premiums directly to the retirement system. Even if your employing office thinks that the survivor annuity will not cover the enrollee share of the premiums, your retirement system will transfer in the enrollment. The retirement system will notify your survivors of their options and take whatever actions they request.

When your surviving spouse will not receive any survivor benefits because your former spouse has a court-ordered entitlement to a survivor annuity, your surviving spouse can continue FEHB coverage if you had a Self and Family enrollment. The retirement system will notify your surviving spouse of his/her options and take whatever actions are requested.

When the retiree's spouse is not a federal employee they will most likely need FEHB coverage in retirement. The rules are different for CSRS and FERS employees and this is a major consideration for federal employees who intend to retire and leave their spouse other than a full survivors annuity.

Under CSRS your spouse will be eligible for FEHB coverage as long as you provide them with a survivors annuity. It can be any amount. In my opinion it is best to provide a survivors annuity large enough to cover FEHB expenses however it isn't necessary. If you elect a survivors annuity of $3600, enough to cover many plan costs, your annuity will be reduced by 2.5%.

FERS retirees must elect either 50% or 25% survivors annuity for your spouse to be eligible for FEHB coverage in retirement. The 50% election will cost you 10% of your full annuity and the 25% survivor annuity election will cost you 5% of your full annuity in retirement.

There are a few improvements in this program that I would hope will eventually extend to our FEHB plans. Primarily, the FEDVIP Plans offer three rate options, Self, Self + 1, and Self & Family. This has been long overdue and it benefits those empty nesters who previously had to pay high Family option premiums to cover the employee and a spouse. The monthly costs seem reasonable, maybe because I live in rating area #1 which offers the lowest premiums. Look over your options closely and compare plans.

The U.S. Office of Personnel Management (OPM) awarded contracts to insurance carriers that will offer supplemental dental and vision benefits under the new Federal Employees Dental and Vision Insurance Program. OPM selected the following companies to provide these services:

Dental plans provide a comprehensive range of services, including but not limited to the following:

The new program becomes effective on December 31 and gives federal employees additional healthcare choices. Employees may enroll for dental benefits, vision benefits or both.

The program allows employees to use pre-tax dollars to pay for their vision and dental premiums. However, as specified by law, there is no federal government contribution.

The Federal Employees Dental and Vision Benefits Enhancement Act of 2004 was signed into law by President Bush on December 23, 2004. The Act requires OPM to establish arrangements under which supplemental dental and vision benefits will be made available to federal employees, retirees, and their dependents, and it gives OPM broad contracting authority to leverage the purchasing power of federal enrollees.

Dental rates for those living in the United States are determined based on where you live. This is called a rating area. To find your bi-weekly or monthly Dental premium, you must first find your rating area on the charts at the OPM web site. You can view 2008 dental rates for all areas online. The OPM site offers complete information on programs, prices and and carriers. Rates for the dental program range from as little as $15.80 per month (rating area 1) under a standard plan for self only to as high as $123.00 per month (rating area 5) under a high plan for self and family.

Vision Rates are not based on where you live and the chart that follows is excerpted from the OPM web site. Retirees would pay a monthly rate that various anywhere from as little as 9.36 in rating area 1 for the standard plan (self only) to as high as $123.00 for the High Option Plan (Self & Family in ) in rating area 5.

If you have questions, contact OPM at fedvip@opm.gov or call them at (202)606-0745.

For questions regarding the Federal Employees Dental and Vision Insurance Program, please contact the customer service representatives at 1(866) 639-3917.

Another consideration is the federal employee's Long Term Care insurance program administered by the John Hancock and MetLife insurance companies. I highly recommend investigating and purchasing this coverage BEFORE you retire. The younger you are when you elect coverage the lower you monthly payments will be. The government plan is very reasonable compared to most private plans that I researched. My wife and I decided that we needed Long Term Care more than we needed additional life insurance coverage. We elected the future purchase option and $125 a day coverage for 5 years, total insurance coverage of $228,125. There was one inflation adjustment since I enrolled and my coverage is now $135 a day with total lifetime coverage of $246,375. My coverage costs $41.22 per month and my wife, who is a year younger than me, pays $38.63. You don’t have to accept inflation adjustments if you don’t want them with the future purchase option. Call 1-800-582-3337 to request their benefit booklet. One of the key advantages of this program is that you can op to pay family members to take care of you for up to one year of coverage and you have so many more care options available. You will be less likely to deplete your estate or become a burden to your family if you have this coverage.

TSP stands for the Thrift Savings Plan. The TSP is an important benefit designed to help you save for your future. The TSP is comparable to a private-sector tax-deferred 401(k) plan. You can participate in the TSP if you are covered by FERS, CSRS, or CSRS Offset.

The TSP offers all participants:

The TSP is especially important for FERS employees because it is one of three parts of your retirement coverage. Employees can now contribute as much as 14% of basic pay each pay period, up to the IRS annual limit.

CSRS employees do not receive Government contributions in their TSP accounts. However, CSRS employees can still take advantage of the TSP to provide a source of retirement income in addition to your CSRS retirement benefit. CSRS employees can contribute up to 9% of basic pay each pay period.

The four articles from the National Institute of Transition Planning (NITP) are very helpful.

CSRS employees don't pay social security during their working years. However, if you worked in the private sector or served in the military you will have a number of Social Security quarters accumulated. To collect Social Security you must have 40 quarters, 10 years of private sector or military service. You can call or write Social Security for a summary report of your contributions. This report will let you know if you are eligible for benefits and provides a detailed list of all Social Security earnings. You can request statements online at http://www.ssa.gov/mystatement or call 1-800-772-1213.

Retirees with 40 quarters or more are eligible for benefits as early as age 62, but benefits are permanently reduced for each month of entitlement prior to the full-benefit retirement age, currently age 65. The age at which unreduced benefits are payable will be increased gradually from age 65 to 67 over a 21-year period beginning with individuals who reach age 62 in the year 2000. (The age of eligibility for Medicare is not affected by these changes.)

Unfortunately, federal CSRS retirees are subject to the Windfall Elimination Provision (WEP) that reduces Social Security benefits for those with less than 30 years of substantial coverage and who earned a retirement benefit from employment not covered by Social Security - your CSRS service for example. If you are subject to WEP, your earned Social Security benefits will be calculated using a modified formula. The modified formula IS NOT used in computing survivor benefits upon your death. Generally speaking, a CSRS retiree's social security will be reduced however the current maximum reduction is approximately $325.

If you have active military time, and are eligible to collect Social Security at age 62,
your annuity will decrease unless you buy back your military time.

FERS employees who retire After their Minimum Retirement Age (MRA) with 30 years of service will receive a Special Retirement Supplement which is paid as an annuity until you reach age 62 and become eligible for Social Security.

To become eligible for benefits, you and your family must meet different sets of requirements for each type of benefit. An underlying condition of payment of most benefits is that you have paid Social Security taxes for the required period of time.

The amount of monthly benefits you receive is based on three fundamental factors:

If you have active military time, and are eligible to collect Social Security at age 62,
your annuity will decrease unless you buy back your military time.

If you accrued 40 quarters (10 years) of employment where social security payments were withheld you are eligible for benefits. Your Primary Insurance Amount (PIA) which is simply your Social Security payment will be impacted. The Windfall Elimination Provision (WEP) can significantly reduce your Social Security payout. Many federal employees have held other jobs before, during, and after retirement including feds who served active military and/or Reserve and National Guard duty where earnings were subject to Social Security. If you aren’t sure if you are eligible you need to contact Social Security at 1-800-772-1213 or visit their excellent web site at www.socialsecurity.gov to request a history of your Social Security payment and status.

This provision reduces your Social Security benefits if you have less than 30 years of what is called “substantial” coverage and earned a CSRS federal retirement benefit. Substantial earnings equaled $2,250 dollars in 1972 and $16,725 in 2005. A complete list of substantial years is included on the Social Security web site. A WEP calculator is available at http://www.socialsecurity.gov/retire2/anyPiaWepjs04.htm.

If you receive a relatively low pension, you are protected. “Your Social Security reduced benefit cannot be more than one-half of that part of your pension based on your earnings after 1956 from which Social Security taxes were not deducted.”

I used the WEP calculator listed above and my Social Security payout was reduced by $188. My reduction is low because I’ll have 25+ years of substantial Social Security earnings by the time I actually stop working and really retire.

The Government Pension Offset, or GPO, is a second provision of the Social Security law that affects many Federal employees. It affects workers who are entitled to a pension based on work in a Federal, State, or local government that was not covered by Social Security, such as CSRS. It also affects employees who transfer to FERS, but do not work for 5 years under FERS. The GPO does not affect employees who were required by law to have Social Security coverage -- such as employees who were automatically covered by FERS without electing it, and people with CSRS Offset coverage.

The GPO affects the Social Security benefits you may be entitled to as a spouse, former spouse, or surviving spouse of someone who is eligible for a full Social Security benefit. Under the GPO, your Social Security spousal benefit will be reduced by $2 for every $3 you receive from your CSRS annuity. Your own Personal Earnings and Benefit Estimate Statement (PEBES) will not give you information about the impact of the GPO. You need to review your spouse's (PEBES), which will give you information about your spousal benefit and adjust that amount.

If you leave Federal service and return to a CSRS-covered appointment after more than 365 days, you would be required by law to have Social Security coverage, so you would have CSRS Offset coverage. In this case, you would be exempt from the GPO. In addition, employees who transfer to FERS and work for 5 or more years under FERS are exempt from the GPO.

Cost-of-Living Adjustments (COLAs) are effective each December first. The adjustment appears in your January payment on the first business day of the month, which is when your benefit for December is paid. Federal Employees' Retirement System (FERS) and FERS Special Cost-of-Living Adjustments are not provided until age 62, except for disability, survivor benefits, and other special provision retirements. Also, under FERS, if you have a CSRS component, the component is subject to the CSRS COLA.

The U.S. Department of Labor calculates the change in the Consumer Price Index (CPI) for urban wage earners and clerical workers from the third quarter average of the previous year to the third quarter average for the current year.

For Civil Service Retirement System (CSRS) or Organization and Disability Retirement System (ODRS) benefits, the increase percentage is applied to your monthly benefit amount before any deductions, and is rounded down to the next whole dollar.

For Federal Employees' Retirement System (FERS) or FERS Special benefits, if the increase in the CPI is 2 percent or less, the Cost-of-Living Adjustment is equal to the CPI increase. If the CPI increase is more than 2 percent but no more than 3 percent, the Cost-of-Living Adjustment is 2 percent. If the CPI increase is more than 3 percent, the adjustment is 1 percent less than the CPI increase. The new amount is rounded down to the next whole dollar.

Retirement Date Issue

Don’t confuse your “Retirement Date” with your “Date of Final Separation” that you list in block 2, Section B on your SF-2801 CSRS or the SF-3107 FERS Retirement Application Forms. I attended two retirement seminars the last three years I was employed by the Federal Aviation Administration. I recall being advised that if you retired December 31 in stead of January 1 you would get the entire COLA the following year. Unfortunately, I assumed that my retirement date was the date that I entered on my retirement application. Also, as a CSRS employee voluntarily retiring I would have had to retire the last day of November to get a full COLA in January a year later.

The date you put on your forms is your last day of work with the agency ─ not your retirement date. To get a full COLA next year you would have to put December 30 in block 2 of Section B for FERS employees and involuntarily separated CSRS employees. OPM’s COLA memo for 2006 states, “To get the full COLA, a FERS retiree survivor annuity must have begun no later than December 31, 2004. If not, the increase is prorated under both plans. Prorated accounts receive one-twelfth of the increase for each month they received benefits. For example, if the benefit commenced November 30, 2005, the prorated COLA would be one-twelfth of the full COLA." To get a COLA for the following month you have to officially be retired on the last day of the proceeding month. This basically means that you have to place the second to last day of the month you retire in block 2 of Section B to officially be retired on the last day of the preceding month.

The following table shows the annual COLA payout for the past five years for both CSRS and FERS retirees.

You can visit http://www.opm.gov/retire/html/faqs/2005cola.asp to review the calculations for the January 2005 COLA payment for CSRS and FERS employees.

RETIREE COLAs (Past Five Years)
Year	CSRS Rate	FERS Rate
2008	2.3	2.0
2007	3.3	2.3
2006	4.1	3.1
2005	2.7	2.0
2004	2.1	2.0
2003	1.4	1.4
2002	2.6	2.0
2001	3.5	2.5
2000	2.4	2.0
1999	1.3	1.3

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