#83: Dual Feds FEHB Rules

Full Episode Transcript
With Your Hosts
Micah Shilanski and Jamie Shilanski

Micah: Welcome back to another amazing episode of plan your federal retirement podcast. I’m your host, Micah Shilanski. And with me is a frequent now returning guest, my sister, and a great advisor in her own right, Jamie Shilanski. Currently..

Jamie: A repeat offender, right?

Micah: That’s what I was thinking. I don’t know, it’s early the morning.

Jamie: First. Yeah. Micah, I’m so pumped to be joining you as we talk about federal employee health benefits and FEHB, as we like to call it. It was funny I was, I was meeting with a prospect one time and they said, Hey, can I talk to you about my fib? And I was like, Oh, yeah. Was it a tiny one like she made like, how big? And they said no, and they pointed out as like, Oh, your federal employee health benefits. Yes. I would love to talk to you about FEHB. So I always like to mention that because the acronyms are so plentiful inside of the federal community if you’re not 100% sure what they are, especially if you’re starting your career mid-career, just always say the whole thing, say the whole thing to make sure whoever you’re talking to is on the same page.

Micah: Amin, so important now as we start looking at the FEHB It is a fantastic benefit. I think it’s Jamie, one of the best benefits federal employees have. Yes, you have a great pension. Yes, I love your TSP. You have some awesome things that are there. But being able to keep health insurance into retirement is an amazing benefit.

Jamie: Yeah, I look at federal employees and of course, we’re on the outside, right? We’re not sponsored by the government or not federal employees. We just specialize in federal employee benefits. And I’m just green with envy. Like I look at your health care plan, and it’s amazing and yet alone to be able to keep this into retirement, even after you’ve gone on to Medicare and it becomes secondary insurance. This is a phenomenal benefit for federal employees. So Micah, one of the questions I get is, we call them inside of our office because we have a team of people that just specialize in federal employees. So we call them dual feds. And that’s when you have a married couple and both of them are federal employees. And I get a lot of questions from my pre-retirees right you know, when they’re about six years away from retirement, and they start talking to us about FEHB, and maybe both of them aren’t going to go out simultaneously. Maybe one person doesn’t, hasn’t met their MRA hasn’t met credible service years. Maybe they just really liked the mission. I’ve had a lot of employees recently with a change of administration, who love the projects that they’re working on and they just want to see him through. They want to see him through to completion. So when that happens, you know the other spouse is like, hey, sayonara, I am out of here. But I want to make sure I keep my health insurance. So what I’m going to do is during our next open enrollment, which happens in November, I’m going to switch to my own plan so that I’m covered by FEHB because we’ve been having a family plan our entire career. So I want to talk about this because I think there’s a lot of misunderstanding about the rules in order to keep FEHB into retirement. Yeah. And

Micah: You brought up a couple of really good points, right? So dual Feds sometimes called tandem federal employees, a husband and wife that have you know, both federal employees and both are going to be vested for retirement in their own right, and this is a very big key right here. In order to keep your health insurance in retirement, Jamie and you know these rules is one you have to be in federal service, right retire with the eligibility of an immediate pension. There’s several rules on that could be MRA and 10. It could be MRA and 30, can be 16, 20 62 and five years of creditable service, but you got to retire with the eligibility of an immediate pension and you have to be in FEHB for five years prior to retirement is really important. But Jimmy, to your point, the five-year requirement is just in FEHB that doesn’t mean it has to be you as the primary person and FEHB. So if I’m on my spouse’s plan and we have a family plan or self-plus-one plan, and I’m in FEHB even though she’s primary, that’s okay. I’m still in FEHB it still counts for the five-year rule.

Jamie: So I’ve got a client Bob and Sue which is the all of our clients are named Bob and Sue which is funny because we have two sets of clients that are named Bob and Sue and I are married together but for convenience sake, so we never divulge anyone’s in private information just Bob and Sue, because the federal employee community is small. Everyone’s worked with someone in different agencies. So Bob says, Hey, Sue, I’m done. I’m done with the mission. I’m eligible for immediate retirement. I’ve hit my MRA. You Sue, you’ve had the insurance as a family plan. This entire time we’ve been in the career you still love what you’re doing. But I don’t and I want to retire. Bob says to Sue, I’m not sure what your sense of humor is going to be like if I retire before you. Well, let’s see how entertaining you find this. Find out. Bob goes and he comes to me and he says, hey, I want to go to a single plan because I’m going to get ready for retirement and I know I’ve got to be enrolled. And then I would come to him and say great news because you’re already covered under Sue’s coverage. You’ve already been enrolled. In FEHB. Now the next set of questions that Bob is going to have is how does OPM know that? How does the Office of Personnel Management know when I go to retire that I have in fact, been enrolled in my spouse’s plan for five years? 

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Micah: Would you have a couple of questions even before we get to that one right is saying we’re talking about the comment about he still wants to make this election and move under a single plan. Why? Well if we have a family plan needs so meaning you need you have kids that are covered under the plan. Why go out into a self only plan now your spouse still has a family plan premium that’s not going down because you’re off of it because it’s still a family plan, plus you got to have your own plans, your cost really went up dramatically. So you could be looking at it and saying hey, they’re going to keep theirs I’m going to keep mine so maybe you want to get into yourself plus one maybe want to move to the Self Only. Okay, now that’s a little bit too Self Only plans is a little bit less expensive than a self and then you know a plus one point right your family plans are the most expensive then you have self plus one they have self only the two Self Only plans are the least expensive. However, one of the things that changes in retirement time is you go to pay your health insurance premium greatness you gotta pay the same premium you were paying before you the government still is going to contribute their portion toward that premium which is amazing for the rest of your life. However you’re paying with after tax dollars are getting a tax deduction for this. So it’s worth looking at it a little bit and saying Hey, should we keep in this example self plus wondered or Sue’s coverage? Because are we saving enough in taxes that covers that difference? Maybe or not, but it’s something that we’re looking at.

Jamie: Who else have two deductibles we have to meet now? Right? So we’ve got two separate plans. We’ve got two deductibles we have to consider. And a lot of pre-retirees love to tell me Jamie not good news. I’m really healthy so this won’t be a problem. And when do they become suddenly surprisingly unhealthy?

Jamie: So knowing those nuances like sometimes we’re pennywise and pound foolish, right? Is is we’re looking at where can I save money on this paycheck, but I’m not looking at that bigger tax strategy, like you’re talking about like a pre and post-tax. How are you paying your premiums if you go to retire? What really makes the most sense for you and your family? So now now that they’ve gone through that and they say, okay, great. It makes the most sense for me to be under a family plan. I’m going to retire. I’m submitting my form for an immediate application for retirement. How does OPM know I don’t want to go out of retirement and be like, oh my goodness, OPM didn’t know I was covered and now I’ve lost this benefit?

Micah: Yeah, we have really important to think about one, it’s going to be on your retirement application. So your tournament application under FERS is SF 3107. And as you’re looking at that, I believe it’s the Section II as an echo. It’s going to ask for your insurance information and one of the boxes in there it says are you eligible for FEHB at retirement time? Mark? Yes. That’s a really important part.

Jamie: And if you think you’re not just mark yes. Let’s let OPM disagree with this right, but number one doesn’t cost you anything.

Micah: Number one other retirement application Mark Yes, you’re eligible for health insurance and retirement. This does not say Are you the primary person this does not say do you want the coverage only under your name? This just says are you eligible for FEHB in retirement? So we mark yes on that one, Jamie. That’s step one. Step two, if you are under a spousal plan, even if you are under your own plan, your agency has to provide evidence that you are covered for more than five years. That form number is escaping me. But there’s a health insurance certification form that says yes, they were covered for five years. If you don’t have it, because you weren’t the primary, then that means your HR reaches out to the agency of your spouse and then they can get it from there. And they can say, hey, yep, you’re you were on FEHB to me you’re in FEHB for this last five years. They have a certificate of health insurance that they include in your retirement application. Those two things show that you are eligible for FEHB in retirement, and Jamie to go on a little bit more on this, if I may, is that this is the one document we really look for when you’re not retiring as the primary person. So in this example, Bob’s retiring, Sue is going to keep the insurance under her name. Bob is going to retire first since insurance is under that after they retire. We like all of our clients to get us a copy of all of the documentation that they got from OPM. When we get that one of the things that I want to look for is this health insurance certification. You know, did OPM send that off? That’s the thing that sometimes we see missing now. Does that mean if it’s missing, you lost your health insurance? No. What that means is I know OPM is going to ask us a question. OPM is gonna go Hey, Bob, you retired you marked yes, on this form. We don’t have a health insurance certification. Where did that come from? So we can be working on that in the meantime to speed up the retirement process.

Jamie: Yeah. And that alleviates a lot of the trickling questions that end up happening, right? So what if something happens to Sue god forbid prematurely, and she was still working and my health insurance was covered under her and then now we’ve opened up this survivor can and we’re just really trying to mitigate any concerns? Anything that puts you in jeopardy of potentially losing your health insurance and retirement because it is one of your greatest benefits.

Amen. Such a great benefit. Now keep in mind into retirement. If you’ve met those two rules that you’ve retired the eligibility of an immediate pension number one and number two, you’ve been in FEHB for five years prior to retirement. Your spouse has talked about non-dual Feds non-tandem federal employees for a second, your spouse is working on the outside sector, and you want health insurance for her retirement. Then what we say is she has two rules. She has to meet with this as well. Number one is she must be on as a survivor benefit. So inside of your retirement form, I believe it’s Section D as in Delta the gotta leave her a survivor benefit of at least the maximum, which is half or the reduced which is 25. If you live, no survivor benefit your health and trans dies when you do learn. It’s number one. The second requirement your spouse has to make is that they have to be in FEHB, not for five years and FEHB before you die.

Jamie: This becomes such a critical planning opportunity because sometimes in the private sector, although not often, not often anymore. There is a really good health insurance program offered to the spouse who’s not a federal employee. And you know we that’s back to that Pennywise Pound Foolish we say oh, you know, we’re actually we’re gonna do is we’re gonna move over there as their insurance is great. And we want to maximize our our retirement income from the government, our pensions are not going to leave any type of Survivor Benefit. Well, this is when we like to say I very cheekily say to clients, great, so we’re disinheriting them just to make sure because that word, right you’re like wait a minute, hold on. I didn’t want to disinherit them, but you’re making your revocable decisions. You’re making irrevocable decisions because you are now dead. And they are now dealing with the repercussions as a survivor that they lost this potential benefit because who’s to say, you know, this is Bob and Sue, who’s to say Sue can continue to work after you have passed. You know, maybe there’s there’s a lot of grief that they’re going through, they want to wrap up their career. So making sure that you’re really thinking this strategy out and playing those different scenarios, right? That if life goes as we as we hope it should be, you’ve got to return together. You’re reliving a beautiful retirement life, but if it doesn’t go as planned, what’s going to happen?

Micah: Such a good question. Alright, so this podcast is gonna be a little short and sweet. We just want to make sure we’re jumping on to benefit which is your health insurance, because we’ll be getting a lot of questions about that, especially with tandem dual federal employees. What that means, Jamie, this podcast is all about action items. For our listeners, though. What’s one thing they could do this week to make sure they’re improving their retirement?

Jamie: You know, I would love to see them have different scenarios. And I would love to say scenarios one, two, and three. And this is really, really hard to think about right? So scenario one life goes as it should. We’re both doing; we’re both alive and retire; who’s going to have what benefit how do we have this coming in? Who’s got this coverage? How are we going to try it? You know, when when we’re Medicare eligible, what happens then? And a scenario that’s not fun to think about but is something that should be addressed but at least you have a plan? What if What if Bob dies prematurely, and Scenario three has Sue pass prematurely? What options changes? What transitions are you going to make? 

Micah: Boy, I said one thing you could do this week. Or this week? All right. So I’m gonna make mine a little lighter on that one. Whether you’re an active federal employee or retired federal employee, every open season, you get to make an election in your health insurance. The vast majority of federal blues do nothing with their health insurance because they’re so scared about making a change. So my action item for you put a date on your calendar the second week of November the second week of December is Open Season. So pick November 20. Just because I’m picking a date out of my head, put it on your calendar say hey, review the health insurance. If you have FEHB BlueCross BlueShield look at Samba look at D haul look at mail hundreds just look at one other policy. Just pick one and look at it and make an educated informed decision to either stay in your current insurance or explore another one but look at one other one this year. I love it. Awesome. Jamie, thank you so much for jumping on this podcast with me as always. It was a ton of fun and until next time, happy planning. Happy planning.

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