When it comes to retirement planning, Federal Employees’ Group Life Insurance (FEGLI) can be a great tool to provide financial security for federal employees and their families. A common question arises when life circumstances change: What happens to my FEGLI coverage if I drop my spouse from my plan? Let’s dive deep into this topic to ensure you have all the information you need.
Understanding FEGLI Coverage at Retirement
FEGLI offers federal employees a group term life insurance option that can often be continued into retirement if specific conditions are met. To retain FEGLI coverage after retiring, the following criteria must be satisfied:
- Immediate Annuity: You must qualify for an immediate annuity under a federal retirement system (FEGLI Handbook, p. 114).
- Continuous Enrollment: You must have been covered under FEGLI for at least five years immediately before retirement or the entire period of eligibility (FEGLI Handbook, p. 114).
- Active Enrollment at Retirement: Your FEGLI enrollment must still be active on the date of your retirement (FEGLI Handbook, p. 114).
- No Conversion to an Individual Policy: You must not have replaced your FEGLI coverage with a private insurance policy (FEGLI Handbook, p. 114).
Key takeaway: Removing a spouse from your FEGLI plan does not impact your ability to meet these requirements.
FEGLI’s Optional Coverage: What Happens When You Drop a Spouse?
FEGLI’s Optional Insurance, specifically Option C – Family Insurance, provides coverage for eligible family members, including spouses and dependent children. Here’s what you need to know:
- Option C Coverage: Allows multiples of $5,000 for a spouse (up to $25,000) and $2,500 per child (up to $12,500). (FEGLI Handbook, p. 31).
- Voluntary Cancellation: If you decide to remove your spouse, you can cancel or reduce your Option C coverage without impacting your Basic coverage (FEGLI Handbook, p. 106).
- Timing: Changes to Option C coverage take effect at the end of the pay period in which the cancellation request is filed (FEGLI Handbook, p. 8).
Common Scenarios: Does Dropping a Spouse Affect Your Retirement Coverage?
Let’s explore specific scenarios that federal employees often encounter:
- Scenario: Retiring Soon After Dropping Spouse from Option C
If you’re retiring within a year and meet all other conditions for retaining FEGLI, dropping your spouse will not impact your Basic or Optional A and B coverage. Option C is entirely optional and separate from your personal life insurance continuation (FEGLI Handbook, p. 106). - Scenario: Spouse Has Alternative Coverage
Your spouse’s coverage through a private employer or Medicare does not influence your FEGLI eligibility. The decision to remove them from Option C is personal and based on your financial goals. - Scenario: Financial Planning Considerations
By reducing or canceling Option C, you may lower your premium costs, which could be redirected toward other retirement expenses. However, losing Option C means losing coverage for your spouse, so weigh this decision carefully.
Key Benefits of Retaining FEGLI Basic Insurance into Retirement
Federal employees often prioritize keeping FEGLI Basic Insurance during retirement due to its affordability and flexibility. Here’s why it matters:
- Automatic Coverage: If you meet eligibility criteria, your Basic insurance automatically continues into retirement (FEGLI Handbook, p. 114).
- Post-Age 65 Reductions: You can choose how much coverage to retain after age 65, including options for 75% reduction, 50% reduction, or no reduction, each with associated cost implications (FEGLI Handbook, p. 119).
- No Medical Exams: Continuing FEGLI into retirement does not require a medical exam, unlike private life insurance policies.
Why Understanding FEGLI Matters
Search engines prioritize content that provides comprehensive, trustworthy, and well-structured answers to user questions. For federal employees searching for “FEGLI” or “Federal Employees’ Group Life Insurance,” this article answers relevant queries, including:
- Eligibility requirements for retirement coverage.
- The impact of changes to Option C – Family Insurance.
- Financial planning implications of reducing FEGLI coverage.
Expert Tips for Managing Your FEGLI Coverage
- Review Your Options Regularly: Life events like marriage, divorce, or retirement may affect your coverage needs. Update your plan accordingly (FEGLI Handbook, p. 85).
- Use FEGLI Tools: The Office of Personnel Management (OPM) provides calculators to help you estimate costs and benefits for different coverage levels (OPM.gov).
- File Changes on Time: Submit changes like dropping a spouse promptly to avoid unnecessary delays in processing (FEGLI Handbook, p. 8).
- Consult with a Specialist: Federal benefits can be complex. If unsure, consult with an advisor specializing in federal employee benefits.
Conclusion: Ensuring a Secure Retirement with FEGLI
Dropping your spouse from FEGLI’s Option C does not jeopardize your Basic or Optional A and B coverage or your ability to continue FEGLI into retirement. However, these decisions should be made carefully, keeping your broader financial and insurance goals in mind.
Your Next Steps: If you have further questions, consult the FEGLI Handbook or reach out to your human resources office for personalized guidance.
Works Cited
U.S. Office of Personnel Management. Federal Employees’ Group Life Insurance (FEGLI) Handbook. 2019. Accessed via provided handbook.
“Federal Employees’ Group Life Insurance (FEGLI) Calculator.” OPM.gov.
Micah Shilanski 00:04
Have you ever wondered, by dropping a spouse from coverage, from insurance, whether life or health, how that affects you in retirement? Well, if you have and stay tuned for this FERS Federal Fact check. Hi, I’m Micah Shilanski with Plan Your Federal Retirement. I’m excited to talk to you about a question we have from Bobby. Now, as you know, one of our goals at Plan Your Federal Retirement is to help another 1 million federal employees with their retirement, the only way we get to do that is with your help, so smash that like button, share this with a friend, send this out there, so YouTube continues to grow for us which is outstanding, which means we’re getting good information to federal employees about their retirement, and we can only do that with your help, so go ahead and take care of that while we’re reading the question from Bobby. Bobby writes in with an interesting question, and I’m a little confused by it sort of kind of fun to go through, and I’ll give a couple different answers, depending on what really the underlying question here is, and she writes and says, I have a question on life insurance coverage, I read that from the basic life insurance, retirement can be continued if all the conditions are met. One the conditions you have not converted coverage to an individual policy. My husband has insurance through company he retired from plus Medicare, and he wants me to drop off my insurance, how would it affect my coverage for insurance when I retire within a year? That’s a great question. Bobby. Thank you very much. Now, throws me for a little bit of a loop when you throw Medicare in there, because I heard the question was life insurance, and that kind of kind of draw a line in my mind, there’s life insurance here, there’s health insurance, and health insurance more dovetails with Medicare, so I’m going to give a couple different answers, to hopefully give you some some good information. On the life insurance side of the equation. No, you do not have to continue spousal coverage for FEGLI Federal Employee Group Life Insurance. Remember, you have your basic insurance, your extra basic if you’re under 45 years young, so your basic, give your extra basic, you have your options A, B, C, right? Then option A is additional coverage, about $10,000, option B, which is your multiple of your FEGLI rate, up to five times your basic plus up to five times coverage, and C is going to be for family, spouse and the kids can be added on there. Now those are different levels of the insurance, but it’s all your insurance, so if you wish to continue your FEGLI but you don’t wish to continue your spousal coverage, that option C, you can absolutely drop that, you could also reduce your FEGLI if it was something that was financially appropriate for you to do as well that does not affect you keeping your life insurance into retirement. Biggest thing is, don’t cancel your policy with FEGLI, because then that would jeopardize your ability to keep that into retirement, but you throw in that little curveball for me to make it a little fun, which talks about Medicare, so then I wonder if we’re conflating life insurance with health insurance, right? So let me talk a little bit about health insurance side of this equation. On the health insurance side, remember, your requirements are to give health insurance retirement, you have two must be in FEHB right, before for five years prior to your retirement, and you must retire with the eligibility of an immediate pension, you got to meet those two requirements. Your spouse also has to be two requirements, which is number one, which is they must be in FEHB before you pass away, and they must be eligible to receive a survivor pension, so those are those two sets of requirements for each of you. Now life insurance requirements have nothing to do with health insurance, so this is only a life insurance question then stop listening to the rest and you’re good to go, if this was about health insurance as well, then there’s a question about dropping him from coverage if he has something outside, I’m generally not a fan of dropping spouses from that FEHB Federal Employee Health Benefits coverage because it’s so good, it’s a great benefit, and God forbid, if you pass away, there’s no way he’s going to be able to get that back unless he’s his own retired federal employee, which is a different thing. So I would be really concerned about dropping the health insurance, and let me slightly concerned about dropping the life insurance. Life insurance, in my mind, is simple, it’s a math equation, you either need it or you don’t, God forbid, Bob, but if you pass away, what position does that leave your spouse in? Do they have enough financial assets to make sure they’re taken care of? If yes, you don’t need life insurance, if no, you need life insurance, and that’s the same on your spouse. That’s the approach that we take with clients, and it works out really, really well. So if you have questions like these about your federal benefits that get really unique and you want to make sure you’re taken care of, then reach out to our office, give us a call, sit down with one of our experts in these federal employee benefits that can really help you understand the great benefits you have and how to use those benefits when planning your retirement. Till next time, Happy Planning!