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Keeping FEHB in Retirement

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“I have a question related to something in one of your articles about FEHB and Medicare. The article stated: “As a full-time Federal employee, you are eligible to enroll in FEHB. If you meet the requirements to do so, as a retiree, you are eligible to maintain FEHB throughout your lifetime. The requirements to maintain FEHB in retirement are: You must be eligible for an immediate pension (annuity) and, Been continuously enrolled in FEHB for 5 years prior to your pension (annuity) starting. Federal Employees frequently ask us if their continuous coverage counts if they have been enrolled as a spouse. The answer is yes. As long as you have been enrolled under FEHB, as a participant or a spouse, you are eligible to maintain FEHB coverage in retirement.”

Here is my question. I have carried my husband on my BCBS FEHB plan since 2004. He is 9 years older than me and will retire first. We’d like to transfer our FEHB coverage plan over to him when he retires, with me being covered as his spouse. Is this possible? Thank you for the help.” – Nicole.

The best benefit of being a Federal Employee is that you are eligible to maintain your health care coverage into retirement if you meet the rules of eligibility.

Your Federal Employee Health Benefits for you and your spouse can be carried into retirement if you meet the following conditions;

  • You must be enrolled in FEHB for 5 years prior to your retirement date.
  • You must have enrolled with the eligibility to receive an immediate pension.

Nicole asks us a question about how FEHB works for dual-fed relationships and we are so happy that she did! So many people do NOT understand how coverage eligibility works and make decisions that cost them a little more in taxes than is necessary.

Dual Fed = you and your legally married spouse are both employed by the Federal Government.

There is no requirement that you have to be the Primary Insured in order to meet the rules of eligibility we discussed above.

If you are enrolled as dual fed in your legally married spouse’s plan as a dependent, you still meet the requirements of eligibility for the 5-year rule.

Nicole and her husband have both been enrolled in FEHB for 9 years therefore they each meet the “5 years” requirement.

When to Change FEHB Coverage

You can make changes to your health insurance during a period of open enrollment or if you have a qualifying life event.

When Nicole’s husband retires, he will have a qualifying life event as his employment with his employer will stop.

We do not like to make changes in health care coverage under a qualifying life event if they can be avoided. We are planners. If we know that your husband is going to retire, for example, June of 2023 then in November 2022 during open enrollment we would make the plan changes. This gives you lots of time to work out any kinks before he actually retires. Planning to retire can be a lot of hurry up and wait. This also allows for you to get something that is within your control done, before you are close to your deadline. Again, we are planners. If we know we are planning to make changes, lets make an actionable plan.

Keep in mind when it comes to your benefits: when you are in you are a guest, when you are out you are a pest. While working, it is a lot easier to get information and make changes than it will be after you retire.

We have answered Nicole’s question – yes, she meets the 5-year rule and yes, she can move under her husband’s plan when he retires. Here is why Nicole may not want to though.

FEHB Premiums

The hands-down, no questions asked the best benefit that you have as a Federal Employee is your health insurance.

Health insurance is another tool in your planning toolbox that will help you design a successful retirement.

It is your responsibility to know how to use those tools to get the desired outcome.

While you are working, your health insurance premiums are made on a pre-tax basis. When you look at your last Leave and Earnings Statement, you will see the “above the line” deductions and one of them, if you are the primary insured, is for health insurance.

You pay a portion of your premium and your employer pays a portion, the majority, o your premium. Payments while employed are pre-tax.

When you retire, your health insurance premium is made on post-tax money. There is no tax deduction in retirement for your health insurance premiums with FEHB.

Contingent on the clients situation, we keep the health insurance under the federal employee who is continuing to work for the federal government so that we can realize that pre-tax premium deduction.

We are not opposed to paying taxes, we just don’t want to tip the IRS.

This is one of those nuances that you should consider when planning for your retirement from federal service. If you are looking for someone to help guide you through making retirement decisions as a federal employee, contact our office to schedule an appointment with one of our Financial Advisors.

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3 Responses

  1. I am in a similar situation but flipped. I have carried family FEHB for 22+ years and will be retiring Dec 31, 2022. My spouse will choose a family plan during open season and I will be selecting No plan during open season (effective start dates of changes on Jan 1, 2023). I am very nervous in doing this, to the point that I may just go 1, and spouse do 1+1 because my retirement specialist do not seem to have confidence. I will want to be able to start my own FEHB when we do not have eligible children in 2 years, and learn from OPM since I cancelled going into retirement that I am not qualified!

    Also, my HR advises that retiring is not a QLE, from the statement above “When Nicole’s husband retires, he will have a qualifying life event as his employment with his employer will stop”

  2. If I have 7 years prior service and took my retirement out. And then I come back to work do I have to redeposit my retirement that was withdrawn and how long after that do I need to work to keep my health benefits?

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