What Happens
to FEGLI Group Life Insurance at Retirement?
The Federal Employee’s Group Life Insurance program
gives retiring employees the option to continue coverage
into retirement if certain conditions are met. These conditions
are as follows:
- You must retire on an immediate annuity (pension) under
the federal retirement system;and,
- Been previously covered
under the FEGLI program for the last five years of service
directly before retiring; or,
- Been previously covered for
all periods of service for which you were eligible for
coverage if it has been less than five years; and,
- You do
not convert your policy to individual life insurance through
FEGLI’s conversion option.
If the above conditions are satisfied, there are several
options for maintaining FEGLI life insurance into retirement.
The information below will review the various options for
continuing coverage.
Basic Insurance and Retirement
At retirement, the amount of your Basic
Insurance Amount (annual pay rounded to the next $1,000
plus and additional $2,000) becomes your Basic Insurance
in retirement. This amount remains level until you reach
age 65. At the age of 65, future coverage will be based
on your mandatory basic insurance election (determined
at retirement). With basic insurance, there are 3 possible
options to select at retirement:
- 75% Reduction
- 50% Reduction
- No Reduction
75% Reduction in Basic Life Insurance
Under the 75% reduction option, at the age of 65 and one
month, your Basic Insurance will begin to reduce by 2% of
the original Basic Insurance Amount each month. If you retire
after age 65, the 2% monthly reduction begins at retirement.
All reductions of your basic insurance cease when it reaches
25% of your pre-retirement Basic Insurance Amount. Additionally,
there is no charge once coverage begins to decrease. The
75% reduction option is the default option.
50% Reduction in Basic Life Insurance
The 50% reduction option works identical to the 75% reduction
option except that benefits reduce at a 1% rate rather than
the 2% rate. Also, instead of reducing to 25% of your pre-retirement
Basic Insurance Amount, benefits will only reduce to 50%
of your pre-retirement amounts. Once you reach age 65, the
regular premium for basic insurance stops; however, you will
continue to pay an extra cost for the additional benefit.
For more information on the cost for the 50% reduction basic
in insurance see the FEGLI
Handbook.
No Reduction in Basic Life Insurance
Under this option, there is no reduction in your Basic Insurance
Amount at age 65. The regular premium for basic insurance
stops, but you continue to pay for the benefit of having
no reduction in coverage. For more information on the cost
for the no reduction basic insurance option see the FEGLI
Handbook.
Optional Insurance and Retirement
The amount of optional insurance you have in retirement
will depend upon your pre-retirement optional insurance values.
These amounts continue in retirement until you reach age
65 at which time they may reduce depending upon your retirement
elections.
Standard Insurance (Option A)
If you have Option A insurance pre-retirement, it will carryover
into retirement and remain at $10,000 until you become age
65 and one month. At that time, coverage begins to reduce
by 2% per month until it reaches 25% of the pre-retirement
amount or $2,500. Once reductions begin, there are no further
premium costs for Option A coverage. You cannot choose a
no reduction option for standard coverage.
Additional Insurance (Option B)
Upon retirement, if you have carried Option B insurance
and are eligible to maintain it, you must make an election
whether or not wish to have these amounts reduce or to have
no reduction in life insurance benefits. At age 65, or retirement
if after age 65, you can choose the number of multiples that
will reduce.
Full Reduction of Option B Life Insurance
Under the full reduction option, at age 65 and one month,
the value of your Option B multiples will reduce monthly
by 2% of the pre-retirement amount. This reduction will continue
for a period of 50 months and then all coverage under this
option will end. There is no cost for Option B multiples
once the monthly reductions begin.
No Reduction of Option B Life Insurance
At retirement if you are eligible to maintain coverage and
you elect the no reduction option, you will continue to receive
100% of your pre-retirement Option B life insurance values.
You will continue to pay the premiums for the no reduction
option until you die or elect to change your option to full
reduction. For information on the cost of No Reduction Option
B coverage see the FEGLI
Handbook.
Family Insurance (Option C)
Upon retirement, if you have previous carried Option C insurance
you must make an election whether or not you wish to have
coverage amounts reduce or to have no reduction in benefits.
At age 65, or retirement if after age 65, you can choose
the number of multiples that will reduce.
Full Reduction of Option C Life Insurance
If you select the full reduction option, at age 65 and one
month, the value of your Option C multiples will reduce monthly
by 2% of your pre-retirement amounts. This reduction will
continue for a period of 50 months and then all coverage
under this option will end. There is no cost for Option C
multiples once the monthly reductions begin.
No Reduction of Option C Life Insurance
At retirement if you are eligible to maintain coverage and
elect the no reduction option, there will be no reduction
in Option C life insurance values. You will continue to pay
the premiums for the no reduction option until you die or
elect to change your option to full reduction. For information
on the cost of No Reduction Option C coverage see the FEGLI
Handbook.
Conclusion
The FEGLI program allows retirees to continue life insurance
coverage into retirement with several alternatives. Your
options will depend upon your pre-retirement coverage elections.
If Optional Insurance coverage is selected,
you can choose to have full or reduced life insurance benefits.
In some cases, these options maybe very costly and ordinary
term life insurance may be more competitive. Before making
your FEGLI retirement selections, call
MEG Financial toll free at (877) 583-3955 to discuss alternatives
or click here for a custom term
life insurance quote.
 Related
Articles on Life Insurance
for Federal Employees
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