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What Happens to FEGLI Group Life Insurance at Retirement?

Basic Insurance at Retirement

Optional Insurance at Retirement

Related Life Insurance Articles for Federal_Employees

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:

  1. You must retire on an immediate annuity (pension) under the federal retirement system;and,
  2. Been previously covered under the FEGLI program for the last five years of service directly before retiring; or,
  3. Been previously covered for all periods of service for which you were eligible for coverage if it has been less than five years; and,
  4. 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:

  1. 75% Reduction
  2. 50% Reduction
  3. 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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