Comprehending your FEGLI benefits as a former federal employee could help you in making prudent retirement financial choices. However, the coverages provided by the Federal Employees Group Life Insurance (FEGLI) program may vary when you consider the options and expenses. This is why it is important for you to understand the retirement benefits before enrolling for FEGLI.  

In the case of an unexpected death, FEGLI provides several advantages to federal employees, including financial security for their families. It covers debts or costs that might overburden survivors, income replacement, and death benefit protection.

FEGLI was founded in 1954 by the US government for federal employees and their families. We will examine the advantages of this insurance scheme for federal employees in this blog, as well as how to optimize its benefits.

Under the FEGLI program, federal employees are entitled to get life insurance. This program is meant to give your family financial stability in the event of your unexpected demise. However, as a federal employee, you can customize your insurance to meet financial requirements with FEGLI’s basic and other extra coverage options.

Therefore, it is crucial that you first understand the FEGLI structure to make informed decisions about your insurance coverage. Here’s what you should know:

1. Basic Coverage

This coverage, usually offered to the majority of government employees, is equivalent to the employee’s yearly wage, which is rounded to the nearest $1,000, and an additional $2,000.

2. Optional Coverage

Basic coverage (Option A), extra self-coverage (Option B), and family coverage (Option C) are the three alternatives available to federal employees. Depending on the needs of the employee, each option offers distinct levels of coverage.

The formula for FERS annuity calculation for FEGLI program is the same for everyone –

“FERS Annuity = Higher-3 Average Salary x Years of attainable service x Pension hike”

Here is how each component of the above-mentioned calculation works:

• Years of feasible service

The total number of years you have served for a federal post that qualifies for FERS credit.

• High-3 Average Salary

The mean of your highest base pay for any three consecutive years. Bonuses, overtime, and other types of extra compensation are not included in basic pay, which also includes your base salary and any regional pay.

• Hike in Pension

For most government employees, it is usually 1%. However, if you work for at least 20 years and retire at age 62 or later, there can be an increment of up to 1.1%.

Understanding the above formula allows you to point out the chances to increase your advantages. Furthermore, you can even position yourself to get larger annuity payments in the future by carefully modifying a few factors.

FEGLI is a well-organized retirement planning for federal employees to help them maximize its benefits. It is the highest-paying life insurance program that is offered to you and millions of your coworkers if they have worked for the United States government.

As a federal employee, you are registered for basic insurance coverage by default unless your designation is prohibited from FEGLI coverage by law or regulation specifically. However, if you decide you don’t want this coverage, you can either cancel it later or waive it when you initially qualify for coverage. In such a case, you have only 60 days after you become eligible to choose the optional coverage plans you wish to avail of.

The FEGLI program is run by the Office of Personnel Management (OPM) and backed by the Office of Federal Employees’ Group Life Insurance (OFEGLI). It provides a combination of basic and optional coverage choices to accommodate different needs. Therefore, seeking advice from a financial expert with expertise in assisting federal employees in comprehending their benefits can be a wise decision.

Benefits under the FEGLI program are paid out in accordance with the legal framework. If an employee assigns ownership of their life insurance, OFEGLI will first payout to the designated beneficiary. However, if there isn’t a designated beneficiary on record, the payout goes to the assignee.

There are three different coverage options that come in three beneficial levels, designated A, B, and C. The breakdown is as follows:

1. Option A (Standard Option)

In addition to the base coverage, this insurance option offers $10,000 in additional life insurance.

2. Option B (Additional Insurance)

This insurance option is intended to provide you with life insurance that will pay you 1-5 times your salary.

3. Option C (Family Insurance)

This insurance coverage is designed to pay benefits equal to 1-5 multiples on the lives of eligible family members.

Taking into account your family, FEGLI Option C, a family insurance plan, covers your spouse and any eligible dependent children. However, the number of multiples you opt for determines the amount for each family member; for example, $5,000 for the spouse and $2,500 for each child.

Remember, the only people who would qualify are your spouse and any unmarried children under the age of 22. However, your child can keep the insurance if they are physically disabled, which prevents them from supporting themselves before the age of 22. Children eligible to be covered can be a –

• Biological child
• Adopted child
• A stepchild
• Foster child

Option C is exclusively focused on offering financial security for your family, in contrast to FEGLI Basic, Option A, and Option B, which cover you. Furthermore, the cost of Option C depends on your age and the number of multiples being chosen, whereas the cost of FEGLI Basic, Options A, and B is determined as per your salary.

When it comes to retirement, knowing your FEGLI benefits as a federal employee can help you make wise financial decisions. However, the FEGLI program provides coverage; when you retire, your options and expenses might vary. 

So, to maximize your advantages, take into account these important pointers here.

• Carefully Evaluate Your Coverage Before you Retire

Before you retire as a federal employee, take a close look at what could be covered by FEGLI. Verifying your current and future premiums is essential because they are going to increase. Maintaining full coverage could be worthwhile if your budget permits; however, you might decide to cut back or eliminate certain coverage to save on the premiums you pay for.

• Acknowledge the Cost Modifications

Insurance coverage options like Option A, Option B, and Option C FEGLI premiums vary depending on your retirement age. However, there is a 75% reduction provided by basic coverage without any additional cost. Besides, you might have to pay more than you anticipated if you don’t prepare ahead. Therefore, evaluate your alternatives and select the one that best suits your financial requirements.

• Try to Reduce Extra Coverage

There can be a minor rise in costs for Option B and Option C as you grow old; however, you can decide to cut the costs or cancel them. Moreover, you might not require multiple FEGLI coverages if you already have other insurance coverages, such as investments, savings, or private life insurance. Therefore, you could consider reductions in spending to increase your retirement income.

• Search for Alternatives

For some retirees, FEGLI might not be as good as private life insurance plans in terms of prices and benefits. So, you have the option to search for insurance plans offered by private insurance companies. Additionally, if you are healthy and fit, you might end up with a more cost-effective plan that offers comparable or better coverage.

• Consider Your Family Requirements

You can decide on your life insurance alternatives based on the financial security of your family. However, it is wise to maintain some level of FEGLI coverage if your spouse or children depend on your pension or other benefits. Also, you might not require any additional coverage if your family is financially secure and stable.

• Make Practical Plans for The Future

Any significant life events or changes should be considered because they could influence your coverage requirements. They can include getting married, starting a family, or buying a house. Always remember that it’s crucial to review and modify your FEGLI coverage as you move through different phases of life. In such an event, if there is a need for increasing FEGLI coverage, reach out to your agency or OPM.

• Consider Your Health and Coverage Needs

Your health could change as you grow old, which can impact the kind of coverage you require. So, obtaining private life insurance in the future might get more challenging or costly if you experience health issues. Therefore, it makes sense to lock in certain coverage options while you’re still eligible for lower rates if you’re in excellent health before your retirement.

Maximizing your FEGLI benefits is not that complicated to understand. You can successfully get most of its benefits if you review your options carefully, plan for the future, and consider every coverage option. 

To get a clear picture of how FEGLI benefits you, use PWR Retirement Group’s federal plan calculator to evaluate your retirement income. If you are searching for service providers, the financial advisors for federal employees in Puerto Rico are always ready to guide you. They can help you with all the information you need to maximize your FEGLI coverage options.