Can federal employees keep their life insurance after retirement?

Yes, federal employees can keep their life insurance after retirement under the Federal Employees' Group Life Insurance (FEGLI) program, provided they meet specific eligibility rules.

Eligibility Requirements

To continue your FEGLI coverage into retirement, you must meet these conditions:

• Immediate Annuity: You must retire on an immediate annuity (a pension that starts within 31 days of your separation).
• 5-Year Rule: You must have been enrolled in FEGLI for the 5 years immediately before your retirement date, or for all periods of service during which it was available if you worked less than 5 years.
• No Conversion: You must not have converted your life insurance coverage to an individual private policy.

How Basic Life Insurance Changes at Retirement

When you retire, you must choose one of three reduction options for your Basic insurance starting at age 65 (or after 12 months of retirement, whichever is later):

• 75% Reduction (Default/Free): Coverage reduces by 2% each month starting at age 65 until it reaches 25% of its original value. Once it hits 25%, you no longer pay premiums.
• 50% Reduction: Coverage reduces by 1% each month starting at age 65 until it settles at 50% of its original value. This requires paying a small monthly premium.
• No Reduction: Coverage stays at 100% of its face value for life. This requires paying higher monthly premiums for the rest of your life.

Optional Insurance (Options A, B, and C)

• Option A (Standard): Continues into retirement but automatically reduces by 2% per month starting at age 65 until it reaches 25% of its original $10,000 value.
• Option B (Additional) & Option C (Family): Can be continued into retirement at full multiples of salary or family coverage, but premiums increase significantly as you get older. You can also choose a "reduced" version where Option B/C drops by 2% per month at age 65 to lower costs.
• Cancellation: You can cancel Optional insurance (A, B, or C) at any time during retirement, but you cannot re-enroll later. Accidental death and dismemberment (AD&D) coverage ends immediately upon retirement.

You can keep your Federal Employees Health Benefits (FEHB) for the rest of your life after retirement, as long as you meet the basic eligibility rules.

Eligibility Rules to Keep FEHB for Life

To carry your federal health insurance into retirement, you must meet two main requirements:

• Immediate Annuity: You must retire on an immediate pension (your annuity must start within 30 days of your separation). (Note: If you retire under the MRA+10 FERS provision and postpone your pension, your health benefits are suspended until the pension actually starts).
• The 5-Year Rule: You must have been continuously enrolled in FEHB (or covered as a family member, or under qualifying TRICARE/CHAMPUS) for the 5 years of service immediately before retirement, or for all federal service since your very first opportunity to enroll.

What If You Don't Qualify?

If you do not meet the 5-year rule or fail to take an immediate annuity, your coverage is not permanent, but you have short-term options:

• 31-Day Extension: Your coverage continues for free for 31 days after your employment officially ends.
• Temporary Continuation of Coverage (TCC): You can extend your FEHB plan for up to 18 months, but you must pay the full premium plus a 2% administrative fee.

Retired federal employees enrolled in the Federal Employees' Group Life Insurance (FEGLI) program can carry their coverage into retirement, but the amount of Basic Insurance depends on the reduction election you choose at retirement.

To qualify for carrying FEGLI into retirement, you must have been enrolled in the coverage for the 5 years immediately before retiring (or since your first opportunity) and retire on an immediate annuity. Accidental Death and Dismemberment (AD&D) coverage stops completely when you retire.

Basic Life Insurance Reduction Options

At retirement, your initial Basic Insurance Amount (BIA) equals your final annual salary rounded up to the next $1,000, plus $2,000. Starting at age 65 or retirement (whichever is later), your Basic coverage follows one of three choices you select on form SF 2818:

• 75% Reduction (Default): Coverage reduces by 2% of the original amount per month starting at age 65 or retirement, until it stabilizes at 25% of the original amount. This coverage becomes completely free (no monthly premium) after age 65.
• 50% Reduction: Coverage reduces by 1% per month starting at age 65 or retirement, until it stabilizes at 50% of the original amount. You pay a monthly extra premium starting at retirement.
• No Reduction: Coverage stays at 100% of your pre-retirement amount for life (it does not reduce). You pay a higher monthly extra premium starting at retirement.

Optional Insurance in Retirement

If you had optional coverage as an employee and meet the 5-year rule, you can also keep optional plans, though you must continue paying the full, age-based premiums (except where noted):

• Option A (Standard): Provides a flat $10,000. At age 65 or retirement (whichever is later), it reduces by 2% per month until it drops to $2,500 (25%), at which point premiums stop and coverage is free.
• Option B (Additional): Provides 1 to 5 multiples of your final salary (rounded up to the next thousand, plus $1,000). At age 65 or retirement, you can choose to have it continue without reduction (paying increasing age-based premiums) or elect a full reduction where it decreases by 2% per month for 50 months until it reaches zero and becomes free/stops.
• Option C (Family): Covers eligible spouses ($5,000 per multiple up to 5x) and dependent children ($2,500 per multiple up to 5x). It follows similar rules as Option B, allowing you to maintain full coverage with age-based premiums or drop/reduce it at age 65.

Death benefits for retired federal employees include monthly survivor annuities, continuation of health and life insurance, and potential lump-sum payouts depending on the retirement system (CSRS or FERS).

Major Survivor and Death Benefits

• Survivor Annuity: Eligible spouses can receive a lifetime monthly payment. Under the Civil Service Retirement System (CSRS), the maximum spousal benefit is 55% of the unreduced annual benefit. Under the Federal Employees Retirement System (FERS), the maximum is typically 50%. This must have been elected at the time of retirement.
• Health Insurance (FEHB): Surviving family members enrolled in a Self Plus One or Self and Family Federal Employees Health Benefits plan before the retiree's death can continue coverage, provided they qualify for a survivor annuity.
• Life Insurance (FEGLI): If the retiree maintained Federal Employees' Group Life Insurance, a tax-free lump-sum payment is distributed to designated beneficiaries.
• Thrift Savings Plan (TSP): Remaining balances in the Thrift Savings Plan are paid directly to designated beneficiaries or survivors.
• Lump-Sum Unpaid Annuity: If no survivor annuity is payable, any remaining retirement contributions or accrued, unpaid annuity for the month of death are paid out under a strict legal order of precedence.

Keeping FEGLI (Federal Employees' Group Life Insurance) in retirement depends heavily on whether you have Basic coverage or expensive optional coverage like Option B.

✅ FEGLI Basic Coverage

• Verdict: Usually worth keeping, especially with the 75% reduction.
• How it works: Coverage drops 2% monthly after age 65 until it reaches 25% of the original face value.
• Cost: Premium-free for that remaining 25% for the rest of your life.
• Action: Select the 75% reduction option on your retirement paperwork.

⚠️ FEGLI Option B (Multiples of Salary)

• Verdict: Rarely cost-effective to keep as you age.
• How it works: Premiums increase sharply with every age bracket.
• Cost: Exponentially higher monthly deductions in your 60s, 70s, and beyond.
• Action: Compare rates with private term insurance before dropping it.

💡 Strategic Action Plan

• Secure quotes first: Never cancel Option B before an approved private policy is active.
• Evaluate needs: Assess if a spouse or family still relies on your income or if your pension/TSP covers them.
• Maintain Basic: Keep Basic with the 75% reduction as a free lifetime final-expense benefit.