Why the 2016 FEGLI Open Season May Not Help Near-Retirees

For the first time in 12 years, the Federal Employees’ Group Life Insurance (FEGLI) is offering an “Open Season.” The FEGLI open season will be held from Sept. 1 , 2016 to Sept. 30, 2016.

During the open season you will have the opportunity to increase your FEGLI coverage without the need for health underwriting. (Open season is not needed to decrease your FEGLI coverage. You can do that anytime using SF-2817.)

This open season, however, may not benefit near-retirees because changes to FEGLI are subject to the “five-year rule.”

The 5-year rule requires that:

• You are entitled to retire on an immediate annuity under a retirement system for civilian employees; and
• You have been insured for the five years of service immediately before the date your annuity starts, or for the full period(s) of service during which you were eligible to be insured if less than five years.

Difference between the FEGLI five-year rule and the FEHB five-year rule:

This five-year rule may sound similar to the five-year rule of FEHB, but the two have a key difference. The FEHB five-year requirement only requires you to be enrolled in FEHB for five years, regardless if you switched coverage types (i.e. switch from Self-only to Family plan, etc.) during that five-year period. The FEGLI five-year requirement, on the other hand, requires that you carry that specific FEGLI coverage (i.e. Basic, Option A, Option B, Option C, and to each multiple) for five years. If you add additional coverage, you will need to carry that coverage for five years.

So for example:

Greg was hired in 1986. He was only enrolled in Basic. In 2004, during the Open Season, he added Option B, three multiples of his salary. In 2014, he married (a life event) and based on this life event, he added two multiples of Option B, for a total of five multiples. Greg retired in 2016. He can keep Basic and the three multiples of Option B into retirement, but he cannot continue the two multiples he picked up when he married because he did not have them for the five years of service immediately before his retirement, nor did he have them for all the time they were available to him.

There are no waivers of the five year/all opportunity rule for continuing FEGLI life insurance coverage into retirement. There are no exceptions to the “no waiver” rule — it does not matter whether you retire on disability, accept a voluntary incentive payment, etc.  The only way to continue coverage into retirement is to meet the five year/all opportunity rule. This, too, is unlike FEHB, which does allow for waivers under certain circumstances.

Five years of effective coverage:

Another detail of the five-year rule is that the FEGLI coverage needs to be effective for the five years prior to retirement in order to be carried into retirement.

This is important because any election you make during this year’s open season will not become effective until October 2017, which means you will need to wait 5 years after October 2017 in order to meet the demands of the five-year rule.

Bottom line: If you want these open season changes to remain with you in retirement, you will need to retire after October 2022!

As always, I wish you success!

Stephen Zelcer is part of the GovLoop Featured Blogger program, where we feature blog posts by government voices from all across the country (and world!). To see more Featured Blogger posts, click here.