By Edward A. Zurndorfer,
This guide presents federal employees and retirees on their life insurance benefits and the questions that they need to ask about their choices and need for coverage under the Federal Employee Group Life Insurance (FEGLI) program that is available to permanent employees and annuitants.
Most federal employees, including both full time and part time employees, are eligible to enroll in the FEGLI program. When an individual enters federal service, the individual is automatically enrolled in the FEGLI “basic” insurance called the Basic Insurance Amount, or BIA. An employee’s BIA is equal to the greater of the employee’s salary rounded up to the next $1,000 plus $2,000, or $10,000. The federal government pays one-third of the premium cost of an employee’s BIA and employees pay the other 2/3 of the premium cost. When an employee is hired, the employee is automatically covered under the FEGLI BIA, unless the employee formally waives the BIA. New employees, or current employees enrolled in FEGLI, must complete a Life Insurance Election (SF 2817) to cancel the BIA.
Newly hired employees have the opportunity to elect additional coverage. There is Option A (standard, or $10,000), Option B (multiple of salary 1 to 5 times) and Option C (Family coverage, on a spouse and children). These coverages are discussed in more detail below. Employees will have some or all of the optional coverages only if the employee elects to enroll. Newly hired employees must elect the optional coverage at their initial hire date using Form SF 2817. Employees pay all the premiums for the optional coverages with no federal government contribution.
BIA coverage for new employees becomes effective on the first day an employee is in a pay and duty status in an eligible position. Optional insurance for new employees is effective on the first day an employee is in a pay and duty status in an eligible position on or after the day the employee’s human resources office receives the employee’s SF 2817 form to elect the optional coverage.
What is the Cost of FEGLI Basic Insurance Amount and Options A, B and C?
The Basic Insurance Amount (BIA) provides term life insurance at group rates. The BIA is equal to the greater of: (a) an employee’s salary rounded up to the next $1,000, plus $2,000; or (b) $10,000. The federal government pays one-third of the premium cost of the BIA and an employee pays the other 2/3 of the premium cost. Those employees who are eligible for the BIA – full or part time permanent employees – are automatically covered unless the employee formally declines the coverage using Form SF 2817.
As a group plan sponsored by the US government, FEGLI BIA uses a composite premium structure. This means that the BIA premium rate is the same for each enrollee in the group, regardless of age or health status. The following table summarizes the cost of FEGLI BIA:
Payroll Method |
Withholding for Each $1,000 of Coverage |
Biweekly |
$0.150 |
Monthly |
$0.325 |
The following example illustrates: Joseph’s SF 50 salary is $97,300. His BIA is $100,000 ($97,300 salary rounded up to the next $1,000 or $98,000, plus $2,000, or $100,000).
His bi-weekly cost is $15 (number of thousands of dollars of coverage, or 100) times $0.15, or $15.00.
Younger employees are entitled to additional BIA life insurance provision called the “Extra Benefit” which doubles the amount of the BIA at no extra cost for enrollees age 35 or younger. Beginning at an enrollee’s 36th birthday, the Extra Benefit decreases 10 percent each year until age 45, at which time there is no Extra Benefit. In the example above, if Joseph were age 35 or younger, he would have an extra $100,000 of coverage for a total of $200,000. If Joseph were age 40, he would have a total of $150,000 of coverage ($100,000 plus $50,000).
Additional Coverages Under FEGLI
Employees may elect additional life insurance under FEGLI. This is called Optional insurance. New employees can elect the following optional insurance coverages: Option A – Standard; Option B – Additional, and Option C- Family coverage. These coverages are not automatic as a new employee must elect any or all of the optional coverages within 60 days of the employee’s appointment to an eligible position. A completed Life Insurance Election from (SF 2817) must be completed and submitted to the employee’s Human Resources Office. After the initial 60 day enrollment period, opportunities to enroll in FEGLI BIA and optional coverages are limited and will be discussed in a separate column.
Option A – Standard is a flat amount of $10,000. The cost for Option A varies by age. The current premium rates are summarized in the table below:
Option A – Standard
Age Group* |
Withholding for $10,000 Insurance |
|
Biweekly |
Monthly |
|
Under 35 35-39 40-44 45-49 50-54 55-59 60 and over |
$0.20 0.30 0.40 0.70 1.10 2.00 6.00 |
$0.43 0.65 0.87 1.52 2.38 4.33 13.00 |
*For insurance withholding purposes, these ages are reached on the first day of the pay period that starts after an employee’s birthday or the first day of the month that starts after an annuitant’s birthday.
Example. Angela is a 46 year old employee. She elects Option A. Angela is paid on a bi-weekly basis. Her cost for Option A is therefore $0.70 bi-weekly, as shown in the table above.
Option B – Additional is an amount equal to one, two, three, four or five times an adjusted SF 50 salary, rounded up to the next $1,000, plus $1,000. The cost of Option B is presented in the following table. Note again that an employee or annuitant must be enrolled in the FEGLI BIA in order to be enrolled in Option B.
Option B – Additional
Age Group* |
Withholding Per $1,000 of Insurance |
|
Biweekly |
Monthly |
|
Under 35 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80 and over |
$0.02 0.03 0.04 0.07 0.11 0.20 0.44 0.54 0.96 1.80 2.64 |
$0.43 0.065 0.087 0.152 0.238 0.433 0.953 1.170 2.080 3.900 5.720 |
*For insurance withholding purposes, these ages are reached on the first day of the pay period that starts after an employee’s birthday or the first day of the month that starts after an annuitant’s birthday.
Example. William is a 51 year old employee. He elects five multiples of Option B. His annual pay is $49,500. Rounded up to the next $1,000, his pay is $50,000. Five times his annual pay is $250,000. William is paid on a bi-weekly basis. Therefore his cost for Option B is 250 times $0.11, or $27.50 bi-weekly.
Option C – Family is to insure an employee’s spouse and eligible dependent children. When an employee elects Option C, all eligible family members are automatically covered. An employee may elect one, two, three, four, or five multiples of coverage. Each multiple is equal to $5,000 for a spouse and $2,500 for each of one’s eligible dependent children.
Each multiple is a unit. For example, if an employee elects two multiples, then the employee has two multiples of coverage on his or her spouse and two multiples of coverage on each of his or her eligible dependent children. In other words, a different multiple cannot be chosen for spouse and for dependent children.
Spouses include a spouse from a valid common law marriage. To be eligible, dependent children must be unmarried and under age 22. A child 22 or older who is incapable of self-support because of a mental or physical disability that existed before the child reached age 22 is also eligible.
The cost for Option C –based on the employee’s or an annuitant’s age is summarized below:
Cost of Option C – Family Coverage
The bi-weekly and monthly cost for Option C is shown in the table below. Note that cost varies by age. The age is the age of the employee or the annuitant and not the insured.
Option C – Family Coverage
Age Group* |
Withholding for Each Multiple |
|
Biweekly |
Monthly |
|
Under 35 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80 and over |
$0.22 0.27 0.41 0.59 0.92 1.48 2.70 3.14 3.83 5.26 7.20 |
$0.48 0.59 0.89 1.28 1.99 3.21 5.85 6.80 8.30 11.40 15.60 |
*For insurance withholding purposes, these ages are reached on the first day of the pay period that starts after an employee’s birthday or the first day of the month that starts after an annuitant’s birthday.
The following example illustrates: Harold is a 48 year old married employee with four children under the age of 22. He elects five multiples of Option C which equals $25,000 for his spouse (5 times $5,000) and $12,500 for each child (5 times $2,500). His bi-weekly cost for Option C coverage is therefore $2.95 (5 times $0.59).
Option C benefits are paid to the employee or annuitant. An employee or annuitant cannot designate a beneficiary.
Accidental Death and Dismemberment (AD&D) Insurance
Accidental death and dismemberment (AD&D) insurance provides additional life insurance proceeds to be paid in the event of a fatal accident which also results in the loss of a limb or eyesight. For benefits to be paid, the death or loss must occur not more than one year from the date of the accident and be a direct result of bodily injury sustained from that accident, independent of all other causes.
AD&D insurance is automatically included in the BIA for employees at no extra cost. It is equal to one’s BIA. AD&D insurance is also automatically included in Option A in the amount of $10,000 for employees at no additional cost. Options B and C do not include AD&D insurance.
Note that regular life insurance amounts (BIA and Option A – Standard) are payable regardless of cause or location of death. AD&D coverage also ends when an employee retires, regardless if the employee retains FEGLI BIA and Option A in retirement.
The following is a list of covered losses under AD&D insurance and the corresponding amounts payable:
AD&D Schedule of Losses
For the loss of … |
The amount payable is… |
Life |
Full amount |
Two or more members* |
Full amount |
One member* |
50 percent of full amount |
* A member is a hand, foot or the sight in one eye.
Note for all losses resulting from any one accident, no more than the full amount is payable.
The Office of Federal Employees’ Group Life Insurance (FEGLI) will not pay AD&D benefits if your death or loss in any way results from, is caused by, or is contribute to by:
• physical or mental illness;
• the diagnosis of or treatment of physical or mental illness;
• ptomaine or bacterial infection (however, OFEGLI will pay AD&D benefits if the loss is caused by an accidentally sustained external wound);
• a war (declared or undeclared), any act of war, or any armed aggression against the united States in which nuclear weapons are actually being used;
• a war (Declared or undeclared), any act of war, or any armed aggression or insurrection in which you are in actual combat at the time bodily injuries are sustained;
• suicide or attempted suicide;
• injuring yourself on purpose;
• illegal or illegally obtained drugs that you administer to yourself;
• operating any motor vehicle while intoxicated, as defined by the laws of the jurisdiction in which you were operating the vehicle.
Those federal employees who initially waived the FEGLI Basic Insurance Amount (BIA), who did not elect the optional insurances when they were first hired, or who want additional coverage than they currently have, have three opportunities to make changes, namely: (1) During a FEGLI “open season”; (2) by applying and qualifying on their own, providing evidence of medical insurability; or (3) experiencing a life event. These three opportunities are now discussed.
FEGLI Open Season
FEGLI “open seasons” are infrequent. The last FEGLI open season was held during September 2016, and the “open season” held before that was exactly 12 years before during September 2004. Previous FEGLI “open seasons” were held in 1999 and 1992. During an “open season”, an employee is guaranteed enrollment and does not have to provide any evidence of medical insurability.
Applying and Providing Evidence of Medical Insurability
Provided at least one year has passed since an employee’s last waiver of FEGLI coverage, an employee can apply for FEGLI coverage on his or her own by providing satisfactory medical information that the employee is insurable. To do so, an employee needs to download Form SF 2822 (Request for Insurance) which is available on the OPM Web site at www.opm.gov/forms/standard-forms/.
An employee and his or her agency must complete part of Form SF 2822. The employee then takes the form to the employee’s physician or other medical professional who will examine the employee at the employee’s expense. The medical professional will complete the rest of Form SF 2822 and then send the completed form to the Office of FEGLI (OFEGLI).
If the OFEGLI approves the employee’s application for insurance, then the employee will automatically be covered by the Basic Insurance Amount (BIA) on the first day the employee is in pay and duty status. The employee will then have 60 days from the approval date to elect Option A (Standard) and/or elect Option B (Multiples of Salary), or increase the number of multiples of Option B, up to a total of five. This is done by completing a Life Insurance Election: FEGLI form (SF 2817) (available at www.opm.gov/forms/standard-forms/) and submitting the completed form to the employee’s human resources office.
An employee cannot elect Option C (Family Coverage) or increase Option C multiples by providing medical information. Option C can be obtained during an “open season” or based on a life event, as discussed next.
Life Event
A FEGLI qualifying live event includes marriage, divorce, death of a spouse, or acquisition of a child. An acquisition of an eligible child includes a child born to the insured, the insured adopts a child, the insured acquires a foster child, stepchild, the insured’s step child or recognized child moves in with the insured, an otherwise child’s marriage is dissolved by divorce or annulment, or his or her spouse dies; and the insured gains custody of an eligible child.
As a result of a life event, an employee can elect the FEGLI Basic Insurance Amount, Option A, Option B and Option C. An employee who has a qualifying life event may also increase the number of multiples of Option B and/or Option C.
In order to increase coverage under a life event, an employee must complete Form SF 2817 and submit the completed form to the employee’s human resources office within 60 calendar days after the occurrence of the life event. Form SF 2817 can be filed up to 31 days before the life event. Proof of the life event must be provided no later than 60 calendar days following the event.
When FEGLI Coverage Stops
The FEGLI program handbook is quite clear: An employee is responsible for knowing when his or her FEGLI stops. In other words, if an employee continues in federal service and wishes to stop FEGLI coverage, then the employee must formally do so by filling out and submitting to his or her human resources office Form SF 2817. If Form SF 2817 is not submitted and accepted by the human resources office, then premiums will continue to be deducted from the employee’s paycheck and FEGLI coverage continues. Note that Option C, which includes life insurance coverage on an employee’s child younger than age 22, ceases when the child becomes age 22. However, if an employee or annuitant does complete and submit Form SF 2817 thereby formally removing the child from Option C coverage, then premiums will continue to be deducted from the employee’s paycheck or annuitant’s annuity check even though the child is no longer insured under Option C.
An employee’s FEGLI life insurance coverage – including Accidental Death and Dismemberment – will stop on the earliest of the following dates:
• The date an employee separates from federal service. An employee may be eligible to continue coverage as an annuitant or while in receipt of workers’ compensation.
• The end of a period of 12 months in non-pay status. An employee may be eligible to continue coverage while in receipt of workers’ compensation. The 12 months may be continuous or broken by periods of less than four consecutive months of pay status.
• The end of the last day of the pay period in which the employee’s human resources office receives the employee’s Form SF 2817. Only the coverage the employee waives cancels some or all life insurance. But if the FEGLI Basic Insurance Amount is canceled, then all optional coverages are also canceled.
• The date an employee transfers to an excluded position.
• The end of the last day of the last pay period in which an employee’s agency withheld life insurance premiums from an employee’s paycheck. This is because the agency has determined that for the next six months or more the employee’s paycheck will be insufficient to cover the required FEGLI premium withholdings, and the employee has decided not to make arrangements to pay the premiums directly instead of payroll deduction.
What Happens to Your Federal Employees Group Life Insurance Coverage When You Retire?
A federal employee who has been enrolled in FEGLI will have his or her FEGLI coverage automatically continue into retirement if the employee: (1) Retires on an immediate annuity; (2) has been enrolled in FEGLI for the five years immediately before the starting date of the annuity, or for annuitants retiring under the Federal Employees Retirement System (FERS) “MRA + 10” (postponed retirement), the five years before their separating date for annuity purposes; and (3) did not convert the FEGLI coverage to an individual whole life insurance policy. Note that an employee must meet the five year participation requirement for the Basic Insurance Amount (BIA) and each type of FEGLI “optional” insurance – Options A, B and C – in order to continue those coverages into retirement.
If an employee has met the prerequisites discussed in the previous paragraph for continuing FEGLI coverage into retirement, then the employee has several choices as to how much of the FEGLI life insurance coverage the employee can carry into and throughout retirement. These choices for the BIA and Options A, B and C are now explained.
Basic Insurance Amount in Retirement
The amount of a retiring employee’s BIA in retirement is the employee’s BIA on the day before the employee retires from federal service. If the employee retires before age 65, this BIA amount continues until the annuitant reaches age 65, after which it may be reduced based on two of the options discussed below. There is no Accidental Death and Dismemberment coverage throughout retirement.
Shortly before an employee retires, the employee must choose the type of reduction by completing Form SF 2818 (Continuation of Life Insurance Coverage As An Annuitant or Compensationer) provided by the employee’s human resources office. There are three choices for the BIA: (1) 75 percent reduction; (2) 50 percent reduction; or (3) no reduction. An annuitant can change to 75 percent reduction at any time. In so doing, the annuitant’s BIA will be as if the annuitant had elected 75 percent reduction and the extra premium will cease. But there will be no refund of any extra premiums paid up to the change.
75 percent reduction
A 75 percent reduction means the annuitant’s BIA will reduce by 2 percent of the BIA amount each month until it reaches 25 percent. The reduction starts at the beginning of the second month after the annuitant’s 65th birthday or at retirement, whichever is later. The BIA will continue to reduce until 25 percent of the original BIA amount. Once the BIA starts to reduce, the cost of the BIA is free. Note that if the retiring employee chooses the 75 percent reduction on Form SF 2818, the election cannot be changed later.
50 percent reduction
This means the annuitant’s BIA will reduce by 1 percent of the BIA each month. The reduction starts at the beginning of the second month after the annuitant’s 65th birthday or at retirement, whichever is later. The BIA will continue to reduce until 50 percent of the BIA amount remains. The premium cost for 50 percent reduction is shown below.
No reduction
This means that the annuitant’s BIA does not reduce throughout retirement. The cost for No Reduction BIA is shown in the following table under “None”:
Cost of BIA After Retirement
Reduction at age 65 |
Monthly cost before age 65 |
Monthly cost starting at age 65 |
75% |
$0.325* |
Free |
50% |
$1.0350* |
$0.71* |
None |
$2.4550* |
$2.13* |
*Per $1,000 per month
The following example illustrates:
When Jan retires on Sept. 30, 2017, she has $100,000 of BIA coverage. Jan is age 62 when she retires. The following table shows the premium cost for Jan depending on what she chooses on Form SF 2818:
Reduction at age 65 |
Monthly cost before age 65 |
Monthly cost starting at age 65 |
75% |
$32.50 |
Free |
50% |
$103.50 |
$71.00 |
None |
$245.50 |
$213.00 |
Optional Insurance in Retirement
The amount of an annuitant’s FEGLI optional insurance in retirement depends on the options – Options A, B and/or C the annuitant had on the day the annuitant separated as an employee. This amount continues until the annuitant reaches age 65 if the employee retires before age 65 or until the month the employee retires if the employee retires after age 65.
Option A – Standard
Any employee eligible to continue Option A into retirement will have his or her pre-retirement amount ($10,000) reduce by two percent ($200) per month until it reaches 25 percent ($2,500) of the pre-retirement amount. The reduction starts at the beginning of the second month after the annuitant’s 65th birthday or the month after an employee retires if the employee retires after age 65.
Note that an employee cannot elect No Reduction for Option A. The monthly premium cost for Option A is shown below. An example is presented below.
Option B – Additional
The amount of Option B coverage in retirement is determined by an employee’s final SF 50 salary rounded up to the next $1,000 plus $1,000, multiplied by the number of Option B multiples that were in effect for the five years of service immediately before the employee’s retirement date. This is the maximum amount of Option B that an employee can carry into retirement. A lower number of Option B multiples can be carried into retirement.
A retiring employee must elect how many Option B multiples to carry into retirement. In addition, the employee must elect if he or she wants Full Reduction or No Reduction for each multiple. For example, an employee who has three multiples can elect to have two multiples with Full Reduction and one multiple with No Reduction. “Mixed elections” are allowed. At the later of age 65 or at retirement an employee has a second opportunity to choose how the multiples reduce.
The following is a summary of the cost of Option B:• Full reduction. Coverage is free (no premium cost) starting at later of the month after one’s retirement if the annuitant retires after age 65 or the month one becomes age 65 if the employee retires before age 65. Effective the month one becomes age 65 or the month after one retires if later, the value of one’s Full Reduction Option B multiples will reduce by 2 percent of the pre-retirement amount per month for 50 months at which time coverage on those multiples will end.
• No Reduction. A retiring employee who chooses No Reduction will continue the FEGLI premium for the annuitant’s age group for the No Reduction multiples until the annuitant dies, or the annuitant changes those multiples to Full Reduction, or the annuitant cancels those multiples. If an employee at the time of retirement chooses – via Form SF 2818 – No Reduction, the annuitant can change to Full Reduction at any time. Note that if an annuitant chooses the Full Reduction, the level of coverage will be as if the annuitant originally elected Full Reduction at the time of retirement. But there will be no refund of previously paid Option B premiums.
The cost of Option B depends on one’s age and the number of multiples on has. The summary of the monthly cost is shown below. Note the following: (1) Annuitants under the age of 65 pay the same monthly premiums as employees; the monthly cost per $1,000 of coverage is broken down into five year brackets; (2) when an annuitant becomes age 65 (or the month after an employee retires if the employee retires after age 65), the Option B premium cost may or may not continue based on whether the employee at the time of retirement chooses via Form SF 2818 Full Reduction; (3) when an annuitant has a birthday, that moves the annuitant into another five year age bracket and the change in premium cost will become effective at the beginning of the month following the annuitant’s birthday. An example of Option B coverage is presented below.
Option C – Family Coverage
The amount of Option C – Family Coverage – is determined by the number of Option C multiples that were in effect for the five years of service immediately before an employee’s retirement date. Each multiple – up to five – on a spouse is worth $5,000 while each multiple on an eligible child is worth $2,500.
An employee who retires before age 65 elects on Form SF 2818 how many Option C multiples the employee wants to carry into retirement. In addition, the employee elects if the employees wants Full Reduction or No Reduction for each multiple. For example, an employee who has three multiples can elect to elect to have two multiples with Full Reduction and one multiple with No Reduction. “Mixed elections” are allowed. At age 65 or at retirement if later, an annuitant will have a second opportunity to choose how many multiples will be reduced.
• Full Reduction. If an employee chooses Full Reduction, coverage is free on those multiples after an annuitant becomes age 65 or the month after the employee retires if the employee retires after age 65. Effective at the month after an annuitant becomes age 65 or later if the employee retires after age 65, the value of the annuitant’s Full Reduction Option C multiples will reduce by 2 percent of the pre-retirement amount per month for 50 months, at which time coverage on those multiples will end.
• No Reduction. If an employee on Form SF 2818 chooses No Reduction for Option C, the annuitant continues to pay the premiums for the annuitant’s age group for the No Reduction multiples until the annuitant dies or the annuitant changes those multiples to Full Reduction or cancels those multiples. The value of an annuitant’s Option C multiples with a No Reduction election will not reduce. Annuitants who choose No Reduction can change to Full Reduction after they reach age 65 will have the level of coverage as if the annuitant had originally elected Full Reduction. But the annuitant will not receive a refund of premiums.
The cost of Option C depends on an employee’s or an annuitant’s age in five year brackets and the number of multiples the employee/annuitant has. Annuitants pay the same rate for Option C as employees do until they reach age 65, after which their premiums may or may not continue based on the reduction election above. When an employee or annuitant has a birthday that moves the employee/annuitant to another age group, the change in premiums will be effective at the beginning of the month following the birthday.
If an employee elected Full Reduction for Option C at retirement, the coverage begins to reduce and is free when an annuitant becomes age 65 (or at retirement if the employee retires after age 65), unless the annuitant changed it to No Reduction at age 65. In this case the annuitant will continue to pay the premiums.
The following table summarizes the current premium rates for Option A, Option B and Option C:
Premium Rates for OPTIONAL Insurance |
|||
Employee or Annuitant |
Option A – Standard ($10,000 Coverage) |
Option B – Additional (per $1,000 of coverage) |
Option C – Family (per multiple) |
Age Group |
Monthly |
Monthly |
Monthly |
Under Age 35 |
$0.43 |
$0.043 |
$0.48 |
Ages 35 thru 39 |
0.65 |
0.065 |
0.59 |
Ages 40 thru 44 |
0.87 |
0.087 |
0.91 |
Ages 45 thru 49 |
1.52 |
0.152 |
1.28 |
Ages 50 thru 54 |
2.38 |
0.238 |
1.99 |
Ages 55 thru 59 |
4.33 |
0.433 |
3.21 |
Ages 60 thru 64 |
13.00 |
0.953 |
5.85 |
Ages 65 thru 69 |
0.00 |
1.170 |
6.80 |
Ages 70 thru 74 |
0.00 |
2.080 |
8.30 |
Ages 75 thru 79 |
0.00 |
3.900 |
11.40 |
Ages 80 and Over |
0.00 |
5.720 |
15.60 |
The following example illustrates the cost of Option A, Option B and Option C.
Lawrence retires from Federal service at age 62 with an SF 50 salary of $98,300. He has Option A, five multiples of Option B (each multiple is equal to $99,000 plus $1,000 or $100,000) and five multiples of Option C on his wife. He has been continuously covered in the FEGLI program including all of the optional coverages for the five years leading up to his retirement date. If Lawrence elects to keep all five multiples of his Option B (five times $100,000, or $500,000) and Option C ($25,000), the monthly premium cost to Lawrence throughout retirement will be as follows:
Premium Rates for OPTIONAL Insurance |
|||
|
Option A $10,000 Coverage |
Option B
$500,000 Cost Per Cost Per $1,000 $500,000 |
Option C – $25,000 (Spouse) Cost Per Cost Per Multiple 5 Multiples |
Age Group |
Monthly |
Monthly |
Monthly |
Ages 62 thru 64 |
13.00 |
$0.953 $476.50 | $5.85 $29.25 |
Ages 65 thru 69 |
0.00 |
1.170 585.00 | 6.80 34.00 |
Ages 70 thru 74 |
0.00 |
2.080 1,040.00 | 8.30 41.50 |
Ages 75 thru 79 |
0.00 |
3.900 1,950.00 | 11.40 57.00 |
Ages 80 and Over |
0.00 |
5.720 2,860.00 | 15.60 78.00 |
Therefore, in order to retain the full amount of Option A (until age 65), Option B and Option B during his retirement, between ages 62 and 64 Lawrence will be paying a total of $518.75 per month ($6,225 annually) for his Options A, B and C coverages. At age 65, he will be paying $619 monthly or $7,428 annually; at age 70, he will be paying $1,081.50 monthly or $12,978 annually; at age 75, he will be paying $2,007 monthly or $24,084 annually; and starting at age 80 he will be paying $2,938 monthly or $35,256 annually.
It is obvious that the cost of Option B and Option C gets increasingly more in cost and probably less affordable as Lawrence approaches age 70. He can reduce the number of multiples or elect Full Reduction on any multiples at any time. But any premiums previously paid will not be refunded.
Federal employees who are close to retirement are therefore highly encouraged to do a full evaluation of their future life insurance needs in order to make sure they are not overly insured and overpaying for their life insurance needs at the time of retirement and in the future.
Other FEGLI Provisions: Assignment of Ownership, Conversion of Coverage, and Living Benefits
Assignment
Assignment means that an employee or annuitant gives up ownership and control of his or her Basic Insurance Amount (BIA), Option A (Standard – $10,000) and Option B (Multiple of Salary) life insurance coverage to someone else. Option C (Family Coverage) cannot be assigned. Note that under an assignment, the FEGLI insurances continue to be on the life of the employee or annuitant and the employee or annuitant must continue to pay for the coverage. However, someone else “owns and controls” the FEGLI coverages. The insurance may be assigned to an individual, to a corporation, or to an irrevocable trust.
FEGLI life insurance can be assigned by completing Form RI 76-10 (Assignment of Federal Employees Life Insurance). Note that an employee’s or an annuitant’s decision to assign cannot be canceled at a later date. Also, only the employee or annuitant with FEGLI coverage can assign the life insurance. Someone with a power of attorney or a fiduciary may not assign the employee’s or annuitant’s life insurance coverage.
Why would an employee or an annuitant want to assign his or her FEGLI life insurance? The reasons that employees assign their life insurance include in order to comply with the requirements of a court order upon divorce, for estate purposes (to remove the life insurance proceeds from their gross estate), to get money before death such as for terminally ill and chronically ill persons, or to satisfy a debt.
Assigning one’s life insurance has far-reaching consequences. An employee who assigns his or her FEGLI life insurance gives up right to convert FEGLI coverage (see below) to designate beneficiaries, and to cancel coverage. If a life insurance policy is assigned, then neither the original owner nor the assignee may elect living benefits (see below).
Conversion of FEGLI coverage
An employee who stops his or her FEGLI or has his or her FEGLI coverage terminated is entitled to a 31- day extension of coverage and is also entitled to convert their FEGLI coverage to an individual whole life (ordinary life) insurance policy. An employee’s policy may terminate due to the employee’s separation, resignation from federal service, retirement, or the end of 12 months in non-pay status
A notice form SF 2819 (Notice of Conversion Privilege, Federal Employees Group Life Insurance) should be given by the employee’s or deceased employee’s employing agency to every family member and/or assignee (if applicable), and to the family of each deceased employee who had the Option C (Family) coverage. Note that an employee who will be carrying all of his or her FEGLI coverage into retirement should not apply for conversion.
What is the purpose behind FEGLI conversion? The purpose behind FEGLI conversion is that it allows a departing or retiring employee who is not allowed to continue FEGLI coverage (for any of several possible reasons) to continue to have life insurance coverage without having to go through a medical examination. Coverage is guaranteed but, as will be shown below, at a high premium cost (especially if the employee or family member is over age 50).
The following is a summary of the conversion process for employees, assignees and family members:
Employees. Assuming an employee has not assigned his or her FEGLI life insurance and the employee does not return to federal service, the employee can purchase an individual whole life insurance policy with a face amount equal to or less than the Basic Insurance Amount (BIA) plus either or both of Optional coverages A and B the employee may have.
Assignees. An assignee is entitled to convert his or her portion of the insured’s FEGLI coverage to an individual direct-pay policy, unless within three calendar days after an assignee’s FEGLI insurance terminates, the insured returns to federal service.
Family members. If, upon termination of the employee’s FEGLI coverage, the employee does not convert Option C (Family Coverage) the eligible family may convert the coverage. Spouses may convert up to $5,000 and children under the age of 22 (including stepchildren who lived with the parent in a regular parent-child relationship, recognized natural children and unmarried children under age 22) can convert up to $2,500 each.
Note the following general information about conversion: (1) The request for conversion information must be submitted to the Office of FEGLI (OFEGLI) within 31 days of the date of termination of FEGLI coverage on form SF 2819 that an employee, assignee, or eligible family member receives (60 days if working overseas); (2) no medical examination is required although a few questions may be asked to the employee, assignee or family member about their health in order to see if he/she qualifies for a lower premium; (3) the employee, assignee, or family member is responsible for paying the entire premium with no federal government contributions; (4) the individual policy will be assigned by an insurance company selected by the employee, assignee or family member; (5) the individual life insurance policy may be an ordinary life policy or a variation of ordinary (whole life). Premium rates vary by company and also vary whether or not the policy is a “participating” (higher premiums but pays dividends annually to the policyholder) or “non-participating” (premiums are set as close as possible to the actual cost of insurance protection with no dividends paid to the policyholder. Some sample annual premium rates for converted FEGLI coverage per $1,000 of insurance are presented below.
Sample Annual Premium Rates for Converted FEGLI per $1,000 of Insurance
Participating Insurance (any dividends paid will reduce these costs)
Age of insured at issuance of policy |
Ordinary Life |
Life Paid-Up at Age 95 |
Age of insured at issuance of policy |
Ordinary Life |
Life Paid at Age 95 |
20 25 30 35 40 |
$9.00 $10.50 $12.50 $15.50 $19.50 |
$10.50 $12.50 $14.50 $17.50 $21.50 |
45 50 55 60 65 |
$24.50 $31.50 $40.50 $53.00 $66.50 |
$28.00 $36.50 $48.00 $64.00 $77.50 |
Insurability
If an agency enrolls an employee in some FEGLI coverage by mistake, then the incontestability provision may apply. If the employee’s erroneous coverage and the applicable premium withholdings have been in force for at least two years before the error is discovered, then that erroneous coverage becomes valid.
Living Benefits
A federal employee who has been diagnosed with a terminal disease with a life expectancy of less than nine months (as medically diagnosed by the employee’s treating physician), may elect to receive a full or partial lump sum payment of his or her Basic Insurance Amount. This payment is tax and penalty-free. To apply for living benefits the employee must call OFEGLI at 1-800-633-4542. Those employees who are unable to call OFEGLI may have a designated individual with a Power of Attorney do so.
Military Reservists Called to Active Duty
FEGLI life insurance ends at the end of 12 months for military reservists who separate from federal service due to military duty, due to a non-pay status. Or 90 days after their military service ends, whichever comes first. During this period, FEGLI coverage is free. Per Public Law 110-181 enacted Jan. 28, 2008, a military reservist can continue his or her coverage for an additional 12 months if called to active duty.
This allows employees who enter active duty or active duty for training in one of the uniformed services for more than 30 days to continue their FEGLI coverage for up to 24 months. FEGLI coverage is free for the first 12 months. Employees must pay both the employee and agency share of the premiums for their Basic Insurance Amount. They must pay the entire cost, no agency contribution, for any Optional Insurance they may have for the additional 12 months of coverage.
Nonpay Status
Those employees who are in non-pay status and who are enrolled in FEGLI will continue to have FEGLI coverage and at no cost to them during the first 12 months of non-pay status. The only exception is for employees receiving workers compensation. During the first 12 months the U.S. Department of Labor will withhold premiums from the employee’s workers’ compensation payments.
FEGLI coverage will terminate after 12 months of non-pay status, or when the employee separates from his or her agency, if earlier. The 12 months may be continuous or broken by periods of less than four consecutive months of pay status. When an employee’s coverage terminates, the employee will have the right to convert his or her coverage to an individual policy or continue coverage as compensation, if eligible.
Part-time Federal Service
Those employees who work part-time (less than 80 hours a pay period), then the employee’s annual pay is their basic pay as shown in their most recent SF 50 and is applied to their tour of duty on record in a 52 week work year. For example, suppose an employee’s annual salary is $72,425. The employee works 24 hours per week. The employee’s annual pay for FEGLI purposes is:
$72,425 divided by 52 weeks divided by 40 hours
times 24 hours
times 52 weeks
which equals
$43,455
The employee’s FEGLI Basic Insurance Amount is therefore: $44,000 ($43,455 rounded up to the nest $1,000) plus $2,000 which equals $46,000.
Reemployed Annuitants
Those individual who have FEGLI coverage, either as a federal annuitant or as a compensationer, in receipt of benefits from the Office of Worker’s Compensation Programs, and return to work in federal service, need to inform their employing agency of their FEGLI coverage. They will need to notify OPM’s Retirement Operations Center in case coverage and premiums need to be adjusted.
Phased Retirement
Phased retirement is a new human resources tool that allows retiring full-time employees to continue in federal service, working a part-time schedule while beginning to draw partial retirement benefits. Eligible employees who obtain the consent of an authorized agency official to enter phased retirement are deemed to be full-time employees for the purpose of the FEGLI program. The FEGLI withholding and employer contribution will be the same as for full-time employees. The FEGLI Basic Insurance Amount and the Optional Coverages (A, Standard; B, Multiple of Salary; and C, Family Coverage have the same rules, limits and premium costs as for full-time employees.
Who Receives FEGLI Proceeds Upon Death of Insured — and How Benefits Are Paid
When the insured and the owner of the FEGLI life insurance – the employee or annuitant who pays the FEGLI premiums – dies, the Office of Federal Employees Group Life Insurance (OFEGLI) will pay life insurance benefits in a particular order set by law, as discussed here:
• If the employee or annuitant assigned ownership of the life insurance by filing Form RI 76-10 (Assignment of Federal Employees’ Group Life Insurance), OFEGLI will pay benefits: (1) First to the beneficiary(ies) designed by assignee, if any; (2) if there is no such beneficiary, to the assignee.
• If the employee or annuitant did not assign ownership and there is no valid court order (see below) on file, then OFEGLI will pay benefits: (1) First, to the beneficiary(ies) the employee or annuitant designated; (2) if there is no beneficiary,then to the employee’s or annuitant’s widow/widower; (3) if there Is no designated beneficiary or widow/widower, to the employee’s or annuitant’s child or children in equal shares, with the share of any deceased child distributed among descendants of that child; (4) if (1), (2), or (3) is not applicable, then to the surviving parents in equal shares, or the entire amount to a surviving parent; (5) if (1), (2), (3) or (4) does not exist,then to the executor or administrator of the estate; and (6) if none of the above, then to the next of kin as determined under the laws of the state where the employee or annuitant legally resided.
If a federal employee or an annuitant wants payment to be made differently from the order as discussed above, and assuming the employee or annuitant has not assigned his or her FEGLI life insurance and a valid court order is not on file, then the employee or annuitant must designate a beneficiary. A FEGLI beneficiary is made using Form SF 2823 (Designation of Beneficiary) and sent to an employee’s human resources office before the employee dies.
Note that a court-appointed guardian or someone with a power of attorney or a fiduciary may not designate a beneficiary.
A valid court order refers to a certified court decree of divorce, annulment, legal separation, or the terms of a court-approved property settlement agreement relating to a court decree of divorce, annulment, or legal separation that was received by an employee’s human resources office before the employee’s death. Such an order must expressly provide for someone to receive the employee’s or annuitant’s FEGLI benefits. Note that if a valid court order is on file, then the court order takes precedence over previously filed designations.
How Someone Should File a FEGLI Claim
OFEGLI is an administrative unit of Metropolitan Life Insurance Company (MetLife) that pays claims for the FEGLI program. A beneficiary or survivor needs to file a completed claim for death benefits, Form FE-6 (which can be downloaded at www.opm.gov/healthcare-insurance/life-insurance/death-claims/) and submit along with a certified death certificate either to the deceased employee’s human resources office or, if instructed, directly to OFEGLI.
Those employees and annuitants who have Option C and when an insured family member dies, the employee or annuitant must download Form FE-6 DEP (Statement of Claim – Option C, Family Life Insurance), downloadable from www.opm.gov/healthcare-insurance/life-insurance/death-claims/, and submit the completed form to OFEGLI together with a certified death certificate.
How FEGLI Benefits Are Paid
If the insured (the employee or annuitant) dies, then the designated beneficiary(ies) will receive the Basic Insurance Amount (BIA), Option A and/or Option B benefits (if enrolled). If an insured family member dies, then the employee or annuitant will receive any Option C benefits that may be payable.
If OFEGLI is paying a beneficiary less than $5,000, then the beneficiary will receive a check. If OFEGLI is paying a beneficiary $5,000 or more, then the beneficiary will have a choice of two ways to receive the payment; namely, either by check or a MetLife Total Contract Account or TCA, which is an interest bearing account set up in the beneficiary’s name with the Metropolitan Life Insurance Company(MetLife). If a beneficiary is receiving $5,000 or more and does not make a decision on how to receive payment, a TCA will be set up in the beneficiary’s name.
The MetLife TCA is a settlement option offered by MetLife for the payment of claims. Note that a MetLife TCA is not a checking, savings, or money market bank account. Since the MetLife TCA is not a bank account, it is not insured by the FDIC or any government agency. Instead, MetLife guarantees the full amount in the MetLife TCA including all interest earned. MetLife’s guarantee is further backed by the beneficiary’s respective state guarantee association. Maximum guarantee limits vary from state to state and may change over time.
A beneficiary has complete control of and access to the entire amount of the insurance proceeds. A beneficiary can withdraw the full amount from the MetLife TCA at any time. The information packet a beneficiary receives will include a draft book (similar to a checkbook). At any time and at no cost, a beneficiary can write drafts, similar to checks, from a minimum of $250 up to the full balance of the account. In addition, a beneficiary will receive periodic activity statements and can designate a beneficiary for the account. Those beneficiaries who choose the MetLife TCA settlement option will receive more detailed information when the account is opened.