Rules for Maintaining FEHB in Retirement

The three guidelines that federal employees must adhere to in order to maintain their Federal Employees Health Benefits (FEHB) upon retiring are covered in this article.

Three Guidelines to Maintain FEHB in Retirement

The first requirement is that you must enter retirement with an immediate pension. You should also be registered with the FEHB program on the day of retirement and have had FEHB insurance for the five years before retirement.

These three rules are essential. But unlike most aspects of receiving government benefits, it’s not that straightforward. Here’s what you should know.

RULE 1:

You should retire with an immediate annuity. You are likely eligible to receive an immediate annuity if you have a terminated service retirement, are fully qualified, or take early retirement; all of them count.

This still qualifies to help you maintain your FEHB throughout retirement if you are eligible under the MRA+10 rules (i.e., you have reached your least retirement age but have a minimum of 10 years of service but fewer than the 30 required to be fully eligible). 

However, you can only get the coverage while receiving your pension. So there is a cost associated with this MRA+10 retirement type. People frequently choose to intentionally delay claiming their pension to avoid the penalty. 

This is acceptable. You won’t have FEHB while delaying that retirement (to avoid the penalties), but it will be reinstated when you return to take the pension. Although fully qualified, early outs, retirements from services that have been discontinued, and even MRA+10 are all regarded as “immediate annuities.”

Someone retiring with a deferred pension is an example of a worker who would not be receiving an instant pension. This is not the same as the MRA+10 case that we discussed. This person doesn’t even have the option of taking their pension immediately. That is an unintentional lapse in eligibility for the pension. Deferred retirees cannot, under any circumstances, take advantage of the FEHB program in retirement.

RULE 2:

The second requirement is that you should be enrolled in the FEHB program on the day you retire. This particular aspect of the subject needs to be clarified because it creates so much misunderstanding for many individuals. The only thing the government cares about is that you have FEHB coverage.

RULE 3:

This overlaps in a way with the third component of the five-year rule – which states that you can switch carriers during that time. The government doesn’t care exactly what plan you are under, so you can switch from Blue Cross to Aetna to Kaiser and back to Blue Cross.

Additionally, they don’t care how the close relative coverage is presented. The government doesn’t care if you’re switching from a “self-only” to a “self-plus family” or from a “self-plus family” to a “self-plus one.”

Remember that you can switch between your own and your spouse’s FEHB coverage. This would apply to two federal employees who are married. You can alternate between the two. The administration is unconcerned. You still have FEHB coverage over that entire period, so you comply with the requirement.

To elaborate on the five-year portion of the rule, for most workers, this is your most recent period of five years in which you had a government post. You would have needed to have joined the FEHB plan on January 1, 2018, if you intended to retire by December 2022. Before leaving the house, you must check to see if you have such coverage.

This is a fairly straightforward computation of five years for federal employees who remain in the service until they retire and have been in the FEHB program without gaps in duty. However, if you took a sabbatical from work during your previous five years of employment, those five years would not include that break. 

You will have to go back an additional year further than that in our earlier example if you intend to leave in December 2022, but you took a sabbatical from duty for the entire year of 2019 for any reason. You would therefore have to have coverage starting on January 1, 2017.

Following this criterion, you were enrolled in the FEHB plan for the last five years of service, during which it was practicable for you to do so. After all, a gap in service prevents you from enrolling in the FEHB plan. Since you took a year off from work in this instance, we had to go back six years to make sure you had the necessary five years of coverage.

Not many federal employees deal with an interruption in service at the very end of their careers. That is exceptionally unique. But now and again, we’ll see it and want to be confident that everyone understands what it is.

If You Willingly Leave FEHB While Still Working

If you leave the FEHB program while still working as a federal employee and have been consistently employed over the previous five years of service, your five-year clock resets when you return and desire to rejoin the FEHB program.

Therefore, in the break-in-service instance, we discussed earlier, you left the service, returned, and reenrolled in the FEHB plan. That aspect is not a challenge. However, the clock will start afresh when you return to the FEHB plan if you are still working and voluntarily quit the program for whatever reason. Therefore, you will need to count backward from that point by five years.

Liability Under TRICARE

Okay, so it would be imprudent of me to skip over TRICARE, the Army health program. Given the many veterans working for the federal government, we should discuss this initiative. Time spent inside the TRICARE program for qualified federal employees can contribute toward the five-year criterion we discussed. However, the other two conditions still need to be satisfied. On the day of retirement, you must be eligible for an immediate pension and enrolled in the FEHB program. TRICARE is excellent. It can assist you in fulfilling the five-year requirement, but the other two conditions must still be met.

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After entering the financial services industry in 1994, it was a desire to guide people towards their financial independence that drove Aaron to start Steele Capital Management in 2013. Armed with an extensive background in financial planning and commercial banking coupled with a sincere passion for helping people, Aaron has the expertise and affinity for serving the unique needs of those in transition. Clients benefit from his objective financial solutions and education aligned solely with
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Born in Olympia, Washington, Aaron spent much of his childhood in Denver, Colorado. An area outside of Phoenix, Arizona, known as the East Valley, occupies a special place in Aaron’s heart. It is where he graduated from Arizona State University with a Bachelor of Science degree in Business Administration, started a family, and advanced his professional career.

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Focused on helping veterans and their families navigate the maze of long-term care solutions, Aaron specializes in customized strategies to avoid the financial crisis that care related expenses can create. Experience has shown him that many seniors are not prepared for the economic transition that takes place as they reach an advanced age.

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