FEHB Is Still One of the Best Retirement Benefits—As Long As You Avoid These Mistakes

Key Takeaways

• The Federal Employees Health Benefits (FEHB) Program continues to offer lifelong value in retirement, but only if you actively manage your plan and avoid common missteps.

• Mistakes such as dropping coverage too early, misunderstanding Medicare integration, or failing to account for survivor eligibility can result in higher costs and reduced protection.

Why FEHB Remains So Valuable in Retirement

If you are a public sector worker approaching retirement, the Federal Employees Health Benefits (FEHB) Program is one of the most durable and comprehensive health benefits you can retain into retirement. It allows you to carry your coverage into retirement with the same government contribution you received while working. The access to a broad selection of nationwide plans and the ability to combine FEHB with Medicare later make it far more flexible than most private sector retiree health options.

Yet, despite how strong the foundation is, some common mistakes can severely reduce the value of your coverage—or worse, disqualify you from continuing it altogether.

1. Not Meeting the 5-Year Enrollment Rule

One of the most fundamental requirements for keeping FEHB into retirement is that you must be continuously enrolled (or covered as a family member) in an FEHB plan for at least five years immediately before retirement. This is a hard rule. If you don’t meet it, you generally cannot carry your FEHB coverage into retirement.

• Temporary coverage or being covered under a spouse’s plan can count, if it’s FEHB.

• The five-year requirement must be continuous and uninterrupted.

• If you drop coverage for even a short time within those five years, the clock resets.

If you are approaching retirement and have been relying on Tricare or another non-FEHB option, check now to see how this rule applies.

2. Thinking You Must Drop FEHB When Enrolling in Medicare

This is a common misunderstanding. At age 65, when you become eligible for Medicare, you are not required to drop your FEHB plan. In fact, keeping both FEHB and Medicare can lead to reduced out-of-pocket costs. Medicare generally becomes your primary payer, and FEHB acts as secondary.

What this coordination can mean:

• Medicare Part A is premium-free for most retirees and covers inpatient care.

• Medicare Part B, which has a monthly premium, covers outpatient care and doctor visits.

• When you enroll in Medicare Part B, many FEHB plans reduce or eliminate deductibles and copayments.

You should carefully weigh the total cost of Medicare Part B premiums against the reduced cost-sharing that your FEHB plan offers when Medicare is your primary payer.

3. Dropping FEHB in Retirement to Save Money

At first glance, the premiums may look steep, especially if you’re comparing them to Medicare Part B alone. But dropping FEHB means giving up a comprehensive network of coverage that includes international benefits, family coverage, and prescription options—often more robust than standalone Medicare.

What you give up if you drop FEHB:

• Access to family and Self Plus One coverage.

• Prescription drug benefits without the complexity of separate Part D enrollment.

• The ability to switch plans during annual Open Season.

• Long-term flexibility in the event Medicare alone does not meet your needs.

You can suspend FEHB if you enroll in certain Medicare Advantage plans, but once suspended, reinstatement can only occur under limited circumstances.

4. Assuming FEHB Plans All Work the Same with Medicare

Not all FEHB plans coordinate with Medicare the same way. Some waive deductibles and copayments if you enroll in Medicare Part B. Others offer reimbursement of your Medicare Part B premiums. But these features vary.

You need to:

• Review your FEHB plan brochure carefully.

• Look for sections describing Medicare coordination and incentives.

• Compare total costs, including Medicare premiums, before choosing a path.

Don’t just assume your current plan is the best one for retirement. Each year during Open Season, you should evaluate if switching to another FEHB plan with better Medicare integration makes sense.

5. Failing to Plan for Survivor Benefits

FEHB does not automatically continue for your spouse after your death unless specific conditions are met. To preserve FEHB coverage for your spouse or dependents after your death, you must:

• Elect a survivor annuity at retirement.

• Be enrolled in a Self Plus One or Self and Family plan at the time of death.

If you do not elect a survivor annuity or switch to a Self Only plan, your spouse’s FEHB eligibility ends when you do. This decision must be made at retirement and cannot be undone later.

6. Ignoring Annual Open Season Opportunities

Every year, from mid-November to mid-December, you can change your FEHB plan. Many retirees overlook this chance, assuming that their current plan still fits their needs. But health needs and plan benefits change over time.

Why Open Season matters:

• You can change to a plan with better Medicare coordination.

• You can switch from a high-deductible plan to a lower-cost option.

• You may find a plan with improved prescription benefits or telehealth services.

Missing this window could mean another year of higher costs or gaps in coverage.

7. Misunderstanding the Impact of Moving or Living Abroad

If you move to another state or even another country in retirement, your access to care could change dramatically. Some FEHB plans are regional HMOs, which may not cover you adequately outside their geographic area.

For international retirement:

• Not all FEHB plans provide robust overseas coverage.

• Look for plans with international benefits or wide national networks.

If you plan to retire abroad, research FEHB plans that offer benefits for international care and make your switch during Open Season before moving.

8. Not Factoring in Income-Related Medicare Premiums

Medicare Part B premiums are based on income, and higher-income retirees pay more through IRMAA (Income-Related Monthly Adjustment Amounts). Your Modified Adjusted Gross Income (MAGI) from two years prior determines your current premiums.

For example:

• In 2025, IRMAA kicks in if your 2023 MAGI exceeds $106,000 (individual) or $212,000 (joint).

• These thresholds can significantly increase your total monthly cost.

When coordinating FEHB with Medicare, include IRMAA in your financial planning to avoid surprises.

9. Believing You Can Easily Rejoin FEHB After Dropping It

Some retirees assume they can drop FEHB and rejoin later if needed. This is rarely true. If you cancel your FEHB coverage in retirement, you cannot re-enroll unless you qualify under a very narrow set of exceptions—such as returning to federal service.

Suspending FEHB (not canceling) to join a qualifying Medicare Advantage plan allows reinstatement later, but cancellation is generally final.

Make sure any decision to drop or suspend FEHB is based on a full understanding of the consequences and limited reversal options.

10. Forgetting to Coordinate FEHB With Long-Term Care Plans

FEHB plans do not cover long-term custodial care, such as assisted living or nursing home stays. Some retirees incorrectly believe FEHB or Medicare will provide these services. They don’t—at least not for extended periods.

You should consider:

• Reviewing options for standalone long-term care insurance or hybrid products.

• Understanding what Medicaid covers and the asset requirements.

• Talking to a licensed professional about estate and care planning.

Failing to plan for long-term care can quickly deplete retirement savings, especially if both spouses need care.

11. Not Considering How Working Past Age 65 Affects Coverage

If you choose to keep working past age 65, you may want to delay enrolling in Medicare Part B to avoid the premium while your FEHB plan remains primary. This is allowed if you are actively employed.

Once you retire, however, the rules change:

• Medicare becomes primary.

• FEHB becomes secondary.

You’ll have an 8-month Special Enrollment Period after retirement to sign up for Part B without penalty. Missing that window can result in late enrollment penalties and delayed coverage.

12. Assuming You’ll Just Figure It Out Later

FEHB and Medicare decisions are layered with eligibility rules, financial implications, and timelines. Assuming it’s easy to sort through on your own, especially while also preparing for retirement, leads many to make preventable mistakes.

Take proactive steps:

• Learn how FEHB and Medicare work together before you retire.

• Use Open Season each year to evaluate better options.

• Consider speaking with a licensed professional to model out cost scenarios.

Careful Choices Help Preserve the Full Value of FEHB

FEHB is still one of the strongest benefits available to retired government employees, but only if you treat it as a living part of your retirement plan. You must actively manage it, revisit it each year, and avoid assuming that it takes care of itself.

Every decision—when to enroll in Medicare, whether to change plans, how to plan for your spouse—should be intentional and informed.

To make sure you are making the right decisions about your health coverage in retirement, get in touch with a licensed professional listed on this website for personalized guidance.