These Overlooked Federal Employee Benefits Might Be the Safety Net You Didn’t Know You Needed

Key Takeaways

• Several federal benefits are underutilized or misunderstood by employees and retirees, yet they provide significant financial protection when used strategically.

• Understanding and leveraging these lesser-known benefits in 2025 could be the difference between a stable retirement and one filled with financial uncertainty.

The Quiet Power of Lesser-Known Federal Benefits

When you think about your retirement benefits as a government employee, your mind probably jumps to the obvious ones: your pension, your Thrift Savings Plan (TSP), and perhaps your FEHB coverage. But beyond those pillars lies a range of other federal employee benefits that are often overlooked—and in some cases, completely unknown.

In 2025, overlooking these secondary benefits could mean missing out on valuable income protection, financial security, and healthcare options that act as a crucial safety net.

Federal Employees’ Group Life Insurance (FEGLI): More Than Just a Policy

FEGLI continues to be the largest group life insurance program in the world, yet many enrollees do not fully understand how to adjust it in retirement or how its costs evolve over time.

Why it matters in 2025:

• Basic coverage continues into retirement if you were eligible at retirement and elected to keep it.

• Optional coverages (Options A, B, and C) may become increasingly expensive post-retirement due to rising premiums every five years.

You need to assess whether reducing or cancelling optional coverage in retirement aligns with your current life insurance needs. FEGLI also offers death benefit options for eligible survivors, which can serve as short-term financial relief during difficult times.

The Value of Survivor Benefits

Survivor benefits are not just a checkbox during your retirement paperwork. They are a structured way to ensure your spouse or other eligible beneficiary continues to receive a portion of your pension should you pass away.

What you need to know:

• Under FERS, electing a full survivor benefit (50% of your annuity) or a partial one (25%) ensures your spouse is eligible to continue FEHB coverage.

• Giving up this option eliminates their ability to maintain federal health insurance.

This benefit can make a significant difference in long-term spousal security. Many retirees make the mistake of focusing only on immediate pension income, forgetting the long-term implications of this one-time election.

Voluntary Contributions Program (VCP): Still Beneficial for CSRS Employees

If you are one of the few remaining employees under the Civil Service Retirement System (CSRS), the Voluntary Contributions Program (VCP) can be an overlooked asset.

Here’s how it works:

• You can contribute up to 10% of your lifetime federal earnings to VCP.

• These contributions can then be rolled into a Roth IRA upon retirement.

Though CSRS is closed to new enrollees, many long-tenured employees still qualify. In 2025, with the repeal of the Windfall Elimination Provision (WEP), using VCP in tandem with Social Security benefits can result in more favorable retirement income planning.

Flexible Spending Accounts (FSA): A Tool Beyond Working Years?

While Health Care FSAs are generally unavailable post-retirement, if you retire mid-year and had enrolled during the most recent Open Season, you can still use your FSA funds until the end of the calendar year in which you retire.

What to do:

• Use your FSA funds strategically before retirement.

• Ensure you submit claims on time (often up until March of the following year).

Understanding FSA timelines helps prevent losing out on hundreds, possibly thousands, of tax-free healthcare dollars.

Long-Term Care Insurance (FLTCIP): Enrollment Still Frozen but Coverage Remains

As of 2025, the Federal Long Term Care Insurance Program (FLTCIP) remains suspended for new applicants. However, if you already have coverage, it continues under your existing terms.

Why it still matters:

• Long-term care remains one of the most financially devastating out-of-pocket healthcare costs in retirement.

• Maintaining this benefit, even with rising premiums, may still be more affordable than purchasing coverage on the open market.

Reviewing your FLTCIP terms and planning for the out-of-pocket maximums now can make this one of the most stabilizing components of your long-term care planning.

Medicare Coordination with FEHB or PSHB

As more retirees reach age 65, questions about how Medicare works with federal health coverage become central.

In 2025, for federal annuitants:

• If you remain with FEHB or transition into the Postal Service Health Benefits (PSHB) program, enrolling in Medicare Part B is optional for most, but mandatory for some postal annuitants.

• Many plans reduce out-of-pocket costs significantly when combined with Medicare Part B.

However, not every plan coordinates equally. You should compare cost-sharing, premium offsets, and Medicare Part D integration features in your plan. Taking the time to analyze these details could save you thousands annually.

Social Security: No Longer Diminished by WEP

With the repeal of the Windfall Elimination Provision (WEP) in January 2025, federal employees who paid into both CSRS and Social Security no longer see their Social Security benefits reduced.

What this means for you:

• You may now receive full benefits from Social Security even if you qualify for a CSRS pension.

• Those who previously avoided claiming Social Security due to WEP penalties should revisit their claiming strategy.

This change alters the retirement landscape dramatically, especially for those who had planned to rely solely on their pension. A recalibrated Social Security strategy could extend your retirement income horizon significantly.

TSP Catch-Up and Super Catch-Up Contributions

The Thrift Savings Plan offers increased contribution limits for those age 50 and older, and a temporary expanded limit for those aged 60 to 63.

2025 Limits:

• Regular elective deferral: $23,500

• Age 50+ Catch-Up: $7,500

• Super Catch-Up (ages 60–63): $11,250

Missing out on these additional contributions during your final years of service could mean losing the opportunity to grow a significantly larger nest egg. Ensure you’re enrolled in automatic catch-up if eligible.

Post-Employment Health Coverage Options

If you do not qualify for an immediate annuity and retire under MRA+10 or deferred retirement, you may not retain your FEHB or PSHB coverage unless you meet specific criteria.

Key details to remember:

• To maintain coverage, you must be eligible for an immediate annuity and have been enrolled in FEHB for the five years before retirement.

• Losing this benefit means seeking alternate health coverage, which may come at a significantly higher cost.

Planning when and how you retire isn’t just about age—it’s also about timing your benefit eligibility.

Beneficiary Designations: Small Detail, Big Impact

One of the most overlooked details is keeping your beneficiary designations updated for:

• Life insurance (FEGLI)

• TSP account

• Unpaid compensation

Without current designations, your benefits may not go to the intended individual, potentially sparking lengthy legal disputes or delays. Review and update your forms after any major life event, such as marriage, divorce, or the birth of a child.

Federal Employees Dental and Vision Insurance Program (FEDVIP)

FEDVIP is often sidelined in retirement planning, yet it offers nationwide dental and vision coverage with no waiting periods.

What to consider in 2025:

• Premiums are fully paid by enrollees, but coverage can be retained in retirement.

• You must elect to continue this benefit at retirement, or you lose eligibility.

FEDVIP is particularly valuable for retirees who lose dental and vision benefits from a spouse’s employer plan. Understanding when and how to enroll, especially during Open Season, can preserve access to essential care.

Leave Payouts: Your Last Paycheck Can Be Substantial

Your accumulated annual leave is paid out as a lump sum at retirement. The more leave you’ve built up, the bigger that final check.

Why it matters:

• It can bridge the gap between retirement and the start of your annuity.

• It’s considered taxable income in the year it is received.

Make sure to time your retirement date strategically to maximize the value of your final pay and avoid pushing yourself into a higher tax bracket unnecessarily.

Putting the Pieces Together for a Stronger Retirement

These lesser-known benefits don’t always make headlines, but they hold the power to add stability, flexibility, and security to your retirement. Whether it’s through increased savings, coordinated healthcare coverage, or income protection for loved ones, the details matter.

Take the time now to:

• Review your FEGLI and TSP designations

• Reconsider survivor benefits

• Optimize catch-up contributions

• Coordinate FEHB/PSHB with Medicare

Many of these benefits require pre-retirement elections or careful timing. Missing a deadline or misunderstanding a rule could be costly.

Protect Your Financial Future by Making Informed Choices

You’ve spent a career serving the public. Now it’s time to protect the benefits you’ve earned. The smartest move you can make is to schedule a personal review with a licensed professional listed on this website. An experienced advisor can walk you through the fine print and help you make decisions with long-term confidence.