Over the last two months, many federal employees have received notifications that their jobs are being eliminated. Some of these employees have been offered early retirement, either in the form of a Voluntary Early Retirement Authority (VERA) with no buyout option, or a Voluntary Separation Incentive Payment (VSIP) which is a VERA with a buyout. Other employees who are not eligible for a VERA or a VSIP and who are forced to resign from federal service may be eligible for a deferred retirement.
Among the important questions that federal employees who are leaving federal service: What happens to employee insurance benefits? These insurance benefits include health, dental and vision insurance, life insurance and long-term care insurance. The last column discussed federal health insurance (FEHB), dental and vision insurance (FEDVIP) benefits. This column discusses what happens to federal life insurance and long-term care insurance benefits when a federal employee retires or leaves federal service.
READ ALSO: What Happens to Federal Employee Health Benefits (FEHB) in Early or Deferred Retirement?
Federal life insurance and retirement
Employees are eligible to continue Federal Employee Group Life Insurance (FEGLI) program life insurance benefits into retirement if they meet the following requirements:
1. The employee is entitled to retire with an immediate annuity under a retirement system for civilian employees. These retirement systems include CSRS, FERS, CIA Retirement System, Foreign Service Pension System and Federal Judiciary Retirement System.
2. Retiring with an immediate annuity means that an employee meets the minimum age and service time to retire and receive the first of lifetime CSRS or FERS annuity checks one to two months after retiring.
3. A retiring employee must have been continuously enrolled in the FEGLI program for the five continuous years of service immediately before and ending on the effective date of employee’s retirement.
What happens if an employee is not eligible to keep FEGLI life insurance?
Federal employees who retire from federal service but do not meet the five continuous year enrollment requirement during the last five years of federal service will lose their FEGLI program life insurance upon retiring from federal service.
Those federal employees who leave federal service under a deferred retirement will also permanently lose their FEGLI life insurance.
Upon leaving or retiring from federal service, a federal employee who loses their FEGLI life insurance and who is in need of life insurance coverage will need to purchase a life insurance policy on their own. A departed federal employee who decides to work in private industry or for a state or local government may have access to employer-sponsored group life insurance with their new employer. The advantage to group life insurance is that group life insurance in most cases is “guaranteed issue.” “Guaranteed issue” means an employee who applies does not have to go through underwriting and prove he or she is insurable. Also, with an employer-sponsored group life insurance policy, the employer may pay a portion of an employee’s life insurance premiums.
FEGLI conversion privilege
A federal employee who will be departing or retiring from federal service and will be losing FEGLI life insurance is entitled to convert FEGLI life insurance coverage to an individual non-FEGLI life insurance policy. There is one exception to this conversion option. Specifically, if an employee leaves federal service and then returns to federal service in a FEGLI enrollment eligible job position within three calendar days after the date the FEGLI program life insurance stops. In that case, the FEGLI life insurance coverage will continue, and the employee is not eligible to convert his or her FEGLI group term life insurance to an individual life insurance policy.
There is no FEGLI conversion privilege under the following circumstances: (1) An employee cancels FEGLI life insurance coverage; (2) An employee’s compensation is terminated because the employee left federal service; and (3) A federal retiree’s CSRS or FERS annuity is terminated.
Converting to an individual life insurance policy
Under the conversion privilege, an employee may convert all or any part of the employee’s FEGLI Basic Insurance Amount (BIA) and Optional coverages (Option A- Standard and Option B – Multiple of Salary) to an individual life insurance policy. No medical examination is required. However, the employee may be asked a few questions about his or her health in order to determine if the employee qualifies for a lower premium. The employee does not have to answer these questions, but if the employee does not, then the employee may pay a higher premium than necessary.
The individual policy will be issued by an insurance company that the employee selects from the list of approved companies that have been accepted by OPM as eligible and that has agreed to issue such policies under the provisions of the FEGLI contract.
The individual life insurance policy may be any type of life insurance customarily issued by the insurance company selected. However, the employee cannot choose term life insurance, universal life insurance, variable life insurance or any other type of life insurance with an indeterminate premium. The life insurance policy cannot include disability or accidental death and dismemberment riders.
Any life insurance policy purchased under the conversion privilege is a personal business transaction between an employee and the life insurance company. The cost of the converted life insurance policy is determined by the life insurance company and based on the employee’s age and class of risk. Since the employee will no longer be part of the FEGLI group contract, the employee’s premium payments may be much higher than the FEGLI premiums.
FEGLI conversion process
When an employee’s FEGLI life insurance terminates, the employee’s employing office must give the employee Form SF 2819 (Notice of Conversion Process). If the employee wishes to convert his or her FEGLI life insurance coverage, then the employee must send the Form SF 2819 to the Office of Federal Employees’ Group Life Insurance (OFEGLI) within the 31-day time limit for conversion. The employee’s agency must also give the employee Form SF 2821 (Agency Certification of Insurance Status). The employee should send Form SF 2821 with Form SF 2819 to the OFEGLI. But if the employee does not have Form SF 2821, the employee should not delay in sending Form SF 2819. The employee should request a completed SF 2821 from the employee’s agency before the expiration of the 31-day time limit and forward it to the OFEGLI. The OFEGLI needs the Form SF 2821 in order to calculate the amount of FEGLI life insurance that can be converted.
Once the OFEGLI has received Form SF 2819 and Form SF 2821, the OFEGLI will send the employee a list of insurance companies that offer conversion policies in the geographic area where the employee lives. The employee must contact the companies to get information to get information on the conversion, life insurance policy and the premium cost.
Federal long term care insurance and retirement
The federal government has been offering group long term care insurance through the Federal Long-Term Care Insurance Program (FLTCIP) to federal employees and retirees and eligible family members since 2002. Employees and retirees must apply and get approved for the insurance. Information about the program can be obtained at https://www.ltcfeds.gov.
Employees and retirees and eligible family members who are enrolled in the FLTCIP pay the full cost of the premiums with no federal government contribution. Employees enrolled in the FLTCIP have their premiums deducted from their bi-weekly salary. Employees who want to continue their long-term care insurance in retirement may do so with no requirements. Once retired, these employees with FLTCIP insurance can have their premiums deducted from their monthly CSRS or FERS annuity checks.
Those employees who leave federal service and are not eligible for a CSRS or FERS annuity may continue to be enrolled in the FLTCIP. However, they will have to make arrangements with FLTCIP to pay their premiums. These arrangements include direct billing and automatic withdrawal from a checking or a savings account.