There are many things to consider before retirement – especially the welfare of partners, children, and other dependents.
If only one family member is in federal employment, different retirement packages are available to take care of dependents. The worker only has to review the packages to decide how much of his retirement benefits will take care of his dependents.
Things are not so simple for families with dual Federal employees. Dual feds families are families in which both spouses are in federal employment. For federal workers in this category, there are several issues to be resolved before retirement.
Federal Employees Health Benefits (FEHB) After Retirement
Under the FERS, federal employees can continue enjoying the Federal Employees Health Benefits (FEHB) scheme on two conditions.
The employee must provide evidence of at least five years of participation in the FEHB scheme during service. The five years must be successive, except in special circumstances, such as when an employee moves to a post that does not offer FEHB coverage. Also, the worker can use different coverage packages during the accumulated five years. It does not have to be the same insurance plan or type through the years. Federal employees enrolled in the Department of Defense’s TRICARE can also enjoy FEHB after retirement in as much as they have been registered for five years and are enrolled under FEHB on the last day of service.
Two, the employee must be retiring on an immediate annuity. After ten years of service (MRA-10), Federal employees leaving service at their MRA will not have health insurance during retirement. However, workers in this category can choose to postpone payment of annuities and health insurance. What happens, in this case, is that the worker will get the compulsory one-year, six-month coverage known as TCC (Temporary Continuation of Coverage). The coverage will stop and resume when the annuitant is eligible to start receiving their benefits.
Married Federal employees should note that only spouses who they elect as survivor annuitants will be able to enjoy the benefits of FEHB after their partners retire from service. Workers who wish to elect survival annuities will have to sacrifice 5% of 25% of their total pension. If the worker survives their partner, the reduction will stop.
Now to dual feds. The FEHB scheme is more advantageous for dual-feds couples. The OPM states that dual-fed couples can enjoy the benefits of their partner’s FEHB without being elected as survivor annuitants. One significant advantage is that the 5% reduction is not applicable here, and dual-feds couples can use the money to purchase other insurance packages, such as a life insurance package. There are life insurance packages that will even cost less than the 5% deduction.
Which is Best – Self-only, Self-plus one, or Family Coverage?
The next stage is deciding the best FEHB package for dual-fed couples. Both partners are eligible for any of these plans, but it will be cheaper to have only one spouse enroll under FEHB while the other spouse enjoys the benefits too. Such a plan could be a self-plus one or family coverage. Alternatively, both spouses could go for different self-only packages.
Dual Feds Can Save More by Paying for FEHB Before Tax Reductions
Employees who are still in service get to pay for FEHB coverage, alongside the government, using pre-tax payment. That is, the worker will make his FEHB payment before the IRS deducts taxes. After retirement, the narrative changes. Retirees pay after-tax reductions, not before. This is known as premium conversion.
Dual Federal employees can save more if one party is still in service. The Fed in service, who will be paying for healthcare coverage using pre-tax dollars, can enroll in the FEHB while the other party enjoys the benefits. Above all, prospective retirees should consult and seek their financial advisors’ counsels as each case differs.