Do Federal Employees Keep Health Insurance After Retirement?

Federal employees often wonder about maintaining health insurance coverage after retirement. Under specific conditions, federal employees can continue their Federal Employees Health Benefits (FEHB) program coverage into retirement. This allows retirees to maintain access to familiar health plans and providers, which can provide stability and peace of mind. Understanding the requirements and procedures for this continuation is a crucial step in planning for a secure retirement.

Eligibility for Continued Coverage

Continuing Federal Employees Health Benefits (FEHB) coverage into retirement requires meeting specific criteria established by the Office of Personnel Management (OPM). A primary requirement is the “5-year rule”: an employee must have been continuously enrolled in FEHB, or covered under a spouse’s FEHB enrollment, for at least five years immediately preceding their retirement date. This period can encompass time as an active employee, a Compensationers enrollee, or an annuitant.

Another requirement is that the employee must retire on an immediate annuity. An immediate annuity refers to a pension that begins no later than one month after the date of final separation from service. This includes various retirement scenarios such as voluntary retirement, disability retirement, or early optional retirement offers. Conversely, employees retiring with a deferred annuity, where the pension payments are postponed, generally cannot reenroll in FEHB later.

The employee must also be enrolled in an FEHB health plan on the exact date their annuity begins. If there was a break in service or a period where FEHB coverage was not maintained, the five-year clock essentially restarts unless specific conditions for a waiver apply. Prior coverage may count towards the five-year rule if re-enrollment occurred and an immediate annuity is chosen upon subsequent retirement.

The five-year continuous enrollment period does not require enrollment in the same specific FEHB plan or carrier. Coverage as a family member under another person’s FEHB enrollment also counts towards this five-year requirement. Periods of coverage under TRICARE can count towards the five-year rule, provided the employee is enrolled in an FEHB plan at retirement.

Family members covered under the employee’s FEHB enrollment at retirement will continue to be covered as long as the retiree maintains eligibility. For a surviving spouse to continue FEHB coverage after the death of the federal employee or annuitant, they must have been covered under a Self and Family FEHB enrollment at the time of death and be entitled to a monthly survivor annuity.

FEHB Premiums in Retirement

Upon retirement, the financial structure of Federal Employees Health Benefits (FEHB) premiums shifts. The government’s contribution to FEHB premiums for retirees remains consistent with what it pays for active employees. The government typically contributes the lesser of 72% of the program-wide average premium or 75% of the specific plan’s premium. This substantial contribution helps mitigate the financial burden on retirees.

The retiree’s share of the FEHB premium is generally deducted directly from their monthly annuity payment. This differs from active employment where premiums are often deducted from bi-weekly paychecks. While active employees often pay premiums with pre-tax dollars through Premium Conversion, this pre-tax advantage typically ceases in retirement, meaning premiums are deducted after-tax from annuity payments.

Medicare’s interaction with FEHB is a consideration for retirees, particularly those aged 65 and older. For individuals enrolled in both, FEHB generally becomes the secondary payer to Medicare Part A (hospital insurance) and Part B (medical insurance). Medicare pays first for covered services, and FEHB then covers many remaining costs as a supplement. Enrollment in Medicare Part A is often automatic and premium-free, but Part B usually involves a monthly premium.

Many financial advisors suggest retirees enroll in Medicare Part B, as it can reduce out-of-pocket expenses by having Medicare as the primary payer. The decision to enroll in Medicare Part B alongside FEHB should be based on individual health needs, financial circumstances, and other insurance coverages. Premium amounts for FEHB plans vary depending on the chosen plan, enrollment type (Self Only, Self Plus One, or Self and Family), and specific benefits. These amounts are subject to annual changes, typically announced during the FEHB Open Season.

Ensuring Continued Enrollment

Ensuring FEHB coverage continues into retirement requires proactive engagement with administrative processes. Contact your agency’s Human Resources (HR) or Benefits office well in advance of your anticipated retirement date. This allows for a review of your eligibility and an opportunity to address potential issues.

The retirement application process includes specific forms for FEHB continuation. Employees typically complete Standard Form 3107: Application for Immediate Retirement (FERS), which contains sections relevant to health benefits. Ensure all necessary information for FEHB continuation is provided.

Understanding the typical timeline for processing retirement applications is important. Processing times vary, so starting the application early helps ensure benefits are in place when your annuity begins. Once your HR department submits paperwork, the Office of Personnel Management (OPM) will process it to finalize your retirement and FEHB continuation.

After retirement, retirees receive confirmation of continued FEHB enrollment. Premium deductions begin directly from monthly annuity payments. Managing FEHB enrollment post-retirement involves several avenues. Retirees can change health plans or enrollment type (e.g., from Self Only to Self and Family) during the annual FEHB Open Season, typically mid-November through mid-December.

Retirees can also make changes to their FEHB enrollment outside of Open Season if they experience a Qualifying Life Event (QLE), such as marriage, divorce, birth or adoption of a child, or loss of other health coverage. For questions or to manage enrollment after retirement, annuitants can contact the Office of Personnel Management (OPM), which oversees the FEHB program for retirees.