Suppose Congress passed a law saying you had to work five years past the date when you were planning to retire? You would be outraged, right?
Now, suppose (in order to save a few bucks) you have put yourself into a position where you must work five years past your retirement deadline. Guess what? It happens all the time.
Each year, a batch of wannabe retirees learn, too late, that while they were piggybacking on their spouses’ private-sector health plan they were rendering themselves ineligible for the federal health program (FEHBP) in retirement.
Here’s how it goes:
A few (very, very few) private-sector health plans are better than those offered by the FEHBP. In some cases, the employer pays more of the premium than the 70 percent paid by the federal government.
For whatever reason, the federal or postal worker decides to be covered by his or her spouse’s private-sector plan. But as they get close to retirement, they realize that the spouse’s plan either disappears, becomes much more expensive or covers less. Few companies are anxious to have large numbers of heavy-user retirees on their insurance roles.
Once they see what they are about to lose when they retire, many feds who previously shunned the FEHBP now embrace it. Or try. And more often than not fail.
That’s because the FEHBP requires that in order to carry health insurance into retirement, the employee/retiree must have been covered (as in pay premiums) by one of the FEHBP plans for the five years’ prior to retirement. It can be any plan, but you have got to be covered.
David Snell, director of benefits for the National Active and Retired Federal Employees (NARFE) Association, has known of many feds who had to work past their planned retirement date to qualify for the FEHBP.
“The problem is that the spouse of the federal employee may have a private-sector health plan where they pay a bigger share of the premium,” he said. “So the federal employee doesn’t enroll in the FEHBP but rather stays in the spouse’s health plan realizing, too late, they have to meet the five-year enrollment rule.”
There is an escape route, although it is a tight squeeze.
“Some folks have to leave government before they had planned,” Snell said. “Perhaps to take care of a sick family member … they were aware of the five-year rule but thought they would enroll in the FEHBP five years before retiring. Now they have to leave.” Snell said such individuals can ask the Office of Personnel Management for a waiver of the five-year rule because of “circumstances beyond their control.” But there is no guarantee they will get the waiver.
The only way to guarantee you (and your spouse) can take the FEHBP into retirement is to enroll in one of the plans. It doesn’t matter which one. You can pick the lowest premium plan and never use it. But what you will have is insurance that, when you retire, you will be able to keep for the rest of your life in the best health program available (the FEHBP) for older folks.
Spend a little now. Save a bundle in retirement.
For more money-saving FEHBP tips listen to our Your Turn radio show today at 10 a.m.
Listen if you can (1500 AM or online), and if you have questions email them to me at email@example.com or call in during the show at (202) 465-3080. The show will be archived here.
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