The 5-year Rule, continued…
A small number of folks believe that if they had FEHBP coverage for at least 5 years anytime during their federal career, they will be able to continue (or pick up) FEHBP coverage for retirement. This is not necessarily true. You cannot expect to continue your FEHBP coverage into retirement just because you were covered under the program for 5+ years at the beginning of your federal career.
If you voluntarily cancel your FEHBP coverage at some point during your federal career and then sign up for the coverage a year or two before you separate for retirement, you would not be eligible to continue the coverage into retirement unless you obtained a waiver of the 5-year rule from OPM in advance. OPM reserves the right to waive the 5-year rule on a case by case basis. For more details regarding this waiver (as well as some of the exceptions under the current waiver policy), please refer to the FEHBP Handbook using the following web-link:
http://www.opm.gov/insure/health/reference/handbook/FEHB22.asp
A different example would be for someone who worked as a federal employee for several years with FEHBP coverage and subsequently left federal service at a young age to pursue a career opportunity in the private sector. If this person never returns to federal service, the most they could hope for as far as their pension is concerned would be a deferred retirement (with no FEHBP coverage) waiting for them later in life (once he/she is old enough to collect their pension). Deferred retirement was briefly discussed earlier in this article.
But, for example, if this person were to return to a covered position with the federal government and elected his/her FEHBP coverage immediately upon being rehired, they could work for a short period of time and then retire (if they were old enough and had enough federal service to be eligible to retire at that time) and keep their FEHBP coverage.
In this example, OPM would apply the 5-year test by verifying that the employee signed up for FEHBP coverage as soon as they were eligible, and if retiring less than 5 years since their reemployment, OPM would have verified the remaining years and months of FEHBP coverage from the last few years or months of federal service before the employee’s initial separation many years ago.
In other words, the rule doesn’t state that you have to be covered under the FEHBP for the 5 calendar years prior to your separation for retirement. The rule just states that you have to be covered for the last 5 years of your federal service. In this example, the person may have had 4 years of FEHBP coverage when they left federal service at the age of 25, but when he/she returned to federal service at the age of 61, signed up for FEHBP coverage immediately upon reemployment and eventually retired a year later at the age of 62, the 5-year test would have been met.
The Effect of Cancelling FEHBP Coverage
If you are not enrolled in the FEHB Program on the date that you separate for retirement purposes, you would not be allowed to pick up the coverage in retirement. So even if you had FEHBP coverage for most of your career, if you cancelled the coverage a few months before you retired, you would not be allowed to reinstate the coverage in retirement. The same would hold true if you cancelled your FEHBP coverage in retirement. In most cases, with one exception, you would not be allowed to reinstate your coverage.
The only exception to the example listed above would be if the federal employee (or retiree) was married to a federal employee (or retiree) and cancelled his/her coverage to be covered under his/her spouse’s FEHBP coverage. In this situation, he/she could qualify to reinstate his/her own FEHBP coverage later in retirement (either during a retirement open season, or with a qualified life event). This is one of many examples of the special circumstances that can be considered when a federal employee (or retiree) is married to a federal employee (or retiree).
The 5-year rule simply states that you must be covered under the FEHB Program for the last 5 years of your federal career (leading up to your date of separation for retirement). It does NOT state that you must have your own plan to meet this 5-year test, so a federal employee could have been covered under his/her spouse’s FEHBP plan for the last 5 years of federal service immediately preceding his/her separation for retirement and the 5-year test would be satisfied.
Open Seasons and Qualified Life Events in Retirement
You have annual open seasons and potential qualified life events (QLEs) for the rest of your life in retirement. This particular person, who cancelled their coverage to be covered under his/her spouse’s FEHBP coverage, could always reenroll under the FEHBP if he/she lost his/her spouse due to death or divorce, or if his/her spouse leaves federal service before he/she is eligible for an immediate retirement. This person could use the QLE option by contacting OPM within the period beginning 31 days before and ending 60 days after the loss of coverage.
If this retiree’s spouse eventually retires under the immediate retirement provisions, the first retiree could voluntarily reenroll under his/her own plan during a future retirement open season. Of course, since an individual is not allowed to be under more than one FEHBP plan at a time, the other spouse would have to use the same open season to remove the first retiree from his/her plan. This can all be coordinated with OPM to ensure no one loses any FEHBP coverage.
Alternatively, the retiree would not have to necessarily wait until the next retirement open season to sign up for his/her own FEHBP coverage. If you earlier in this article, I mentioned that you are no longer covered by the pre-tax rules after you retire. For employees, the pre-tax rule prevents them from changing from Self & Family to Self-Only plans outside of an open season without a QLE. But since retirees do not fall under the pre-tax rules, a federal retiree can switch from a Self & Family plan to a Self-Only plan anytime they want.
So in this particular example, the spouse (who is retiring from the federal government later) can attach an FEHBP election form to his/her application for retirement requesting that OPM switch the plan from Self & Family to Self-Only effective the commencement date of retirement. At the same time, the spouse (who retired earlier) can contact OPM to sign up for his/her own Self-Only plan due to the QLE of losing his/her coverage under the spouse’s FEHBP plan. Again, all of this can be coordinated with OPM to ensure that no one loses a day of coverage.
