More Examples for Feds married to Feds
As I mentioned previously, in most cases, it’s usually cheaper to maintain two Self-Only plans when a federal employee is married to a federal employee. This is usually the case unless there are eligible children in the family. The same typically holds true for a federal retiree who is married to a federal retiree unless one of the retirees is a public safety officer.
Earlier I explained that retired public safety officers have a federal tax exclusion that they can claim each year. In that situation, the federal retiree may want to consider keeping a Self and Family FEHBP plan with his/her spouse’s retired public safety officer pension.
Earlier in this article, you also learned that most other retirees pay their FEHBP premiums with post-tax dollars, therefore their FEHBP premiums do not reduce their taxable income in retirement. In most cases, a federal retiree who is married to a federal employee will save more money (from taxes) by keeping one Self & Family plan with the spouse who plans to continue working longer versus maintaining two slightly cheaper Self-Only plans (where only one would be withheld on a pre-tax basis). A federal retiree would most likely be saving more money in taxes if he/she remained under their spouse’s FEHBP coverage while the spouse is still federally employed.
This might also hold true for a retired public safety officer who is married to a federal employee. The cost of a Self-Only plan for a retired public safety officer might not even reach the maximum $3000 tax exclusion to take full advantage, and even if it exceeded $3000, the additional cost of the plan would not reduce the retiree’s taxable income.
But if the retired public safety officer switched his/her FEHBP coverage to his/her federally employed spouse’s FEHBP coverage, the full amount of the Self & Family plan would reduce the taxable income for the family. In this example, once the federal employee spouse retires, he/she can cancel his/her coverage during the first open season in retirement and the retired public safety officer could use the same open season in retirement to sign up for the Self & Family plan. In this example, no one would lose any FEHBP coverage.
If I am a federal retiree and I’m married to a federal employee (who is eligible for FEHBP coverage), I certainly wouldn’t want to maintain the Self & Family plan under my retirement. This is why I have taken the time to share so many examples with you and will continue to do so. My intention is to help federal employees and retirees get the most out of their benefits. There are many different situations out there, so let’s continue discussing some other examples.
More 5-year Rule Examples
The 5-year rule does NOT say that you must maintain a particular plan for the last 5 years to carry that particular plan into retirement. For example, an employee might have just switched from Aetna to Blue Cross Blue Shield (BCBS) a year before he/she retired. This person would be allowed to continue the BCBS coverage into retirement as long as this person has been covered under the FEHB Program for the last 5 years.
Another example, an employee might have switched from a Self Only plan to a Self and Family plan a few months before he/she retired. As long as the employee was covered under the FEHB Program for the last 5 years, he/she would be allowed to continue the Self and Family plan into retirement.
More Post-Retirement Options
As mentioned previously, you will have opportunities to make adjustments to your FEHBP plans for the rest of your life in retirement with annual open seasons and QLEs. You are not stuck with the same FEHBP plan forever. If you don’t care for the plan that you are in a few years after you retire, simply change it during an open season.
After you retire, you can change your FEHBP coverage if you move to an area where your current plan does not provide coverage, or if you lose your spouse, or if you remarry, or when you become eligible for Medicare… these are all examples of QLEs that would allow you to change your FEHBP plan in retirement outside of an open season.
TRICARE and FEHBP
TRICARE (military health insurance) also qualifies as coverage to meet the 5-year test to determine eligibility to continue the FEHBP (Federal Employees Health Benefits Program) into retirement.
For example, a federal employee (with TRICARE coverage) might have enrolled under the FEHBP a few months prior to separating for retirement. Even though this person may not have had FEHBP coverage for the last 5 years, as long as this person was covered under TRICARE for the last 5 years (of his/her federal civilian career) AND obtains FEHBP coverage BEFORE he/she separates for an immediate retirement, they would be allowed to continue the FEHBP coverage into retirement.
But if this person was not enrolled under the FEHBP on the date of separation for retirement, he/she would NOT be able to enroll after they retire. Federal employees with TRICARE coverage should be cautious as they approach retirement if they do not have FEHBP coverage.
If they intend to enroll under the FEHBP during the last open season just before they retire, they should be aware of the effective date of the agency’s FEHBP open season election (which is usually the first day of the first pay period in the next agency payroll calendar year). If they retire before the effective date of the election, the enrollment election would be cancelled by the agency. But if they retire on the effective date of the election or later, the enrollment would be processed by the agency and the coverage could be continued into retirement.
