There’s a new administration in town, and changes are already in motion. If you aren’t eligible to retire but want to leave government, you need to understand the consequences of your action, at least in terms of the benefits you’ve enjoyed as a federal employee.
If you are enrolled in a FEHB plan when you leave the government, you are automatically given a free 31-day extension of health benefits coverage. After that, you have three choices: Drop the coverage, continue that coverage for a set period of time or convert to an individual contract.
Under the Temporary Continuation of Coverage, or TCC, provision, you can keep your current FEHB coverage for up to 18 months. However, the government won’t share the cost with you. You’ll have to pay the full amount yourself. That means both your share and the government’s share, plus an administrative charge of 2 percent. This would be a real financial jolt.
One way of cutting those costs would be to enroll in a different FEHB plan or option with lower total premiums. Another would be to buy an individual contract at your own expense.
Like the FEHB, your Federal Employees’ Group Life Insurance, or FEGLI, will continue in force for 31 days at no cost to you. However, unlike FEHB, you only have two choices: Drop the coverage, or convert all or part of your coverage to an individual policy and pay the full amount of the premiums yourself. The premiums will be based on the dollar amount of the insurance you convert, your age and your risk category.
If you have been separated from the government for at least 31 days, you can ask for a refund of your retirement contributions. While this might be a good source of ready cash, if you expect to return to government employment, you might want to think twice before doing that. Although you could always make a deposit to buy that service back (or, in some cases, accept an actuarially reduced annuity), the interest you’d have to pay could add up.
Before you make up your mind about a refund, you need to find out if you’d be eligible for a deferred annuity. More on that in a future column.