Federal Retirement

Maximizing Income with a Pension Preservation Strategy

Posted on by Cassie Graves
Federal Retirement Pension Max Life Insurance Survivor's Benefits Strategy

Are FERS Survivor Benefits for Feds Worth It? Explore Pension Preservation strategies for federal retirement planning.

Strategies to Avoid FERS Pension Reduction for Survivor Benefits

The strategy seems relatively simple at first: keep the retiree’s full FERS pension and use the avoided survivor‑election reduction to fund a life insurance policy that protects the spouse instead. The higher monthly income created by declining the election is either partially or entirely redirected into premiums, and the policy’s death benefit is sized to match or exceed what the spouse would have received from the federal survivor payment.

Advisors use pension preservation strategies when clients want more income while both spouses are alive, more control over the benefit, and the possibility of leaving a larger, tax‑free lump sum. It also offers flexibility if the spouse passes first, since the policy can be repurposed or surrendered, unlike a locked‑in federal election. But the approach carries risks: the retiree must qualify for coverage, sustain premiums long‑term, and understand their survivors cannot continue FEHB if the spouse needs continued health insurance.

Here’s the whole breakdown:

How FERS Survivor Benefits Can Be the Most Expensive Election in the Federal Retirement Application Process

For federal employees, the survivor benefit election is one of the most consequential choices in the entire retirement package and it becomes an irrevocable decision. It’s expensive, with the cost growing the longer the annuitant lives, and often misunderstood, even by seasoned professionals. Electing the full 50% FERS survivor benefit permanently reduces the retiree’s gross pension by 10%. On a $40,000 pension, that’s a $4,000+ annual reduction every year for the rest of their life.

This election becomes locked in 30 days after OPM finalizes the retirement package, leaving no opportunity to correct a mistake later. That’s why many advisors look to pension preservation strategies: they want to help clients keep more of their income while still protecting the spouse.

But the strategy only works when it’s built on a foundation of accuracy, suitability, and respect for the surviving spouse’s long‑term security, especially when it comes to their healthcare.

Fed Options can help you guide federal employees through the online retirement application process with OPM so costly mistakes are avoided, including decisions around survivorship. Schedule a meeting now.

Survivor Benefit Optimization Explained

Survivor Benefit Optimization, sometimes referred to as pension maximization, is built on a simple idea: instead of accepting the 10% pension reduction to provide a government survivor benefit, the retiree keeps their full  or partially reduced (5%) pension and uses part of the savings to purchase an outside life insurance policy.

The mechanics are straightforward:

  • The retiree elects no or partial FERS survivor benefit (with notarized spousal consent).
  • They retain their full or lessened reduced
  • A portion of the increased income funds permanent or temporary life insurance coverage with the spouse as the owner and beneficiary.
  • The death benefit replaces, or exceeds, the income the spouse would have received from the survivor annuity.

When structured correctly, the couple enjoys higher income while both are alive, and the spouse receives a tax‑free lump sum at the retiree’s death. But keep in mind this is not universally appropriate, and it is never risk‑free.

What Happens if Federal Retiree Dies After Spouse?

In the case that a FERS annuitant’s spouse dies first, the 5 or 10% reduction is restored going forward, once OPM is notified, but previously reduced pension payments are not reimbursed. If the federal retiree gets remarried, they can add a survivor’s benefit within two years of the marriage date. In this case, pension preservation strategies pan out as the retiree keeps FEHB eligibility. But due to the uncertainty over which spouse will pass first, both outcomes must be properly planned for. Furthermore, adding a survivor spouse benefit when the employee remarries may also add extra penalties. Thus, this may be cost prohibitive for the retiree.

How Pension Preservation Can Create More Income and Flexibility

If performed correctly, preserving the FERS pension allows for more income at the onset of retirement and more opportunities for flexibility later.

A traditional FERS survivor annuity pays the spouse a taxable monthly benefit. Life insurance pays a tax‑free lump sum. That difference alone can dramatically change a surviving spouse’s financial trajectory.

Private life insurance products can also include living benefits that the FERS system simply doesn’t offer. Cash value accumulation, policy loans, and potential dividends give the couple tools they can use while they’re still alive. For some households, that flexibility is worth far more than the guaranteed, but rigid, structure of the survivor annuity. The biggest kicker here is coordinating FEHB and/or outside health care benefits, which may be more expensive, but the surviving spouse might have more income to afford that. There are several factors at play here and barely any facet is wholly predictable.

Still, the strategy’s advantages only matter if the plan is built on a complete understanding of the rules that govern federal retirement benefits. And no rule is more critical than the one tied to FEHB and the survivor income.

Make it Clear: Waiving Survivorship Jeopardizes FEHB for the Surviving Spouse

This is the part advisors and other financial professionals must make abundantly clear: a surviving spouse cannot keep FEHB unless they are entitled to a FERS survivor annuity.

It doesn’t matter how long they’ve been covered via their spouse under an FEHB plan.

If the retiree waives the survivor benefit entirely, the spouse loses FEHB permanently upon the retiree’s death. There are no appeals possible, no exceptions available, and no chance of reinstatement. Unless the spouse has their own pension from their own federal service, or they remarry another federal retiree, they cannot re-enroll in an FEHB plan. A temporary continuance of coverage (TCC) might be granted, but this coverage is usually as costly as going with outside health insurance and/or Medicare.  

This is where integrity matters. Advisors who recommend pension preservation strategies without addressing FEHB are putting a surviving spouse’s healthcare at risk during the most vulnerable years of their life.

For many households, the solution is a partial survivor benefit. It preserves FEHB eligibility while reducing the pension reduction. It’s not as income‑efficient as a full waiver, but it protects the spouse’s healthcare benefits. Unlike with CSRS, where as little as a 1% survivorship could be elected, the lowest a FERS survivor’s benefit can go is 25% of the pension for the survivor at the cost of a permanent 5% reduction of benefits.

Here Are the Best Candidates for a Survivor Benefits Optimization

Pension preservation is best for candidates that share several characteristics:

They are insurable at favorable rates. The entire strategy hinges on qualifying for outside life insurance coverage. Ideally, the client applies 10–20 years before retirement to lock in better underwriting.

Their premium cost matches the survivor income need. The spouse may need more than the 50% maximum, which would be 10%. Identifying the need of income and staying within a realistic cost range for the employee is key.

They value liquidity and control. Some households prefer a lump-sum payout over a monthly benefit. Others want access to cash value or living benefits. These are features not offered by FERS survivor benefits.

They understand the FEHB rule and plan accordingly. This is non‑negotiable. If the spouse needs, or thinks they may need, FEHB – then the plan must include at least a partial survivor benefit.

They have a stable financial profile. Debt, inconsistent income, or poor cash flow can undermine the strategy.

When these conditions are met, the strategy can be a powerful, ethical, and client‑centered solution.

Bottom Line: Pension Preservation Requires Proper Planning

At the end of the day, optimizing survivor benefits with private life insurance products is a strategy that rewards careful modeling, transparent communication, and a deep understanding of how the mechanics of FERS operate.

SUBSCRIBE TO THE FED OPTIONS NEWSLETTER
Federal Retirement

FEGLI in Retirement: Guide for Financial Professionals Serving Feds

Posted on by Cassie Graves
FEGLI and Life Insurance Retirement Planning Guide for Financial Firms

FEGLI premiums, especially for Option B, can rise sharply in retirement. Advisors who proactively compare FEGLI to private alternatives can help clients avoid overpriced coverage.

How Advisors Can Help Decipher FEGLI Choices in Retirement

FEGLI is one of the most misunderstood components of the federal benefits package, and the transition into retirement is where the biggest mistakes occur. Keeping, reducing, or dropping coverage altogether can be a decision hinging entirely on an individual’s health and financial circumstance.

If advisors don’t step in early to review FEGLI’s age‑banded premiums, reduction rules, and long‑term cost trajectory, clients may discover that their once‑affordable coverage has become unsustainable – often when it’s too late to make a change. By the time the financial impact is realized, their health profile may no longer support competitive private underwriting, leaving only two routes: drop coverage altogether (meaning decades paid into the program were essentially wasted) or keeping FEGLI at a steep price.

Are you a financial professional who needs back-office support for serving federal prospects and clients? Schedule a Free Consultation with Fed Options to learn more.  

 

Advantages of FEGLI Coverage While In Service

During active federal service, FEGLI (especially Basic) is often a simple choice, being more accessible, and often more cost‑effective, than obtaining an outside individual policy in its place:

  • Basic Coverage: Salary rounded up to the next $1,000 + $2,000. Partially subsidized by the government.
  • Option A: A flat $10,000 of additional coverage. (Amount has not changed since 1968 when option A was established and $10,000 had much more purchasing power. In today’s dollars, it would be equivalent to over $95,000.)
  • Option B: One to five multiples of salary. Usually affordable early in a career but increases every five years, gradually becoming very costly.
  • Option C: Family coverage for spouse and eligible dependent children.

No medical underwriting is required if elected at hire or during a qualifying life event, creating an important safety net for employees with health concerns.

Advisors should also ensure clients keep their FEGLI beneficiary form updated. FEGLI pays strictly according to the form on file, not the will.

Stay up-to-date with Federal Employee Retirement Benefits news and updates – Subscribe to the Fed Options Newsletter

 

FEGLI Gets Expensive Fast as Feds Approach their Retirement Years

FEGLI premiums spike dramatically as covered individuals approach the ages at which they are eligible to retire comfortably, potentially eroding the value of their FERS or CSRS benefits. This is especially the case when it comes to Option B.

  • Age‑Banded Premium Spikes: Option B costs jump at ages 55, 60, and 65. These increases can be dramatic, doubling or more within a single band.
  • Automatic Reductions:
    • Option B reduces 2% per month starting at 65 unless the retiree elects the costly “No Reduction” option.
    • Option A gradually reduces automatically in retirement to 75% at age 65 unless it is dropped completely – a move that is highly advised against in almost all cases.
  • Basic Coverage Reduction Choices: Retirees must choose a 75% Reduction, 50% Reduction, or No Reduction. The 75% Reduction eliminates premiums at 65 but leaves only 25% of Basic coverage.

For many retirees, FEGLI becomes one of the most expensive benefits they carry into retirement, often without fully realizing it until the bills arrive.

Infographic to Help Feds see cost of Life Insurance in Retirement

Advisor Strategies for FEGLI and Retirement

FEGLI was designed as a workforce‑protection benefit, not a permanent retirement solution. To address this, financial planners should help feds with following, ideally when they’re 5 years out or later from retirement, as to lock in better rates.

  • Compare FEGLI Option B to Private Term: Private carriers offer level premiums that don’t escalate with age.
  • Customize Coverage: Private policies allow precise tailoring of survivor needs without FEGLI’s reduction rules.
  • Review Option C: If a spouse passes away or children age out, coverage should be dropped. Retirees may even qualify for a refund if they paid for ineligible dependents.

Your role is to help clients understand what FEGLI really costs over time, and whether it still will fit in their retirement plan.

Strengthen Your Firm With Fed Options

Fed Options provides the back‑office support that makes federal benefits planning scalable and repeatable.

How Fed Options Supports Your Firm

  • Benefits Command Center: Automated FEGLI comparisons, cost modeling, and strategy notes.
  • Advisor‑Ready Reports: Clean, client‑facing visuals that simplify complex FEGLI decisions.
  • Federal Benefits Basics Course: A foundational training program covering CSRS, FERS, TSP, FEHB, FEGLI, and survivor benefits.

Meet With Fed Options

Schedule a meeting with Fed Options. We’ll show you how our back‑office support can help your firm deliver deeper value to federal prospects and clients.

Federal Pay

Advantages of Offering Voluntary Benefits to Federal Employees

Posted on by Cassie Graves
Voluntary Benefits for Federal Employees and Retirees

Voluntary benefits to keep federal employees and retirees protected. Learn how United Benefits can help your firm with exclusive product offerings. 

When helping federal workers with financial planning, conversations are often focused on benefits that the government provides their employees: the FERS pension, TSP management, Social Security strategy, and FEGLI. While these are essential components of a federal employee’s long‑term financial picture, they mostly are involved with retirement and estate planning . Active federal employees, including those in the early and middle stages of their careers, also face immediate financial vulnerabilities that these standard benefits don’t address.

That’s where voluntary benefits come in. Often overlooked, voluntary benefits can offer real solutions for active feds, create opportunities for advisors to build stronger relationships, and fill in gaps that usually aren’t covered by their employee benefits.

Partnering with United Benefits

Fed Options has partnered with United Benefits to offer products and policies that provide these voluntary benefits for feds. Because their approach aligns with that of Fed Options and the federal community, we are super excited to be affiliated with a company that has over 30 Years experience serving the Federal workforce.

United Benefits voluntary policies are designed around the exact gaps federal employees face.

United Benefits provides training, support, and product access for advisors. You can schedule time directly with John Witten to learn how these offerings fit into your client conversations.

SCHEDULE NOW

How Voluntary Benefits Can Fill Potential Gaps in Federal Benefits

Many federal employees are still years away from retirement. They’re not ready to move TSP assets, but they are ready to make decisions about life insurance, disability coverage, and family protection. When the price point matches the provided benefit and the application process isn’t arduous, it’s practically a win-win for all involved.

Here are some of the holes in coverage that voluntary benefits can help fill:

FEGLI’s Cost and Underwriting Challenges

FEGLI provides valuable baseline coverage, but it is limited and those limitations become more pronounced over time:

  • Option B becomes prohibitively expensive with age, especially as employees approach retirement.
  • Private life insurance alternatives often require full underwriting, long applications, and the risk of rate changes, which is often a major deterrent for both advisors and clients.
  • FEGLI also has limited options for spouses, children, and dependents, leaving many families underinsured.

Among other limitations, it’s worth noting that the maximum coverage amounts for FEGLI were set between the 1950s and early 1980s and haven’t been reset for inflation. Private life insurance solutions, however, offer a streamlined, predictable alternative that fits naturally into life insurance discussions.

The Problem with Sick Leave: No Short‑Term Disability for Feds

Federal employees do not have employer‑provided short‑term disability coverage. Their only buffer is accumulated sick leave, which is often insufficient should a major medical event occur. This can lead to income loss, financial strain, and delayed recovery. For this reason, it’s hardly a surprise that disability insurance is the #1 voluntary benefit purchased by federal employees.

Voluntary disability coverage fills this gap directly, solving problems that FEHB and FERS do not address.

Guarantee‑Issue Disability Insurance

Disability coverage is one of the most impactful voluntary benefits for federal employees:

  • Protects income during medical leave
  • Available through payroll deduction
  • Requires no underwriting, making it easy to implement

For advisors, it’s a straightforward way to provide immediate value to clients who may be years away from retirement.

Advisor Strategy: How Voluntary Benefits Create Clients Today

Once you’ve helped a federal employee protect their family or income, you become their go‑to advisor. That trust compounds over time:

  • Email drips become more effective
  • Birthday reminders and check‑ins feel more personal
  • You get the first call when they’re ready to move TSP assets or discuss retirement income planning
Federal Retirement, Financial Planning for Feds

Everything You Need to Know About Recent Changes to the Roth TSP

Posted on by Cassie Graves
Roth TSP - Recent Changes - 2024 - 2026, SECURE Act 2.0

Reviewing the end of Roth RMDs, in-plan conversions, and the new mandatory contribution rule that went into effect this year.  

Refresher: What Is the Roth TSP?

The Roth Thrift Savings Plan allows federal employees and uniformed service members to contribute after‑tax dollars to their retirement plan. Like a Roth IRA, qualified withdrawals, including earnings, are tax‑free if:

  • The participant is 59½ or older, and
  • The Roth TSP has been open for at least five years

With the removal of RMDs and the upcoming catch‑up rule changes, the Roth TSP is becoming an increasingly central tool in long‑term tax planning for federal employees.

Stay informed! Subscribe to the Fed Options Newsletter.

What Makes a Roth TSP Different from a Roth IRA?

For years, the differences between a Roth TSP and a Roth IRA came down to two major rules:

  • Income limits
  • Required Minimum Distributions (RMDs)

Federal employees have always been able to contribute to the Roth TSP regardless of income, while Roth IRAs phase out contributions at higher income levels. And until relatively recently, Roth TSPs were still subject to RMDs, unlike Roth IRAs. But since tax year 2024, that second difference is gone. Roth balances inside the Thrift Savings Plan no longer require RMDs, aligning the Roth TSP with Roth IRAs for the first time.

Therefore, the biggest remaining contrast between the Roth accounts now is that you can’t contribute to a Roth IRA if income is above a certain level ($168,000 for single filers and $252,000 for joint filers in 2026), but no there are no income restrictions

Plus, thanks to SECURE Act 2.0, two additional TSP contribution changes are now shaping how federal employees plan for retirement.

We’ll also look at how in-plan TSP Roth conversions might work for your financial plan.

Learn how Fed Options can elevate your firm or agency to next level – Schedule a free consultation.

No More RMDs for Roth Accounts in the Thrift Savings Plan

Beginning in the 2024 tax year, Roth TSP accounts are no longer subject to lifetime RMDs. This is one of the most significant improvements to the federal employee savings plan in years.

Historically, RMDs were required because TSP withdrawals had to be taken pro‑rata from Traditional and Roth sources. That rule made it impossible to isolate Roth dollars from distribution requirements. But now, the rules are far more flexible. Withdrawals must still be taken proportionately from the funds (G, F, C, S, I) you’re invested in. But you can now choose how much comes from Traditional vs. Roth. This gives federal retirees significantly more control over:

  • Tax‑efficient withdrawal sequencing
  • Managing taxable income in retirement
  • Preserving Roth dollars for long‑term, tax‑free growth

For advisors, this opens the door to more nuanced income‑planning strategies, especially when coordinating TSP withdrawals with Social Security, pensions, and outside IRAs.

Catch‑Up Contributions Must Go to Roth TSP for High Earners

2026 will be the first tax year where all catch‑up contributions for federal employees earning above a certain threshold must be made after‑tax into the Roth TSP. So, for IRAs, high income could restrict access to a Roth account, but with the TSP (for catch-up contributions at least), high income mandates the use of a Roth account.

Here’s the rule:

  • If a federal employee’s federal salary exceeds $145,000 (indexed), their catch‑up contributions (age 50+) must be put in a Roth TSP.

Important clarifications for advisors:

  • Only federal salary counts toward the $145,000 threshold
  • Spousal income does not matter
  • Outside income does not matter
  • If a federal employee’s AGI is high but their federal salary is below the threshold, they may still make Traditional catch‑up contributions
  • All agency matching contributions remain Traditional, regardless of employee choice

This rule will push many high‑earning federal employees toward larger Roth balances, which is a point advisors should proactively model for tax‑diversification and bracket‑management purposes.

Increased Catch‑Up Amounts for Ages 60–63

Another SECURE Act 2.0 change that went into effect for the 2025 tax year gives federal employees ages 60 to 63 a temporary “super catch‑up” window.

For 2025:

  • Standard catch‑up (age 50+): $8000
  • Additional age‑60–63 catch‑up: $11,250 ($8000 + additional $3,250)
  • Regular TSP contribution limit: $24,500

This means employees ages who turn 60 – 63 this year can contribute up to $35,750 total in 2026.

This is a powerful planning window for late‑career savers, especially those preparing for early retirement, VERA offers, or RIF exposure.

Enroll in the Federal Benefits Basics Course to start learning about federal benefits online, at your own pace.

When Feds Should Consider Utilizing New In‑plan TSP Roth Conversions

Now fully available inside the Thrift Savings Plan since the end of January 2026, in-plan TSP Roth conversions allow federal employees to convert existing Traditional TSP balances into Roth TSP dollars without rolling funds out into an IRA first. The converted amount is added to taxable income for the year, so clients must have outside cash available to cover the tax bill.

A Roth conversion is generally most attractive when a client expects to be in a higher tax bracket later, but is currently in a low‑income year (such as the gap years between retirement and Social Security), wants to reduce future RMD exposure from Traditional accounts, or wants to build a tax‑free income “bucket” for long‑term planning and estate efficiency. Conversions are less appealing when the tax hit pushes the client into a higher bracket, triggers IRMAA surcharges, or strains liquidity.

The key is modeling the tax impact over multiple years so the conversion becomes a strategic move, not an expensive surprise. This is key area where federal employees need guidance from a financial professional they trust.

Federal Retirement

Breaking Down the 5-Year Rule Waiver for FEHB

Posted on by Cassie Graves
FEHB 5 year rule waiver

What is the 5-year rule for keeping FEHB in retirement? Learn in which circumstances it can be waived to keep health insurance.

How Federal Employees Can Keep Health Benefits in Retirement with Waiver of 5-Year Rule

The waiver of the five-year rule for the Federal Employees Health Benefits (FEHB) in retirement is an exception granted by the Office of Personnel Management (OPM) under specific circumstances. Normally, federal employees must be continuously enrolled in FEHB for the five years immediately preceding retirement or since their first opportunity to enroll to continue coverage post-retirement. However, OPM can grant waivers in limited cases.

LOPM may approve a waiver if:

  • • The employee retires under an early retirement or buyout authority known as the Voluntary Early Retirement Authority (VERA).
    • The employee has been continuously covered under FEHB since their agency’s latest statutory buyout authority or an OPM-approved early retirement/buyout authority.
    • The employee receives a buyout, takes early optional retirement, or faces involuntary separation due to a Reduction in Force (RIF), directed reassignment, reclassification to a lower grade, or abolishment of position.

This waiver is particularly important in 2025 as the federal workforce has undergone a drastic restructuring. The FEHB waiver is being granted to those who accepted a VERA buyout, a deferred resignation offer, or were involuntarily separated and eligible to retire either with a regular pension or a DSR (discontinued service retirement). However, with a deferred retirement, employee are ineligible for an FEHB plan after retiring and this remains the case. Former workers might be able to receive a TCC (temporary continuance of coverage) if not able to retire without deferring. However, the full premium to a 2% administration fee must be paid by the former employee, making the cost much more of a burden. While in service, the government covers 72 to 75 percent of FEHB premiums.
.

SUBSCRIBE TO THE NEWSLETTER

How to Apply for a Waiver for FEHB 5 Year Rule

  • Employees do not need to write to OPM if their agency has buyout authority.
  • If eligible, the agency will attach a memorandum to the retirement application stating that the employee meets the waiver requirements.
  • Employees should contact their Human Resources Office to determine eligibility and ensure proper documentation is submitted.

Breaking Down the Five Year Rule for FEHB in Retirement

The FEHB five-year rule is a key requirement for federal employees who want to continue their Federal Employees Health Benefits (FEHB) coverage into retirement.

To keep FEHB coverage after retirement, an employee must:

  1. Be enrolled in FEHB for the five years immediately before retirement or, if less than five years, for all service since their first opportunity to enroll.
  2. Retire on an immediate annuity, meaning they start receiving their pension right away. With a postponed, but not deferred, annuity, the retiree can resume FEHB coverage upon collecting their pension if they met the requirement above.

How Previous Enrollment Counts

  •  If an employee had breaks in service where they were not eligible for FEHB, previous enrollment can count toward the five-year requirement.
  • If an employee canceled FEHB coverage while continuously employed, they must restart the five-year period upon re-enrollment.

What Happens If You Don’t Meet the Rule?

  • You get a 31-day extension of coverage at no cost.
  • You can convert to an individual policy or request Temporary Continuation of Coverage (TCC) for up to 18 months, but you must pay 100% of the premium plus a 2% administrative fee.
Federal Retirement

Federal Retirement Myths: Debunking Early Retirement for Federal Employees

Posted on by Cassie Graves
Top Early Retirement Myths for Federal Employees

Reviewing three commonly misunderstood rules regarding retiring from the federal government. Which of these did you think was true?

Myth #1: You Need an Application for the FERS Special Retirement Supplement (SRS).

False! Federal employees do not need to apply for the SRS, which supplements social security income until age 62. If eligible, retiring feds receive the benefit automatically at no cost. Eligibility mostly depends on the type of retirement. If the FERS pension is unreduced and immediate, any FERS retiree younger than 62 will get the extra income. It is also important remember, as the current White House continues to reduce personnel at federal agencies, that those retiring under VERA (Voluntary Early Retirement Authority) or with a DSR (discontinued service retirement) will not receive the SRS until they reach their MRA (minimum retirement age, between 55 and 57).

What is the difference between VERA and DSR?

The main difference between the two is that with a VERA, retirement is voluntary and with a DSR, the federal employee left their federal job involuntarily. Another difference is that “early out” retirements under VERA are offered through the employing agency while a DSR has to applied for with OPM. There are also no VSIPs (Voluntary Separation Incentive Payments) with a DSR.

Why do some federal employees believe the SRS has to be applied for?

Some federal retirees expecting an SRS benefit still do not receive it. This is not because they “didn’t apply for it,” and most likely not an error, but because the federal retiree is working another job. Like with social security, the SRS is subject to the earnings test. If earned income is more than $23,480 (in 2026), then the SRS is reduced $1 for every $2 received. If they have a job that pays well above this limit, it could completely cancel out their SRS.

Need to talk with a Federal Benefits Specialist? Schedule a meeting.

Myth #2: There are NO exceptions to FEHB 5-Year Rule to Keep healthcare plan after retiring.

This is also FALSE! A waiver can be requested to override the FEHB 5-year rule, even if the employee’s agency doesn’t already have pre-approval for a waiver. If the agency is pre-approved to waive the requirement themselves, an HR specialist should provide the retiring employee with a memorandum explaining the authority that the agency has regarding its ability to waive the 5-year requirement. If not pre-approved, the federal worker must contact OPM directly at  (202) 606-1535 to request a waiver.

Approval of the waiver is dependent on the following conditions:

  • The federal employee was unable to satisfy the 5-year rule due to circumstances out of their control, and they took reasonable to steps to attain FEHB coverage in the given timeframe.

They must provide evidence that:

  • The individual had a compelling reason to believe they were covered under FEHB during the timespan in question, OR
  • Their employing agency didn’t allow them to enroll despite being eligible,
  • The amount of control the employee had over their FEHB coverage enrollment,
  • If they acted to regain coverage at the “earliest opportunity” after learning about loss of FEHB benefits, AND
  • If they had “substantial” FEHB coverage during their last 5 years of federal service.

What is the FEHB 5 Year Rule?

For a federal employee to retain their FEHB health care plan after retiring, they must maintain coverage for at least the last 5 years that they were employed by the federal government. Note that this rule is based on 5 continuous years of coverage, not consecutive. What this means is that if there was a break in service, the employee could still be eligible for FEHB in retirement even if they did not have FEHB during that break. So if a federal employee had an FEHB plan for 3 years, took a one year leave without pay in which he didn’t not have FEHB, and then came back to the federal government to work 2 more years and reenrolled in FEHB, those 5 continuous years would count despite not being consecutive. And remember, even if the rule is satisfied, a surviving spouse can only maintain FEHB coverage if they receive a survivorship pension after the federal retiree passes away.

Myth #3: Employees retiring under Special Provisions can’t avoid age-based penalty when making TSP withdraws unless they retire the year that they turn 55.

FALSE – another myth DEBUNKED! This rule is often confused with the TSP early withdrawals rules for regular FERS employees. Typically, when retiring with an unreduced immediate FERS pension at age 55 or older, the age-based penalty is not applicable. If retiring early before age 55, however, they must wait until the usual age of 59.5 to take money out of the traditional TSP and not worry about the steep 10% IRS penalty. For workers retiring under special provisions (firefighters, law enforcement officers, and air-traffic controllers), the rules work different.

Retirement Eligibility for Special Provisions

Similar to the eligibility requirements for both DSR and “early-out” retirements under VERA, employees must be at least age 50 with 20 years of service, or any age with at least 25 years. Unlike regular FERS, though, retiring under special provisions means as long as you go out with an unreduced, immediate pension, you can start taking penalty-free TSP withdrawals at ANY age. This means, so long as they had 25 years of creditable service, these employees could start withdrawing from their traditional TSP assets in their 40s and not be impacted by an age-based IRS penalty. (This rule was added in the SECURE Act 2.0)

Become a Federal Benefits Expert! Check out the Federal Benefits Basics Course

 

Career

FEDERAL BENEFITS CASE DESIGNER

Posted on by Cassie Graves

Fed Options is a small and mighty growing company that is looking to hire a Federal Benefits Case Designer. This could be a possible management position. We are looking for a dedicated team member who is excited to work closely with us in this developmental phase of growth time. Please send us your resume to cassie@fedoptions.co.

Needs to have:
– Great communication skills both online and verbal
– Has a strong moral and ethical compass
– In-depth knowledge of the federal retirement FERS system
– An understanding of the benefits and nuances of the rules around the benefits Experience with TRAK / RetireReady systems is a plus

Experience understanding complex federal employee nuances is also a plus Pay can be talked about during the interview and will depend on experience and expertise






    Career

    CASE DESIGN SUPPORT, LEVEL 1

    Posted on by Cassie Graves

    Fed Options is a small and mighty growing company that is looking to hire a Case Design Support. We are looking for a dedicated team member who is excited to work closely with us in this developmental phase of growth time. Please send us your resume to cassie@fedoptions.co.

    Case Design Support Level 1, which would be someone to:
    – Review cases for the case manager
    – Enter initial case design data for the cases assigned
    – Begin case notes for the professional

    The employee would need to have:
    – General knowledge of the federal employee benefits
    – Familiarity with Retire Ready (TRAK) or Fed Retire Online software program(s) is a plus