Updated: Oct 4, 2020
FEGLI, which stands for Federal Employees Group Life Insurance, covers over 4 million federal employees, retirees, and their families¹. It is the largest group life insurance program in the world, with benefits underwritten by MetLife. This is an important point to let your beneficiaries know about in the event of your death. In some states, MetLife is not required to inform beneficiaries of a pending benefit, so be sure to let your heirs know where to find this information, even if you’d prefer to keep how much coverage you have a private matter.
Basic Life Many federal employees are at least enrolled in Basic Life insurance, where payroll deducts premiums unless you specifically waive it. Postal employees are automatically enrolled and their premiums are paid for by the Postal Service while they're employed. To determine your coverage, round your base salary up to the nearest thousand and add $2,000 more. If you are under age 45, your Basic Life also has a multiplier. For every year under age 45, there is a 10% increase in coverage up to a maximum of a 100% increase for those age 35 and below. Basic Life costs 15 cents per $1,000 in coverage each pay period. At retirement, you can elect for Basic Life to become free upon turning 65 (or immediately, if already 65 or older). If elected, it will become free at age 65 and coverage will reduce by 2% per month until reaching 25% of its original value, which you will retain for the rest of your life. You may also choose to keep up to 50% or 100% of your original coverage instead, but the cost would increase in retirement by 318% or 755% respectively. In addition to Basic Life, you can also elect up to three forms of optional insurance: Options A, B, and C.
Option A Option A provides a flat $10,000 in additional coverage. The cost increases with age, maxing out at $6 per pay period at age 60. Whether or not it is economical to keep this coverage in retirement varies on an individual basis. If you’re approaching age 65, it likely makes sense to keep and have it become free at 65, allowing it to reduce to 25% of its original value, or $2,500. If you are retiring at age 60 or younger, it may make financial sense to drop this option instead. Of course, there are a lot of factors that go into these decisions, such as your health and life expectancy, among other things.
Option B Option B allows for coverage equal to 1-5 multiples of your base salary rounded up to the nearest thousand. Given that this can equate to hundreds of thousands of dollars in coverage, this is easily the most expensive FEGLI option. Costs continue to increase every 5 years until reaching age 80. For most feds, Option B can be quite cost-effective while they are younger, oftentimes costing less than $15 per month for individuals in the youngest age bracket. However, Option B becomes prohibitively expensive in later years, forcing many people to drop it when it inevitably costs between $1,000 - $2,000 each month, potentially more depending on their salary. If you can afford to pay $2,000 each month in life insurance premiums, then you probably don’t need the life insurance to begin with! It is best to view Option B as a term life insurance policy, given that you will be priced out of keeping it at some point. Knowing that you will most likely have to drop it eventually, the decision then becomes when to drop it, which again varies on a personal basis, and should be weighed carefully amongst a variety of factors.
Option C Option C is also referred to as “family coverage.” You may have up to 5 multiples of this option, with each multiple providing $5,000 in coverage on your spouse and $2,500 on each dependent child under age 22. Like the other options, Option C increases in cost every 5 years, capping at age 80². The cost depends solely on the number of multiples you’ve elected, not the number of people, so feds with more children do get a better deal.
In some cases, federal employees end up paying for Option C even though no one is actually covered by it. This typically happens because they become divorced and/or their children age out of coverage at some point in time. MetLife will not inform you to stop paying these premiums, so many unknowingly continue to do so. If you think you may be in this boat, please contact us. You are entitled to a refund on those uninsured premiums, and we can help you with that process.
Adjusting Coverage You can reduce your FEGLI coverage or change your beneficiaries at any time. We can help you fill out a FEGLI Change Form in a matter of minutes. Adding coverage is not as simple; you may enroll in the first 60 days of becoming a new or newly eligible employee, up to 60 days after a Qualifying Life Event, during a FEGLI Open Season (which are infrequent), or after you pass a physical exam (Option C excluded). Before making any changes, we encourage you to talk to one of our knowledgeable retirement strategists, as the best decision for your personal situation can vary greatly from your colleagues.
¹United States, Congress, “Life Insurance: Premiums For Employees .”OPM, Office of Personnel Management , www.opm.gov/healthcare-insurance/life-insurance/program-information/#url=Premiums-for-Employees.
²United States, Congress, Life Insurance, Office of Personnel Management. www.opm.gov/healthcare-insurance/life-insurance/.