Do Not Wait For Open Season To Find A Less Expensive FEGLI Solution

FEGLI News

New Retirees Face Life Insurance Choices

By Reg Jones

To be able to carry any of Federal Employee's Group Life Insurance into retirement, employees must start coverage at the first opportunity to enroll, or be enrolled for five years. Most retiring employees meet this requirement, but some to not.

Unfortunately, the law does not provide authority for the government to waive the rule. Therefore, even a retirement based on disability does not provide leeway.

Conversion to Individual Policy
Although life insurance coverage will terminate the day after retirement, an automatic 31-day extension will be provided at no cost to the employee.

During that extension period, a retiree has the option of letting the insurance terminate or converting coverage to an individual policy. Not surprisingly, an individual policy will be more expensive than the group insurance policy under FEGLI because there will be no government contribution.

To convert to an individual policy, a retiree will need to complete standard form 2819, "Notice of Conversion Privilege," and pay the first premium to the insurance company before the 31-day extension ends, and designate a new beneficiary because the FEGLI policy will no longer be valid.

If circumstances prevent conversion to an individual policy within 31 days, a belated request can be sent to the Office of Federal Employee's Group Life Insurance, P.O. Box 2627, Jersey City, NJ 07303-2627. That request must be made within six months after insurance coverage ends. It must be in writing and must include an explanation of why action was not taken. This is a high hurdle, so the reasons have to be convincing.

Termination of Life Insurance
Even if FEGLI coverage is carried into retirement, there is one situation under which life insurance coverage will be terminated - when entitlement to an annuity benefits ends. The two most common circumstances for an annuity being terminated are:

• Re-employment by the government ends the life insurance coverage of a retiree, and the right to convert to an individual policy. However, if the new job included FEGLI coverage, the former retiree can take out a new policy, with its value based on the new salary.
• A disabled retiree under 60 who is recovered or restored to earning capacity will lose both annuity and life insurance coverage. And neither a 31-day extension of coverage nor a conversion is allowed for life insurance to an individual policy.

How a retiree will be treated after that depends on eligibility for a deferred annuity or an immediate discontinued-service annuity. The rules governing eligibility for a deferred retirement differ between the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS).

Under CSRS, a retiree must be age 62 with 5 years of creditable service. Under FERS, the choices are wider: age 62 with 5 years of service, 60 with 20, minimum retirement age with 30 or minimum retirement age with 10, but with a reduced annuity benefit.

There is bad news. Retirees eligible for a deferred annuity will not be able to regain life insurance coverage when they finally retire. And they will not be able to convert to an individual policy, either. However, if the disability annuity is restored because of a loss of earning capacity or a recurrence of the disability, the retiree will have the opportunity to have the life insurance coverage reinstated. The coverage will be the same as held previously, and the face value may not exceed what was in effect at the time the insurance was terminated.

The news is much better for those who qualify for an immediate discontinued-service annuity, who will be able to retain their life insurance coverage. The rules governing eligibility for this kind of retirement are the same for CSRS and FERS: Age 59 with 20 years of creditable service or any age with 25 years of service.

Reg Jones was head of retirement and insurance at the Office of Personnel management.