Federal Employees Group Life Insurance (FEGLI) in RetirementFEGLI Assignments, if none 2. According...

Bill Russo and Sean McKewBenefits & Work Life Program Manager

Federal Employees Group Life Insurance (FEGLI)in Retirement

Providing Professional Growth & Development to the HR Benefits Community

Provide an overview of the FEGLI Program Explain eligibility requirements Review monthly costs and reduction options Discuss the Designation of Beneficiary Explain Living Benefits Act, Assignments, and Viatical

Settlements Explain the Common Disaster Clause

Objectives

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Federal Employees’ Group Life Insurance

Provides insurance and builds no cashvalue, it is intended only to provide a cash payment upon the

death of eligible members

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It is the largest group life insurance program in the world


Eligibility & Enrollment

• Eligible employees are automatically enrolled in Basic Insurance and Accidental Death & Dismemberment upon hire or first eligibility (unless coverage is waived).

• Have the option to choose Optional coverage within 60 days

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Coverage

• The Basic insurance Amount (BIA) is equal to annual rate of pay, rounded up to the nearest thousand plus $2,000

• An Extra Benefit increases the amount of Basic insurance if death occurs prior to age 45.

• The Extra Benefit coverage is free

• Doubles the amount of Basic coverage age 35 and younger

• Beginning on employee’s 36th birthday, the Extra Benefit decreases 10% each year until employee reaches age 45.

(5)


Extra Benefit/Age Multiplication Factor

(6)

To determine the amount of the Extra Benefit, multiply your BIA by the appropriate age multiplication factor as follows:


Computing the Basic Insurance Amount (BIA)

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Example:

Employee’s current salary $130,325

Round up to nearest thousand $131,000 (The employee’s BIA)Add $2,000

$133,000

Providing Professional Growth & Development to the HR Benefits Community 8

Option A Standard

• Provides $10,000 of coverage

Option B Additional

• Elect up to five multiple of annual rate (Round up to the nearest $1,000)*

Option C Family

• Elect up to five multiples. Coverage of spouse and eligible children.*

Types of Optional Insurance

*Option B Example: $64,342 salary= $65,000 coverage per multiple *Option C: Each multiple is equal to $5,000 for a spouse and $2,500 for each eligible dependent child


How Much Coverage?

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Example: Ivana Livelong is 46 years old and has a basic salary of $79,647. She has a Basic+A+B2+C2. What is the total amount of her FEGLI coverage?

BIA amount = ________________Option A = ________________ Option B = ________________Option C = ________________


Qualifying Life Events

Life Events that permit changes

Marriage

Divorce

Death of Spouse

Acquire eligible child

Note: FEGLI typically offers infrequent Open Seasons


Separations

Separation US & Absent US

Non-Pay Status or Insufficient

Pay

Furlough Resignation

Reduction In Force

Retirement


Termination & Cancellation

• Termination: Employee gets a 31-day extension of coverage and a right to convert• Termination does not affect the employee’s eligibility to

continue coverage into retirement

• Cancellation: Unless you have assigned your insurance you may at anytime:• Cancel your Basic insurance

• Canceling Basic insurance automatically cancels all Optional insurance

• Affects employee’s ability to continue coverage into retirement

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Permissible Employee Changes

Employees may at any time

(13)

Cancel Basic

Cancel Options A, B or C

Reduce multiples of

Option B or C


Returns

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Break In Service

• 180 >

• 180 < OWCPReemployed Annuitants


Continuing FEGLI Into Retirement

• There are four requirements:

• Retiring on an immediate annuity

• Insured for at least 5 years immediately before date of retirement, or since first eligibility. NOTE: Employee must have been enrolled in each optional coverage at least 5 years immediately before retirement to retain coverage.

• Insured on the day of retirement

• Have not converted to individual policy

(15)


Reduction Options for Basic

No Reduction

•At age 65, coverage will reduce 2% a month, until 25% remains. Cost free

75% Reduction

•Coverage will not reduce, 100% of BIA is payable as a death benefit

50% Reduction •At age 65, coverage will reduce 1% a month, until 50% remains

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Retirement Coverage Basic Example

(17)

Insurance Coverage75% Reduction No

Cost after 6550% Reduction No Reduction

$100,000 $25,000 $50,000 $100,000

$60,000 $15,000 $30,000 $60,000


Retirement Basic Rates

(18)

Time 75% Reduction 50% Reduction No Reduction

Through the Month

of your 65th

Birthday

$0.3250 monthly $1.0350 monthly $2.4550 monthly

Starting the Month

after your 65th

Birthday

Free $0.71 monthly $2.13 monthly

Monthly Premiums for Annuitants per $1,000Basic:


Final Reduction Amounts/Cost

(19)

Reduction AmtOver 65 Final Reduced Amount on

$100,000 Coverage Cost over 65 per Month

No Reduction$100,000

$213

50% Reduction $50,000 $71

75% Reduction$25,000

Free


Reduction Options for Optional

(20)

• Employee must have been enrolled in “Each Option”at least 5 years immediately preceding retirement in order to retain coverage as an annuitant.

Option A

Option B and

Option C

Automatically reduces upon reaching age 65 (coverage reduces by 2% each month until reduction has reached 75% - $2,500 will be payable as a death benefit)

Elect how many multiples you wish to continue into retirement and choose no reduction or full reduction

NOTE: Employee must complete the SF 2818.


Retirement Optional Rates

(21)

Age Group Option A Option B* Option C**

Under 35 $0.43 $0.043 $0.48

35–39 $0.65 $0.065 $0.59

40–44 $0.87 $0.087 $0.89

45–49 $1.52 $0.152 $1.28

50–54 $2.38 $0.238 $1.99

55–59 $4.33 $0.433 $3.21

60–64 $13.00 $0.953 $5.85

65+ FreeFree* (BUT see below) Free* (BUT see below)

Monthly Premiums for AnnuitantsOptional:

* For eligible annuitants who elected No Reduction for Option B, coverage is NOT free for age 65+.

These annuitants must continue to pay premiums

*Per $1,000, **Per Multiple


Retirement Optional No Reduction Cost Post 65

(22)

Age Group Option B Option C

65–69 $1.17 $6.80

70–74 $2.08 $8.30

75–79 $3.90 $11.40

80 and over $5.72 $15.60


Changes to FEGLI in Retirement

(23)

Can an employee change their reduction election?

• Yes, the employee has 30 days from the date he or she receives the first regular monthly annuity check to write OPM and request the change. After that time, the annuitant can only reduce to 75% reduction.

Can an employee reduce or cancel FEGLI in retirement?

• Yes, an annuitant can reduce or cancel insurance anytime.


Designation of Beneficiaries

Employees are responsible for the designation

of their beneficiaries if:

• Benefits are paid to a charitable organization or firm

• Benefits are paid in a different order of precedence

• The employee wants to have a contingent beneficiary

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Assignment of Life Insurance

Transfer of ownership of life insurance to another:

• Individual, Corporation or Trustee

• May assign Basic, Options A and B

• Must continue to pay full premiums

• Must assign 100% of the policy

• Automatically cancels prior beneficiaries

NOTE: Assignment is irrevocable

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Viatical Settlement

• Viatical Settlement: Employees or retirees who have a life expectancy of 24 months or less may assign their Life Insurance to a viatical settlement firm in exchange for cash.

• Applies to Option A and B

• Must assign 100% of the policy

• Must continue to pay full premiums.

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Living Benefit

(27)

Living Benefit: Employees or retirees expected to die within 9 months or less may elect to have their Basic Life Insurance paid to them before death.

• Applies to Basic insurance only

• Employees can elect a partial or full benefit in increments of $1,000

• Annuitants can only elect the full amount.

• Payment for coverage stops if full benefit is elected.


If form is not on file, the order of precedence is followed for payments

Employee is responsible for maintaining updated designation of beneficiary forms

Employing office reviews form based on agency established procedures

SF 2823:

Designation made prior to November 17, 1986, is not valid if employee transfers to another agency

A valid court order and assignment will take precedence over a designation of beneficiary

Total designations must equal 100%

Designation of Beneficiary


Order of Precedence

Federal Order of Precedence for Life Insurance is as follows:

1. FEGLI Assignments, if none

2. According to the terms of a valid court order, if none

3. Beneficiary(ies) as designated on the SF 2823, if none

4. Widow or widower, if none

5. Children of the deceased (and/or any descendants of a deceased child), if none

6. Parents in equal shares, if none

7. The executor or administrator of the estate, if none.

8. Next of Kin (according to state laws)

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Common Disaster Clause

• This is a statement on the Designation of Beneficiary form that specifies a minimum number of days the designated beneficiary must survive the designator in order to receive the benefits. The statement, “if he/she survives me by at least ____ days,” would be added following the name of the designated beneficiary. The specified time period may not exceed 30 days. If an alternate is not named, benefits would be paid according to the order of precedence.

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Provided overview of FEGLI program

Discussed eligibility requirements

Provided costs and reduction options

Explanation of Living Benefits Act, Assignments and

Viatical Settlements

Explanation of the Common Disaster Clause

Summary

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Laws Regulations Resources

• 5 U.S.C. Chapter 87

• 5 C.F.R. Part 870

• P.L. 83-598, P.L. 105-311

• FEGLI Handbook

• OPM.gov

• FEGLI Calculator

• OFEGLI 1-800-633-4542.

• SF2817 SF2818 SF2832 SF2819 SF2821 RI76-10 FE-8

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