FEHB in Retirement: What You Need to Know Now

When you finally step into retirement as a federal employee, one of the biggest questions you might have is: What happens to my FEHB? Does it get more expensive?

Let’s clear that up, because in reality — it doesn’t really change very much. But it might appear to.

Why It Looks Like Your FEHB Costs More

You’ve probably heard a lot of co-workers — or even retirees — say:

“Hey, this FEHB got really expensive, Charles. I know it’s way more than it used to be!”

Here’s the reality: Instead of paying for it every pay period (every two weeks), you’re paying for it monthly. That’s the only difference.

Let’s do the math. If you were paying $200 per pay period, that’s $200 times 26 pay periods a year. That’s $5,200 annually. Now, divide that by 12 months. That’s about $433 a month.

So when you see that monthly deduction, it feels like your costs went way up — but they didn’t. The government still pays their portion — around two-thirds, sometimes three-quarters if you’re lucky.

Rising Costs and Inflation Are Real

Now, some plans have indeed gotten more expensive. In fact, this past year, some BCBS plans had increases over 13%. That’s inflation for you.

But again, the government continues to pay most of your premium, even in retirement. You don’t lose that contribution.

Open Season Doesn’t End When You Retire

A lot of people don’t realize this. Open Season still happens for you as a retiree — the same second Monday in November to the second Monday in December.

You can still shop for a better plan, check if your doctor accepts it, and see if you can get more coverage or lower co-pays for the same money.

This is when groups like GEHA (Government Employees Health Association) or MHBP (Mail Handlers Benefit Plan) come in. They work like a warehouse club — pooling together thousands of employees to negotiate better rates. They’re like Costco for your health insurance.

What About Premium Conversion?

Let’s talk premium conversion. That’s a fancy term for saying your premiums were pre-tax when you were working.

So if you made $150,000 and spent $10,000 on health insurance premiums, you were only taxed on $140,000.

But after retirement? No more pre-tax. It’s post-tax. That tax break goes away.

Special Provisions: The $3,000 Tax Credit

There’s an exception. If you were a law enforcement officer — DEA, FBI, U.S. Marshals, CIA — or an air traffic controller or firefighter, you’re eligible for a $3,000 tax credit.

For single folks paying a couple hundred bucks a month, you’ll easily come in under that cap. The max is $3,000 per family. But only for special provision retirees.

The Five-Year Rule

To keep your FEHB in retirement, you must have had it for at least five years continuously before retiring.

There are exceptions, though. If you were married to another federal employee and were covered under their FEHB, you need to notify OPM in writing, include a copy of your health insurance card, and keep a signed copy for your records.

Don’t assume the government will get it right — sometimes mistakes happen.

Don’t Overlook Survivor Benefits

One critical thing: If you don’t purchase at least a 25% survivor benefit for your spouse — and you’re covered under their FEHB — your health insurance ends when they die.

That’s why that minimum survivor benefit is so important.

Medicare Part B: Do You Have to Take It?

Let’s wrap this up with Medicare Part B.

If you’re a postal retiree, you’ll likely be required to enroll in Part B going forward. That’s part of the new postal reform.

But for everyone else, you don’t have to take it. You can, and many do, but it’s optional. Just keep in mind — you’ll be paying premiums for both FEHB and Medicare if you do.

If you’re retired military and using TRICARE, you must enroll in Medicare Part B at 65 to continue TRICARE for Life.

Final Thoughts

A lot of you heading into retirement need to be aware of these details.

Remember:
You don’t have to work longer — you just need a better plan.

If you have questions or want help making sense of all this, I’d be happy to walk through it with you.

Want help building a plan that fits your unique situation?
👉 Schedule a complimentary consultation