Over the last two months, many federal employees have received notifications that their jobs are being eliminated. Some of these employees have been offered early retirement, either in the form of a Voluntary Early Retirement Authority (VERA) with no buyout option, or a Voluntary Separation Incentive Payment (VSIP) which is a VERA with a buyout. Other employees who are not eligible for a VERA or a VSIP and who are forced to resign from federal service may be eligible for a deferred retirement.
Among the important questions that federal employees who are leaving federal service: What happens to employee insurance benefits? These insurance benefits include health, dental and vision insurance, life insurance and long-term care insurance. This column will discuss what happens to a federal employee’s federal health, dental and vision benefits when the employee leaves federal service before normal retirement age.
Eligibility for FEHB health benefits after retirement
Employees are eligible to continue Federal Employees Health Benefits (FEHB) coverage in retirement if they meet all of the following requirements:
• The employee is entitled to retire with an immediate annuity under a retirement system for civilian employees. These retirement systems include CSRS, FERS, Board of Governors of the Federal Retirement System, CIA Retirement System, Foreign Service Pension System, and Federal Judiciary Retirement System.
• Retiring with an immediate annuity means that an employee meets the minimum age and service time to retire and receive the first of lifetime CSRS or FERS annuity checks. For example, retiring with at least 30 years of creditable FERS service and reaching one’ s minimum retirement age: (2) Retiring under the FERS “MRA + 10 “retirement option; and (3) Early retirement including a VERA and VSIP.
• A retiring employee must have been continuously enrolled, or covered as a family member, in any FEHB program health plan for the five continuous years of service immediately before the effective date of the employee’s retirement.
What happens to an employee who is not eligible for immediate retirement?
If a federal employee not eligible for immediate retirement elects to leave federal service, or an employee is fired or forced to resign because of a reduction-in-force (RIF), then the employee upon leaving federal service will lose FEHB program health insurance. If the departed employee has at least five years of creditable service, then the employee would be eligible for a deferred retirement in which the employee would receive a deferred annuity.
For example, a FERS employee leaves federal service with 10 years of creditable FERS service. The employee would be eligible for a deferred FERS annuity starting at age 62. However, the employee would not be eligible to have their FEHB program health benefit restored when the FERS annuity starts at age 62.
“Postponed “MRA + 10” retirement.
As mentioned, FERS-covered employees who have reached their MRA and are eligible to retire under the “MRA + 10” immediate retirement are eligible to keep their FEHB program health insurance A downside to “MRA+10” immediate retirement is that the retiring employee’s FERS annuity is reduced five percent per year for every year the retiring employee is under 62. To avoid the reduction, the employee can postpone the start of his or her FERS annuity until age 62, or age 60 if the employee has between 20 and 29 years of creditable service. This avoids the annuity reduction and is called a “postponed” MRA+10 retirement.
A disadvantage to “postponed” retirement is that when the employee leaves federal service, the employee will temporarily lose FEHB program health insurance. Once the departed employee applies for his or her retirement at age 60 or age 62, the departed employee can apply to have the FEHB program health insurance restored for retirement.
Returning to federal service in order to be eligible for immediate retirement
Those federal employees who leave federal service before they are eligible for immediate retirement can return to federal service in the future in order to work the required number of years in order to retire under the immediate retirement rules. They then could be eligible to keep their FEHB program health insurance in retirement. The following example illustrates:
Joan entered federal service on January 10,2013 at age 50. She worked for three years until January 31, 2016, and then resigned. During the three years that Joan was a federal employee, she was enrolled in the FEHB program. On February 1, 2023, when Joan was age 60, she returned to federal service and reenrolled in the FEHB program. She worked until February 8, 2025, at which time she retired from federal service at age 62, with five years of creditable service. Joan was eligible to keep her FEHB program health insurance for retirement. This is because Joan was enrolled in the FEHB program continuously for the five-year period ending on the day she retired from federal service, February 8, 2025. The fact that Joan had left federal service on January 2016 and did not return until February 2023 is not used in “five continuous year FEHB program enrollment” rule. This is because during the period that Joan was not a federal employee (February 2016 through January 2023) she was not eligible to be enrolled in the FEHB program.
Federal Employee Dental and Vision Insurance Program (FEDVIP)
FEDVIP provides separate dental and vision insurance for federal employees. If a federal employee is enrolled in the FEHB program, the employee is automatically eligible to enroll in a dental and/or vision insurance plan offered through FEDVIP.
If an employee leaves federal service and therefore loses his or her FEHB program health insurance, the employee loses access to the FEDVIP. The same applies if the retiring employee is not eligible to keep FEHB program health insurance in retirement, then the retired employee is not eligible to have access to the FEDVIP throughout retirement.