Joe Ramos
Director of Retired Members
Outlook May / June 2019

Some Misconceptions about FEHB

There happens to be a lot of misconceptions about how the Federal Employee Health Benefits Program (FEHB) works in regards to retirement. Some people believe that the health benefits are lost completely upon retirement, while others assume they are solely responsible for the entire premium payment.

First let’s begin with how an employee becomes eligible to keep the FEHB Program upon retirement. A federal employee must be a member of the plan on the day of retirement and covered under it for the five years leading up to that day. Most employees are aware of the five year rule; however, many are not clear on what the five year rule actually means. It does not mean that the employee has to be in one specific plan for each of those five years. Employees are permitted to change carriers, plans and or coverage types within that five year timeframe. Likewise, if two federal employees are married to one another, they are permitted to switch between plans without any disruption to their eligibility and with keeping FEHB upon retirement.

One very common misconception is that employees believe the government will no longer pay a portion of the FEHB premium when an employee retires and that is simply not true. The government will continue to pay roughly 72% of the overall premium, which means that the retiree will continue to pay the same percentage (roughly 28%).

Premiums that employees and retirees pay are exactly the same, with one minor exception upon retirement. Active postal workers pay less for their FEHB coverage, but retirees’ premiums will mirror regular federal employees and therefore increase some. The premium will rise upon retirement simply because the postal service is no longer offsetting the cost.

One particular FEHB program with great benefits is the NALC Health Benefit Plan. For example, if an employee is covered under the NALC Health Benefit Plan, with the high-family option (plan 322), the employee would be paying about $181.00 a pay period for that coverage while working and would remain about the same upon retirement. The only real difference is that retirees pay their premium on a monthly basis rather than bi-weekly. Next year, when premiums change, it will come equally for employees and retirees

Outlook March / April 2019
After nearly a decade of battering, 2019 could be the make or break year for the Federal Employee Retirement System. Although most current retirees are under the old Civil Service Retirement System, FERS covers 95 percent of feds currently on the job.

This year will be a repeat of previous legislative assaults on the federal benefits package, but with one key difference, Democrats are running the House. Most of the House Republicans who repeatedly tried to cut costs in the massive FERS program which covers CIA agents, NASA scientists, and letter carriers are either gone from Congress or relegated by the 2016 Midterm Elections to minority status. And the House committees that handle civil service matters and appropriations are now controlled by long serving Democrats who represent sizable numbers of working retired feds. Republicans in the Senate, who gained seats as a result of the election, have been indifferent to feds or helpful by blocking proposals of the House and White House or actually pushing federal pay raises. Changes in the FERS Program are the number one goal of both friends and critics of the Civil Service benefits package. That includes: semi-automatic longevity pay raises for one, two or three years; 401 K plan with a 5 percent government match; guaranteed paid vacations and sick leave that can be accumulated and applied toward retirement credit. After salaries and expenses, retirement represents the biggest cost to the government as an employer.

Proposals to change FERS include a soon-to-be revived White House and GOP House plan that would reduce future cost of living adjustments for the majority of current retirees and eliminate them for workers who retire in the future. Under the CSRS Program, annuitants get annual cost of living adjustments the same as people under Social Security; beneficiaries get a 4 percent COLA in January.

People under the FERS plan get so-called diet COLAs, meaning that if inflation hits 4 percent, they would get a 3 percent COLA under current rules. If Congress OK’d the Republican budget plans of the past there would be no COLAs ever in the future for FERS retirees. Over time, inflation will erode the value of their frozen pensions.

With Democrats in control of the House, groups representing workers and retirees will push for enactment of the Fair COLA for Seniors Act. It’s been introduced by Rep. John Garamendi (D-CA). If it became law, future COLAs for federal-military-Social Security retirees would be based on the CPI-E. it’s an index aimed at determining the actual rise in inflation for people ages 62 and older who typically have much higher medical costs. Using the CPI-E in place of the CPI-W would almost certainly mean much higher COLAs for retirees in the future. Currently COLAs for retired feds, military personnel and people getting Social Security are based on the (CONSUMER PRICE INDEX-W).

The fact that Congress is divided and that the administration already has a lot on its plate means it is unlikely the federal benefits package will be under major assault this year. But whether it is or not the fact that the House and Senate are under different management is probably a good omen for both federal workers and retirees.


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