Federal Life Insurance: Age 65 Decline Explained

Life insurance rates are determined by a variety of factors, including age, health, hobbies, and gender. The older you are, the more expensive your premiums will be, as the cost of life insurance is based on actuarial life tables that predict the likelihood of death while the policy is in force. Typically, the premium amount increases by about 8% to 10% for every year of age. Federal employees who are enrolled in the Federal Employees Group Life Insurance (FEGLI) program can expect changes to their Basic, Option A, Option B, and Option C insurance plans as they age. For example, the basic insurance coverage for federal employees aged 35 and under includes an extra benefit that doubles the amount of basic insurance at no extra cost. This benefit decreases by 10% each year until the age of 45, when it ends. Additionally, retirees over the age of 65 may experience a reduction in their basic life insurance coverage, depending on their retirement date and the reduction schedule they elected. It is important to note that life insurance rates by age may vary, and seeking information from official government websites or consulting with an independent agent is advisable.

Federal Employees' Group Life Insurance (FEGLI) program

Federal Employees Group Life Insurance (FEGLI) is a term insurance product offered to actively employed individuals by the Federal Government. The insurance is currently provided by the Metropolitan Life Insurance Company (MetLife).

FEGLI offers Basic Coverage, which covers the life of the insured for either their annual salary, rounded up to the next even $1,000, plus $2,000, or $10,000. The Government pays one-third of the premium cost for Basic Coverage, and the employee pays the remaining two-thirds, unless they are a USPS worker, in which case the agency pays 100% of the premium. Basic Coverage also includes Extra Benefit, which increases the amount of Basic Insurance payable if the employee dies before reaching the age of 45.

FEGLI also offers three types of optional coverage: Option A-Standard, Option B-Additional, and Option C-Family. Option A provides an additional $10,000 of term life insurance. Option B allows employees to choose between one and five times their annual salary, rounded up to the next $1,000, as their insurance coverage amount. Option C provides life insurance coverage for the employee's spouse and unmarried dependent children, with $5,000 for a spouse and $2,500 for each eligible child. For all three optional coverages, the employee pays the full cost of the premiums, which are based on their age group.

Upon retirement, employees can choose to continue their FEGLI coverage, provided they meet certain conditions. They must have been enrolled in FEGLI for the five years before their retirement, or from their earliest opportunity to enroll. They must also be receiving annuity payments, which is when life insurance premiums are withheld from one's annuity. Additionally, they must not have converted their life insurance coverage to an individual policy.

When electing to continue FEGLI coverage into retirement, employees must choose a reduction schedule for their Basic Life Insurance: 75% reduction, 50% reduction, or no reduction. Under the 75% reduction schedule, the insurance reduces by 2% of the face value each month beginning with the second month after the employee's 65th birthday or retirement date, whichever is later, until it reaches 25% of the face value. This coverage is free after the age of 65. The 50% reduction schedule follows the same reduction pattern, but the premium is higher until the employee reaches the age of 65, after which the premium drops and the insurance value declines by 1% per month until it reaches 50%. The no reduction option is the most expensive, with the highest premium, and allows the employee to retain the same insurance value they had when they retired.

For Option A-Standard coverage, employees may continue this into retirement, but the premiums increase with their age. At age 65 and over, there is no charge, and the value of the insurance drops by 2% per month until it reaches 25%. Option B-Additional coverage can also be continued into retirement, and employees can choose to have a full reduction or no reduction in their coverage. If employees elect a full reduction, the coverage reduces by 2% of the face value per month for 50 months, at which time it ends. If they elect no reduction, the withholding for the coverage is adjusted to reflect the employee's age, and the value does not reduce unless they later cancel the election or change their coverage amount. Option C-Family insurance operates similarly to Option B, with employees able to choose full reduction or no reduction.

Reduction schedules for basic life insurance

If you retired before December 9, 1980, your basic life insurance will be reduced by two percent of the face value each month, starting with the second month after your 65th birthday or your retirement date, whichever is later. This reduction will continue until your basic life insurance reaches 25 percent of the face value. This coverage is free.

If you retired on or after December 9, 1980, but before January 1, 1990, you elected one of the following reduction schedules for your basic life insurance using form SF-2818 "Continuation of Life Insurance As an Annuitant or Compensationer:"

75 percent reduction: If you elected this reduction schedule, your basic life insurance will reduce by two percent of the face value each month, beginning with the second month after your 65th birthday or your retirement date, whichever is later. This reduction will continue until your basic life insurance reaches 25 percent of the face value. This coverage is free.

50 percent reduction: If you elected this reduction schedule, your basic life insurance will reduce by one percent of the face value each month, beginning with the second month after your 65th birthday or your retirement date, whichever is later. This reduction will continue until your basic life insurance reaches 50 percent of the face value. You will have premiums withheld from your annuity beginning at retirement, and this will continue for life.

No reduction: If you elected this reduction schedule, the full amount of your basic life insurance remains in force after you reach age 65. There is no reduction in the value of your basic insurance. You will have premiums withheld from your annuity beginning at retirement, and this will continue for life.

Effective January 1, 1990, you also pay the same regular basic premium, on a monthly basis, that active employees pay, until you reach age 65. If you choose the 50 percent reduction or no reduction, you also pay an extra premium. You continue to pay this extra premium for life or until you change to a 75 percent reduction or cancel your coverage.

Medicare Part A and B coverage

Medicare is federal health insurance for anyone aged 65 and over, as well as some people under 65 with certain disabilities or conditions. Original Medicare includes Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance).

Medicare Part A Coverage

Medicare Part A helps cover inpatient care in hospitals, skilled nursing facility care, hospice care, and home health care. Most federal employees and annuitants are entitled to Medicare Part A at age 65 without cost. When you don't have to pay premiums for Medicare Part A, it makes good sense to obtain coverage as it can reduce your out-of-pocket expenses.

Medicare Part B Coverage

Everyone is charged a premium for Medicare Part B coverage. It covers services from doctors and other healthcare providers, as well as durable medical equipment (like wheelchairs, walkers, and hospital beds). It also covers many preventive services, such as screenings, shots or vaccines, and yearly "Wellness" visits. Part B also covers limited outpatient prescription drugs, mental health and substance use disorders, and oxygen equipment and accessories.

Changes to insurance premiums with age

The Federal Employees' Group Life Insurance (FEGLI) program offers basic life insurance coverage to federal employees, with the option to add additional coverage through Optional plans. Changes to insurance premiums vary depending on the specific plan chosen and the age of the policyholder.

Basic Coverage

Under FEGLI, basic coverage includes insurance for the greater of the policyholder's annual salary, rounded up to the next even $1,000, plus $2,000, or $10,000. The government typically pays one-third of the premium cost for basic coverage, while the employee pays the remaining two-thirds. USPS workers are an exception, as the agency covers 100% of the cost.

For those under 45, there is an extra benefit that increases the payout if the employee passes away before turning 45. Premiums are automatically deducted from paychecks until the age of 65.

Upon reaching 65, policyholders can choose from three reduction schedules:

• 75% reduction: Coverage decreases by 2% of the face value each month until it reaches 25%. This option has no associated premium after 65.
• 50% reduction: Coverage decreases by 1% of the face value each month until it reaches 50%. Premiums drop to $0.75 per $1,000 per month after 65.
• No reduction: Coverage remains the same, and premiums drop to $2.25 per $1,000 per month after 65.

Optional Coverage

Optional coverage plans include Option A-Standard, Option B-Additional, and Option C-Family, each offering varying levels of additional coverage.

Option A-Standard provides an additional $10,000 in coverage. Premiums for this option increase with age:

• 50-54 years old: $2.17/month
• 55-59 years old: $3.90/month
• 60-64 years old: $13/month
• 65 and above: No charge

Option B-Additional allows policyholders to choose coverage multiples of their annual salary, ranging from 1x to 5x. Premiums for this option also increase with age:

• 50-54 years old: $0.217/month per $1,000
• 55-59 years old: $0.39/month per $1,000
• 60-64 years old: $0.867/month per $1,000
• 65-69 years old: $1.04/month per $1,000
• 70-74 years old: $1.863/month per $1,000
• 75-79 years old: $3.90/month per $1,000
• 80 and above: $6.24/month per $1,000

Those who elect the 50% or no reduction schedule for Option B can cancel or reduce their coverage at any time.

Option C-Family provides coverage for the policyholder's spouse and unmarried dependent children. It offers coverage multiples of $5,000 for a spouse and $2,500 for each eligible child. Premiums are based on age:

• 50-54 years old: $1.80/month per multiple
• 55-59 years old: $2.88/month per multiple
• 60-64 years old: $5.27/month per multiple
• 65-69 years old: $6.13/month per multiple
• 70-74 years old: $8.30/month per multiple
• 75-79 years old: $12.48/month per multiple
• 80 and over: $16.90/month per multiple

At age 65, premiums for this option stop, and coverage declines by 2% per month for 50 months unless the retiree chooses to maintain full coverage and continue paying premiums.

Medicare and FEHB

It is important to note that while turning 65 does not affect FEDVIP enrollment or eligibility, it may impact FEHB coverage. Most federal employees are entitled to Medicare Part A at 65 without any premiums, and enrolling in this can help reduce out-of-pocket expenses and FEHB premiums.

Medicare Part B, on the other hand, requires premiums for everyone. Reviewing the premium and benefit information can help determine if purchasing this coverage makes financial sense.

In summary, insurance premiums under FEGLI and its associated plans generally increase with age, especially after 55, and various reduction schedules become available at 65, potentially lowering premiums but also reducing coverage amounts.

Life insurance coverage after retirement

Federal Employees' Group Life Insurance (FEGLI)

If you are a federal employee enrolled in the Federal Employees' Group Life Insurance (FEGLI) program, you can maintain your basic life insurance benefits after retirement if certain conditions are met. Firstly, you must have been enrolled in FEGLI for the five years preceding your retirement or from the earliest opportunity to enrol. Additionally, you must not have converted your life insurance coverage to an individual policy, and your annuity payments must start within 30 days.

Reduction Schedules

The reduction in basic life insurance coverage after retirement depends on the date of retirement and the chosen reduction schedule. For those who retired before December 9, 1980, the basic life insurance reduces by 2% of the face value each month, starting from the second month after your 65th birthday or retirement date, whichever is later. This continues until the coverage reaches 25% of the face value, and this reduced coverage is provided free of charge.

For individuals who retired on or after December 9, 1980, but before January 1, 1990, three reduction schedules were available:

• 75% reduction: Similar to the previous schedule, the coverage reduces by 2% of the face value each month until it reaches 25%. This option has no additional cost.
• 50% reduction: The coverage decreases by 1% of the face value monthly until it reaches 50%. Premiums are higher for this option, and while they are reduced at age 65, they continue for life.
• No reduction: The full amount of basic life insurance is retained, and premiums are withheld from the annuity beginning at retirement and continuing for life. This option is the most expensive.

Optional Life Insurance Coverage

In addition to basic life insurance, federal employees may have optional life insurance coverages, including Option A-Standard, Option B-Additional, and Option C-Family. These optional coverages can also be continued into retirement, and the specific reduction schedules and premiums will depend on the option chosen and the age of the retiree.

It is important to note that accidental death and dismemberment coverage under basic life insurance and Option A ends upon retirement. Additionally, if you are employed at the age of 65, your coverage continues unreduced. For retirees, the coverage may be reduced or unchanged, depending on the elections made at retirement for basic and optional coverages.

Medicare and Life Insurance

When it comes to Medicare, turning 65 does not affect your Federal Employees Dental and Vision Insurance Program (FEDVIP) enrollment or eligibility. If you are eligible for premium-free Part A coverage, it is advisable to enrol, as it can help reduce out-of-pocket expenses. While Medicare Part B coverage requires a premium for everyone, reviewing the information and deciding whether to purchase it is essential.

In conclusion, understanding life insurance coverage after retirement can be complex, and it is important to carefully review the conditions, reduction schedules, and premium changes associated with your specific situation.

Frequently asked questions