Lots of questions surround federal employee group benefits when the employee has to retire early due to a disability. Federal employees all have the opportunity to take part in group health and life insurance, as well as long term disability insurance and other programs. Once the employee is no longer working for the government, the question arises, “What happens to my benefits?”
The short answer is simple: You can keep them!
The group benefits can continue into retirement whether you finish your career on disability or meet the qualifications for a voluntary immediate retirement. The rate that the employee pays can change some at the retirement point, as well as throughout the retirement period, as can any insurance premium, in accordance with the risk that insured poses to the carrier. For instance, the FEGLI (Federal Employee Group Life Insurance) Option B coverage is an annually renewal term coverage and the rates can and will climb as you age. However, the Basic coverage can be kept at a minimal cost with options to quit paying for it at all once you turn 65.
Health insurance can be continued into disability retirement as well. If you are a postal employee, you can expect to see a rise in the premium whenever you retire. The reason is that the collective bargaining for postal employees has the USPS paying a slightly higher percentage of the premium than any other federal agencies do. Once you retire, the government portion will fall to the normal, non-USPS rate.
All retirees can expect costs associated with group benefits premiums to rise. That is a fact whether you are applying for disability retirement at age 40, or finally stepping away from the workforce, still healthy at age 75.
One other benefit that is cause for a lot of questions is the TSP (Thrift Savings Plan). The TSP works like a 401k for federal employees, and the federal agencies match employee contributions up to 5% of the employee salary. Once the employees separate, they do not lose that money. As long as they are fully vested, that money is theirs forever. However, due to tax restrictions, they cannot access it before turning 59 ½ without a stiff penalty.
However, once the employee is separated, the agency will cease to provide the matching funds. The new retiree can leave the money in the TSP, or move it to a private IRA, a new company’s 401k, or similar retirement account.
Call Harris Federal for answers to your retirement questions. With Chartered Federal Employee Benefit Consultants available to help you understand the decisions you will face upon retirement, especially federal disability retirement.