Author: Bob Braunstein, Federal Benefits Specialist

Did you think some Federal benefits are “no brainers”? Do you think these statements are true? 

• My High-3 is based on my highest three salaries at the end of my career.
• I can take any amount of FEGLI coverage into retirement as long as I have carried FEGLI for the 5 years immediately prior to my retirement date.
• I must be covered under the same FEHB Plan for the last 5 years prior to retiring to take FEHB into retirement.
• I will face permanent late enrollment penalties if I delay enrolling in Medicare B when I turn 65.
• I do not need to enroll in Medicare D, because FEHB prescription drug coverage is essentially equivalent.

While all these statements could be true, more often than not they aren’t. 

Let’s take a closer look:

High-3 average salary

While many believe their High-3 salary is always the average of their highest three salaries at the end of their careers, this is usually not the case: 

• The High-3 is an average of your basic pay during your highest three consecutive earning years (usually a combination of pay for grade/step and locality). 
• In addition to the usual annual Federal increases, these years could include within range or quality step increases, promotions, higher or lower locality pay if your job moves to a different location. 
• It’s not uncommon to average 5 or 6 rates of pay during one’s highest three consecutive earning years. 
• And while most High-3’s average one’s last three years of earnings, your High-3 could be earlier in your service if you accepted a downgrade earlier in your career, or if you moved at the same pay grade to another work location with lower locality pay several years before you retire.

The 5-Year Rule for FEGLI

Many believe that the 5-year rule for Federal Employees’ Group Life Insurance (FEGLI) is simply to be covered by the insurance for the 5 years immediately preceding retirement. But this wouldn’t be true if you increased your FEGLI coverage within less than 5 years of your intended retirement date. This is because the new desired level of coverage has to be in effect for 5 years to be retirement-portable. If after such an increase you retire before 5 years pass, your coverage drops back to the amount you had prior to the increase – so you would need to stay on the job for a while longer in this and similar scenarios.

The 5-Year Rule for FEHB

The Federal Employees Health Benefits (FEHB) Program 5-year rule does not require you to be in the same plan for the 5-year qualification period. In fact, you could be covered by numerous plans and options (one per year, of course) during the 5-year period, including interchangeable Family, Self, and Self-Plus-One enrollments. You can even satisfy the 5-year requirement as a family member under your Federal spouse’s plan (i.e., you are both Federal employees).

Medicare B

While delaying Part B could result in monthly premium penalties, this would not be the case if you are turning 65 while you still have health insurance through your agency – because you have not yet retired. When you retire (and your FEHB coverage moves to OPM), you would have 8 months to enroll in Part B without a penalty – and even if you are way past age 65, it won’t matter!  Those living abroad could also delay Part B if they are enrolled in a foreign country’s public health program. And you could drop Part B and not face reenrollment penalties later if you come out of retirement and enroll in your new employer’s health plan. When the employer coverage ends, Part B reenrollments are, again, penalty-free.

Medicare Part D

Until recently, Federal retirees were usually advised to ignore Part D prescription drug coverage as FEHB drug formularies provide equivalent coverage. But Part D now caps the cost of insulin at $35 per month and will begin capping all prescription drugs at $2,000 year beginning in 2025. These changes could mean significant savings for those who are insulin dependent or need to purchase high-cost non-generic drugs. Without Part D, an FEHB prescriber’s prescription drug copays are subject to their plan’s annual out-of-pocket maximum, which could be between $5,000 and $9,000 per year (depending on the plan).

In brief, these and other benefits often have hidden complexities and requirements. Understanding them will be critical for planning your Federal retirement. 

Bob Braunstein is a retired Federal employee who was last employed as a Senior Human Resources Consultant with the Office of the Comptroller of the Currency (OCC) at the Department of the Treasury. During his Federal career, he served in a full range of HR positions spanning recruitment, staffing, employee relations, retirement and benefits, and position classification/management disciplines.  He is a retirement and benefits instructor for NITP.

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