The Value in Just the Basics
Federal Employee Life Insurance has many options but what is often lost with having so much choice is the value of the Basic coverage. The Basic Federal Employee life insurance provided by FEGLI is a valuable Federal benefit that will come in handy for your family in time of need.
We have written before how helpful it is to carry the Basic coverage after retirement even if it is just 25% of its full pre-retirement benefit. The benefit level can often be sufficient to cover funeral expenses. Funeral expenses can unfortunately be a financial toll at the worst of moments. Basic coverage should not be taken lightly.
Basic Coverage at the Start of the Gate
As soon as you start working for the Federal Government, your basic coverage begins. The Federal Government makes you go out of your way to cancel it. I think that speaks for itself how valuable the government finds this coverage.
What is the Payout
Like most things dealing with Federal benefits, your basic benefit payout has a little complication. The basic benefit is the greater of these two numbers; 1) your annual basic pay round up to an even $1,000 and then add $2,000 or 2) $10,000. The number you come up with is called your Basic Insurance Amount or BIA. If you are carrying Basic at the time you retire from Federal Service, this BIA stays with you.
The Extra Benefit
If you are under 45, for no additional charge, your BIA gets an extra benefit, as the government likes to call it. If you are 35 or under, the BIA is essentially doubled. Every year after 35, this Extra Benefit decreases by 10% until it is completely phased out by age 45.
For every $1,000 of BIA, the cost to the Federal Employee is $.15 per pay period. Therefore, if your BIA was $100,000 and there was twenty-six pay periods in a given year, you would pay $.15 x 100 x 26 = $390 for the year.
Federal employees can continue to carry basic coverage into retirement with three levels of BIA benefit, 100%, 75% and 50%. If you are a Federal retiree over 65, the 25% BIA benefit level costs nothing.
Advantages to Being a Federal Employee
Your federal benefits are one of the advantages to being a Federal Employee but it can be difficult to decide what options best meets your needs. If you want more information, please see a Federal Benefits Specialist.
For over 30 years, federal employee retirement planning has been a key focus of Medallion Financial Group. We recognize that FERS retirement benefits have extra layers of complexity, such as the Thrift Savings Plan (TSP), 401K, Pension plan, FEGLI and more. It’s easy to get lost in a sea of bad advice when so few people understand the basics. We help with the basics and beyond to enable our clients to get the education and advice they need to retire with confidence.
Our focus is twofold: first and foremost, we are fiduciary advisors. We stand against any violation of laws, values, and ethics. Second, we treat our clients as part of our family, not only those who call Maryland and Georgia home, but clients across the US who have benefited from our reputation of personal service, integrity, and expertise.
We strive to exceed client’s expectations – because we have high expectations of ourselves.