Ask The Experts: Retirement

By Reg Jones

Medicare Part A

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Q. I’ll be 65 this month. I retired from civil service in 2008. I’m working part time as a city employee and still paying into Medicare. My wife is 60 years old, and I want to keep her with my Federal Employees Health Benefits program. Since I qualify for free Part A, do I have to enroll with Medicare for this, and will my FEHB remain primary for my wife and me?

A. Since you are still working, you don’t have to enroll in Medicare Part A. However, I can’t think of a good reason not to do so, even though it will remain secondary to your FEHB plan until you stop working.

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Survivor annuity

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Q. My husband has 28 years and I have 27 years under FERS as civilians with the Defense Department (Air Force). My husband has been carrying Federal Employees Health Benefits insurance for our family for the past nine years. If he decides to retire early or prior to me, will he have to select an annuity for me so I would have health insurance coverage if he was to pass? I wouldn’t want to have to continue to work and carry insurance for five years prior to retiring if this is the case.

A. He wouldn’t have to elect a survivor annuity for you. As long as you were covered under the self and family option, you could continue your coverage by having the premiums taken out of your pay if still employed, or your annuity.

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Getting retirement annuity information

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Q. Why isn’t OPM publishing how much (percentage wise) of federal retirement annuities are to be withheld BEFORE an individual puts in for their retirement? I have found several other people who plan on retiring who had no idea how much may be withheld from their retirement annuities. It’s like everyone is keeping it a secret. We are all told to plan ahead of time for our retirements, but neither OPM nor personnel offices are telling people how much is going to be withheld from our annuities when we start asking for our retirement estimates.

Considering the tidal wave of upcoming baby boomer retirees, individuals need to know this information when they start planning their federal retirements and take that into consideration when estimating how much they are going to have to live on because it is not the estimated amounts they are getting from their personnel offices, which is based on years of services, high-three, etc.

How many people are not aware of this information? I know I feel like I am beating a dead horse, but I really feel potential retirees have a right to know this information upfront, not AFTER they have made the decision to retire or AFTER they get their first check.

A. OPM can’t do that because there are too many variables. Let me explain.

Just as was true when you were first hired, when you retire you’ll be asked to designate the amount you want to have deducted from your annuity for federal and (if applicable) state taxes. If you don’t say what you want done with federal taxes, OPM will sign you up for yourself and three dependents. OPM won’t do anything if you are required to pay state taxes as an annuitant and haven’t elected to have deductions taken out.

You’ll have to do a little research to decide how much money you want deducted from your annuity for taxes. There are two reasons for that.

First, your annuity will be less than what you were receiving before you retired, so you may end up in a lower tax bracket. Second, a portion of your annuity will be tax-free because it will represent a return of the money you contributed to the retirement system while working. You can find out more about that by going to www.irs.com and downloading a copy of publication 721.

Things that won’t be deducted from your annuity include Social Security taxes, Medicare taxes and union dues, if any. Things that will be deducted include FEHB premiums and, in most cases, FEGLI premiums.

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Medicare Part B

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Q. I am retired and have Blue Cross/Blue Shield Basic for my health plan. I will be 65 in May and need to make a decision on whether I should get Part B when I have my current FEHB coverage. If I decide to take Part B, there will be another monthly cost. Is there any FEHB plan that would benefit me to enroll in and also keep the costs down if I decided to take Part B? This is confusing to me.

A. It’s confusing to you because it’s confusing to everyone faced with that decision. Unfortunately, there isn’t any way to make it less confusing. You’ll have to consider your current and anticipated health care needs. Then you’ll need to review the pluses and minuses of your current plan and Medicare Part B to see if there’s anything to be gained by enrolling in Part B. Finally, you’ll need to look at some other FEHB plans with lower premium costs to see if they’ll provide you with what you need and want, while offsetting some of the cost of Part B.

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Pretax FEHB exclusion

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Q. Is the pretax Federal Employees Health Benefits exclusion still available after retirement?

A. No.

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Deferred annuity

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Q. My husband left federal employment at age 55 after seven years. He was covered under FERS. He is almost 63 and has applied for a deferred annuity. He is thinking of returning to federal employment. If he does so and receives health benefits, when he retires, can he carry those benefits into retirement? Must he be re-employed for a certain length of time to do this?

A. He must be enrolled in the Federal Employees Health Benefits program for a total of five years to carry that coverage into retirement. If he was enrolled in the program on the day he left and re-enrolls when he returns to work, those periods of coverage will be treated as though they were continuous.

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Health benefits after retirement

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Q. Will the government still pay the same share into the Federal Employees Health Benefits program if I retire at 62 with only 14 years of service?

A. Yes.

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Changes in health insurance cost

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Q. My December federal retirement take-home pay was $1,609.11. My January federal retirement take-home pay was $1.645.66. My February federal retirement take-home pay was $1,511.67. My take-home pay was reduced by $133.99. In my 15 years of retirement pay, I have never seen this much taken for medical at once.  For the past few years, my take-home pay has continued to reduce. Inflation is not keeping up with medical costs. What’s going on?

A. All plans in the Federal Employees Health Benefits program are experience-rated. This means that the premiums in the current year are based on an analysis of the premiums the plan took in versus the expenditures it made to pay enrollee claims. While sometimes a plan’s premiums go down, they often go up. To find out if the change you experienced is the result of increased plan premiums, go to www.opm.gov/healthcare-insurance/healthcare/plan-information/premiums and check the rates for 2012 and 2013.

The only way you can moderate the effects of premium increases is to shop around among the many plans in the FEHB program and find one that meets your needs but has lower rates. One of the benefits of the FEHB program is that you can change plans during any open season.

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Retirement eligibility

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Q. I retired from the Army after 18 months of military service at age 22 because of combat wounds. I retired from a nonprofit and went to work for the government at age 56. I am now 62 and have eight years of federal service (executive agency), including depositing the 18-month military buyback. At what age and number of federal service years am I eligible to retire and receive medical benefits as a retiree?

A. You could retire now if you wanted to. Any federal employee with five years of service can do that. As for medical benefits, there aren’t any, regardless of age and service. However, if you have been enrolled in the Federal Employees Health Benefits program for the five consecutive years before you retire, you could carry that coverage into retirement.

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Deferred annuity

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Q. I am going to be 53 this year. I have 32 years of federal service and would like to take the deferred retirement option. My minimum retirement age is 56. I understand I will not be entitled to special retirement supplement. My spouse retired under CSRS, and she carries our Federal Employees Health Benefits plan.  When I reach my MRA, do I have to initiate the paperwork to start my FERS annuity?

A. Yes, you would be eligible for a deferred annuity at age 56. Several months before you reach that age, download a copy of Standard Form 2801, Application for Immediate Retirement, which you’ll find at www.opm.gov, click on Forms. Fill it out and send it to OPM.

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Survivor annuity

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Q. My husband is a retired CSRS annuitant. If he is admitted to a nursing home on Medicaid and his monthly check is given to Medicaid, will I still be eligible to receive my share of his annuity upon his death, and will I be able to continue to receive health insurance from FEHB?

A. Yes, as long as he elected a survivor benefit for you and you are covered under the self and family option of his Federal Employees Health Benefits plan.

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Cancel FEHB coverage?

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Q. If I am 100 percent disabled due to a service-connected disability and entitled to free health care with the Veterans Affairs Department for life, does it make sense to cancel the Federal Employees Health Benefits insurance that I have had since I retired in 2004? I am also covered under my wife’s health insurance through her former employer.

A. I can’t tell you if it makes sense. That’s something you’ll have to figure out. Review the benefits you receive from VA and those you and your wife receive both from her employer plan and your FEHB enrollment. Keep in mind that former employer plans can be reduced or terminated, unlike those under the FEHB program. If you decide to continue your FEHB enrollment, you might consider selecting a plan with adequate coverage but low cost.

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Medicare and FEHB

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Q. I am retiring from the VA when I am 62. I hold the insurance for myself and my husband, and I am able to keep family health benefits when I retire.

My husband is two years and nine months younger than I am.

When I reach 65, can I still keep GEHA insurance until my husband reaches 65 and can start drawing Medicare on his own? I do not want him not having heath insurance when he is 62. I heard someone say that at 65 I could do Medicare Part A and keep my government health insurance, and then, when he has reached 65, I could drop the GEHA in an open season and go with Part B with a supplement.

A. Yes, you need to keep enrolled in the self and family option of your FEHB plan to ensure that your husband’s health needs are covered. As for dropping your FEHB plan when you are both covered by Medicare, you had better think twice about that. If you drop it, you will never be able to re-enroll if you later change your mind. While Medicare Part A is free (you already paid for it through payroll deductions), you’ll have to pay for Part B. Whether you need to enroll in Part B is something you have to think through. Compare what your FEHB plan will cover with what Medicare Part B covers. Then review your current and anticipated health needs.

While many retirees elect to be covered by their FEHB plan and Medicare Parts A and B, many others elect not to enroll in Part B. One answer doesn’t fit all.

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Benefits/drawbacks of Medicare Part B

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Q. I will retire under CSRS and will maintain my FEHB insurance and Medicare Part A. What are the advantage and disadvantages of obtaining Medicare Part B?

A. The disadvantage is that you have to pay the premiums for Medicare Part B. The advantage is that it works with your FEHB coverage to reduce your out-of-pocket costs for medical, clinical lab service, home health care, outpatient hospital service and blood. You’ll have to review what the two plans offer and see where they overlap, reinforce each other or fill gaps.

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Divorce and health benefits

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Q. I have worked for the Veterans Affairs Department as a civilian for more than five years. My wife always handled the health care insurance under her company’s program, so I never took advantage of mine. We are now in our 18th month of divorce and I would like to go on my health care program under my benefits at VA. My human resources department says I need a divorce decree to be able to get coverage. My wife is about to lose her job, so I am worried that I may be without coverage. What should I do?

A. If your wife loses her coverage as a result of losing her job, you might be able to enroll in the Federal Employees Health Benefits program under Code 1M of the Office of Personnel Management’s Table of Permissible Changes in Enrollment. Check with your personnel office. If you don’t, you’d have to wait until the next open season to enroll.

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FEHB enrollment date

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Q. I am 64 years old and have nine years in CSRS. Four years were 1972 to 1976. At that time, I took my retirement out, then another seven months in 1985-86. I was reinstated in the federal government in February 2008, working for the IRS under seasonal but worked full time. I transferred in September with no break in service, accepting a position for the Defense Department. My service computation date gives me Feb. 4, 2004, under FERS. I signed up for Federal Employees Health Benefits at that point. I want to retire, but I need to take my FEHB with me when I do. What date would I be eligible to use as my retirement date and take with me my FEHB?

A. The law requires that you be enrolled in the FEHB program for the five consecutive years before you retire. Breaks in service won’t have a negative impact if you were enrolled when you left and immediately re-enrolled when you returned to government service. You’ll need to check with your personnel office to see if that was the case for you. If it wasn’t, the five-year period will start over from the date that you re-enrolled.

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Re-employment and five-year rule

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Q. My husband worked for a Veterans Affairs Medical Center for seven years, then left federal employment.  He is 63 and eligible for a deferred annuity. He may be returning to his previous job. Is there a certain amount of time he must be re-employed so as to be able to retire and carry his health benefits into retirement?

A. If he was enrolled in the Federal Employees Health Benefits program on the day he left, re-enrolls on the day he is re-employed by the federal government, and has been enrolled for five years, he would be able to carry that coverage into retirement.

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Medicare Part B penalty

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Q. I am retired under CSRS with survivor benefits for my spouse. I have Medicare Part A and Federal Employees Health Benefits Blue Cross/Blue Shield family plan. My spouse has just become Medicare eligible. Since there is a penalty (140 percent) for me to pick up Part B, we are contemplating continuing with the Medicare Part A and FEHB. The adviser at Social Security questioned our health insurance coverage after I die, noting the penalty in picking up Part B later. I assume that FEHB coverage will continue with the survivor benefits. Also, will the cost of the FEHB become the self-only rate?

A. If you are enrolled in the self and family option and have elected a survivor benefit for your wife, she would be able to continue that coverage and could convert to the self-only option.

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Primary vs. secondary insurance

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Q. I have been covered by my wife’s GEHA plan for the past 10 years, and I continue to be covered under her policy (as do our two kids; we are in a self and family plan). Two new variables are coming into play for my health care: 1) I will be eligible for Medicare coverage in two months; and  2) I just started receiving a federal annuity. (Note: I am eligible to receive Social Security but have not yet signed up).

I have two related questions:

1) If I continue to remain under my wife’s Federal Employees Health Benefits policy (assuming that I can), what happens if I sign up for Medicare? Which is the primary insurance, and is it more beneficial to have FEHB or Medicare as the primary insurance?

2) If I were to register for Medicare coverage (and if I am still under FEHB coverage via my wife), does it make sense to register for both Part A and Part B, or just Part A of Medicare? Insurance?

A. Because you are retired, Medicare would be primary and your FEHB coverage secondary. It doesn’t make any sense not to sign up for Medicare Part A because you’ve already paid for that benefit through payroll deductions. Whether you need to sign up for Part B is decision you’ll have to make. To get a better understanding of the relationship between the FEHB and Medicare, go to www.opm.gov/insure/health/medicare/index.asp

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Medicare and Blue Cross/Blue Shield

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Q. I’m a federal retiree who is considering changing to Blue Cross/Blue Shield Basic during the next open season. How does Medicare Part A work in conjunction with BC/BS Basic? Which would be the primary?

A. Medicare would be primary and your Federal Employees Health Benefits plan secondary. To find out how the two benefits would be coordinated, check with your plan.

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