A lot of preparation goes into retirement planning, and federal couples – spouses both employed by federal agencies – face some unique decisions regarding their benefits. The most common concerns are which FEHB coverage they should carry into retirement and whether they need to select a survivor annuity.
Choosing The Right FEHB Coverage
If there’s no need to provide coverage for children, you can choose whether each spouse should carry a self-only policy or whether one should select self-plus-one coverage. While several factors go into this decision, including the work status of each spouse, each option has its benefits.
Self-Only Plans
Dual self-only plans give you the freedom to choose coverage that best fits your individual needs. It might be the case that one spouse has Medicare coverage and needs a plan that coordinates well with Parts A and B. Conversely if the other spouse isn’t yet covered by Medicare, an HDHP with the added benefit of an HSA could make more sense. Crunch the numbers to see if carrying dual self-only plans is cheaper than a self-plus-one election.
“If the spouse carrying self-plus-one coverage separates from service prior to being retirement eligible, it’s imperative to transfer coverage to the spouse who is still employed.”
Self-Plus-One Plans
There are likely differences in the ages and years of service for federal couples that result in different retirement dates. When one spouse retires before the other, it could be beneficial for the working spouse to maintain coverage for both via a self-plus-one plan. This option offers a distinct tax advantage since employees pay premiums using pre-tax funds.
Keep in mind that if the spouse carrying self-plus-one coverage separates from service prior to being retirement eligible, it’s imperative to transfer coverage to the spouse who is still employed. You won’t have to wait until Open Season to do this, as losing coverage under your spouse’s FEHB plan is a qualifying life event.
Survivor Benefits
Electing a survivor annuity not only provides income for your spouse but it allows them to continue FEHB coverage. If both spouses meet the requirements to carry FEHB into retirement, this won’t be a concern. However, after crunching the numbers you might find that the surviving spouse will need additional income to meet their needs.
Remember, when one spouse passes away you will only be receiving one annuity payment and the higher of your two Social Security benefit checks. If these two sources of income, plus any distributions from your TSP accounts, don’t cover your estimated expenses, you might consider a survivor annuity.
For more information on how to coordinate your federal retirement benefits, reach out to an FRC® trained advisor.
