Your Life Insurance at a Glance

Transcription

1 FEGLI FEDERAL EMPLOYEES GROUP LIFE INSURANCE Your Life Insurance at a Glance BASIC LIFE Life insurance coverage is equal to your actual rate of annual basic pay rounded up to the next $1,000, plus $2,000, or $10,000, whichever is greater. Extra benefit Double life insurance benefits until age 36, decreasing at 10% per year until age 45, at which time the extra coverage will end. Accidental Death and Dismemberment (AD&D) coverage; Extra Benefit shown above does not apply to AD&D. You must elect Basic Life to be eligible for the Options. PLUS Option A Standard Life insurance coverage of $10,000 AD&D coverage up to the face amount of your Option A coverage Option B Additional You may elect coverage equal to one, two, three, four, or five times your actual rate of annual basic pay (after basic pay is rounded up to the next $1,000) Option C Family Spouse $5,000 life insurance coverage. You may choose from one to five multiples of coverage. Each eligible dependent child $2,500 life insurance coverage. You may choose from one to five multiples of coverage.

2 FEDERAL EMPLOYEES GROUP LIFE INSURANCE (FEGLI) The amount of insurance you need in retirement should be based on your personal and family situation, savings and investment portfolio, and long and short-term plans. After retirement you can decrease your life insurance, but you cannot increase it. The latest, valid designation of beneficiary form (SF 2823) on file will determine who receives benefits in the event of your death. However, effective July 22, 1998, Public Law established an exception to using the statutory order of precedence regarding who is entitled to receive life insurance proceeds under FEGLI upon the death of an enrollee. Pursuant to that law, the order of precedence is not used to pay life insurance if there is anyone expressly provided to receive the benefits in a court decree of divorce, annulment, or legal separation or the terms of any court order or court-approved property settlement agreement. If there is no SF 2823 on file, the benefit will be paid in the normal order of precedence (i.e., widow/widower, children, parents, executor/administrator of estate, and next of kin, in that order). If you do not want the benefit to be paid in the normal order of precedence, or if you wish to change your current designation, you must submit a new SF Designation of beneficiary forms can be obtained from OPM s web site ( and may be submitted at any time. Normally, FEGLI benefits are paid upon your death. However, in the event of a terminal illness, FEGLI provides two options for obtaining life insurance benefits while you are alive. These options are: 1) assignment to a viatical settlement company, and 2) living benefits.

3 REQUIREMENTS FOR CONTINUING ENROLLMENT INTO RETIREMENT You may continue life insurance into retirement if you: Retire on an immediate annuity, Are insured on date of retirement, and Have been covered for the 5 years of service immediately preceding retirement, or since the first opportunity to enroll. The accidental death and dismemberment feature ceases at retirement. In the Basic Coverage, the reduction in post-retirement basic life insurance coverage after age 65 depends on your election at the time of retirement. The election is made on an SF 2818, Continuation of Life Insurance Coverage as a Retiree or Compensationer. 75% Reduction -- Reduced 2% per month down to 25% of basic amount in force at the time of retirement. 50% Reduction -- Reduced at 1% per month down to 50% of basic amount in force at the time of retirement. No Reduction -- Remains at full value -- does not reduce. Coverage Election Regular Premium to Age 65 (per $1,000)* After Age 65 (per $1,000)* 75% Reduction $ $0.0 50% Reduction $ $0.59 No Reduction $ $2.04 For those employees who continue to work after reaching age 65, the insurance coverage remains the same as for all other employees. * Your premium is based on your annual salary at retirement. Option A coverage after retirement: Cost continues up to age 65 at the same employee rate. There is no cost after age 65 and the amount of optional insurance begins to reduce 2% per month of face value until the insurance reduces to $2,500. Option B coverage after retirement: Upon retirement the employees may choose the number of multiples (for which they are eligible) to continue. The retiring

4 employee who has more than one multiple must elect either full reduction or no reduction for all multiples. Full Reduction: Cost continues up to age 65 at the same rate as active employees. There is no cost after age 65 and the amount begins to reduce 2% per month until the amount has been reduced 100%. Insurance stops at 12:00 noon on the day before the 50 th reduction; after that no benefits are payable upon the employee s death. The annuitant may not change to no reduction more than 30 days after he/she receives the first annuity check. An individual who does not make an election will automatically get full reduction. No Reduction: Annuitant will continue to pay at the same rate as active employees. Coverage will not reduce when annuitant reaches age 65 and premiums will continue to be withheld from the annuity after age 65. The annuitant may change to full reduction at any time. Option C coverage after retirement: Employees who are eligible to continue Option C have two choices of Option C reduction upon retirement. The employee must elect either full reduction or no reduction for all multiples if he/she has more than one multiple. Full Reduction: Cost continues up to age 65 at the same rate as active employees. There is no cost after age 65 and the amount begins to reduce 2% per month until the amount has been reduced 100%. The insurance stops at 12:00 noon on the day before 50 th reduction; after that no benefits are payable upon the death of an eligible family member. The annuitant may not change to no reduction more than 30 days after he/she receives the first annuity check. An individual who does not make an election will automatically get full reduction. No Reduction: Coverage will not reduce. Premiums will continue to be withheld from the annuity after age 65 and cost will be at the same rate as active employees. The annuitant may change to full reduction at any time.

5 ASSIGNMENT OF FEGLI COVERAGE An assignment is an irrevocable transfer of ownership of your FEGLI coverage (except dismemberment insurance and Option C Family) on an RI to one or more individual(s), corporation(s), or trustee to obtain cash based on FEGLI Basic Life and Options A and B, before death. Your rights after Assignment: Continue Option C-Family coverage (if previously elected) Elect a reduction schedule for Basic Life that is less than 75% standard deduction at the time of retirement. If you elect a lesser reduction (no reduction, or 50% reduction), you may not later cancel the election. After Assignment of Life Insurance: You continue to be insured You cannot cancel or reduce the assignment Designation of beneficiary on file at the time of assignment is void You may not convert the insurance to a private policy when it terminates You may not elect a Living Benefit Rights of the Assignee(s): Cancel the insurance coverage Cancel a retiree s election of a lesser reduction (50% or no reduction) of Basic Life Designate and change beneficiaries Convert to a private policy when the coverage terminates (but not when the assignee voluntarily cancels it) Reassign the insurance

6 The Assignee may not: Increase the amount of insurance as a result of any event Elect a Living Benefit Make the original election of a reduction schedule for Basic Life when you retire Termination of Assignment: Occurs 31-days after the life insurance terminates unless you are reemployed during the 31-day period in a position in which the insurance resumes Once terminated the assignment does not resume if you are later reemployed in a position in which you again have FEGLI coverage. You must make a new assignment if you want someone else to have ownership of the life insurance. There is no 31-day temporary extension of coverage. The assignment terminates permanently at the same time the life insurance terminates.

7 LIVING BENEFIT Living benefits are life insurance benefits paid to you by FEGLI while you are still living, rather than a beneficiary or survivor when you die. (They are also known as accelerated benefits in the private sector.) Eligibility You are eligible to elect Living Benefits if you are an employee, annuitant, or compensationer covered under the FEGLI Program who has been diagnosed as terminally ill with a life expectancy of nine months or less, and you have not assigned your insurance. You cannot apply in advance; you must be terminally ill at the time of application. Amount of Insurance Available for Election Only Basic Insurance is available for Living Benefits. Optional insurance cannot be paid as Living Benefits. If you are an employee, you can elect either full Living Benefits, i.e., all of your Basic Insurance, or partial Living Benefits (which must be expressed as a multiple of $1,000). Annuitants and compensationers can elect only full Living Benefits. Limit on Number of Elections You can elect Living Benefits only once. If you elect full Living Benefits, you have no more Basic Insurance. If you elect partial Living Benefits, you cannot later elect another Living Benefit from the remaining Basic Insurance. Election Procedures Application Process If you want to apply for Living Benefits, you must contact the Office of Federal Employees Group Life Insurance (OFEGLI) at OFEGLI will send you an application form, Claim for Living Benefits (FE-8). NOTE: Agencies cannot obtain a supply of applications and are not to give this form to employees who ask about Living Benefits. When OFEGLI sends the application form FE-8, a calculation sheet is also enclosed so you can estimate the amount of Basic Insurance available. The

8 calculation sheet takes into account the age multiplication factor for employees under age 45 and the post-65 reduction for annuitants age 65 and over. The benefits available will be reduced by an amount representing interest lost to the Federal Employees Life Insurance Fund because of the early payment of benefits. Completing the Election You complete Part A of the Claim for Living Benefits (FE-8), and your doctor completes Part B. You then send the form back to the Office of Federal Employees Group Life Insurance (OFEGLI). Only a terminally ill person can apply for Living Benefits. A guardian, someone with power of attorney, or any other person cannot apply for Living Benefits on your behalf. OFEGLI determines whether you qualify for Living Benefits. Living Benefits Approval If the Office of Federal Employees Group Life Insurance (OFEGLI) approves your Living Benefits application, you will receive a check, along with an Explanation of Benefits (FE-8C). You can change your mind about electing Living Benefits up until you cash or deposit the check. The effective date of the Living Benefits is the date you cash or deposit the check. If you decide not to elect the Living Benefits, you should write Void on the check and return it to OFEGLI. If the Living Benefits payment is not cashed before your death, your representative must return the check to OFEGLI. Your beneficiaries may then file a claim for death benefits. Living Benefits Disapproval If the Office of Federal Employees Group Life Insurance (OFEGLI) does not approve your Living Benefits application, you will be notified. There are no appeal rights; however, you can provide additional medical evidence to support your claim or reapply if future circumstances warrant. Tax Treatment of Living Benefits Living Benefits payments are not subject to Federal income tax. Living Benefits payments received before January 1, 1997, were subject to Federal income tax. However, many states have laws, regulations, or rulings concerning the taxability of Living Benefits. You should consult a tax advisor or your State s tax department for specific information concerning State income tax laws.

9 Comparison Chart Of An Assignment versus A FEGLI Living Benefit Earliest Date Available Life Expectancy Requirement Insurance Involved Percentage of Face Value Paid to Employee/Annuitant Source of Payment Residual Life Insurance Benefit Payments of Premiums Payments received after December 31, 1996, will not be subject to Federal income tax Assignment October 3, 1994 (for all enrollees) 24 months or less (generally) 100% of Basic, Option A and Option B (if held) (100% must be assigned, although not necessarily all to the same person or firm) 60% to 85% The percentage varies, and is negotiated with the Viatical Settlement Firm (VSF) VSF to whom benefits are assigned (sold) None, unless the VSF agrees to accept only a percentage of the assignment or to designate a portion to a survivor Employee or annuitant continues to pay full premiums and cannot cancel the premiums VSF may agree to reimburse the employee/ annuitant directly for premiums paid Living Benefit July 25, months or less 100% of Basic (employees and annuitants) Part of Basic (employees only must be a multiple of $1,000) 94% (approximately) FEGLI Program Option A and Option B, if held. May assign the remainder of their insurance (Option A, Option B, and any remaining insurance) Premium payments for Basic end for annuitant and employees who elect a full Living Benefit. For employees who elect partial Living Benefits, premiums are prorated depending on the amount of Basic remaining