For many federal employees, some of the most valuable benefits earned through their service include their FERS Annuity, Thrift Savings Plan, and Federal Employee Health Benefits (FEHB). Yet, the FEHB program is often the most overlooked. As one of the more generous benefits a federal employee receives, understanding and optimizing this benefit is essential to long-term financial wellness, both while working and in retirement.
How FEHB Works While You’re Employed
The FEHB program functions as a marketplace for private health insurance providers with plans designed exclusively for federal employees. These are not obscure or boutique plans either; many are familiar names you might recognize from television ads or private-sector employer options, such as Blue Cross. What sets FEHB apart is the government’s contribution. On average, the federal government subsidizes two-thirds of your total monthly premium. The employee is responsible for the rest, which is deducted bi-weekly from your paycheck.
You can make changes to your plan during the annual Open Season, which occurs mid-November to mid-December, or after experiencing a qualifying life event (QLE), such as marriage, divorce, or the birth of a child. Eligibility while working is straightforward: if you are in a career or benefits-eligible status, you can be enrolled. However, there are additional requirements that must be met in order to carry FEHB into retirement.
FEHB Eligibility in Retirement
When we talk through retirement planning with clients at Dugan Brown, a key question we always ask is, “How long have you had FEHB?”
It’s an important one, since maintaining FEHB in retirement requires continuous enrollment in any FEHB plan for at least five years leading up to retirement. This doesn’t mean sticking with the same provider or plan for five years, it means continuous FEHB participation. If you meet that requirement, coverage for you and any eligible family members will continue in perpetuity. Being covered under Tri-Care or if under a spouse’s FEHB plan would also count toward this 5-year rule.
It is important to note that you must be eligible for a voluntary retirement with the federal government to continue FEHB along with the five years of continuous enrollment. If you’re considering voluntary early retirement under the MRA+10 provision, you can still carry health insurance into retirement, but there are additional rules and stipulations to consider. If you are simply separating from service prior to attaining MRA, and aren’t eligible for any type of immediate annuity, your FEHB will be cancelled. It is highly recommended to speak with one of our retirement consultants and schedule a meeting to evaluate your exact situation.
What Changes To Your FEHB After Retirement?
Once retired, instead of bi-weekly payroll deductions, your share of the premium is paid monthly and deducted directly from your FERS annuity. The government will continue to subsidize the premiums just like while employed. Shifting from a bi-weekly pay structure to monthly can be a challenge for some and should be planned around prior to retiring to make the transition easier to deal with.
Another key decision that affects your FEHB coverage is the survivor benefit. If you choose not to elect a survivor benefit for your FERS annuity and you pass away, your spouse will lose access to your health insurance. To ensure your spouse can keep FEHB coverage after your passing, you must elect either the partial or maximum survivor benefit. This allows your spouse to continue receiving a portion of your pension, along with the applicable health insurance premiums deducted directly from that payment.
Do You Need Both Medicare and FEHB?
You become eligible for Medicare once you reach age 65. One decision that will need to be made is whether or not to sign up, specifically Medicare Part B. For most Americans, Medicare is the obvious and only choice after age 65. For federal employees however, because you can continue your FEHB in perpetuity, you have additional options.
Medicare Part A
If you’ve paid into Social Security and are eligible for a benefit, Medicare Part A is typically free. Medicare Part A covers hospital and emergency care. Here is a quote directly from OPM regarding this OPM:
“If you are entitled to Part A without paying the premiums, you should take it, even if you are still working. This may help cover some of the costs that your FEHB plan may not cover, such as deductibles, coinsurance, and charges that exceed the plan’s allowable charges.”
Medicare Part B
Medicare Part B covers outpatient services and comes with a monthly premium. For most Americans, that cost is $185 per month in 2025 and is projected to increase to $206.50 per month, starting in 2026. Premiums may be higher if you exceed certain levels of household income. If you delay enrollment past age 65, except during a special enrollment period, such as when retiring from federal service, a permanent monthly penalty could apply.
What many federal employees do not realize though, is that enrolling in Medicare Part B is still optional. The potential penalty would only ever apply if you enrolled later than you were supposed to enroll. If you never sign up, the penalty will never apply. One key exception for this is now for USPS employees. With the passing of the Postal Reform Act, postal workers are now covered under PSHB. One of the new requirements of PSHB is mandatory enrollment in Medicare Part B, at age 65 or retirement, whichever occurs later, in order to maintain PSHB enrollment.
Many people ask what the best choice is for their situation. While dropping FEHB and relying solely on Medicare is rarely the most advantageous approach for many retirees, the right decision depends on individual needs and circumstances. For most, the real consideration is whether to enroll in Medicare Part B to have alongside FEHB, but it’s important to review your personal situation before making any changes.
According to OPM:
“Generally, plans under the FEHB Program help pay for the same kind of expenses as Medicare. FEHB plans also provide coverage for emergency care outside of the United States which Medicare doesn’t provide. Some FEHB plans also provide coverage for dental and vision care.”
For retirees who are satisfied with their current FEHB coverage and don’t expect frequent or costly medical care, Medicare Part B may be an unnecessary added expense. However, if you use healthcare services often, having both coverages could help lower your out-of-pocket costs. Some FEHB providers even make the combination more appealing by offering premium reimbursements for Medicare Part B or by waiving certain copayments, coinsurance, and deductibles for services covered under Part B. In retirement, Medicare serves as your primary insurer, with FEHB providing secondary coverage.
Final Thoughts: Know the Rules, Plan Ahead
Navigating the rules around FEHB, Medicare, and survivor benefits can feel complex, but understanding how each piece fits into your overall retirement picture is critical. The FEHB program remains one of the most valuable and flexible benefits available to federal employees, and making informed choices, especially about eligibility, timing, and Medicare coordination, can help you protect both your health coverage and your financial security well into retirement. Be sure to take time to plan ahead and review your options before leaving federal service, to ensure that you and your family continue to benefit as best as you can.
Key Takeaways
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- The federal government pays about two-thirds of your FEHB premium, both while working and in retirement.
- To keep FEHB in retirement, you must be continuously enrolled in an FEHB plan or Tri-Care for at least five years and be eligible for an immediate annuity.
- Electing a survivor benefit at retirement is necessary for your spouse or dependent children to maintain FEHB coverage if you were to pass away.
- Medicare Part A is typically free if you’ve paid into Social Security and can help cover hospital-related expenses not paid by FEHB.
- Enrolling in Medicare Part B is optional for most federal retirees, though mandatory for USPS employees under PSHB.
- In retirement, Medicare becomes your primary insurer and FEHB becomes secondary.
