Federal Employees' Group Life Insurance Program

FEGLI Handbook

New Changes to FEGLI Program

IMPORTANT! NEW CHANGES TO FEGLI PROGRAM

Recently passed legislation makes some major changes to the FEGLI Program. Pub. L. 105-205 was enacted July 22, 1998, and changes the order of benefit payments under the FEGLI Program. Pub. L. 105-311, the Federal Employees Life Insurance Improvement Act, was enacted on October 30, 1998. There are several provisions to this act, and each has its own effective date. OPM will be providing additional information on the implementation of the legislation to employing offices via Benefits Administration Letters and on the FEGLI Web Site.

Since these changes were made after the FEGLI Handbook was written, the information found in this section supersedes any conflicting information found in other parts of the Handbook.

Public Law 105-205 - Court Orders and Payment of Benefits

Payment of FEGLI benefits is made in accordance with the order of precedence set by FEGLI law. First in the order of precedence is a designated beneficiary. Until now, there has been no statutory limitation on changing designations. Even if a court order required an insured individual to name his/her children or former spouse as a beneficiary, there was no mechanism under the FEGLI law to require the insured to complete a Designation of Beneficiary form or to prevent him/her from changing the designation at a later date.

Pub. L. 105-205 requires FEGLI benefits to be paid in accordance with the terms of a court decree of divorce, annulment, or legal separation, or the terms of a court order or court-approved property settlement agreement relating to such a court decree, regardless of whether the insured person actually completes a designation complying with the court order.

The court order supersedes any prior designations made by the insured. If such a court order is in effect, the insured cannot change his/her designation, unless the person(s) named in the court order agree(s) in writing or unless the court order is subsequently modified.

Pub. L. 105-205 also allows a court order to direct the insured to make an irrevocable assignment to the person(s) named in the court order. However, until the insured properly completes an assignment form, the assignment does not occur.

Submission of Court Order

To be valid, a certified copy of the court order must be submitted to the employee's employing agency on or after July 22, 1998, and before the employee's death. Anyone can submit the court order. (Court orders submitted for other reasons prior to July 22, 1998, are not valid for FEGLI purposes. The court order must be resubmitted.)

For annuitants, the court order must go to OPM. For compensationers, during the first 12 months of nonpay status the court order must go to their employing agency. After separation or the completion of 12 months in nonpay status, the court order must go to OPM.

Disposition of Court Order

A court order must be filed in the employee's Official Personnel Folder (OPF). It is critical that agency personnel clearly stamp the court order with the receipt date. The OPF must be flagged in some way to indicate that it contains a court order. Agencies do not have to review the court order or make any determination on its validity.

When an active employee dies, any court order in his/her OPF must be sent to the Office of Federal Employees' Group Life Insurance (OFEGLI), along with other life insurance forms.

When an employee retires and is eligible to continue FEGLI as an annuitant, any court order in his/her OPF must be sent to OPM with the retirement application and other life insurance forms. When a compensationer separates or completes 12 months in nonpay status and is eligible to continue FEGLI as a compensationer, any court order in his/her OPF must be sent to OPM with other life insurance forms.

If an employing agency receives a subsequent court order for the same individual, it should date stamp and file it in the OPF, with the other court order(s). All court orders should be sent along with the other life insurance forms to either OFEGLI or OPM, as appropriate. At the time of the insured's death, OFEGLI will determine which court order, if any, is valid for payment of benefits.

If an insured individual submits a designation of beneficiary when he/she has a court order on file, the employing office should review it to see if it is completed properly, certify its receipt, and file it in the OPF. The employing office should notify the insured that there is a court order on file and that the designation may not be valid. At the time of the insured's death, OFEGLI will determine whether the court order is still in effect or whether benefits should be paid according to the designation.

Pub. L. 105-311 - Federal Employees Life Insurance Improvement Act

This law makes several changes to the FEGLI Program. It:

• Eliminates the maximum amount of Basic and Option B coverage available;
• Provides for an election of unreduced Option B at retirement;
• Allows a one-time election for current annuitants with Option B coverage to stop or freeze the reduction;
• Provides portable Option B upon separation or end of continued coverage while in nonpay status, for employees who meet the 5-year/first opportunity requirement;
• Increases available Option C coverage to up to 5 times the current amounts;
• Provides for an election of unreduced Option C at retirement;
• Provides coverage for qualified foster children under Option C;
• Allows for the direct payment of premiums when an employee, annuitant, or compensationer's pay is insufficient to cover the required premiums;
• Adds the incontestability provision to the law and applies it to annuitants and compensationers who are erroneously allowed to continue coverage;
• Requires that OPM conduct an open enrollment period for eligible employees to elect, resume, or increase FEGLI coverage; and
• Requires OPM to study and report to Congress on Federal employees' interest in expanded FEGLI coverage.

OPM will publish implementing regulations and provide additional instructions to agencies via Benefits Administration Letters. Check the FEGLI Web Site for updated information.

Elimination of Maximums on Basic and Option B

No more maximums will be placed on the amount of Basic and Option B coverage available. Regardless of salary, Basic insurance will equal an employee's pay, rounded up to the nearest thousand, plus $2,000. Each multiple of Option B coverage will equal an employee's pay, rounded up to the nearest thousand.

Previously, Basic insurance could not exceed the annual rate of pay at level II of the Executive Schedule, rounded up to the nearest thousand, plus $2,000. Each multiple of Option B coverage could not exceed level II of the Executive Schedule, rounded to the nearest thousand.

Since these maximums have been removed, Option A coverage will no longer be higher than $10,000 for any enrollee.

Effective Date: The first pay period beginning on or after October 30, 1998.

Election of Unreduced Option B at Retirement

Retiring employees and compensationers will now be able to choose to continue their Option B coverage without reduction into retirement. Premiums for the unreduced coverage will continue to be withheld from annuity or compensation after the annuitant/compensationer reaches age 65.

Previously, an employee could elect to continue unreduced Basic insurance at retirement, but this choice was not available for Optional coverage.

An annuitant who elects unreduced Option B can later cancel that election and have the full reduction.

Annuitants and compensationers who currently have Option B coverage on a reduction schedule will be offered a one-time opportunity to elect an unreduced schedule on a prospective basis.

Effective Date: April 24, 1999. This would affect employees who separate for retirement on or after April 24, 1999.

Portable Option B upon Separation or End of Continued Coverage while in Nonpay Status

This is a three-year demonstration project. Separating employees and employees who have completed 12 months in nonpay status who meet the 5-year/first opportunity requirement can elect to continue their Option B coverage by making direct premium payments. Coverage for the first 12 months in nonpay status continues to be free. The employee still has the right to convert to an individual contract instead of continuing FEGLI coverage.

To meet the 5-year requirement, an employee must have been insured for the 5 years of service immediately before the date of separation (or the date that 12 months in nonpay status have been completed), or for the full period(s) of service during which he/she was eligible to be insured if less than 5 years.

Coverage reduces to 50% after the date the insured reaches age 70 and will stop at the beginning of the second calendar month after the insured reaches age 80, subject to a temporary extension of coverage and right to convert to an individual policy under conditions to be set by OPM.

Effective Date: April 24, 1999. This would affect employees who separate or complete 12 months in nonpay status on or after April 24, 1999.

Election of Unreduced Option C at Retirement

Retiring employees and compensationers will now be able to choose to continue their Option C coverage without reduction. Premiums for the unreduced coverage will continue to be withheld from annuity or compensation after the annuitant/compensationer reaches age 65.

Previously, an enrollee could elect to continue unreduced Basic insurance at retirement, but this choice was not available for Optional coverage.

An annuitant who elects unreduced Option C can later cancel that election and have the full reduction.

Unlike Option B, current annuitants and compensationers with Option C will not have the opportunity to elect an unreduced schedule.

Effective Date: April 24, 1999. This would affect employees who separate for retirement on or after April 24, 1999.

Increased Option C Coverage

Employees will now be able to elect Option C coverage in multiples of 1, 2, 3, 4, or 5 times the current amount. Currently, Option C provides $5,000 life insurance coverage for a spouse and $2,500 for each eligible child.

New employees and newly eligible employees will be able to elect up to five times the $5,000/$2,500 Option C amount as of the effective date.

Employees also may increase Option C coverage when a qualifying change in marital or family status occurs. Qualifying events will apply under Option C in the same manner as they apply under Option B.

Effective Date: The first pay period beginning on or after April 24, 1999.

Coverage of Foster Children under Option C

Qualified foster children are now considered family members eligible for coverage under Option C. The qualification requirements will be the same as those under the Federal Employees Health Benefits (FEHB) Program. Implementing regulations will provide more specific information.

Effective Date: October 30, 1998.

Direct Payment of Premiums

An employee, annuitant, or compensationer may make direct premium payments when his/her pay is insufficient to cover the premiums required for FEGLI coverage. Previously, only FERS annuitants were able to make direct premium payments. For other insured persons, their coverage was terminated when pay was insufficient to cover the premiums.

Effective Date: The first pay period beginning on or after October 30, 1998.

Incontestability of Erroneous Coverage

The erroneous enrollment of an employee, annuitant, or compensationer becomes a valid enrollment when the insurance and premium withholdings have been in force for two years during the enrollee's lifetime. Previously, the incontestability clause was not codified in FEGLI law and only applied to current employees. This provision extends the same protection to annuitants and compensationers who were erroneously allowed to continue FEGLI coverage into retirement.

Effective Date: Effective for erroneous coverage findings made on or after October 30, 1998.

Open Enrollment Period

An open enrollment period will be held from April 24, 1999, through June 30, 1999. Eligible employees may elect to begin, resume, or increase any type(s) of life insurance available under the FEGLI Program without providing evidence of insurability.

Effective Date: An open enrollment election will be effective the first pay period beginning on or after April 23, 2000, that follows a pay period in which the employee was in pay and duty status.

Study of Other Life Insurance Options

OPM is required to conduct a study and report to Congress on Federal employees' interest in expanding FEGLI coverage options to include group universal life insurance, group variable universal life insurance, and/or additional voluntary accidental death and dismemberment insurance.