Open enrollment typically lasts between October and December. While it’s simple to overlook your annual benefit selections like health insurance and retirement savings, as your life evolves, so too do your needs. What was appropriate for you last year may not be this year due to health, family, budget, new legislation, and more.
Before you commit to another year of your current benefits, here are a few things to consider.
Healthcare Benefits
Federal employees and their families can access some of the country’s most comprehensive health coverage. As a federal employee, you, your spouse, and any children under 26 are eligible to use the Federal Employee Health Benefits (FEHB) program.
With open enrollment approaching, now’s the time to review your options and decide what coverage is best for you and your family. The answer hinges upon several factors, including your income, budget, current health needs, potential health concerns, prescriptions, preferred providers, and more.
FEHB Healthcare Plan Options
Fee-for-service (FFS): FFS plans without PPOs tend to have the highest premiums, which makes them the most expensive healthcare option for federal workers. However, they allow participants to visit any doctor or healthcare provider without restriction.
If you choose an FFS plan with a PPO, you’ll typically save money if your service providers are within the PPO network.
Health Maintenance Organization (HMO): An HMO uses a network of doctors and providers and helps coordinate care on your behalf. Unlike PPOs, those on an HMO plan must visit their primary care physician (PCP) before seeing a specialist. HMOs are limited regarding who you can visit, but premiums are typically lower than FFS plans.
Consumer-Driven Health Plan (CDHP): Participants on a CDHP are subject to a healthcare spending limit. Once they reach the limit, the participant is responsible for some of the costs accrued.
A typical example of a CDHP is a high deductible health plan (HDHP). The IRS defines an HDHP as a plan with a deductible greater than $1,400 per person or $2,800 per family for the 2022 tax year.
Premiums for CDHP will vary, but the government does help offset the high deductible amount by offering participants a health savings account (HSA).
Types of Tax-Advantaged Healthcare Accounts
There are a few accounts you and the FEHB may contribute to while your family is on an eligible plan.
Health Savings Account (HSA)
As mentioned, those participating in an HDHP can access an HSA. The FEHB partially funds this account, and participants also have the option to contribute. In 2022 individuals can contribute up to $3,650, and families can contribute up to $7,300.1 This limit includes the participant and the FEHB contributions.
HSAs are valuable tools for covering eligible healthcare costs, thanks to their triple tax advantages:
- Contributions are tax-deductible, meaning they lower your taxable income for the year.
- Funds in the account grow tax-free.
- When used to pay for eligible expenses, withdrawals remain tax-free.
Another notable benefit of HSAs is the ability to roll over money in the account year after year. Unlike other health accounts, you will not lose access to your HSA at the end of the year or after leaving your job.
Most HSAs include an option to invest the balance, which is helpful for those looking to further catalyze long-term growth. For these reasons, many people find HSAs advantageous in preparing for medical expenses in retirement.
Health Reimbursement Account (HRA)
Unlike an HSA, only the federal government can contribute to an HRA. You might receive this account if you’re on a CDHP that doesn’t qualify for an HSA. If you leave your job, you will no longer have access to your HRA account, thereby forfeiting any leftover funds.
Flexible Spending Account (FSA)
Certain branches and agencies of the federal government enable employees to participate in a Federal Flexible Spending Account Program (FSAFEDS).
There are several flexible spending account options under this program, including:
- Health care FSA: You can use the money you contribute to this account for eligible healthcare costs that your FEHB plan may not cover.
- Limited expense health care FSA: For employees participating in an HDHP with an HSA, a limited expense health care FSA allows them to get reimbursed for qualifying dental and vision care costs.
- Dependent FSA: With this account, you can help pay for costs associated with caring for a dependent, such as a young child or elderly relative.
Note that for FSAs, unlike Health Savings Accounts, unused account balances don’t necessarily roll over from one year to the next so make sure you understand the roll over rules that apply to your account.
Retirement
As a federal employee, saving for retirement isn’t a walk in the park—it can be rather complex.
The Federal Employee Retirement System (FERS) serves as the primary source of income in retirement for long-time federal employees. There are two primary components of FERS: the basic benefit and the Thrift Savings Plan (TSP).
FERS Basic Benefit
The FERS basic benefit, like a pension, acts as an annuity for eligible employees, with the added benefit of including cost-of-living adjustments. In periods of high inflation, this addition is certainly notable.
The formula for understanding how much you’ll receive in retirement is:
Annual Gross Pension = High-3 Salary x Years of Creditable Service x Pension Multiplier
While the formula is simple, determining each factor can be tricky. If you’re looking to get a more specific frame of reference for your retirement, please reach out and speak with our team.
Thrift Savings Plans (TSP)
A TSP is similar to a 401(k) but for federal employees. Participants contribute to their TSP, and the funds grow tax-deferred until retirement. The IRS taxes your withdrawals in retirement as ordinary income.
There is also a Roth option, which allows you to contribute after-tax dollars—making the withdrawals of the portion associated with your contributions tax-free in retirement.
The 2022 limit for TSP contributions is $20,500, with an additional $6,500 catch-up contribution limit for those over 50.2
Insurance
Health insurance is only one piece of your protection puzzle. When was the last time you conducted an insurance review? Reviewing your overall insurance coverage is critical to protecting your wealth and your loved ones in the event of an emergency or disaster.
The review should include your needs surrounding:
- Life insurance
- Disability (short and long-term)
- Long term care
If you’re nearing retirement or experiencing another major life event, your current coverage may no longer suit your needs. Being overinsured takes money out of your pocket that could be better allocated elsewhere.
Additional Critical Benefits
It’s easy to forget about the array of available benefits, so ensure you’re taking advantage of them during this open enrollment period.
If you have a generous paid time off policy, are you using those accrued vacation days? Employee burnout is a serious issue, but taking time off is an effective antidote, and it’s particularly important if you’ve already reached the maximum annual leave that can be carried over.
Another benefit worth reviewing is your eligibility for student loan forgiveness. Some federal employees may receive a lifetime maximum of $60,000 in federal student loan repayments from their employer.3 If you qualify, this is a significant benefit to consider when reviewing your current compensation package.
Set Yourself Up For Success
The bottom line? Federal employees get generous benefits, but the different programs and options can be confusing to navigate. As we approach the holidays and a new year ahead, now’s an ideal time to review your offerings, make changes, and ask questions about your benefits.
Our team specializes in helping federal employees make the most of their benefits and prepare for a sound retirement. Don’t hesitate to reach out. We can help you make knowledgeable decisions about your coverage.
Sources:
1IRS Announces 2022 Limits for HSAs and High-Deductible Health Plans
22022 Thrift Savings Plan (TSP) Contribution Limits and the TSP “Spillover” Method