We continue exploring the FEHB handbook as the upcoming open season looms.
OPM’s FEHB Handbook is a dense digital document that details all the technicalities around health insurance for active and retired federal workers and their family members. In this series, we’re attempting to summarize the government’s guide in more digestible chunks. In the first article, we provided a general overview of the handbook and its introduction. The second article looked at the legal responsibilities of the parties involved. And the third piece focused on FEHB premiums and the tax implications of premium conversion. Now, let’s explore FEHB withholdings and contributions, plus how to calculate the daily rate.
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A federal worker’s employing agency is responsible for taking premiums and making appropriate contributions to their FEHB premium during the very first pay period that FEHB enrollment is in effect. Employees are responsible to confirming the dollar amounts that are withheld and contributed, and to report any errors as soon as they are noticed. If an incorrect withholding amount is being used, this could lead to a federal employee being indebted to the federal government for the discrepant amount. For FERS and CSRS annuitants who have their FEHB premiums deducted from their pension, they should similarly check their annuity statements for any errors.
FEHB Cancellation or Termination
When a federal employee cancels their FEHB plan, it officially ends on the last day of the pay period in which their employing agency’s office receives the cancelation request. In this case, the coverage ceases immediately. However, if FEHB coverage is terminated due to a reason other than voluntary cancelation, the health benefits remain in place for an additional 31 days after the effective termination date, at no cost. For those in LWOP (leave without pay) status, the effective date is the last day of the pay period in which they were able to pay their share of the FEHB premiums.
Calculating the Daily Rate for FEHB
There are some circumstances, like when a federal employee switches positions within the government, that a different payroll office will take over paying withholdings and contributions for health benefits. Each office is responsible for the actual time worked, based off what is known as the daily rate. Another case where this happens is when a fed leaves or returns to a federal job due to military service. In such cases, the employing office stops making withholdings and contributions on the date that military service begins, or likewise, resumes them on the date that that they are restored to their old post after serving a tour of duty.
The daily withholding contribution rate for FEHB premiums are equal to the biweekly rates multiplied by 26 and divided by 364 (this number is always used, even for leap years).
- Daily withholding rate = (biweekly withholding rate / 26) x 364
- Daily contribution rate = (biweekly contribution rate / 26) x 364
FEHB Withholding and Contributions
- Retirement : When retiring, a federal worker’s agency is responsible for their FEHB withholdings and contributions until last day of their last pay period, but that’s only if the FERS or CSRS annuity starts after their final pay period of employment. If the first FERS or CSRS payment happens before the final period, the employing agency is responsible up to the day before the annuity payments begin.
- Death: When an enrollee in FEHB passes away, their employing office is responsible for the withholdings and contributions up to the day of death. Note this is only if the deceased elected no survivor benefits for FERS or CSRS, or if they had a ‘self-only’ plan. Otherwise, the withholdings and contributions would continue for the surviving spouse.
- Retroactive Reinstatement: In the relatively rare circumstance that a federal employee gets reinstated to their post after being suspended or fired erroneously, they have a choice about their FEHB contributions and withholdings upon reinstatement. They can choose to have their FEHB coverage be effective retroactively , whereas the employing agency must pay withholdings and contributions as if the suspension never occurred. Or, they can decide to just enroll in a new FEHB plan.
Government Contributions for Part-Time Workers
The government pays a portion of a federal employee’s healthcare premium, and this amount of money is determined by the government contribution rate, which is used for full-time feds. For federal workers who work part-time, the rate the government contributes is calculated like so:
First, divide the number of hours worked, biweekly, by number of hours a full-time worker does in a similar position in the same timeframe (typically 80 hours). Then, multiply your answer by the government contribution for comparable full time workers. This gives you the government contribution rate for FEHB premiums for those working part-time.
That being said, if you have continuously worked part-time since the year 1979 (or earlier), with no breaks in service, then even though you’re part-time, you still receive the full rate from the government. (And thank you for your dedicated civil service!)
Upcoming articles in this FEHB series will be focusing on health plans, eligibility, and enrollment. In the meantime, don’t forget to register for our next FEHB Webinar!
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**Written by Benjamin Derge, Financial Planner, ChFEBC℠ The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.
