Can you keep FEHB when in LWOP status? Information for federal employees.

This article is about keeping FEHB health plans when in leave without pay (LWOP) status or when an employee has insufficient pay to cover health premiums. It is part nine of our series on OPM’s FEHB Handbook,

The previous sevens parts went over the following topics –

Part One: General Overview
Part Two: Legal Responsibilities
Part Three: FEHB Premiums and Premium Conversion
Part Four: FEHB Withholding, Contributions, and the Daily Rate
Part Five: Types of Health Plans Available
Part Six: FEHB Coordination with Other Health Insurance
Part Seven: Eligibility
Part Eight: Enrollment

LWOP is an option for employees who need to take an extended period of time off for a health or family emergency after they’ve exhausted all of their other leave options. If the LWOP period is less than a year, then FEHB coverage can be maintained. This part of the series goes over how this works.

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For the most part, the same rules apply to those in LWOP status as those who don’t have sufficient pay to cover FEHB premiums. You can keep your FEHB plan if you’re in LWOP or insufficient pay status for up to 365 consecutive days. (But it should be noted that there are some special circumstances to be aware of regarding military personnel, student trainees, teachers, part-time and temporary feds, and other employees like those transferring to international organizations or state or local governments.)

After the 365-day period is over, there is a 31-days extension of coverage and conversion rights before FEHB enrollment is fully terminated. There is also a 4-month period of active employment that is needed before going back into LWOP status would reset the 365-day tally. If a period of paid work lasts less than 4 months between two instances of LWOP status, the 365-day counter picks up where it left off. Related to this, an employee must work for at least 4 months after a period of LWOP or insufficient pay to maintain their FEHB enrollment.

When an employee takes unpaid family medical leave (FMLA), which can be up to 12 weeks, and then enters LWOP, the two unpaid leave categories act operate concurrently with one another – so there’s no extending the 365-day period with an additional 12 weeks of FMLA leave.

Once LWOP status is effective, it is the employing agency that is responsible for notifying and tracking these workers. The agency’s HR office must also send the employee a notice to let them know their options for keeping FEHB. The employee must respond to keep their FEHB enrollment, no response received in 31 days will lead to termination of coverage. The notice is supposed to be given in person, but if that’s logistically impossible, first-class mail is sufficient. The 31 days begins five days after the letter is postmarked.

Paying FEHB Premiums in LWOP and Insufficient Pay Status

If electing to keep FEHB while on LWOP, there are options to pay premiums out-of-pocket or to incur a debt with the employing agency. The agency notice mentioned above will lay out the choices:

Pay as you go: Paid directly to employer with after-tax dollars. If not paid, agency can collect the debt from unused annual leave lump-sum, their FERS and CSRS annuity, and the individual’s income tax refunds.
Catch-up payments: Agency will advance the money needed and then the employee will pay it back upon returning from LWOP. This can be paid back pre-tax, but doesn’t reduce taxable income until it has been paid and it only applies to the tax year in which the premium was paid back from pre-tax payroll deductions.

Either way, the employing office pays the full FEHB premium to OPM each pay period that the employee is on LWOP or the pay is insufficient to cover the premiums. Upon returning to work, there is a 60-day window in which the federal employee can re-enroll in FEHB coverage. If they don’t, it breaks the continuity in the 5-year requirement to keep FEHB in retirement, essentially resetting the clock.

And lastly, if debt is incurred for unpaid FEHB premiums and the insured employee is receiving disability benefits or workman’s compensation, FEHB will coordinate with these benefits. Please reach out to us or refer to the OPM handbook for more information.

Upcoming articles in this FEHB series will be going over termination, conversion, TCC, and more! In the meantime, don’t forget to register for our next FEHB Webinar!

**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.