Coordinating Health and Retirement Benefits

As we wind down the year and prepare for a new one, let’s take a look at some of the questions that have arrived in my email inbox over the past few weeks. 

I am a federal retiree and I am 63 years old. My wife is 66. Her Medicare Part B premium more than doubled due to my income. Her income is substantially less than mine. Although I work, my insurance is as a retiree. She has a Medicare supplement plan in addition to the ridiculously high Part B premium. Is there anything we can do to lower the Part B penalty? 

You might want to consult with a tax expert to find out if “married filing separately” would be a better way to file your taxes so that your wife wouldn’t need to pay the higher Medicare premium. Of course, while she may pay less for Medicare, your overall tax bill could be higher, so this may not solve the problem. 

There is no need for her to be enrolled in a Medicare supplement along with being covered under your Federal Employees Health Benefits Program plan. Her coverage under your FEHBP plan will act as a supplement to Medicare. 

Since you mention that you have been reemployed in the private sector since you retired, one option would be to see if your employer offers a less expensive health plan so that you would carry "current employment" health coverage in addition to your FEHBP. (The employer plan would be primary and FEHBP would be secondary). You would need to cover your wife so she could cancel and delay enrollment in Part B while you are working and covered by your employer's plan. Once you’re both 65 and retired, hopefully some of the IRMAA adjustment will go away and you can switch to a less expensive FEHBP plan that provides a health fund or Medicare reimbursement account.

Otherwise, she can pay the higher premium for Medicare Part B until you stop working or she can delay Part B. But then she will permanently be charged a 10% surcharge on her rate for every 12 months she delayed enrollment. I would suggest paying the higher rate knowing that once you are fully retired, you can let the Social Security Administration know know and they will lower her rate (and yours if you are 65 by then).

One other option you have is to continue to use only your FEHBP coverage and skip Part B altogether. I don't recommend doing this, because having both FEHBP and Medicare can provide excellent coverage. 

I enrolled in FEHBP in December 2015. My first deduction and benefits started in January 2016. I become eligible to retire in September 2020. Will my five years of having benefits be in January 2021? So could I retire by February 2021?

For most employees, the 2016 leave year began on Jan. 3, 2016, so you would have FEHBP in effect for five years on Jan. 3, 2021 and could retire anytime on or after that date. If you are planning a February 2021 retirement, you shouldn’t have to worry about meeting the five-year test for continuing your FEHBP coverage into retirement.

I am 62 and have reached my minimum retirement age with 36+ years of service. My spouse is also a federal employee with over 30 years of service, and she’s 60 (and also has reached her MRA). I am currently enrolled in a family FEHBP plan, as we have two sons, 21 and 24, who are beneficiaries on my plan. I’m trying to determine if I should forego a survivor annuity as financially it’s not necessary, since my wife and I will receive healthy annuities and we have a substantial TSP balance. And we’re both under FERS, so we’ll receive Social Security. We recently attended a retirement seminar during which the presenter advised that in order for a surviving spouse to have access to FEHBP benefits the retiree must select a survivor annuity. Since we’re both federal employees, and have been on the same FEHBP plan for 20+ years, I don’t believe this statement applies to us. 

You are correct. You don’t need to elect a survivor annuity for your spouse in order for her to carry FEHBP in the event that you die before her—as long as she retires with entitlement to an immediate retirement and has been covered as a family member under your FEHBP or under her own plan for the five years before her retirement.

One note of caution about survivor benefits: Remember that when one spouse dies before the other, the surviving spouse will lose the FERS retirement benefit of their spouse as well as the smaller of their two Social Security retirement benefits. This can cause a significant loss of income. I’ve addressed this issue in several previous columns: Providing For Each Other, 9 Questions (and Answers) for Federal Couples, and More Things To Consider When Making Your Annuity Election.