With the substantial number of federal employees being subjected to reductions in force (RIFs), taking early retirement under the Voluntary Early Retirement Authority (VERA), or resigning or retiring early under the deferred resignation program, the issue arises as to what happens to employees’ health benefits in that situation. The answer depends on several factors.
The Federal Employee Health Benefits (FEHB) program is ultimately governed by statute, 5 U.S.C. Chapter 89, which cannot be modified without action by Congress, although OPM is authorized to issue implementing regulations (which it has done in 5 C.F.R. Part 890). In FEHB, there are three main options for extending coverage for separating federal employees: Temporary Continuation of Coverage (TCC), conversion or continuation of FEHB coverage into retirement.
TCC coverage is the federal sector analogue of private sector COBRA coverage, although there are some differences. Under the TCC program, an employee is originally given 31 days of free coverage post-separation. The employee can then sign up for TCC coverage, and must do so within 60 calendar days of separation. While the TCC program has an exception for eligibility for employees separated for “gross misconduct,” that exception would not apply to a RIF, VERA or the deferred resignation program. The employing agency is supposed to provide an SF-2810 form to a separating employee to notify them of their option of registering for TCC; if the Agency fails to provide the form on time, that extends the deadline for the employee to register for TCC. See 5 C.F.R. §§ 890.1104, 890.1105(b)(2). An employee who enrolls in TCC may retain their FEHB coverage for up to 18 months from their date of separation. Enrollment can be filed on a SF-2809 form, or by letter or written statement to the former employing agency. See 5 C.F.R. § 890.1105(a). Employees under TCC have to pay an increased premium for their FEHB coverage, as they must not only pay their normal premium for their FEHB plan, but also pay the amount the employing agency had been subsidizing the insurance coverage by (which constitutes 72% of the premium amount), plus an administration fee; nonpayment of the premiums can result in cancellation of TCC coverage. Under the statute, “An employee enrolled in a health benefits plan under this chapter who is removed […] and later reinstated or restored to duty on the ground that the removal […] was unjustified or unwarranted may, at his option, enroll as a new employee or have his coverage restored, with appropriate adjustments made in contributions and claims, to the same extent and effect as though the removal or suspension had not taken place.” See 5 U.S.C. § 8908(a).
A separate option is to convert the FEHB coverage into a non-group plan with the relevant insurer. As OPM guidance states, if a separated employee under TCC is retroactively reinstated to duty with back pay (for example, if their termination action is rescinded), they are entitled to request refund of the excess premium payments in writing from their insurer. OPM in its guidance warns that the conversion policies may be inferior to FEHB benefits, stating that “Many conversion contracts provide fewer benefits at a higher cost than what is offered under the FEHB Program. Also, there is no Government contribution to the cost of the individual conversion contract.“
Employees retiring upon separation (either under a VERA, under discontinued service retirement (DSR) based on a RIF separation or retiring under the deferred resignation program because they are otherwise eligible to retire) may be able to retain their FEHB benefits into retirement, if they meet certain requirements. First, the employee must have been continuously enrolled in FEHB for the five years prior to separation, or for the entire period that they could have been enrolled pre-separation in FEHB if that period is less than 5 years. See 5 U.S.C. § 8905(b). Second, the employee must be moving into “immediate retirement” status (whether it be MRA+10, MRA+30, early retirement under VERA or DSR, or disability retirement); a deferred retirement does not qualify (although an exception applies where an employee eligible for MRA+10 retirement postpones when they being collecting their annuity, under which the employee can potentially reenroll under FEHB when they claim their annuity, and can apply for TCC in the interim). This can create some complications for those applicants who might only be determined to be eligible for “immediate retirement” after a delay (for example, if the Office of Personnel Management delays in finding the employee eligible for disability retirement), in which circumstances the employee may have to either face a temporary gap in their FEHB coverage or seek TCC or other coverage options, then reinstate the FEHB coverage once the retirement is approved. Premiums for retirement annuitants are at the same rates as for current federal employees.
If you are a federal employee facing a RIF or separation under a VERA or the deferred resignation program, and wish to discuss your rights, consider contacting Gilbert Employment Law to request an initial consultation.