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Federal Employees News Digest : Oct. 8, 2012
October 8, 2012 Vol. 62, No. 13 7 Visit us on the Internet at www.FederalDaily.com This third of four columns on federal employees and life insurance focuses on the federal govern- ment-sponsored group term life insurance program called Federal Employees Group Life Insurance, or FEGLI. This week's column discusses which employees are eligible for FEGLI, the amount of coverage included in FEGLI, and how an employee enrolls in FEGLI. FEGLI is a group term life insurance plan. It does not build up cash value and enrollees cannot take out a loan against their FEGLI insurance. The Office of Personnel Management has a contract with Metropolitan Life Insurance Co. (MetLife) to pro- vide this life insurance for federal and postal employees and annuitants. MetLife has an office called the Office of Federal Employees Group Life Insurance (OFEGLI) that adjudicates claims under the FEGLI program. Basic insurance Full- and part-time employees entering federal service are auto- matically enrolled in "basic" insurance unless they formally waive this coverage. Basic insurance is based on an employee's annual rate of basic pay---as shown or their SF 50 (Notice of Personnel Action)--- rounded up to the nearest $1,000, plus $2,000. This is called the Basic Insurance Amount, or BIA. The government pays one-third of the BIA premium cost for BIA and the employee pays the other two- thirds. Employees pay 15 cents per thousand dollars of coverage per pay date. For example, an employee with $100,000 of BIA pays $15 each pay date. Employees under age 45 automatically have extra coverage without paying additional premiums. This extra benefit increases the amount of BIA payable at the time of the employee's death if the employee dies before age 45. Optional insurance Those employees who have BIA may also elect optional insurance. Unlike BIA, employees are not automatically enrolled in optional insurance. Employees pay the full cost for all optional insurances they elect. There are three types of optional insurance: (1) Option A, which provides $10,000 of coverage; (2) Option B coverage, which comes in one, two, three, four or five multiples of the employee's annual rate of basic pay; and (3) Option C coverage, which insures the employee's spouse and eligible dependent children. It comes in one, two, three, four or five multiples of coverage. Each multiple is equal to $5,000 for a spouse and $2,500 for each eligible dependent child. Accidental death and dismemberment Accidental death and dismemberment (AD&D) cov- erage is an automatic part of BIA and Option A insur- ance for employees at no additional cost. There is no AD&D with Options B and C and there is none for annuitants or employees on workers' compensation. AD&D benefits are payable for an employee who sustains injuries by accidental means and dies within one year after the accident, or loses a limb or sight in one or both eyes. Under BIA, accidental death benefits are equal to the employee's BIA plus accidental dismember- ment benefits equal to one-half of the employee's BIA for the loss of one limb or sight in one eye. Under Option A, accidental death benefits are equal to the employee's Option A coverage and accidental dismemberment benefits are equal to one-half of the employee's Option A coverage for the loss of one limb or sight in one eye. Unless an employee's position is excluded from FEGLI coverage by law or regulation, the employee is automatically enrolled in BIA. Those employees who do not want this coverage can either waive it when they become eligible for coverage or cancel it at a later date. Optional insur- ance is not automatic. An employee must specifically elect the type of Optional insurance they want within 31 days of becoming eligible. Eligibility after retirement Employees who have FEGLI and who wish to keep their FEGLI coverage after retiring from federal service may do so if they fulfill the following requirements: (1) they are entitled to retire on an immediate CSRS or FERS annuity; (2) they have been insured for the five years of service immediately before the starting date of the annuity or for the full period(s) of service during which they were eligible to be insured if less than five years; (3) they are enrolled in FEGLI on the date of retire- ment; and (4) they have not converted to an individual policy. FEGLI enrollees can and should designate a beneficiary via Form SF 2823. In doing so, the participant can: (1) allow benefits to be paid to a person, firm, organization, or other legal entity not listed in the order of precedence; (2) allow benefits to be paid in a different order than the order of precedence; or (3) allow benefits to be paid to a trust that they have established for minor children. Living benefits Living benefits are life insurance benefits paid tax-free to a FEGLI enrollee who is still living rather than passed to a beneficiary or survi- vor when the enrollee dies. An enrollee can elect a living benefit if the enrollee is diagnosed as terminally ill with a life expectancy of nine months or less and has not assigned their FEGLI insurance. Edward A. Zurndorfer is a Certified Financial Planner and Enrolled Agent in Silver Spring, MD. He is also a registered representative with FSC Securities Corporation, branch address: 833 Bromley St. - Suite A, Silver Spring, MD 20902. Phone: (301) 681-1652. Securities offered through FSC Securities Corporation,member FINRA/SIPC. EZ Accounting and Financial Services and FSC are independent companies. Informed Investor Evaluating life insurance needs and coverage: Part III
Oct. 1, 2012
Oct. 15, 2012