Author: holmesr9

Every November, the Federal Employees Health Benefits Program opens for annual enrollment. Every year, the majority of federal employees do nothing and let their current plan auto-renew. That is often a mistake that costs hundreds or thousands of dollars.

FEHB premiums change annually. Coverage terms shift. Your health needs evolve. A plan that made sense three years ago may not be your best option today.

The Open Season Window

FEHB Open Season typically runs for 47 days each November and December. Changes take effect the first full pay period of January. Outside of Open Season, you can only change your FEHB enrollment due to a qualifying life event such as marriage, divorce, birth of a child, or loss of other coverage.

5 Things to Actually Compare

1. Total Premium Cost

The government pays approximately 70-75% of your FEHB premium. Your share of the premium is deducted pre-tax from your paycheck. Compare your biweekly share across similar plans, but do not stop there. The premium is only one piece of your total annual health care cost.

2. Deductible and Out-of-Pocket Maximum

A plan with a lower premium but a $3,000 deductible may cost you more than a plan with a slightly higher premium and a $500 deductible, depending on how you use health care. Look at the out-of-pocket maximum, the most you would pay in a worst-case year, to understand your true financial exposure.

3. Your Doctors and Specialists

If you have established relationships with specific physicians, verify they are in-network before switching plans. Out-of-network costs can be significantly higher under some FEHB plans, and some plans do not cover out-of-network care at all except in emergencies.

4. Prescription Drug Coverage

Review the formulary for any maintenance medications you take regularly. The difference in cost-sharing between a Tier 1 and Tier 3 prescription can be $50 to $100 or more per month. If you take multiple medications, this comparison alone can determine which plan saves you the most money.

5. FEHB in Retirement

If you are within five years of retirement, pay close attention to one rule: to carry FEHB coverage into retirement, you must have been continuously enrolled in an FEHB plan for the five consecutive years immediately before your retirement date.

If you are enrolled and planning to retire, staying enrolled is not optional, it is essential. Losing FEHB coverage in retirement means paying full private market premiums for health insurance for the rest of your life.

Where to Compare FEHB Plans

The Office of Personnel Management maintains a plan comparison tool at opm.gov. You can compare premiums, benefits, and cost-sharing side by side for every plan available in your geographic area.

Do not rely on your agency’s benefits fair or a coworker’s recommendation alone. Spend 15 minutes on the OPM comparison tool before the Open Season window closes.

Bottom Line

Auto-renewing your FEHB plan without comparison is the benefits equivalent of paying full price for something that might be on sale next door. The government is paying the majority of your premium either way. Make sure the plan you are paying your share toward is actually the best option for your health needs and budget.

Educational content only. Not personal financial, medical, or benefits advice. Consult your agency benefits officer or OPM for guidance specific to your plan options and situation.

Last year’s reduction in force pushed thousands of federal employees over age 50 with 20 or more years of service into Discontinued Service Retirement. Now some want to come back. The path you take back matters significantly for your paycheck, your retirement calculation, and your job security in any future workforce actions.

What Is Discontinued Service Retirement?

DSR is an involuntary retirement under FERS or CSRS triggered when an employee is separated against their will through a RIF, abolishment of position, or similar agency action. It is not the same as voluntary early retirement under VERA. That distinction can matter when you return to federal service.

Path 1: Rehired Annuitant

As a rehired annuitant, you return to federal service while continuing to receive your DSR annuity. Here is how it typically works:

• Your annuity continues while you work
• Your salary is offset by the amount of your annuity unless a waiver applies
• Example: Position pays $95,000. Annuity is $45,000. Agency pays you $50,000. Your total income remains $95,000 but your base pay on paper is $50,000
• TSP participation and agency matching may still apply depending on appointment type
• Your High-3 generally does not recalculate unless you work long enough to qualify for a recomputation
• In some situations, rehired annuitants may be prioritized for separation in a future RIF

Path 2: Reinstated as a Regular Employee

Reinstatement means returning to federal service as a regular employee, with your annuity suspended for the duration of your reemployment.

• Your DSR annuity stops while you work
• You receive the full salary of the position with no offset
• Your new service counts toward an updated retirement computation
• Your High-3 can be recalculated when you retire again, potentially increasing your future annuity
• Full TSP participation and agency matching typically resume
• Full leave accrual applies

Which Path Is Better?

It depends on your situation and goals.

Rehired annuitant may be better if: You want income certainty now, plan to work only a few years, or your annuity is substantial relative to the position salary.

Reinstatement may be better if: You plan to work long enough for a meaningful High-3 recalculation, want full salary without the offset, or are concerned about RIF priority in a future workforce action.

The Critical Questions to Ask HR in Writing

Before accepting any return-to-service offer, get these answers in writing from both your agency HR and OPM:

• Am I being hired as a reemployed annuitant or reinstated as a regular employee?
• Will my DSR annuity terminate, pause, or continue?
• If it continues, will my salary be offset?
• Is a salary offset waiver available for this position?
• Am I eligible for TSP contributions and agency matching?
• Will this service count toward a future retirement recomputation?
• What appointment type and retirement code will appear on my personnel action?

The involuntary nature of your DSR may affect which path is available to you. Some guidance suggests that reinstatement into a permanent career position after an involuntary separation stops the annuity automatically. Others may classify the return as a rehired annuitant by default. Do not rely on verbal answers. Get it documented before you sign your appointment papers.

Educational content only. Not personal retirement, financial, or legal advice. Rules vary by appointment type, position, and agency. Consult your agency HR, OPM, and a licensed professional for guidance specific to your situation.

The private sector offer looks compelling on paper: a 30% salary increase, a 20-minute commute instead of two hours, and a modern workplace. But federal compensation is more than your base salary, and the decision to leave deserves a full accounting before you sign anything.

The Four Pillars of Federal Compensation

When comparing a federal position to a private sector offer, you need to evaluate all four components, not just base pay:

1. Base salary including locality pay
2. TSP with agency match (up to 5% of salary in free contributions)
3. FEHB health insurance (government pays roughly 70-75% of premium)
4. FERS pension (guaranteed, inflation-adjusted lifetime income)

How to Calculate What Your FERS Pension Is Worth

Your annual FERS annuity is calculated as:

1% x High-3 average salary x years of service
(1.1% if you retire at age 62 or older with 20+ years)

Example: 20 years of service, $90,000 High-3 average = $18,000 per year in annuity, guaranteed for life, with cost-of-living adjustments in retirement.

Over a 25-year retirement, that is $450,000 in guaranteed income at minimum, not counting COLA increases. That is what you walk away from when you leave early.

Every year you leave before your full retirement eligibility costs you 1% of your High-3 salary in annuity reduction, permanently.

The FEHB Value Most People Underestimate

The federal government pays approximately 70-75% of your FEHB premium. For a self-plus-one or family plan, the government contribution can be worth $10,000 to $15,000 or more per year.

When a private sector offer includes health insurance, compare the full premium cost, deductibles, copays, and out-of-pocket maximums, not just whether coverage exists.

The Commute Math

A two-hour round trip commute at 220 work days per year equals 440 hours annually, roughly 11 full work weeks, spent in your car. The economic value of reclaiming that time at even $30 per hour is over $13,000 per year. That is real and worth counting.

But time value alone does not close a gap created by walking away from a pension you spent 15 or 20 years building.

Questions to Answer Before You Decide

• How many years until your next full retirement eligibility milestone?
• What is the annual annuity difference between leaving now versus staying to your MRA+30?
• Does the private sector offer match or exceed your total federal compensation, including pension value?
• Does the new employer offer a 401(k) match? A pension? What are the vesting rules?
• How does the health insurance compare in total cost and coverage quality?
• What happens to your FEHB in retirement if you leave now versus staying to meet the five-year rule?

The Five-Year FEHB Rule

To carry FEHB coverage into retirement, you must have been enrolled in FEHB for the five consecutive years immediately before retirement. If you leave federal service before meeting this threshold and later return, the clock resets. Losing FEHB in retirement can cost tens of thousands of dollars in additional health insurance premiums.

The Bottom Line

Leaving federal service may absolutely be the right decision. The question is whether it is the right decision for your specific numbers at your specific point in your career. Run the math before you decide, not after.

Educational content only. Not personal financial, retirement, or legal advice. Consult your agency HR office, a financial planner, or OPM for decisions specific to your situation.

The IRS increased the Thrift Savings Plan contribution limit for 2026. If you have not updated your contribution election, you may be leaving significant tax-advantaged savings on the table every year.

2026 TSP Contribution Limits

• Standard limit: $23,500 per year
• Age 50+ catch-up contribution: An additional $7,500 per year
• Age 50+ total maximum: $31,000 per year
• Special catch-up (ages 60-63): Up to $34,750 per year under SECURE 2.0 rules

Why This Matters More Than You Think

The difference between contributing at the old limit versus the new one seems small month to month. But over a career, compounding turns small annual increases into significant retirement wealth.

At a 6% average annual return, contributing an additional $500 per year for 20 years grows to approximately $18,400. That is money sitting in your TSP that costs you nothing but a quick update to your contribution election.

How to Update Your TSP Contribution Election

Federal civilian employees update TSP contributions through their agency payroll system, typically Employee Express, myPay (for DOD civilians), or your agency-specific HR portal. The change usually takes effect within one to two pay periods.

You can elect to contribute a percentage of your salary or a flat dollar amount per pay period. Contributing a percentage automatically scales with pay raises, which is generally the smarter long-term approach.

Traditional TSP vs. Roth TSP: Which Should You Choose?

Traditional TSP contributions are pre-tax. You reduce your taxable income now and pay taxes on withdrawals in retirement. This makes sense if you expect to be in a lower tax bracket in retirement than you are today.

Roth TSP contributions are after-tax. You pay taxes now and qualified withdrawals in retirement are tax-free. This makes sense if you expect to be in the same or higher tax bracket in retirement, or if you want tax diversification.

Many federal employees benefit from splitting contributions between both, particularly mid-career employees who are uncertain about future tax rates.

Do Not Forget the Agency Match

FERS employees receive automatic agency contributions of 1% of basic pay plus matching contributions up to 4% more if you contribute at least 5% of your salary. That is up to 5% of your salary in free money that disappears if you contribute less than 5%.

If you are not contributing at least 5%, that is the first number to fix before worrying about the annual limit.

Educational content only. Not personal financial or investment advice. Consult a licensed financial planner for decisions specific to your situation.

For decades, your FERS retirement annuity has been calculated using the High-3 formula: the average of your three highest consecutive years of basic pay, multiplied by 1% (or 1.1% if you retire at 62 or older) multiplied by your total years of service.

Congress is now proposing to change that to a High-5 calculation. That single change could permanently reduce your monthly retirement check by $500 to $1,000 or more every year for the rest of your life.

How the Current High-3 Formula Works

The FERS annuity formula is straightforward:

Annual Annuity = 1% x High-3 Average Salary x Years of Service

Example: A GS-12 employee with a High-3 average of $85,000 and 25 years of service receives an annuity of $21,250 per year, or about $1,770 per month.

What Changes Under High-5

Under the proposed High-5 formula, OPM would average your five highest consecutive years of basic pay instead of three. Because most federal employees receive annual pay increases, your two additional years pulled into the average will almost always be lower-earning years, which drags your average salary down.

Using the same example above, if that employee’s salary grew from $78,000 to $85,000 over five years, their High-5 average might be $81,500 instead of $85,000. That $3,500 difference reduces their annual annuity by $875 per year, or $17,500 over a 20-year retirement.

When Would This Take Effect?

The proposed effective date currently in the legislation is January 1, 2028. Federal employees who retire before that date under the current eligibility rules would lock in the High-3 calculation permanently.

This is a proposed change. It is not yet law. But planning now, before it passes, is far more effective than reacting after.

FERS Retirement Eligibility Quick Reference

• MRA + 30 years of service: Full immediate annuity, no reduction
• Age 60 + 20 years of service: Full immediate annuity
• Age 62 + 5 years of service: Full immediate annuity (at 1.1% multiplier)
• MRA + 10 years of service: Reduced immediate annuity (5% per year under 62)

What You Should Do Now

First, know your numbers. Request a retirement estimate from your HR office or calculate it yourself using your current High-3 and projected years of service. Then model what a High-5 would look like using a slightly lower average.

Second, know your eligibility date. If you are within a few years of a full retirement milestone, the proposed change may factor into your timing decision.

Third, follow updates. This legislation is moving through Congress. Subscribing to Federal Benefits Resource ensures you get plain-English updates as they happen, not after the deadline has passed.

Educational content only. Not personal retirement, financial, or legal advice. Consult your agency HR office or OPM for decisions specific to your situation.