Pull your annuity statement and find the FEGLI deduction line, then go to OPM’s current premium rate table and locate your age band. The deduction you are seeing today is not the deduction you will see after your next five-year birthday band, and the 80-and-over bracket is where most federal annuitants finally give up on Option B. Knowing the next two brackets, not just the current one, is what makes this a decision instead of a reaction.
The deadline that actually binds is your 65th birthday, or more precisely the second month after it. That is when your Full Reduction or No Reduction elections take effect on Option B, and the election you made — often years earlier, on a form you barely remember — determines whether your coverage begins winding down at no cost or stays level while you pay age-banded premiums for the rest of your life. Verify with OPM which election is on file for you. Do not assume.
One structural fact frames everything else on this page: FEGLI is group term insurance. It has no cash value, no policy loan, no surrender value, and no nonforfeiture options. Half the standard advice about permanent life insurance simply does not apply. Your realistic choices are narrower and they are worth understanding precisely.
In This Article
- What You Actually Own
- The Elections That Control Your Cost After 65
- Your Real Options, Ranked
- Assignment: The Only Route That Resembles a Sale
- When Selling or Assigning Is the Wrong Answer
- Beneficiaries and the Federal Order of Precedence
- Related Federal and Group Coverage Questions
- Frequently Asked Questions
What You Actually Own
The Federal Employees’ Group Life Insurance program was established by statute in 1954 and is codified at 5 U.S.C. chapter 87. The Office of Personnel Management administers it, and the group policy is underwritten by Metropolitan Life Insurance Company, which handles claims through the Office of Federal Employees’ Group Life Insurance.
Coverage comes in four pieces. Basic is your annual basic pay rounded up to the next $1,000 plus $2,000. Option A, called Standard, is a flat $10,000. Option B, called Additional, is one to five multiples of your annual basic pay, and it is the expensive one. Option C, called Family, covers a spouse and eligible children in multiples.
The premium structures differ in a way that matters. Basic is priced at a flat rate per $1,000 of coverage regardless of age. Options A, B, and C are age-banded, re-pricing in five-year brackets as you cross each birthday threshold, with a top bracket at age 80 and over. Because Option B is a multiple of salary rather than a flat amount, the age-band escalation applies to a large face amount, which is why the dollar increases feel so severe.
OPM adjusts FEGLI rates periodically — a set of changes took effect at the start of 2024 — so any figure printed anywhere other than OPM’s own current table should be treated as historical. Look up your bracket at the source.
The Elections That Control Your Cost After 65
At retirement you make separate elections for Basic and for the options, and they behave differently.
Basic. Three choices. 75% Reduction: beginning the second month after age 65, coverage reduces 2% per month until it reaches 25% of the original amount, and premiums stop entirely. 50% Reduction: coverage reduces to half and you continue paying a reduced premium for life. No Reduction: coverage stays at full value and you pay the highest premium for life.
Option A. Beginning the second month after 65, it reduces 2% per month to $2,500 and becomes free. There is no election to make.
Option B and Option C. This is where the money is. Full Reduction: beginning the second month after 65, coverage reduces 2% per month for 50 months until it reaches zero, and premiums stop. No Reduction: coverage stays level and you pay the age-banded premium for as long as you keep it.
The practical consequence for someone at 78 staring at a large deduction: if you elected No Reduction on Option B, that deduction will re-price upward again at 80. If you elected Full Reduction, your coverage has been melting away since 65 and will be gone at roughly age 69 and two months — meaning the deduction you see may be for Basic and Option C rather than Option B at all.
Call OPM’s retirement information line or check your annuity statement to confirm which elections are on file before doing anything.
Your Real Options, Ranked
Cancel Option B, keep Basic. You may cancel FEGLI coverage at any time as an annuitant. Cancelling Option B is irreversible — there is no re-enrollment for annuitants — but it stops the largest deduction immediately. If the coverage is genuinely unaffordable and no one depends on it, this is the clean answer.
Reduce the number of Option B multiples. You do not have to cancel all of it. Dropping from five multiples to two cuts the deduction proportionally and keeps meaningful coverage. Ask OPM specifically about reducing multiples rather than cancelling outright; many annuitants do not realize this is available.
Switch from No Reduction to Full Reduction. Where permitted, this ends the premium going forward and lets the coverage wind down rather than disappearing at once.
Keep paying. Rational when a survivor genuinely needs the benefit and the deduction is manageable relative to the annuity. Death benefits are generally excluded from a beneficiary’s income under Internal Revenue Code section 101(a).
Buy replacement coverage. Compare the FEGLI deduction against an individually underwritten policy. For an annuitant in good health, private term or guaranteed universal life is sometimes cheaper than Option B at advanced ages. For an annuitant with health conditions, it usually is not, and cancelling FEGLI without a quote in hand is a mistake.
Assign the coverage. Discussed in detail below. It is the only route that resembles a sale.
Notice what is absent. There is no reduced paid-up, no extended term, no surrender for cash value, no policy loan, and no 1035 exchange, because FEGLI has no cash value to work with. See options for a policy with no cash value.
| Coverage | Premium basis | What happens after 65 | Assignable? |
|---|---|---|---|
| Basic | Flat rate per $1,000, not age-banded | 75%, 50%, or No Reduction election | Yes, with Option A and B together |
| Option A (Standard, $10,000) | Age-banded | Reduces 2% per month to $2,500, then free | Yes, with Basic and Option B |
| Option B (Additional, 1-5x salary) | Age-banded, top bracket 80+ | Full Reduction to zero, or No Reduction with rising premiums | Yes, all multiples together |
| Option C (Family) | Age-banded | Full Reduction to zero, or No Reduction | No |
| Cash value / loans | None – FEGLI is group term | Not applicable | Not applicable |
Assignment: The Only Route That Resembles a Sale
Federal law has permitted assignment of FEGLI ownership since legislation enacted in 1994, and OPM’s FEGLI Handbook expressly contemplates assignment to a viatical settlement firm as well as to individuals. The mechanism is a form assignment — OPM’s Assignment of Federal Employees’ Group Life Insurance, form RI 76-10 — filed with the appropriate office.
Four constraints make FEGLI assignments unusual, and anyone considering one should understand all four.
The assignment must be irrevocable. There is no undoing it.
You must assign all of it. Basic, Option A, and Option B are assigned together. You cannot assign a portion of Option B and keep the rest.
Option C cannot be assigned. Family coverage stays with you.
Premiums keep coming out of your annuity. This is the constraint that most often defeats the economics. The assignee acquires the right to the death benefit but does not take over the payroll or annuity deduction — withholding continues from the annuitant’s own annuity, and any reimbursement arrangement is a private contractual matter between the parties rather than something the government administers. A buyer pricing a FEGLI assignment has to solve for that, and many will not.
Add the underlying economics: Option B coverage under Full Reduction is scheduled to go to zero, and under No Reduction it carries a steeply escalating cost. Both make the asset less attractive to a buyer than a comparably sized individual policy. See whether a FEGLI policy can be sold.
When Selling or Assigning Is the Wrong Answer
When a survivor needs the coverage. Federal survivor annuities are a percentage of the retiree’s annuity, and many households genuinely need the FEGLI benefit to bridge the gap. Assigning it away irreversibly to solve a cash flow problem can leave a spouse materially worse off.
When Full Reduction is already running. If your Option B coverage is scheduled to reach zero, there is little for a buyer to purchase and the premium has already stopped or is about to.
When cancelling solves the problem. If the objective is simply to stop the deduction, cancellation or a reduction in multiples does that immediately, at no cost, with a form. An assignment is a far more complex path to the same cash flow relief plus an uncertain payment.
When you are in good health. Pricing depends on life expectancy underwriting. A healthy annuitant will not attract a meaningful offer, and the effort is wasted.
When the amounts are small. Basic coverage plus a couple of Option B multiples on a modest federal salary may total well under the roughly $100,000 threshold below which there is generally no market.
When you have not verified your elections. Half the people who ask this question turn out to have made Full Reduction elections years ago and are paying for something other than what they think. Verify first.
Beneficiaries and the Federal Order of Precedence
Two FEGLI-specific rules deserve attention because they surprise families.
First, FEGLI pays according to the federal statutory order of precedence at 5 U.S.C. section 8705 unless a valid designation of beneficiary is on file. That order runs to the widow or widower, then children, then parents, then the executor, then next of kin — it does not follow your will. A will does not designate a FEGLI beneficiary. Only Standard Form 2823 on file with the right office does.
Second, that federal designation preempts state law. The Supreme Court held in Hillman v. Maretta, 569 U.S. 483 (2013), that the FEGLI statutory scheme preempts a state law that would have redirected proceeds away from a named ex-spouse after divorce, and also preempted the state’s provision creating a cause of action against the named beneficiary. In practical terms: if your ex-spouse is still named on your FEGLI form, your state’s automatic revocation-on-divorce statute will not fix it. You have to file a new designation.
Check your designation now. It costs nothing and it is the highest-value ten minutes on this page.
Related Federal and Group Coverage Questions
If you also carry or once carried military coverage, the analysis differs again. Servicemembers’ Group Life Insurance and Veterans’ Group Life Insurance have their own conversion rules and their own restrictions — see SGLI and VGLI conversion options.
If you are separating from federal service without retiring, or leaving any employer’s group plan, the conversion right is the thing to protect. Group coverage generally carries a short window — commonly 31 days after coverage ends — during which you may convert to an individual policy without evidence of insurability. Miss it and the right is gone. See the conversion window at retirement, what group life conversion is, and portability versus conversion.
That conversion right is also the only route by which most group coverage becomes a secondary-market asset at all, because a converted individual permanent policy can be sold while a group certificate generally cannot. See selling group life after retirement and whether group life can be sold.
For a broader look at what happens to premiums at advanced ages across all policy types, see premium increases after age 80.
Pine Lake Life Solutions provides education and a free, no-obligation policy review. If you hold an individual policy alongside your federal coverage, send its cover page or call (305) 209-7183. If FEGLI is all you have and cancelling or reducing multiples is the right answer, you will be told that plainly. Nothing here is legal, tax, or benefits advice; verify your elections and rates with OPM.
Frequently Asked Questions
Why did my FEGLI deduction jump?
Because Options A, B, and C are priced in five-year age bands, and crossing a band threshold re-prices the coverage at the new bracket rate. The top bracket is age 80 and over. OPM also periodically adjusts the underlying rate table, with a set of changes effective at the start of 2024. Check OPM’s current table for your band.
What is the difference between Full Reduction and No Reduction on Option B?
Full Reduction means the coverage reduces 2% per month for 50 months beginning the second month after age 65, ending at zero, and premiums stop. No Reduction means coverage stays level and you pay the age-banded premium for as long as you keep it. Verify with OPM which election is on file for you.
Can I cancel just part of my Option B coverage?
Yes. Option B is carried in multiples of your annual basic pay, and you can reduce the number of multiples rather than cancelling entirely. Many annuitants do not realize this and cancel everything when dropping from five multiples to two would have solved the cash flow problem while keeping real coverage in place.
Can I sell my FEGLI coverage?
FEGLI ownership can be irrevocably assigned, and OPM’s handbook contemplates assignment to a viatical settlement firm. But the assignment must cover Basic, Option A, and Option B together, Option C cannot be assigned, and premiums continue to be withheld from your own annuity rather than paid by the assignee. Those constraints make buyers scarce.
Does FEGLI have any cash value I can access?
No. FEGLI is group term insurance with no cash value, no policy loan provision, no surrender value, and no nonforfeiture options. Advice about reduced paid-up, extended term, 1035 exchanges, or borrowing against a policy does not apply. Your levers are cancelling, reducing multiples, changing reduction elections, or assigning.
If I cancel FEGLI, can I get it back later?
As an annuitant, generally no. Cancellation of optional coverage is treated as permanent, and there is no open season or re-enrollment mechanism for retirees comparable to what active employees occasionally receive. Get a quote for replacement individual coverage before you cancel, particularly if your health would make new underwriting difficult.
My ex-spouse is still my FEGLI beneficiary. Does divorce fix that?
No. FEGLI pays according to a valid designation on file, and where none exists, according to the federal statutory order of precedence. The Supreme Court held in Hillman v. Maretta that this federal scheme preempts state revocation-on-divorce statutes. File a new designation of beneficiary form; a will does not change it.
Find out what your policy is worth — free, confidential, no obligation.
A 15-minute educational review covers your eligibility, every alternative, and a realistic view of what each path would net you.
Related Reading
- Can I Sell A Fegli Policy
- Sgli Vgli Conversion Options
- Sell Group Life After Retirement
- Can I Sell A Group Life Insurance Policy
- Retiring Group Life Conversion Window
- Portability Vs Conversion Group Life
- What Is Group Life Conversion
- Premium Increase After Age 80
- Policy With No Cash Value Options
Pine Lake Life Solutions does not purchase life insurance policies and does not provide legal, tax, or investment advice. Information provided is for educational purposes only. Eligibility for any option, including life settlements, is not guaranteed and depends on individual circumstances, policy terms, underwriting, and market conditions. Consult independent legal, tax, or financial professionals before making decisions regarding a life insurance policy.