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Federal Employees Benefits Q &A

Do you have questions about your federal employee CSRS or FERS pension/annuity or federal employee retirement planning? Concerns about your Thrift Savings Plan (TSP) account or what about federal employee pay and leave issues?

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The Q&A forum is moderated by Ed Zurndorfer -- an expert on federal employee benefits -- and a Certified Financial Planner, chartered life underwriter and chartered financial consultant in Maryland.

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wyre  
#1 Posted : Wednesday, July 20, 2016 4:50:23 AM(UTC)
wyre

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United States

Just received a note fr long term care saying there would be no increase in premium, and now I'm reading that OPM "negotiated" a new contract w John Hancock that might raise fed worker premiums from 80-over 100%.

First, if no other company applies, is this really a "negotiation?" I feel we've been paying for nothing, and this federal "benefit" is basically going to have to be reduced to an insufficient level (lower coverage amounts or time span) in order to maintain a reasonable premium. Ed, are you rethinking your advice re long term care now that the price/benefit ratio is about to be so drastically compromised? And, is the letter we received from Hancock worth the paper it's printed on? Will there be premium increases for everyone, or are they selectively targeting certain policies? A colleague said she re received notice of a 3% increase. Mine said it would be 0. trying to determine if these "promises" of low or no increases are nullified due to the new contract?

Update: the notice of increase arrived yesterday, so I guess that part of my question has been answered. Everyone gets a hike, but after comparison with colleagues, not everyone gets the same increase. For example, my notice had an additional paragraph stating that due to certain protections based on the % of increase, I also had an option to stop paying and still get credit for the amount of money I have thus far paid in. The person in the next cubicle did not have that paragraph in his notice. He had 4 % inflation protection, I had 5% ... so apparently his 'increase' was a lower proportional amount, and he didn't have that extra benefit. Confusing, to say the least.

And finally, one option (to keep premiums the same) is to lower inflation coverage. Mine had the option to drop to down to 4% and pay an extra $60-70 a month, or lower inflation increases to 2.9% to keep the same premium rate and my neighbor's said his dropped to about 1.6% from 4%. It seems they are trying to wiggle out of the inflation coverage, yet still keep us paying into the system.

The question remains, without inflation coverage, is it really worth it?

This federal "benefit" allowing us to participate in the program doesn't seem to be handled the way that most employee benefits are -- I'm curious to hear of others' experiences and your decision process. If you do nothing -- they renew you at the highest rate (same covering, big increase), so read it carefully!!!

Edited by user Friday, July 22, 2016 3:01:14 AM(UTC)  | Reason: updated info

Ed Zurndorfer  
#2 Posted : Sunday, July 24, 2016 1:06:37 PM(UTC)

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Many current FLTCIP policyholders received this week in the mail from LTC Partners a notice that their premiums would be increasing in order of 50 to 100 percent effective November 1, 2016 if they retain their current level of LTC benefits. As a "peace" measure, LTC Partners presented some alternatives to the policyholder such as reducing annual inflation adjustments from, for example, 4 percent to 0.9 percent and premium payments would remain the same. Or the policyholder could stop paying premiums altogether and get a "paid up" LTC insurance policy based on premiums paid to-date. In most cases, the "paid up" policy would pay for 2 or 3 months of a nursing home stay in an expensive area of the country, perhaps 5 to 6 months in a not-so expensive area of the country. Perhaps the best thing a policyholder should do is to keep the policy and pay the same premiums with the lower inflation factor. With the money they are "saving" by not retaining their current inflation factor, the policyholder should invest for the long term the difference in premiums themselves. For example, they should invest that difference in the TSP or put the money in an IRA. By "self insuring", they are doing themselves a favor in two ways. First, the money stays in their pocket and not with the LTC Partners. Second, in the event they die and never use the money for LTC costs, a family member or someone else can inherit the money and use the money themselves.
vbgregg  
#3 Posted : Sunday, July 24, 2016 5:50:45 PM(UTC)

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The premiums for my wife and me increased more than 100%!!! If we keep the coverage the same, mine went from $136 to $308, and my wife's went from $180 to $406, both of which work out to 126% increase.

If we reduce our annual inflation increase from 4% to 0.9%, our premiums stay the same. And there is a middle choice to pay about half the increase and get about half the inflation adjustment.

Gregg
Ed Zurndorfer  
#4 Posted : Wednesday, July 27, 2016 2:48:04 AM(UTC)

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Thank you for your input into this forum.
EngineerJim  
#5 Posted : Saturday, July 30, 2016 3:44:34 PM(UTC)
EngineerJim

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A recently (3 yrs ago) retired friend of mine got the notice that his rate increase was over 150%. He decided to take a coverage deduction to keep the premium to $200 month. At some point it is like throwing good money away to protect the years of previous payments to have some coverage.
Ed Zurndorfer  
#6 Posted : Saturday, July 30, 2016 5:56:16 PM(UTC)

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Perhaps when Congress returns from its current recess in September it will subpoena OPM officials to get answers on how OPM could "negotiate" such a contract with the Long Term Care Partners, allowing premiums to rise on average 83 percent to existing FLTCIP policyholders. Note that members of Congress are eligible for the FLTCIP, and many members of Congress who are enrolled in the FLTCIP received notices of their premium increases during the current Congressional recess.
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