FEDVIP stands for Federal Employees Dental and Vision Insurance Program. The government’s FEDVIP program is not like the Federal Employees Health Benefits (FEHB) program. FEHB is a great deal for 99% of employees while dental/vision is not near as clean cut. Some Feds do not need dental/vision coverage while for others it is a great deal. Here are the most important things you need to know to maximize the dental/vision program.
FEDVIP Coverage
FEDVIP covers most things when it comes to dental or vision. But when it comes to expensive things like getting a crown for your tooth, sometimes FEDVIP will not cover high-cost expenses. It is important to know what your FEDVIP plan covers and whether it is worth it to you.
FEDVIP vs FEHB
The federal government pays a large part of your FEHB benefits which makes finding a cost-effective alternative to your health insurance difficult. On the contrary, the federal government does not pay a portion to your dental or vision insurance. This makes FEDVIP much less competitive and finding an alternative solution much easier.
FEDVIP Taxes
While you are working for the government, FEDVIP costs are tax deductible. For example: If you made $100,000 over the year and spent $2,000 on FEDVIP during the year, it will be as if you earned $98,000 of taxable income that year. However, this benefit goes away when you retire. If you continue paying $2,000 for FEDVIP, the government will count that as taxable income. Note: FEHB is also a tax deduction during your career but not in retirement.
Is an HSA or FSA Better Than FEDVIP?
If you are unsure what a Health Savings Plan (HSA) or Flexible Spending Account (FSA) is, check out this article. They are tax efficient ways to pay for health expenses including dental or vision expenses. If you do not have a lot of dental or vision problems, you may want to look into HSAs or FSAs. Paying FEDVIP can cost far more than it is worth. Many people rarely use the benefits of FEDVIP and when they do, their expenses are low. For others, they might have a lot of dental or vision expenses so having FEDVIP makes perfect sense. Whatever your situation, make sure you try to get the most out of your money.
FEDVIP Into Retirement
As we talked about previously, you will lose the tax deduction of FEDVIP once you retire. Even if FEDVIP is the same price, you might spend 20% more on FEDVIP in retirement because of taxes.
One good thing about FEDVIP in retirement is that there is no 5-year rule. The 5-year rule applies to FEHB but not FEDVIP in retirement. The 5-year rule states that you must have FEHB at least 5 years before retiring to be able to keep it into retirement. Unlike FEHB, you can take FEDVIP into retirement even if you have not had it at all during your career.
One nuance to know is that you can only keep FEDVIP in retirement if you retire with an immediate retirement. An immediate retirement means you receive your Federal Employees Retirement System (FERS) pension immediately when you retire. You can also receive FEDVIP with a postponed retirement but only when you start receiving your pension. You cannot receive FEDVIP if you retire with a deferred retirement. If you are confused about these different types of retirement, feel free to read this article on the types of FERS retirements.
Check Your Leave and Earning Statement (LES)
If you are not sure if you even have dental or vision coverage, check your Leave and Earning Statement (LES). This will tell you all the deductions that come out of your paycheck every 2 weeks. Maybe having FEDVIP is not for you and maybe it is. If you would like personalized help with your retirement or any questions you may have, feel free to schedule an appointment with us through this link: https://app.hawsfederaladvisors.com/whatservicemakessense.
