By: Bob Braunstein, Federal Benefits Specialist
Published: January 2021
The year 2021 holds some interesting changes for Federal employees and retirees. The changes include new health, dental and vision plans, a health care flexible spending account rollover increase, and the possibility of continuing certain cost-saving exceptions for these programs under the “Corona Aid Relief and Security Act (CARES)”. Active employees will be afforded a new way to elect their TSP contributions, also known as “Spillover.”
For those who opted to change their enrollments during the last Open Seasons, changes made to Federal Employees Health Plans (FEHB) and Federal Employees Dental and Vision Insurance Plans (FEDVIP) become effective in the first full pay period of January 2021 for employees and on January 1 for retirees. Changes to Flexible Spending Accounts, allowed for employees only, also become effective January 1. For those who changed their health plans, expect new ID cards within a few weeks. Continue to use your enrollment forms as proof of insurance and reach out to your HR office if your cards have not arrived by the end of the month. HR Offices will provide you with the date information was forwarded to your new carriers. You may then contact them with questions. Retirees should contact their plan carriers to ensure their coverage has transferred to their new plans. If not, contact OPM at firstname.lastname@example.org and 1-888-767-6738.
While the cost of health insurance premiums increased an overall 3.6% over 2020 rates, the rate of increase was lower than recent years. This is attributable primarily to less demand for regular care, elective surgeries, and routine services due to COVID-19. The CARES Act which was passed last year, will continue to provide a variety of cost-reducing relief services including waivers of cost-sharing for diagnostic and antibody testing, treatments, prescriptions, and telehealth services associated with COVID-19. Vaccines, which are now being rolled out to the public, will also be free to FEHB subscribers.
FEHB plan choices for 2021 include numerous national fee-for-service plans, health maintenance organizations, consumer driven and high deductible plans. A new national plan called United Healthcare Advantage was introduced as well as five new regional plans. Several regional plans were discontinued and employees were either able elect new coverage or accept transfer to the GEHA Elevate program. FEDVIP introduced the new Health Partners Dental PPO, United Health Care Dental PPO, Metlife Federal Vision Plan PPO (high option), and the new high option Emblem Dental Health Plan. All plans were available for enrollment during the immediate past Open Season.
Annual contribution limits for Dependent Care Flexible Spending Accounts (DCFSAs) and Health Care Flexible Spending Accounts (HCFSAs) remain unchanged, but HCFSAs now allow carryover of $550 of unused expenses (an increase of $50 over 2020) into the next year. Some critical dates to remember for managing your FSAs include:
- December 31, 2020 – the last day to incur expenses for HCFSAs;
- January 1, 2021 – the beginning of the new FSA benefit period (vs. the first pay period);
- March 31, 2021 – the last day to incur expenses for DCFSAs;
- April 30, 2021 – the last day to submit all claims for the 2020 benefit period.
- Also, the waiver of physician approval for over-the-counter drugs (due to COVID-19), expired on January 1, 2021.
The Federal pay raise for employees has been approved at 1% across the board. While the raise is effective as of January 5th, employees will see it in their pay approximately two weeks later. Locality rates will remain the same. Eligible retirees were granted a 1.3% COLA effective December 1, 2020 which appeared in their January 1 retirement payments. Federal employees will see some increases to the 2020 amounts payable to their survivors. These include raising the lump sum death benefit to a spouse of an employee who dies in service from half a year’s pay at final salary plus $34,542.02 to half a year’s pay at final salary plus $34,991.07; and increases in survivor annuities for dependent children – single orphan increased to $552 (up from $545 in 2020) per child with a maximum monthly payout of $1,659 (up from $1,635), and double-orphan increased to $663 (up from $655) with a monthly maximum of $1,990 (up from $1,965).
Under the CARES Act, the TSP was able to expand both withdrawal opportunities and loans for COVID-19 related issues, waive the 10% penalty for early COVID-related withdrawals, and allow allocating tax liabilities for these withdrawals over tax years 2020 through 2022. While TSP loan payments were allowed to be suspended in 2020, those must be resumed effective January 1, 2021. TSP’s biggest change for 2021 is their new “Spillover” feature which no longer requires separate contribution elections for regular and catch-up contributions each year. Employees eligible to make catch-up contributions – either turning 50 or already at that age this year – can elect all contributions on one form. If/when their contributions exceed the deferral limit, excess funds are automatically diverted to the allowable catch-up amount. (Note that both the IRS elective deferral limit for regular contributions and catch-up contributions remain unchanged for 2021 at $19,500 and $6,500, respectively.)
Employees who lost use-or-lose annual leave (AL) due to COVID-19 last year may get some of those hours back. Section 1111 of the latest defense policy bill set a new temporary cap on annual leave carryover for the 2020 leave year only. Specifically, employees with 240-hour AL ceilings can have their carryover increased to 300 hours. For those overseas, the amount can be increased from 360 to a 450 AL ceiling. The additional leave carryover must be used in 2021 or it will be forfeited. It will also not count for purposes of determining the annual leave lump sum payout when one separates/retires from Federal service. Annual Leave ceiling increase does not apply to most employees in the Senior Executive Service or those working for non-appropriated fund instrumentalities. Agencies must first use other leave restoration rules before applying the provisions of Section 1111. Congress is also considering the continuation of COVID-19 emergency paid sick leave, which last year allowed an additional 80 (above regular annual sick leave accrual). The CARES Act provision that allows agencies to grant sick leave to contractors who were unable to reach their worksites during the pandemic has been extended December 31, 2020 to March 31, 2021. TSP is also considering extending COVID-related withdrawals and their more flexible tax liability/penalty relief features from 2020.
Finally, if you are a Federal employee looking to move up in your career, there could soon be more room at the top. The long-awaited outflow of older employees into retirement could be closer to reality this year. While predicted for the past several years, the likelihood of this retirement “age wave” may begin to be realized due to “COVID-19 fatigue”. Working virtually, having to adapt to multiple computer-based meeting/presentation platforms (e.g., Zoom, Teams, Adobe, etc.) are among the reasons being given by older workers – accustomed to more traditional working arrangements – who are now considering retirement from Federal service.
Bob Braunstein is a retired Federal employee who was last employed as a Senior Human Resources Consultant with the Office of the Comptroller of the Currency (OCC) at the Department of the Treasury. During his Federal career, he served in a full range of HR positions spanning recruitment, staffing, employee relations, retirement and benefits, and position classification/management disciplines. He is a retirement and benefits presenter for NITP.