Top 10 Mistakes Made by Federal Employees — Part 2: Paying too much for Fegli Option B

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1.23.26: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Speaker1:
Welcome back to the Federal retirement Show. I'm your host, Val Majewski with American Benefits Exchange. And as always, I really appreciate you taking the time out of your busy schedule to join us to view our content. That's what it's here for. That's what we are here for, is for you, the federal employee that's looking for information regarding your benefits and retirement situation and maybe even looking for some guidance, some suggestions being put in the right direction. That's what we're here for. We've got over 160 episodes that you can go back and check out, so you can view it on SoundCloud, Spotify, YouTube, Apple Podcasts, uh, go to our website, Federal retirement Show.com. You can see all of the the information there as well. So again, thank you for joining us today. And I really appreciate you you being here. Now we're in the middle of a series. We just started uh, we're re going over the top ten mistakes that veteran employees make. Now, this is a pamphlet that I wrote years ago. Some of the mistakes, you know, have have changed over time. But I'm going back to the original ten and giving you my updated perspective on these things and not I will say we'll throw in some bonus ones at some point because there are more than ten mistakes. There's not only ten mistakes, and hopefully you're not making any of these mistakes. And if you are, then you can correct them in a relatively short period of time.

Speaker1:
That's the reason why we're giving you this information, so you can evaluate your situation and determine if you're making one of these mistakes, and then hopefully remedying it. That's the that's the main goal, right? You don't want to be making that mistake forever. Um, you want to be able to remedy it and put yourself in a better situation. And that's the the whole point of going through all of this. So, uh, today is number two. And today's number two mistake is paying way too much for Fegley option B, way too much for Phegley option B now you can go back and you can view our previous episodes on Phegley. We've done a number of them. You can get a full understanding of Phegley Federal Employees Group life insurance if you don't know what that means, and the basic and all the other options that you had to choose from when you first got hired. And a lot of times, I'd say 95% of federal employees that I talked to made decisions when they first got hired. When it comes to Phegley, and they have not changed that decision over the course of their working career. Now, that may not be you. You might be thinking, I've made some changes over time. Great. But the majority, vast majority of federal employees that I meet, the decisions that they made when they first got hired are the exact same setup, the exact same situation that they're currently in, and Phegley option B is the one that allows you to get up to five times your salary in additional life insurance coverage on top of your basic and option A, so just understand that this is a big option for you.

Speaker1:
It's a big additional thing that you can add to your fegli coverage. And if you're not familiar as to why paying way too much for Fegli option B is A is a mistake. We're going to cover the basics of both here in just a second, so cost for Fegli should be. Why is this a mistake? Because if you're unaware, costs increases every five years. Starting at age 40 increases every five years starting at age 40. I'm going to show you an example of that here in just a second. But there are more cost effective options for those that want the life insurance coverage. And I'll say this. People will tell me, well, I got the five times my salary because I wanted the additional coverage, I wanted the extra life insurance, but it was not properly told to me that the cost would increase every five years. Starting at age 40. I realized that it was pretty cheap when I first started. And that is true. It is cheap. I'll show you that here in a second. But for those that want the coverage, it's rare that I talk to somebody that says, I just got five times because that's what they gave me. That's what I had the option for.

Speaker1:
So I took the max. Most would tell me that they got it because they wanted it. So for those that wanted to continue, now that they're learning that the cost will increase over time, there are more cost effective options outside of the government. Because what does Phegley stand for? Federal employees Group life insurance. When you're in a group plan, cost generally increases over time. Why? Because the health of the group gets older and worse as you go, and the cost will go up. That's just how group policies are typically written or underwritten. But an individual policy, something that is tailor made for you, your situation, your health profile, all those things that cost is locked in, locked in for the duration of the plan. Whether it's a temporary plan, like a term plan or a permanent plan, like a whole life or universal life or something similar. That plan is the cost for that plan is locked in. So you can imagine if I'm in a plan where the cost will increase every five years and as you'll see, it increases drastically as you get older. Or if I'm in a plan that is locked in, eventually I'm going to start saving some money here because the cost for the group plan is going to go up, get so expensive that I might end up canceling it or getting rid of it when my personal plan, my individual plan, if I got that set up, if it were more cost effective over time, it was going to be locked in.

Speaker1:
It's not going to increase. So how much does option B increase? How much does it go up? What are the what are the factors. What does this look like. Well this is a real life example. This is an age 43 year old. I've used this example for a number of years, but in age 43 year old federal employee that let's say has five times option B, which is an extra in this example, an extra $490,000 of additional coverage. And we're just looking at the option B costs here, not the the basic or option A, this is just option B. So if we look let's look at the middle column here in this chart. And we're seeing the biweekly factor. This is per pay period per $1,000 worth of coverage okay. Per pay period per $1,000 worth of coverage. Now as you're really young or early in your career, the cost is very low, right? It's $0.02 per pay period per $1,000 worth of coverage at age 40 is when you see the first increase. It goes from 2 to $0.03. Okay, still probably not breaking the bank. And in this example, this person's paying $14.70 per pay period for this. Not not very expensive at all, actually, compared to maybe private coverage, it's on par and perhaps a little cheaper than an individual private plan. But but there is that.

Speaker1:
But there it increases every five years going forward. So now from age 44 to 45, you see a doubling goes from $0.03 to $0.06. From age 49 to 50, it goes from $0.06 to $0.10, another almost double at age 54 to 55. It'll increase from $0.10 to $0.18, another almost double. And then the biggest jump that you'll see in this program is from age 59 to 60. It goes from $0.18 per pay period per $1,000 worth of coverage to $0.40 more than doubles. Now, I'm not a mathematician, but I'm pretty good with numbers. And if I start saying double, almost double, almost double, more than double, you can hear how the cost is going to drastically increase over time. Now this person's 43 years old, 43 So in a short 17 years from now, they're going to go from paying $0.14 per pay period to a $196 a pay period. $14 a pay period to $196 per pay period. That is a more than ten times increase in their cost in 17 short years. So understand how, if you're not paying attention to this, if you didn't realize that this is what happens, that you're just going to keep seeing this come out of your paycheck, it's going to drastically increase over time. And at some point when you finally realize that this is costing you way too much, you may end up canceling it and losing all coverage and not having any value in return. You may have overpaid for the same amount of coverage over the course of your career, and you could have gotten a more cost effective plan, which puts more money in your pocket.

Speaker1:
And where can you put that money you can put into your bank account, or it can go into your retirement savings. So there's a lot of benefits to getting more cost effective coverage compared to sticking with option B, so you can see how the cost will continue to increase even beyond age 60. But I just stopped there because that's around retirement age for a lot of you. And it's the biggest jump that we see in this program. So if you're unaware of this, unaware of it's never too early. It's never too late to look at better cost saving options. And I will say, for every federal employee, whether they're 25 years old out of college, they just got a job or they're 65 years old. If if they look at alternatives to option B and we compare the cost of option B over the course of time, you will save money. If you're if you're healthy enough to qualify. We'll say this healthy enough to qualify for life insurance. You will save money over time compared to option B. Okay, I'm not knocking it entirely because if you're relatively unhealthy and you cannot qualify for life insurance outside of Exactly. You can't qualify for a private plan due to whatever health issue that might be, uh, or health history.

Speaker1:
Then it's worth sticking with with option B at whatever level of coverage you want. But understand, understand, if you are healthy enough, you're going to save money. In every scenario that I've run, whether you're 25 or 65 over time, compared to the cost effective option B, you are going to save money. So if you're looking at mistake number two, mistake number two, being, uh, paying way too much for option B, first of all, do you have option B right. Are you aware that you have it. Well we have to take a look at your leave and earnings statement. Um, if you're unfamiliar with this, if you're unsure and we can deduce with the codes that are on there whether or not you have the option B, if you do, it is worth your time getting a comparison and an estimate to see if you can save some money over the course of your working career and beyond. Outside of the option B okay, one of the the easiest things that we can do for you is run a comparison so you can see the numbers and see it all laid out in plain English. But that is mistake number two, paying way too much for option B. And again we're in this series of going over the top ten mistakes that federal employees make and hopefully how to avoid them. If you want more information or you want a option B comparison, you want to see what else is out there for you, reach out to us.

Speaker1:
You can go to our website. I mentioned it earlier, but if you did not have a chance to write it down, it's federal retirement show.com there's a form there that you can fill out. One of our experts across the country. If it's not me personally, we'll be reaching out to set up a time to go over this information and make sure you tell that person, if it's not me, that, hey, I want to talk about the option B, I saw the option B mistake episode and I want to talk about that. So like I said earlier, I really appreciate you taking the time out of your schedule to join us, to be with us, to view our content. Um, I've talked about the other episodes. Go back and watch all of them. There's a lot of great information there, and I have a mission for each and every one of you. Share this with somebody. Somebody that you work with also needs to hear this. Do us a favor. Share it with them. We want to help as many federal employees as we possibly can, and the only way that we can really do that effectively is if you're telling others that you work with about it. So look forward to talking to you personally. Look forward to seeing your colleagues on a future episode of the Federal retirement show, and we'll talk to you again real soon.

Speaker2:
Ai chat has been everywhere, not just the chat that you do with AI, but people talking about it and investing in it and all the things. So where does it fall on the spectrum of helpful, scary all, all of those types of feelings that people have about it? Well, small business owners are really trying to leverage AI in a really kind of a unique way to help them run their businesses. And here to talk more about that is Andrew Schimke, who is senior director of product management at LinkedIn. Andrew, thanks so much for taking a few minutes for me. Really appreciate it.

Speaker3:
Yeah. Of course. Thank you so much for having us on.

Speaker2:
Yeah. No, I'm glad to talk to you because it's, uh, it's a topic. Of course, as I say, that everybody is, is talking about here. And, um, you know, what are you guys have some new research out. So what are some, uh, feelings that small businesses have these days about, um, how they can leverage AI and and use it to the, you know, the best of their abilities, the best of AI's abilities right now. And what different kinds of things are they using it for?

Speaker3:
Yeah. Of course. Um, so, you know, January is one of the biggest hiring months of the year. Uh, business owners like you and I, we have New Year's resolutions, new goals. Um, and they have goals for their business. They want to grow. Maybe they have new budgets or new clients. Um, and to grow, they need people. They need good people to help them achieve those objectives. So, uh, they're really looking to hire, uh, it's one of our biggest hiring months. And we recently learned that 79% of small businesses shared it's actually harder to hire this year than last year, uh, with the majority citing a lack of qualified applicants. Um, at the same time, they're also sharing that new AI tools. There's a lot of optimism that it'll help them compete for talent in ways they couldn't before. Um, so, you know, both juggling the challenges of hiring and getting harder than last year, but also a lot of optimism that hopefully AI will help.

Speaker2:
Yeah. And tell me some more about those tools that are out there now that, uh, can support small businesses as they look to hire. I mean, you know, as you say, there are a lot of different challenges that they face, you know, sifting through, trying to find qualified candidates for these positions. How can AI really help along in that process. Yeah.

Speaker3:
One great example at LinkedIn, we built a tool specifically for small businesses called Hiring Pro. And we know small businesses, uh, you know, they they may not have a recruiter, but they still need to hire. Uh, they have to juggle the challenges of running the business, growing clients, managing inventory, marketing, uh, you know, maybe down a team member or too much work to do. And they need someone quickly to help them. Uh, and so we when I say we built it for small business, I mean, we made it really simple. All it takes is just sharing the job title you're hiring for. Uh, and then it's like working with a hiring professional. It's. You're hiring pro, uh, you review the work it does. So first you share the job title and it'll create a job description. It'll pull information from your company on LinkedIn. Uh, the job, uh, what skills are required? Um, and craft a really personalized job description for you. Once you are happy with it, you can change it, modify it. It'll start searching and finding candidates for you based on that job description. And it'll you know, be like working with a person. It'll say, you know, does this person look good? And you'll say, no. They need more years of experience and hiring Pro will learn from your feedback. And then as applications and resumes come in, it'll review all of those applications and resumes. And based on what you said you were looking for and surface the strongest fits for your role. Um, when we speak with small businesses that are already using this tool, um, they're reporting saving over six hours a week. Um, and so imagine getting almost a full working day back to run your business, grow, spend time on more strategic things while hiring pro AI really just focuses on doing a lot of those mundane tasks. Um, you know, that take a lot of time. Um, but maybe you want that time back.

Speaker2:
Yeah. No, that that means a lot to small businesses, I'm sure, because you have so much on your plate that, you know, filling an empty spot. Obviously, it's an important thing. But if you can take some of that work off of your plate and put it onto someone else's, or in this case, on onto AI, um, that can be extremely, extremely helpful here. Um, what advice do you have for small businesses who may be looking to adopt AI tools like this in their recruiting efforts? Are there any sort of, you know, maybe best practices or things? You know, people, a lot of people even today, you know, AI has been around for a while now and has been evolving very quickly. Uh, but some people are still wary of it. Uh, you know, what would you say to maybe those folks who are kind of still a little bit wary of utilizing tools like this?

Speaker3:
You know, my biggest piece of advice is to start experimenting today, uh, with tools, you know, and trust. So, um, you know, it's like, uh, I'm not great at tennis. Um, but I want to be great at tennis. Uh, and so I have a coach, I, you know, constantly go out and try to improve and learn. Um, and a lot of trial and error. Um, you know, it's unfamiliar to me. It's kind of scary to get on the court and look silly. Um, uh, and so, uh, through practice, trial and error, experimentation, I'm getting better. Um, and I think AI is just like another tool that requires practice and experiment. Spend a lot of time trying out new tools, especially those that you trust and are already getting leverage from. They probably have AI features, and then find areas in your business that you're struggling to, uh, either complete or have time for and search and find AI tools that might help you with that. Um, and the first tool you find might not work. And don't get discouraged. Just like you know me on the tennis court when I keep hitting the net. Uh, you know, it just takes more time, more practice, maybe a different tool. Um, and as you experiment, you'll find stuff that works, and slowly you'll build up, you know, maybe a whole library of AI tools that are helping you do different parts of running your business. And so, again, just don't give up. Keep trying. Um, and don't get discouraged too easily.

Speaker2:
You sound a little bit like me when I tried to take up tennis several years ago. Uh, except I had the tendency to launch the ball over the the fence around the court. And so I was I was like, maybe I should switch to baseball. I don't know, uh, it was, uh, it was an adventure.

Speaker3:
At least you can get it over the net.

Speaker2:
That's right, that's right. I had at least that part down. Um, well. Very good. Uh, Andrew, just about time for us to wrap up here. But anything else that you wanted to touch on here? You know, maybe where folks can go to learn more information?

Speaker3:
Yeah. Of course, if you're a small business in the US, uh, and you're, you know, struggling to hire. And one time back, uh, you can visit LinkedIn.com, uh, to learn more and get started and save. Save, hopefully six hours a week.

Speaker2:
There you go. That's what they're reporting now. So then hopefully if folks out there who are small business owners want to, um, find out more, they can go there to the website. We'll direct them in that particular direction and hopefully save some time as well. Andrew Shimkus Senior Director of Product Management at LinkedIn. Thank you so much for joining me and talking about this. Really do appreciate it.

Speaker3:
Thank you so much for having us.

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