Federal retirees enjoy what may be the most flexible health-coverage decision in the American retirement landscape: the ability to carry the Federal Employees Health Benefits (FEHB) program into retirement, to add Medicare Part B (or not), to suspend FEHB temporarily to try Medicare Advantage, and to keep the same plan they had during their working careers. That flexibility is valuable — FEHB family premiums in 2025 average roughly $700 per month, of which the government pays about 72%, leaving the retiree with roughly $200 monthly — but it also produces a steady stream of bad decisions, because the trade-offs are not obvious and the wrong choice can lock in higher premiums or inferior coverage for life. This guide walks through the rules and the common scenarios.
FEHB in retirement: the 5-year rule
FEHB coverage can continue into retirement if the retiree meets the "5-year rule": the employee must have been enrolled in FEHB (or covered as a family member) continuously for the five years immediately before retirement, or for the full period since the first opportunity to enroll. The rule is administered by the Office of Personnel Management under 5 U.S.C. § 8905 and is intended to prevent employees from waiting until they need coverage to enroll.
Retirees who meet the 5-year rule continue FEHB coverage with the same plan, the same benefits, and the same government contribution — roughly 72% of the weighted-average premium, capped by statute — that they had as active employees. The retiree's share of the premium is deducted from the FERS or CSRS annuity and is not tax-deductible for most retirees, though retirees with substantial medical expenses may be able to itemize on Schedule A.
Several exceptions relax the 5-year rule. Employees who retired under the discontinued service retirement or optional early retirement provisions of the Federal Employees Retirement System, and who met the 5-year rule at the time of retirement, retain FEHB. Employees enrolled in TRICARE or CHAMPVA can count those programs toward the 5 years, provided they are enrolled in FEHB at retirement. And spouses of federal employees who die in service or after retirement can continue FEHB coverage under the survivor annuity, provided the deceased employee met the 5-year rule at the time of death.
Medicare Part A and Part B basics
Medicare Part A (hospital insurance) is premium-free at age 65 for anyone with 40 quarters of Social Security-covered earnings — equivalent to 10 years of work paying Social Security taxes. Most federal employees meet this threshold through their FERS-covered service alone, since FERS employees pay Social Security tax on their federal earnings. CSRS employees, who do not pay Social Security tax on federal earnings, may need to rely on non-federal work or a spouse's earnings record to qualify for premium-free Part A.
Medicare Part B (medical insurance) requires a monthly premium, set annually by the Centers for Medicare and Medicaid Services. The 2025 standard Part B premium is $185.00 per month, deducted from Social Security payments for retirees who are receiving them. Higher-income retirees pay more through the Income-Related Monthly Adjustment Amount (IRMAA), discussed below. Part B covers physician services, outpatient care, durable medical equipment, and many preventive services — coverage that FEHB plans also provide, which is why the decision to enroll in Part B is not automatic for FEHB-covered retirees.
The Part B enrollment window opens during the seven-month Initial Enrollment Period around age 65 (three months before, the month of, and three months after the 65th birthday). Retirees who delay Part B beyond this window without other credible coverage face a 10% premium surcharge per year of delay, permanently added to the monthly premium. FEHB coverage counts as credible coverage, but only if the retiree was actively employed — for retirees, FEHB alone does not waive the late enrollment penalty.
How coordination of benefits works
When a federal retiree carries both FEHB and Medicare, the two plans coordinate to cover the same medical services. For active employees, FEHB pays first and Medicare pays second (if the employee has Part B). For retirees, Medicare pays first and FEHB pays second — a reversal that surprises many newly retired federal employees. The reversal is codified in 5 CFR § 890.46 and applies to all FEHB plans.
In practice, this means Medicare processes claims first, paying the amounts it covers, and FEHB then pays according to its plan terms — typically covering deductibles, coinsurance, and any services Medicare does not cover, such as certain preventive care. The retiree is responsible for any out-of-pocket costs that neither plan covers. Most FEHB plans waive their deductibles and coinsurance for retirees who have both Part A and Part B, which effectively makes Medicare the primary payer and FEHB a Medigap-style supplement.
The coordination means that the question of whether to enroll in Part B is essentially a question of whether the additional premium is worth the additional coverage. For retirees with FEHB plans that already provide broad coverage and low out-of-pocket costs, Part B may add little value. For retirees with high-deductible FEHB plans or chronic conditions requiring frequent outpatient care, Part B can substantially reduce out-of-pocket spending.
Suspending FEHB for Medicare Advantage
A federal retiree who enrolls in a Medicare Advantage (Part C) plan can suspend FEHB coverage — a unique option that lets the retiree try Medicare Advantage without permanently giving up FEHB. The suspension is governed by OPM regulation at 5 CFR § 890.6a and applies only during the annual Open Season (typically the second Monday of November through the second Monday of December). The retiree must be enrolled in Medicare Parts A and B to suspend FEHB for Medicare Advantage.
During the suspension, the retiree pays no FEHB premium and receives no FEHB benefits — all coverage comes from the Medicare Advantage plan. If the retiree is dissatisfied with Medicare Advantage, they can re-enroll in FEHB during the next Open Season without having to answer medical questions or wait for coverage to take effect. This re-enrollment right is the most valuable feature of the suspension rule, because ordinary FEHB enrollees who drop coverage cannot re-enroll later unless they are covered as a family member under another federal employee's enrollment.
The suspension option is one reason some financial planners recommend that federal retirees at least consider Medicare Advantage, even if they intend to return to FEHB. Many Medicare Advantage plans offer $0 premiums (beyond the Part B premium), dental and vision coverage, and fitness benefits that FEHB plans typically do not include. The trade-off is that Medicare Advantage plans use provider networks and require referrals for specialists, while FEHB PPO plans generally allow direct access to any provider.
IRMAA: when income matters
The Income-Related Monthly Adjustment Amount (IRMAA) adds surcharges to Medicare Part B and Part D premiums for retirees whose Modified Adjusted Gross Income (MAGI) exceeds certain thresholds. For 2025, the surcharge tiers begin at MAGI above $106,000 for single filers and $212,000 for married filing jointly. The income used is from two years prior — 2023 income is used to set 2025 IRMAA — which means retirees with a one-time income spike (such as a large TSP withdrawal or Roth conversion) can trigger IRMAA for years after the spike.
The Part B IRMAA surcharges for 2025 range from $74.00 per month (for MAGI between $106,000 and $133,000 single, or $212,000 and $266,000 joint) up to $628.90 per month (for MAGI at or above $500,000 single, or $750,000 joint). Add the standard $185.00 premium, and the highest-income retirees pay $813.90 per month for Part B alone. Part D IRMAA surcharges run from $12.30 to $85.50 per month on top of plan premiums, depending on income tier.
IRMAA can be appealed using Form SSA-44 if the retiree experienced a "life-changing event" — marriage, divorce, death of a spouse, work reduction, work stoppage, loss of pension, or loss of income-producing property. A one-time large withdrawal from TSP does not qualify as a life-changing event, which is why retirees planning Roth conversions or large withdrawals should model the IRMAA impact two years in advance. For more on IRMAA tiers and appeal rights, see our dedicated IRMAA guide.
Prescription drug coverage
Prescription drug coverage is one area where FEHB almost always beats Medicare Part D. FEHB plans typically cover the same formulary drugs with lower copays than Part D plans, and FEHB has no coverage gap (the "donut hole" was eliminated in 2025) and no annual or lifetime maximums. A federal retiree carrying FEHB does not need Part D — and enrolling in Part D while carrying FEHB can create coordination headaches without meaningful benefit.
OPM specifically directs FEHB plans to provide prescription drug coverage that is "actuarially equivalent" to standard Part D coverage, which means FEHB enrollees satisfy the Medicare Part D requirement without enrolling in a separate Part D plan. Retirees who drop FEHB to enroll in Medicare Advantage with prescription drug coverage (MA-PD) may find the prescription benefits comparable but rarely superior, and they lose the flexibility to return to FEHB outside of Open Season.
The most common mistake in the FEHB-Medicare decision is treating it as a one-time choice that cannot be revisited. Federal retirees should re-evaluate their FEHB plan annually during Open Season, especially after major life events such as a spouse's death, a chronic illness diagnosis, or a move to a new state where provider networks differ. The combination of FEHB plus Medicare Part B is the right answer for most federal retirees, but the specific FEHB plan and the Part B enrollment timing depend on individual circumstances. For more on the broader federal retirement picture, see our FERS retirement guide, and for help modeling retirement income that may trigger IRMAA, see our Social Security calculator.
Last reviewed June 6, 2026. This article is informational and does not constitute legal, tax, or financial advice. Consult a qualified professional for guidance specific to your situation.