Assessment of Federal Employees' Group Life Insurance Program

GGD-86-28: Published: Apr 7, 1986. Publicly Released: Apr 7, 1986.

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In response to a congressional request, GAO: (1) compared the Federal Employees' Group Life Insurance (FEGLI) Program to private sector programs; (2) determined whether the program's premiums could be reduced; (3) identified any needed program reforms; and (4) analyzed FEGLI participation.

Congress intended that the FEGLI program be comparable to private sector life insurance programs. GAO noted that this objective has not been achieved because: (1) private sector plans no longer require their employees to share costs, while nonpostal federal employees pay two-thirds of the cost of FEGLI basic insurance; and (2) private sector employers typically provide basic life insurance coverage equal to 1.5 to 2 times an employee's pay, and FEGLI provides similar coverage only to employees age 40 and younger. GAO found that, although FEGLI has reduced its premiums by 44 percent during the past 10 years, the government could reduce employee costs by an additional 7.5 percent by: (1) updating the economic assumptions in the program to be consistent with those used in determining the civil service retirement system's costs; and (2) assuming responsibility for the FEGLI unfunded liability, which it created due to past funding insufficiencies. In contrast with other government life insurance programs which invest their available funds in special nonmarketable federal securities, the Office of Personnel Management (OPM) has employed various investment strategies for FEGLI funds. GAO found that the nonmarketable federal securities: (1) would be particularly appropriate for FEGLI investments because of their long-term nature; and (2) earned a higher return during 6 of the past 10 years. GAO noted that 90 percent of eligible federal employees, about 2.3 million, participate in FEGLI and 955,000 elect coverage for their families.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: Because OPM does not intend to act on this recommendation, it should be closed.

    Matter: Since total federal compensation currently lags behind the private sector and FEGLI is inferior to private sector programs, Congress should consider making FEGLI comparable to the benefits available to private sector employees.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: OPM recalculated FEGLI premiums using economic assumptions consistent with the civil service retirement system which, along with other changes, resulted in a 7.5-percent premium reduction for basic insurance.

    Recommendation: The Director, OPM, should reduce FEGLI premiums by: (1) recalculating program costs using economic assumptions consistent with those used in determining the cost of the civil service retirement system; and (2) eliminating the charge to employees for the unfunded liability.

    Agency Affected: Office of Personnel Management

  2. Status: Closed - Not Implemented

    Comments: Because OPM does not intend to act on this recommendation, it should be closed.

    Recommendation: The Director, OPM, should seek legislative authorization to permit the investment of FEGLI funds in special nonmarketable federal securities.

    Agency Affected: Office of Personnel Management

 

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