Assessment of Federal Employees' Group Life Insurance Program

Gao ID: GGD-86-28 April 7, 1986

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.


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