If thousands of federal employees are being laid off or their agencies are closing, they face significant financial and benefits-related changes. You can play a key role in helping them transition smoothly while adding value and building a profitable practice. 

Because these things are happening anyway you should be prepared to meet these opportunities and challenges head on. Here's a breakdown of what these former federal employees, and worried federal employees, will need you to help them review, consider and change, and how you can assist them:

Key Federal Benefits at Risk

Health Insurance (FEHB — Federal Employees Health Benefits)

Federal employees could be at risk of losing access to their FEHB plan upon separation.

They may qualify for temporary continuation of coverage (TCC) (coverage similar to COBRA coverage), but it can be costly. You should have alternatives and resources ready to recommend.

Private health insurance, Affordable Care Act marketplace plans, or employer-sponsored plans (if the employees move to private sector jobs) are alternatives, but if they've been career federal employees, this could be a foreign market to them. You should be prepared to coach and council the employees and be patient with helping them make this transition.

Federal Employee Group Life Insurance (FEGLI)

Coverage typically ends 31 days after separation.

For some, deciding what to do about life insurance could be really stressful.

Some of these employees may convert their FEGLI to an individual life policy, but premiums could be higher, and the process could be totally unfamiliar and overwhelming.

Alternative: Walk the employees through what can be converted and/or consider private term or permanent life insurance to replace what they feel is most important.

Thrift Savings Plan (TSP) — Federal Retirement Savings

Employees will need to decide whether to keep their funds in TSP, roll them over to an individual retirement account, or transfer the assets to a new employer's 401(k). That may seem straightforward, but these decisions will be foreign to some and stressful for others, so your patience and emotional support will be critical.

You can help the employees assess their investment strategies, point out possible penalty-free withdrawals (if the employees are age 55 or older and separating) and assist them in navigating these uncharted waters.

FERS Pension (Federal Employees Retirement System)

If the employees are not vested (less than five years of service), they may lose future pension eligibility, so calculate this potential loss and find out how much of this they may want to replace.

If they are vested, they may receive a reduced pension starting at age 62. Help them calculate this and develop a plan to not run out of money in retirement but ensure the surviving spouse has the resources to last out their lives.

For some, you may suggest they consider early retirement options or taking a lump sum (and what to do with that lump sum).

Social Security Considerations

Those eligible for the Federal Employees Retirement System (FERS) Supplement may lose it if they separate early, so help them figure out what and how this will impact them now and in the future the most.

You can play around with the number by showing illustrations to help see options for when to claim their Social Security to maximize benefits.

Long-Term Care (FLTCIP — Federal Long-Term Care Insurance Program)

Coverage may not continue if laid off, so explore how and when this could negatively impact them or their family and how much of this they might want to replace.

Private long-term care insurance or hybrid life/long-term care policies could be alternatives; however, there could be sticker shock and eligibility issues for them, so be prepared to be creative with funding options and product alternatives.

Federal Annuities and Survivor Benefits

Laid-off employees must decide what to do with their contributions, including conversion options and funding alternatives.

You can be useful in helping spouses assess the potential impact on their survivor benefits while having alternatives and creative ideas ready to demonstrate.

Unemployment Benefits and Severance

You can also help navigate their eligibility for unemployment and other separation federal benefits.

Some employees may receive severance; you can be critical in helping their spouses make proper budgeting and investment decisions around these benefits.

What You Should Review and Help Them Change

Budget and emergency fund: Income disruption requires reviewing expenses and increasing emergency savings while also providing emotional support.

Debt management: Help them inventory their expenses and minimize high-interest debt (credit cards, loans) before separation.

Insurance coverage: Council them on how to replace lost life, health, and disability insurance, sometimes with creative products and funding options.

Investment and retirement strategy: Define and adjust investment risk tolerance and optimize tax-advantaged savings, taking into account the impact on spouses and their needs now and in the future.

Estate planning updates: Review existing wills/council for appropriate will/trust if lacking any, coach on appropriate wording for beneficiaries, and asset protection strategies for now and in the future.

This is an emerging market being created in real-time. It has a shelf life of two to four years, so put your marketing hat on, be creative and proactive and use this opportunity to grow your client base and build for a successful 2025.

Lloyd Lofton is the founder of Power Behind the Sales and the author of The Saleshero's Guide To Handling Objections.

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