Episode 87 – Retiring school employees: moving from SEBB to PEBB
As a school district employee in Washington state, you have several choices when it comes to health care in retirement. One option is to enroll in PEBB, the Public Employees Benefit Board. You should apply no later than 60 days after your employer sponsored coverage ends and preferably sooner if possible. We talk with Laura from the Health Care Authority about this important decision and what you need to know.
Episode transcript:
[music intro]
Jenny
Welcome back to Fund Your Future with DRS. Well, today we’re talking about health insurance coverage in retirement, but specifically for employees who work in school districts in Washington state. So, while these folks are working, they have insurance coverage through the School Employees Benefits Board or SEBB. But when those folks retire, they’re eligible to transfer their insurance coverage to the Public Employees Benefits Board, or PEBB.
And both of these boards are administered by the Washington State Health Care Authority. And there can be some kind of nuance things about making this transition if folks choose to do that. So we’ve invited Laura from the Health Care Authority to talk with us about how employees can make this transition successful. Welcome, Laura.
Laura
Thank you so much for having me.
Seth
So, we traditionally think about folks who are retiring from schools, ending work in June. The school year ends in June. But I think oftentimes people don’t realize that those folks are still usually under contract through July and August. They’re receiving paychecks, they’re earning retirement service credit. Their insurance is still in place. So we officially consider them retired in September.
So as Jenny was describing, those folks are on SEBB coverage, the school insurance through August, and then their retiree coverage can start in September. So just to start off, Laura, when should a person who’s in that process contact the Health Care Authority about starting their coverage?
Laura
Yes. So, we love to hear from you early. Typically… well, the actual rule is that they have 60 days from the day that their employer-sponsored coverage ends to get the paperwork in to us. But it’d be great to sort of reverse that and think, I want to get it in 60 days before my employer sponsored coverage ends.
There’s quite a few different things that we need from our retirees when they’re onboarding into the PEBB retiree program. So, the first thing is going to be their retiree enrollment form. That can be submitted to us via our online portal, Benefits 24/7 or, via paper form. If folks are eligible for Medicare, then they do need to submit proof that they’ve enrolled in part A and part B of Medicare.
And if they’re enrolling dependents, then sometimes we have some extra documentation that we might require for dependent verification. And lastly, depending on how a person chooses to pay for their coverage, they may need to submit a first month’s payment to us in order to get them officially enrolled. So, thinking about it early is a great idea. If someone needs to enroll in Medicare, they allow you to start that process up to 90 days early.
So, kind of think about kicking it off that 90-60 days early. That is going to help you out a lot as you move through the process.
Seth
That’s perfect. That makes sense. So, thinking about like April, May, maybe early June, you’re starting to think about it. It’s good to know, though that people do have 60 days after their coverage ends. We certainly get the occasional person who’s worked in a school who contacts us in late September and says, oh yeah, by the way, I retired.
And so, they can still make it happen, but it is a deadline. What happens if people miss that 60 days? So, if it ends up being January of the following year and they realize, oh no, I forgot to sign up for health care through PEBB.
Laura
Yeah. Unfortunately, if they’ve gone past that 60 day deadline, then typically they are going to get denied. If they enroll, their paperwork would come in and they would be issued a denial. Now the denial comes with appeal rights. So then that person could then appeal the decision. You know, maybe they could prove extraordinary circumstances or something like that.
But typically those are going to be denied and you would not be able to enroll in the program. So that’s why we really emphasized earlier better than later. But let’s say we get that paperwork on the 59th day of their 60 days. At that point, they would get retroactively enrolled so that their coverage begins the first of the month after the other coverage ends.
But of course, that’s never ideal, because you don’t want to have to go back and pay for coverage that you maybe weren’t aware that you had at the time, so you didn’t really get to utilize it. But of course, that is what we would do so that there’s no gap in the, coverage that you would have. But again, if you can get it in early so that we can get you in a timely, that’s always going to be ideal.
Jenny
Gotcha. So, we kind of mentioned that some of these school employees will have their contract end in August. But we also know that other school employees maybe like janitorial staff or transportation, will have their contract end in June. Is it a similar sort of schedule in terms of the 60 days beforehand?
Laura
Yeah, exactly. So, if they’re going to end in June, then let’s see. That would put us, you know, you could start now. You could get that in any time. It would be similar if you can do it early, that’s fantastic. But you still have that 60 days from the date that your other coverage ends. So similar. Yeah, exactly the same really.
Jenny
Perfect.
Seth
So, I think we also frequently hear from folks who they’re ending employment in the school, and they’re going to maybe delay collecting their pension. They’re stopping work at 62 or 60. Are there things that they should consider as far as options for either starting insurance coverage or if they’re going to go on to a spouse’s coverage? What sort of options or things should they keep in mind?
Laura
Yeah. So, if someone is essentially separating employment, but in their mind they’re not officially retiring, then they may still be eligible for the PEBB retiree benefits. It depends on a few factors. So number one is going to be the pension that they’re in. Most of the PERS/SERS 2 pensions, you don’t have to be drawing your pension immediately in order to be eligible for our program.
You just have to meet those age requirements in the years of service requirements. But maybe you are separating, but you don’t actually want our benefits yet, but you want to have the option to have them in the future. And so that’s also a possibility. But we do need a form. So, we need you to formally defer or delay enrollment with us by sending us a form with your intention to do so.
And that’s the same form that we used for, enrollment. You’ll just select a different option about deferring. And you can absolutely do that. The deferral reasons are pretty narrow, though. So, a person wants to be very sure that they are staying within the perimeters of the deferral reasons we have. But really common reasons would be their spouse is still working.
So, they’re going to, enroll as a, dependent on their spouse’s coverage, or maybe they’re going to take coverage through the Health Benefit Exchange because they’re not eligible for Medicare yet. They’re finding a good rate there. So those would be some reasons that a person could defer. With our program, the deferral rules are the same as the enrollment rules.
Essentially, if you’re eligible to defer, you would also have to be eligible to enroll. And the way we’ll determine that is by you submitting your paperwork to us so that we can look through, everything and see if we can, award you that official deferral.
Jenny
Gotcha. So really, if folks are planning to defer or enroll, they really still need to get that paperwork in.
Laura
Yes, absolutely.
Seth
So really, any time you’re ending employment. Yeah. And you’re thinking about your insurance options afterwards. Good idea to follow up with the Health Care Authority and check to see “can I enroll, can I defer?” and then go from there.
Laura
When you get that deferral, you’ll get an official letter from us that says you are approved for deferral on such and such date. And then you’ll keep that in your files. And then when you return later, you can submit that. Let us know again that you had officially deferred. It’ll also be in our system. And then we’ll go from there.
Seth
Maybe we can just walk through an example of what this would look like if I’m retiring and my wife is still working and I’m going to defer and stay on my wife’s insurance. I’m a teacher and I’m going to stay on my wife’s insurance. And then she retires. So, I’ve deferred my coverage. And then basically I have to fill out a new enrollment with Health Care Authority whenever? Once again, within 60 days of my coverage ending. Is that same deadline apply?
Laura
Yep. It’s that kind of magical 60 day number. So, if you separate, you go on your spouse’s coverage for however many years, and then your spouse retires and you both want to come over to the PEBB retiree coverage, then you would submit enrollment at that point with your spouse. You would have had you had that official deferral on file.
And then what we would require is proof that you had other enrollment from the date of your deferral until the date that that other enrollment ends. So typically that’s going to be coming from the spouse’s employer or the health care plan that you were on during that period of time. And that would be one of the requirements for a return to deferral.
Seth
So same scenario: we end up both retiring and we have started PEBB retiree insurance. Based on my previous employment, if I pass away and I have a survivorship option and my spouse wasn’t a PEBB or SEBB member, are they able to continue on in that insurance program or is that insurance no longer available to them since they weren’t a member of the system?
Laura
Right. So, if you have a spouse who is enrolled with you, and you are, you’re the reason you’re in PEBB. So, you were the, the PEBB eligible person and you got them on as a dependent and you pass away first. They do have that option to continue as a surviving spouse. So, there is a little bit of paperwork that we would need from that person, because essentially then they get enrolled in their own account and they close out the account that had two people on it. But yes, that is an option that’s available.
Jenny
That’s awesome.
Laura
Yeah.
Seth
Yeah, I know frequently people… anytime you have to change insurance coverage, it oftentimes means you have to change medical providers as well. Like it can be significantly disruptive. And I can imagine if you were on that coverage for an extended period of time, that may be something that you would want to consider as staying on that coverage.
So, I know, Laura, one thing that comes up frequently with folks who are thinking about retiring early, so before 65 is, well, I’m not yet Medicare eligible, what options am I going to have as a retiree and how much is it going to cost? But could you just talk to us a little bit about the difference between retiring before 65 and after 65, when it comes to insurance options?
Laura
Yeah. So, if you retire after 65, then you’re eligible for Medicare. And that’s the instance in which we would require you to enroll in Medicare Part A and B, provide proof of that enrollment and then maintain that enrollment. And then your plan options in our portfolio are going to be plans that work with Medicare. So, we have Medicare Advantage plans, Medicare supplement plans.
But if you’re a retiree who is not yet eligible for Medicare, you can still be a PEBB retiree in our program, but you would choose a non-Medicare plan. And the non-Medicare plans that we have are actually the same plans that are available to PEBB active employees.
So, the folks who usually kind of see the biggest difference are going to be those coming from SEBB. Because these will be new options for them. But we do have several plans that are non-Medicare plans that are available. But like you mentioned, the cost is kind of the big thing because those plans you no longer have your employer contribution and you’re not yet eligible for the Medicare subsidies. So, they are going to be high cost compared to what you’ve paid for as an employee.
So sometimes that’s where the deferral might come in. Sometimes people might look at deferring and, you know, doing something if they’ve got other opportunities through the Health Benefit Exchange or a working spouse. But the options are there. And we do have a lot of folks who come on before they’re 65. Maybe it’s a few months and then they become eligible for Medicare, and it’s like a little bit of a party. They get that reduction in their premiums and their Medicare card, and then they choose a different plan.
Seth
From what I looked at in the past, it’s somewhere between like $1,000 -$1,500, somewhere in that ballpark. Does that sound right?
Laura
I would average it, yeah, probably around a thousand. And of course, depending on when a person is listening to this podcast, you know, things change a lot. But yeah, it is sticker shock when you come from your employee. You know, what you pay in as an employee every month out of your paycheck, and then you see how much those plans are without that employer contribution.
And another thing I want to mention too, is the non-Medicare plans don’t include routine vision benefits. So if you are someone who needs that with your coverage and you choose a non-Medicare plan, you can also choose a standalone vision plan. And that’s just something you know, we like to make sure people are aware of because as employees those are typically either embedded in the plan or covered for us by our employer.
And then the other piece is the dental coverage. We’ve been talking a lot about just medical coverage, but we also have dental coverage that’s available whether your Medicare or non-Medicare, the rate is the same for that coverage.
Seth
That makes sense. It does feel like something that if you’re thinking about retiring early, setting some money aside, saving through DCP, having some additional way to think about paying for that. And as you describe to me, it sort of reminds me of like, when a person becomes 65, it’s like paying off your car, your car payments stop.
And then it’s like this big relief of like, “oh, I’ve freed up this money in my overall budget.” That might be a helpful way for folks to think about it. I know we’ve been talking a lot about, school employees and teachers, when they retire. It is frequently the case that those folks also then return to work as a substitute.
Maybe as a, occasional bus driver. They have a connection to the community. They have an opportunity to maybe make a little bit of additional income. Can you talk a little bit about how that works as they’ve transitioned from SEBB coverage to PEBB coverage as a retiree. How does that work as a retiree when you’re working once again back in a school district, but you have this retiree insurance coverage?
Laura
Yeah. So, if … you’re already enrolled. You’re just cruising along with your PEBB retiree coverage and you decide to go work, maybe as a substitute or a bus driver. So, you can do that if you work less than 630 hours, then you can stay on that retiree or yeah, you can stay on the retiree coverage. But if you exceed the 630 hours, you would be dis-enrolled from the PEBB retiree coverage and you would go into the employee sponsored coverage, through PEBB or SEBB.
This is a rule that’s dictated for our program by Medicare that if you work above that hourly amount, then we do have to take you off the retiree program. But that’s not forever. When you stop working, then you can come back and go back on to the retiree coverage.
Jenny
And then just to clarify, is that 630 hours for the school year?
Laura
Yes. That’s right. So, 630 hours during the school year, which is considered September 1st through August 31st.
Jenny
Okay, perfect.
Seth
And I think one thing that is important, or at least that I have heard from retirees in that situation, Laura, you mentioned this earlier, but the coverage options are different between the SEBB and the PEBB program. So, if you’re a retiree on PEBB coverage and then you work more than 630 hours and have to go back onto the employee coverage, you might have different insurance coverage options that you then have to choose from.
And then when you go back to being a retiree in the PEBB program, you would have different options again. So you may in those cases, bounce back and forth between different coverage, providers, is that a fair way to describe it?
Laura
Yes, that’s right, because you are going to have different options. And it’s something to consider too, because, you know, maybe you’ve paid into your deductible in one plan and then you have to start over again, if you start another plan. So, it’s kind of something to think about if you return to work and just being aware of exceeding that 630 hours and what that might mean for that decision.
Seth
That’s a really good point, too, because there are different rules. If you’re a retiree on how many hours you can work and still collect your pension, and that amount is higher, and so people might get that number in their head and then realize that, like, oh, I’ve exceeded my hours for insurance purposes. So just something to coordinate and think about.
And our thresholds run on the calendar year instead of the school year. And so can definitely cause some confusion for folks.
Jenny
But just an overall, as long as they stay under that 630 hours for the school year, then they can just stay on the same retiree coverage and be good to go.
Laura
Yep. That’s correct.
Jenny
Laura, is there any other things that people should know?
Laura
Yeah. So, one of the things I like to make sure people are aware of, it’s a big decision when you join the program. And a lot of times people really agonize over what plan to choose. Sometimes it comes down to two and they’re, you know, really going back and forth between the two plans. And so, what I just want to make sure people know is that we do have that open enrollment, just like you had as an employee.
We have that annual open enrollment every year. So, every year you have that opportunity to change your plan when you are Medicare eligible, you can change between a Medicare Advantage plan and a supplement plan every year if you wanted. There’s no restrictions, there’s no underwriting, waiting periods or penalties. That’s a big advantage of getting your benefits through our program.
You have those options, and if you’re retiring where your coverage is going to start in October, I always say, well, that’s a great time. You know, it’s just a few months left of the year. That’s a great time to kind of test drive a plan, and then you have that opportunity to change to do something different if you want. So, I just like to make sure that people are aware of that.
And then lastly, the other thing that I want to say is that once you join the program, outside of that scenario, we discussed where if you return to work and you went on to employee benefits outside of that scenario, if you choose to leave the program to try a plan outside of our program, unfortunately that would mean you couldn’t return to us unless you went back to work in a benefits-eligible position.
So, it’s really important to know that once you’re in, if you leave, it’s going to disqualify you from returning. So, I like to make sure that people are aware of that as well.
Seth
So, can I ask one clarifying question there: so I could defer my coverage as a retiree and try some other plan? No, I can’t defer. I see you shaking your head. No.
Laura
Well, if you deferred, there’s those really specific reasons that you’d be approved for deferral. Yep. So, if you deferred you could go on a spouse’s employer coverage or coverage through the Health Benefit Exchange. But you couldn’t defer for instance, if you wanted to try a Humana Medicare Advantage plan outside of PEBB, then you think, “oh, I’m going to see how that goes for a year,” you wouldn’t be able to come back in that instance, because that’s not what we consider a valid deferral reason.
Seth
That’s really helpful context, because I think your point about the open enrollment period, I think is really key to remind people there are some decisions in this overall retirement process that are really one-time decisions. Like, you have to make this decision within 60 days to enroll or defer. But there are other decisions where you can change once a year or whenever you want, like understanding what are the critical decisions or the critical touch points that you have to make, and what are the things that you have ongoing flexibility in.
And it’s not always clear when you’re going through the process to understand that. So, helping maybe make it a little easier to sleep at night as well, knowing that, like, I can make this decision and I can revisit it later.
Laura
Exactly. And the open enrollment period is always going to be the Monday before Halloween. And then it ends the Monday before Thanksgiving. So, for 2026, the year we are recording this podcast, that makes it October 26th through November 23rd.
Jenny
Perfect. I love that you guys have solidified the dates on that. So, it’s just really easy to remember with those holidays.
Laura
Yes. Always thinking ahead.
Seth
Great. Well, thank you for joining us Laura. We know, at DRS, we’ll get one question about retirement and then five questions about insurance options. And it is the thing that people are most nervous about and interested in understanding. And there as you were describing when you’re working, a lot of this is just taken care of for you. And so, [we’re] trying to provide more education.
And we really appreciate the partnership with the Washington State Health Care Authority. People don’t often realize that DRS and HCA are two different organizations, but we do work closely together on a lot of things. And so, [we] really appreciate you coming on the podcast and sharing with our listeners about this really important decision that people have to make.
Jenny
Yeah. And I guess as a follow up question as well, are there easy tools or resources that you like to direct school employees to kind of look at these comparisons of coverage?
Laura
Yes. I’m so glad you asked. So, you can certainly find us on our website, which is www.hca.wa.gov. You can call our customer service, we can help you there as well at 1-800-200-1004.
And then it might be a good idea to talk about some events that we have. Coming up in June, DRS will be in the lobby at Cherry Street Plaza for the Health Care Authority, so you can come in for a lobby visit. You can speak to our staff about your retiree health benefits, and you can speak to someone from DRS, one stop shop. And that’s going to be at the Cherry Street Plaza at 626 Eighth Avenue Southeast in Olympia. And these are going to be first-come, first-serve appointments. Our lobby hours are Monday through Friday from 8 to 4. So, if you’re somewhat local and you like to take care of things in person, then that would be a great option for you.
Jenny
Excellent. Thanks for plugging that. We really appreciate it. And we’re getting this podcast episode out in the month of May. So, folks can take advantage of that. And from what I heard you say, the big message is to have folks hopefully start thinking about this at least 90 days before they’re planning to retire, so that they have ample time to get in all of their paperwork.
Laura
And I would say no earlier than 90 days, because there are things that are important about signature date. So sometimes earlier than 90 days is too early. But 90 days is the sweet spot.
Jenny
Nice. Okay, perfect. All right. Well, thank you so much, Laura.
Laura
Thanks so much for having me.
[music outro]
Disclaimer
Thanks for listening. And now we’d love to hear from you. What topics would you like to hear about? What questions do you have for us? Send an email to drs.podcasts@drs.wa.gov that’s drs.podcasts@drs.wa.gov. The Department of Retirement Systems provides this podcast as a public service, but it’s neither a legal interpretation nor a statement of DRS policy.
References to any specific product or entity do not constitute an endorsement or recommendation. The views expressed by guests are their own, and their appearance on the program does not imply an endorsement of them or any entity they represent. Views and opinions expressed by DRS employees are those of the employees and do not necessarily reflect the view of DRS or any of its officials.
