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Frequently Asked Questions Insurance

What's the payback period if I decide to waive premium conversion solely on the basis of my Social Security benefit?

The Office of Personnel Management (OPM) did some calculations comparing the increase in take home pay to the loss of Social Security benefits at various income and Federal income tax levels. The results presented below show how many years of additional Social Security benefits it would take to make up for the take home pay you will lose by not participating in premium conversion. The calculations were simplified; they don't account for the fact that your take home pay will increase now, but you probably won't be receiving your Social Security benefits until many years from now.

The amount of your FEHB premium does not affect the calculations.

Salary Income Tax Rate* Years of Social Security Benefits To Recover Lost Pay
To $6,400 0% p
15% 11
28% 17
$6,401 to $32,100 0% 10
15% 31
28% 49
$32,100+ 0% 22
15% 66
28% 104

*Marginal Federal rate. If you don't know yours call your Payroll Office.

As you can see if you don't have to pay any Federal income tax, you lose the primary benefit of premium conversion.

But some individuals might still want to participate because their Social Security and Medicare taxes will be lower. You also can see that at very low earnings levels ($6,400 or less) the decision is less clear cut. OPM's statistics indicate there are less than 100 employees in this category.

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