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Frequently Asked Questions Insurance

Premium Conversion

  • Under OPM's premium conversion plan, the qualifying life events (QLEs) that may allow you to change your premium conversion election are:
    • Changes in entitlement to Medicare or Medicaid for you, your spouse or dependent
      • Your spouse or dependent first becomes eligible for coverage under Medicare or Medicaid
      • You, your spouse or dependent loses entitlement to Medicare or Medicaid
    • Employment Status
      • Change in your employment status or that of your spouse or dependent from either full-time to part-time, or the reverse
      • Start of your spouse's employment
      • Your spouse or dependent is employed in a position that offers health insurance
      • Start or end of an unpaid leave of absence by you, your spouse or your dependent
    • Other
      • Significant change in the cost or conditions of your spouse's health care coverage related to your spouse's employment that affects you.
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  • The annual Open Season for premium conversion coincides with the FEHB Open Season, which is held each year from the Monday of the second full workweek in November through the Monday of the second full workweek in December.
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  • Taxes are avoided, not deferred. Premium conversion eliminates the taxes you pay on the part of your salary that pays your FEHB premiums. Since your taxable income is lower with premium conversion, the amount you owe in taxes is reduced. You won't owe the IRS money in April because of premium conversion.
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  • You may change your participation status in premium conversion during the annual FEHB open enrollment period, or during the calendar year if you have a qualifying life event. Qualifying life events include marriage, birth of a child, or change in a spouse's employment.
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  • You are generally better off with premium conversion. Your tax savings are slightly less, since you don't pay Social Security taxes. However, a reduction in Social Security benefits is not an issue for you since Social Security is not a component of your Civil Service Retirement. Even if you have Social Security coverage as a result of a non-Federal job, premium conversion would not change your Social Security benefit.
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  • If you participate in premium conversion, you are not able to deduct FEHB premiums as a medical deduction on your income tax return. That is because you are no longer paying the premium--it's being paid by your employing agency.
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  • No. Under section 125 of the Internal Revenue Code, pre-tax benefits are only available to current employees.
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  • Regardless of your marital status, and the number of dependents you have, if you :
    • pay no Federal income tax, or
    • earn less than $6,400 per year
    you should give serious consideration to waiving participation in premium conversion.
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  • Probably not. Premium conversion affects only your Federal salary, and Social Security is based on total taxable earnings. The earnings from your non-Federal job will be added to your Federal taxable earnings.
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  • Yes, once you participate in premium conversion, your participation continues automatically unless you elect not to participate. Each year during FEHB Open Season you may decide whether or not to participate for the following year.
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