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No. Again, premium conversion has no effect on retirement benefits or retirement calculations.
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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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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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On-board Employees
For most eligible employees, premium conversion becomes effective on October 8, 2000 [pay period 22], with the first pre-tax FEHB deduction occurring with the associated pay date near the end of October.
New Employees/ Employees with an Initial Opportunity to Enroll in the FEHB
If your initial opportunity to enroll in FEHB occurs on or after October 1, your agency must deduct your premiums on a pre-tax basis from your pay effective with the first applicable payroll period beginning on or after October 1, 2000, unless you have waived participation in premium conversion.
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Based on information from the Department of the Treasury, the average Federal employee who participates in the FEHB Program will save $434 per year in Federal income, Social Security and Medicare taxes. In most jurisdictions, state and local income taxes also will be reduced.
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Yes, but you need to opt-out or waive participation in premium conversion. You must file a waiver form by the date set by your agency, but not later than the day before the effective date of coverage.
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Enrollment or participation in premium conversion ends if you terminate or are terminated from Federal government employment. If you are eligible and elect to participate in Temporary Continuation of Coverage (TCC), you pay those premiums directly on an after-tax basis.
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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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Participation in premium conversion is automatic for eligible employees.
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Transfer-in FEHB Enrollment
Under CSRS/FERS, your employing office must transfer-in your FEHB enrollment as of your effective date of participation in premium conversion. Procedures and guidelines pertaining to the transfer of the FEHB enrollment of reemployed annuitants who participate in premium conversion are outlined in
Payroll Office Letter P-00-13 [129 KB], FEHB Premium Conversion.
Employing Agency Must Contribute Employer Share of Premium
Prior to premium conversion, the employer share of the FEHB premium for reemployed annuitants under CSRS/FERS was paid from an OPM appropriation. Effective with premium conversion, your employing office must contribute the employer share of the FEHB premium for all reemployed annuitants that are enrolled in the FEHB as employees. The employer contribution for reemployed annuitants will be remitted to OPM in the same manner as that for other employees.
Separation from Active Service
Your participation in premium conversion ends on the last day of the last pay period as an employee. When you separate from active service, your FEHB enrollment must be transferred back from your employing agency to OPM or the appropriate retirement system.
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Premium conversion does not affect your EITC. The EITC is based on Total Earned Income (TEI), which includes both taxable and nontaxable earned income. Taxable earned income includes money earned as wages, salaries and tips while nontaxable earned income includes salary deferrals and reductions. Premium conversion falls under the category of nontaxable earned income because salary is reduced by an amount equal to a health insurance premium payment and a health insurance premium is then paid with these pre-tax dollars. The EITC amount is unaffected by premium conversion because premium conversion shifts health insurance premium payments from taxable to nontaxable earned income, both of which are included in the TEI when calculating the EITC.
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Mary J. is a single parent with one child who will turn age 26 at the end of March. She wants to maintain her Self and Family coverage until that time. The loss of an eligible child is a QLE, and changing her coverage from Self and Family to Self Only is on account of and consistent with that QLE. At the end of March, Mary changes her coverage to Self Only.
Michael M., a federal employee, has Self Only coverage and so does his wife, who is employed in the private sector. In June, she gives birth to their first child. Michael wants to cancel his FEHB coverage, saying that his wife has picked up family coverage that includes him and their new child. Michael's request is on account of and consistent with his QLE.
Monique K. begins an approved period of leave without pay (LWOP) to attend school. She elects to keep her FEHB coverage, and incur an obligation to her employing agency. She may not change her FEHB coverage, but may change her premium conversion election.
Agencies must determine acceptable documentation for a qualifying life event (QLE). Acceptable documentation includes birth and death certificates, marriage licenses, divorce papers, etc. When your QLE is one where documentation is not readily available the IRS has indicated that your certification of coverage under another health plan is sufficient.
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If you are not participating in premium conversion, you may elect to reduce your FEHB coverage at any time. As a participant in premium conversion you will be able to reduce FEHB coverage only during an FEHB Open Season or in conjunction with a qualifying life event (QLE). IRS rules govern these non-Open Season opportunities for those who participate in premium conversion.
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We ensure that the plans provide the benefits described in the FEHB Program brochures. The health plans often make Preferred Provider Agreements and other arrangements with providers which are contractual arrangements between the carriers and the providers. Because of the discounts that a plan realizes through its contracts with PPO providers, the plan is able to reimburse a higher percentage of the negotiated PPO allowance when PPO providers are utilized. It would not be cost effective for the plan to reimburse at the higher level when the provider is not giving a discount. Furthermore, much of the benefit you receive from using PPO providers comes from the PPO provider's agreement not to bill you for more than the negotiated PPO allowance. Non-PPO providers are under no such obligation. In some areas of the country, it is much more difficult for a plan to arrange PPO contracts for all types of services. In areas where there are no PPO providers, you can still receive your plan's regular benefits, as opposed to the incentivized PPO benefit.
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FEHB premiums deducted from the pay of a participating employee are deducted BEFORE FICA and Federal income taxes. When an employee waives participation in premium conversion, FEHB premiums will continue to be deducted from the pay after FICA and Federal income taxes. In all cases, deductions for CSRS or FERS will continue to be made first.
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No. Federal retirement, thrift savings and life insurance benefits are not affected by participation in premium conversion.
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