Appendix B: FDIC Premium Conversion
Section 125 of the Internal Revenue Code allows an employer to provide a portion of an employee's salary in
benefits rather than cash. Instead of paying a certain amount to an employee as taxable income, the employer
uses it to purchase benefits for the employee. Several years ago, the Federal Deposit Insurance Corporation
(FDIC) established the Premium Conversion Plan as a tax-savings benefit for its employees. The FDIC Premium
Conversion Plan enables employees to pay their share of Federal Employees Health Benefits (FEHB) Program
premiums on a pre-tax basis, which reduces an employee's taxable income by the amount of health insurance
premiums. As a result, taxes are calculated on a lower income base.
This feature is offered and administered by the FDIC and is not a provision of the FEHB Program's Premium
Conversion Plan. FDIC employees will continue to be covered by the FDIC-sponsored premium conversion
plan. Both plans comply with plan requirements under Section 125 of the Internal Revenue Code and provide
the same benefit of lower tax liability. For specific details about the FDIC Premium Conversion Plan, employees
assigned to the Office of the Inspector General should call the OIG Human Resources Branch at 703-562-6419.
All other employees should contact the Benefits Hotline at 1-877-334-2111, *925 from any FDIC facility or TDD
1-877-334-3092.
| Open Season Dates |
November 12, 2007 . December 10, 2007 |
| Effective Date |
Your change in tax treatment of your health insurance premiums will become effective January 6, 2008 (Pay date of January 17, 2008). |
| Eligibility |
All employees who are eligible for and elect FEHB coverage. (By law, the Premium Conversion Plan is not available to retirees.) FEHB premiums are withheld on a pre-tax basis automatically, unless you waive this provision. |
| Elections |
If you would like to have your 2008 FEHB premiums paid with after-tax money, you must
submit a completed Premium Conversion Waiver/Election form to the Benefits Center,
3501 N. Fairfax Drive, Room VS-A-1027, Arlington, VA 22226 during this Open Season. OIG
employees should submit the waiver form to the OIG Human Resources Branch, 3501 N.
Fairfax Drive, Room VS-E-9117, Arlington, VA 22226 . Premium Conversion Plan Waiver/
Election forms may be obtained from the FDIC Net or the Benefits Hotline.
|
| How does PCP Work? |
Under the health insurance premium conversion arrangement, your taxable income is
reduced by the amount of health insurance premiums withheld for basic pay. The FEHB
premium deduction will be withheld from pay as "pre-tax money," which means the premium
amount is not subject to income, Social Security, or Medicare taxes. You save on
Federal income taxes, and where applicable, also on state and local income taxes. This
premium conversion feature applies only to health insurance premiums you pay under the
FEHB Program. Dental and vision insurance premiums are withheld on a pre-tax basis
under the Flexible Cafeteria Benefits Plan . "FDIC Choice."? |
| Impact of Premium Conversion on Benefits |
Paying for health insurance premiums on a pre-tax basis does not affect your other benefit
programs; it only changes the way you pay for your share of the FEHB premium cost.
Other benefits such as life insurance and retirement will continue to be based on adjusted
basic salary before biweekly premiums are deducted.
Most employees prefer paying their premiums with pre-tax money because they save on
taxes. However, there are two possible disadvantages to paying your premiums with pretax
money that you should balance against the tax savings you receive. Those possible
disadvantages are:
- Paying your premiums with pre-tax money reduces the earnings reported to the
Social Security Administration. When you retire and begin to collect Social Security,
you may receive a slightly lower Social Security benefit. Your Medicare, life insurance,
retirement plan, and both the Thrift Savings Plan and the FDIC Savings Plan
benefits will not be affected.
- There are some Internal Revenue Service (IRS) restrictions on the ability to reduce
your health insurance coverage outside of an Open Season if you pay your premium
contributions with pre-tax money. These are explained in detail in the "IRS Guidelines
for Reducing Coverage" section below. If you pay premiums with after-tax
money you will not be affected by the IRS guidelines that restrict reductions in coverage.
You may cancel your level of health insurance coverage at any time of year
without having a qualified life status change.
|
| IRS Guidelines For Reducing Coverage |
When your premium deductions are withheld on a pre-tax basis, certain IRS rules affect
your ability to change coverage. You may elect to reduce your coverage, that is, to cancel
your health insurance enrollment, or change from family to Self Only coverage, during the
health insurance Open Season or following a permitted election a brief listing of permitted
election changes is provided below. For more details about these and other permitted
election changes, contact the FDIC Benefits Hotline or the OIG HRB,
- Marriage or divorce
- Birth of a child or addition of a qualified dependent
- Death of your spouse or loss of a qualified dependent
- Start or end of your spouse's employment
- Change in your spouse's employment status from either full-time to part-time, or the reverse
- Start or end of your spouse's unpaid leave of absence
- Significant changes in your (or your spouse's) health coverage because of your
- Completion of a full pay period in non-pay status, e.g., leave without pay.
|
If you want to reduce your health insurance coverage outside the FEHB Open Season, the change
must be consistent with your qualified life status change. For example, if you have a new baby, you
can not change from a Self and Family to a Self Only enrollment.
To reduce your coverage outside of a FEHB Open Season, complete and submit a Health Benefits
Registration Election Form (SF-2809) to the Benefits Center, 3501 N. Fairfax Drive, Room VS-A-1027,
Arlington, VA 22226, or to OIG HR at 3501 N. Fairfax Drive, Room VS-E-9117, Arlington, VA 22226 or
make the change on-line using Employee Express no later than 60 calendar days after a qualified life
status change has occurred, and provide any necessary supporting documentation. Waiver and
restorations become effective the first day of the pay period after the form is received.
Information in this section serves as the FDIC Premium Conversion Plan Summary Plan Description.
If you need additional information, employees assigned to the Office of the Inspector General
should call the OIG/Human Resources Branch for assistance at 703-562-6419.
All other employees should contact the Benefits Hotline at 1-877-334-2111, *925 from any FDIC facility
or TDD 1-877-334-3092.