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Frequently Asked Questions Insurance

Premium Conversion

  • No. Again, premium conversion has no effect on retirement benefits or retirement calculations.
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  • The quickest way to determine the amount of money you will save yearly is simply to calculate (separately or combined) the tax rate multiplied by the total amount of health insurance premiums. These examples show the savings for a typical employee in the 28% tax bracket:

    Self Only Self and Family Yearly FEHB premium: $700.00 $1,600.00 Federal income tax savings $196.00 $448.00 FICA tax savings (7.65%) $53.55 $122.40 Annual Savings $249.55 $570.40

    These examples do not include savings on state and local taxes.

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  • No, only deductions for FEHB premiums may be deducted pre-tax at this time.
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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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  • 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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  • Participation in premium conversion is automatic for eligible employees.
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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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  • 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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  • 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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  • No. Under section 125 of the Internal Revenue Code, pre-tax benefits are only available to current employees.
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