Premium Conversion

For the civilian employees who have Federal Employees Health Benefits withheld from your pay, you will have more money on payday. A new program from the Office of Personnel Management will increase your paycheck beginning with the pay period of 8 October 2000.

The program is called "premium conversion." It is a "pre-tax" arrangement, meaning that the part of your salary that goes for health insurance premiums will become non-taxable. This means that you save on Federal income tax and FICA taxes (Social Security and Medicare taxes). In most cases, you will also save on State income tax and local income tax.

How much? You save a percentage of your premium. If your annual premium is $1800, and you pay 35% in taxes on that amount of salary, you save 35% of $1800. That is $630, or $24.23 every two weeks.

Do you have to pay a tax later? No. Do not confuse premium conversion with the deferred taxation of the Thrift Savings Plan contributions, which are taxed when you receive the money.

The payroll office will make the switch automatically. You do not need to fill out a form. You do have a choice, though, to waive premium conversion despite the savings. It is a personal decision.

The Civilian Personnel Advisory Center will sponsor "brown bag" sessions on the premium conversion in order to answer your specific questions. The sessions are scheduled for 1200 - 1300 on Monday, 18 Sep and 25 Sep, in Room 229 at Darling Hall. Everyone interested is invited to attend. Also, there is an excellent web site address at  that has good information. You can also reach this web site from the CPAC on-line under

The premium conversion would only apply to active duty civilian employees, not to retirees.