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Insurance Services Programs

Federal Employee Health Benefit Program

RI 70-14 For Federal Deposit Insurance Corporation Employees

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 202-416-2966. All other employees should contact the Benefits Hotline at 1-877-334-2111 or TDD 1-877-334-3092.

Open Season Dates		November 14, 2005 – December 12, 2005
Effective Date		Your change in tax treatment of your health insurance premiums will become effective December 11, 2005 (Pay date of January 5, 2006).
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 2005 FEHB premiums paid with after-tax money, you must submit a Premium Conversion Waiver/Election form to the Benefits Center, 3501 N. Fairfax Drive, Room 1027, Arlington, VA 22226 during this open season. OIG employees should submit the waiver form to the OIG Human Resources Branch, 801 17th St, Washington, DC 20434. Premium Conversion Plan Waiver/Election forms may be obtained from the FDIC Net or Benefits Hotline at (877) 334-2111 or OIG at (202) 416-2966
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 pre-tax 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 one of the life status changes listed below: 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 spouse's employment 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 Form (SF-2809) to the Benefits Center, 3501 N. Fairfax Drive, Room 1027, Arlington, VA 22226, or to OIG HR at 801 17th St., NW, Room 904, Washington, DC 20434 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.

If you are the only person remaining in your self and family enrollment as a result of a change in marital or family status (death of a spouse, divorce, child marries or becomes age 22), you must elect to reduce the enrollment (self only or cancel) within 60 calendar days of such a life status change. Otherwise, the self and family enrollment will continue until another event (life status change or FEHB Open Season) occurs that will allow an election to reduce coverage. The effective date of change from family to self-only will be the first day of the pay period that follows the pay period in which your enrollment 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 202-416-2966.
All other employees should contact the Benefits Hotline at 1-877-334-2111 or TDD 1-877-334-3092.

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