The Postal Service has established the pre-tax payment of health insurance premium contributions as a tax-saving benefit feature for its employees. This feature has been sponsored by the Postal Service since 1994. Payment of premiums on a pre-tax basis prohibits enrollees from reducing coverage unless they qualify as described in the section "Reducing Coverage" below.
If you are a career employee, your premium contributions will automatically be withheld from pay as "pretax money," which means the premium amount is not subject to income, Social Security, or Medicare taxes.
Premiums are collected on a pre-tax basis automatically, unless you waive this treatment. Once you begin to pay FEHB premiums with pre-tax money, this method continues each year.
Although you are automatically enrolled to pay premium contributions with pre-tax money, you do have an opportunity during FEHB Open Season, or if you have a qualifying life event, to waive this treatment and pay your premiums with "after-tax money". This means you give up the tax savings of paying with pre-tax money.
There are two possible disadvantages of paying your premiums with pre-tax money that you should balance against the tax savings you receive.
First, when you retire, if you begin to collect Social Security (normally this occurs at age 62 at the earliest), you may receive a slightly lower Social Security benefit. Paying your FEHB premiums with pre-tax money reduces the earnings reported to the Social Security Administration. (Your Medicare, life insurance, retirement plan, and Thrift Savings Plan benefits are not affected.)
Second, there are some restrictions on reducing or canceling your coverage outside FEHB Open Season that apply if you pay your premium contributions with pretax money. These are explained in the section "Reducing Coverage" below.
Most employees prefer paying their premiums with pre-tax money because they save on taxes. Nevertheless, if for any reason you do not want this method of payment, and instead wish to have premiums paid with after-tax money, you must submit a form that is available from your local personnel office to waive the pretax treatment. For more information, see the section "How to Waive or Restore Pre-Tax Payment" on page 5 of this Guide.
When your premium contributions are withheld on a pre-tax basis, certain Internal Revenue Service (IRS) guidelines affect your ability to change coverage. You may elect to reduce your coverage, that is, to cancel your FEHB enrollment, or to go from Self and Family to Self Only coverage, only during an FEHB Open Season, unless you have a qualifying life event. These are shown in the chart on pages 24 to 27 of this Guide titled "USPS Employees: Table of Permissible Changes in FEHB Enrollment and Pre-Tax/After-Tax Premium Payment." Refer to the column labeled "FEHB Enrollment Change That May Be Permitted" and the header "Cancel or Change to Self Only." You also must satisfy the time limits shown in the column labeled "Time Limits in Which Change May Be Permitted."
If you are the only person left in your Self and Family enrollment as a result of a qualifying life event in marital or family status, you must elect to reduce the enrollment (elect Self Only coverage or cancel coverage) by submitting the FEHB PostalEASE Worksheet to your local personnel office within the time limit shown in the column labeled "Time Limits in Which Change May Be Permitted" in the chart on pages 24 to 27 of this Guide. Otherwise, your self and family enrollment will continue until another event (that is, a qualifying life event or FEHB Open Season) occurs that allows you to elect to reduce coverage.
Reducing your FEHB coverage outside of FEHB Open Season must be in keeping with, or on account of, your qualifying life event. For example, if you have a new baby, you usually would not change from Self and Family to a Self Only enrollment, or cancel coverage.
To reduce your FEHB coverage outside of FEHB Open Season, submit an FEHB PostalEASE Worksheet to your local personnel office within the time limits shown in the column labeled "Time Limits in Which Change May be Permitted" in the table on pages 24 to 27 of this Guide. You must provide any supporting documentation requested by your local personnel office. The effective date of a change from Self and Family to Self Only will be the first day of the pay period that follows the pay period in which your Worksheet is received by your personnel office. The effective date of a cancellation will be the last day of the pay period in which your Worksheet is received by your personnel office, if received within the specified time limits.
It is your responsibility to notify and submit necessary forms to your local personnel office on time when you are the only person left on your enrollment.
Retirement is NOT a qualifying life event that allows cancellation prior to the date of your retirement. If you wish to cancel an enrollment at retirement, your personnel office will accept your completed SF 2809 and forward it to OPM for processing after separation from the Postal Service. (Annuitants' FEHB premium contributions are not withheld as a pre-tax payment, thus once you are an annuitant, reduction in coverage is allowed at any time.)
During periods of non-pay status or insufficient pay, you may terminate your FEHB enrollment. The effective date of termination is retroactive to the end of the last pay period in which a premium contribution was withheld from pay. Contact your local personnel office for more information about how termination during periods of non-pay status or insufficient pay affects FEHB enrollment.
If you pay premiums with after-tax money, you will not be affected by the IRS guidelines described above that restrict reductions in coverage. You may reduce your level of FEHB coverage at any time of year without having a qualifying life event. You will give up the tax savings from paying your premium contributions with pre-tax money.
If you wish to pay your premiums with after-tax money, you must contact your local personnel office and ask for Postal Service (PS) Form 8201, Pre-tax Health Insurance Premium Waiver/Restoration Form. During Open Season, complete the form and return it to your local personnel office by close of business December 13, 2005. If this is your initial opportunity to enroll in FEHB, you have 60 days to submit your election to your local personnel office. You also may make such an election when you have a qualifying life event which is shown in the chart on pages 25 to 28 of this Guide. Refer to the column labeled "Premium Conversion Election Change That May Be Permitted." You must also satisfy the time limits shown in the column labeled "Time Limits in Which Change May Be Permitted."
If you submit a waiver, your premiums will continue to be paid with after-tax money in future years, unless you later submit another PS 8201 to restore pre-tax payment of FEHB premiums.
If you previously submitted a waiver in order to pay with after-tax money, and you want to begin paying your premiums with pre-tax money, you may submit PS 8201 to restore pre-tax payment of your premium contributions. You may change the method of payment from pre-tax to after-tax, or the reverse only during the annual FEHB Open Season or following a qualifying life event and within the time limits described earlier in this section.
This section of the FEHB Guide serves as your summary plan description of the USPS Plan for the Pre-tax Payment of Health Insurance Premiums. There is also a legal plan document containing the full legal plan provisions, which you may arrange to view by writing to:
PRETAX PAYMENT OF HEALTH INSURANCE PREMIUMS
475 L'ENFANT PLAZA SW ROOM 9670
WASHINGTON DC 20260-4210