U.S. Office of Personnel Management - Recruiting, Retaining and Honoring a World-Class Workforce to Serve the American People

How do I waive premium conversion?

You should obtain, complete and return a waiver/election form to your employing office. You may waive participation in premium conversion (or elect to participate, if you previously waived) during the annual FEHB Open Season. Also, you may have the opportunity to waive participation in premium conversion if you've experienced a Qualifying life event (QLE). Refer to the QLE section for more information.

FEHB Open Season

During the FEHB Open Season, you will have an opportunity to elect or waive your participation in premium conversion. An Open Season election to participate or waive participation in premium conversion must be received by your employing agency no later than the last day of the Open Season to be considered timely filed. The effective date of your election will be the same as the effective date of an FEHB enrollment election: the first payroll period that begins on or after January 1^st. If your agency accepts and processes a late Open Season enrollment election, it must also accept a late election to participate or waive participation in premium conversion.

Because elections begin with pay periods, when you change participation in premium conversion (begin or waive participation) during the FEHB Open Season, there will likely be at least one payroll paid date in the subsequent calendar year in which your FEHB deductions reflect the previous election.

Mark G. had previously waived participation in premium conversion. He opted to participate again in premium conversion during the November 2002 Open Season. Mr. G. is paid on a biweekly basis, with the following payroll periods:

Payroll	Begin Date	End Date	Pay Date	Pre-Tax/ After-tax
01	12/15/02	12/28/02	1/8/03	after-tax
02	12/29/02	1/11/03	1/22/03	after-tax
03	1/12/03	1/25/03	2/5/03	pre-tax

Mr. Marks' payroll office would treat his FEHB deductions on an after-tax basis through the end of payroll period 02.

Why would someone waive premium conversion? What are the disadvantages?

For a small number of individuals it may make sense to waive premium conversion. There are two items to consider in making a decision to waive participation and they are:

Flexibility

Under IRS rules, you may reduce coverage (cancel, or change from Self and Family to Self Only) only during an Open Season or at the time of a qualifying life event.

Social Security

Paying your premiums with pre-tax money reduces your earnings reported to the Social Security Administration. When you begin to collect Social Security (normally this occurs at age 65), you may receive a slightly lower Social Security benefit. The extent of the impact will vary depending upon the retirement system you participate in, your salary compared with the Social Security wage base ($87,000 in 2003) and the number of years until you retire.

What do I lose if I waive participation in premium conversion?

By choosing to waive participation in premium conversion, you lose the opportunity to take advantage of the tax savings that it provides. Please see the example below (please note savings vary by location since state and local tax savings usually exist in addition to Federal tax savings):

	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