“Premium conversion” is a pre-tax arrangement in which the part of an employee’s salary that goes for Federal Employees Health Benefits (FEHB) program premiums becomes non-taxable. This means that participants save on federal income tax and Social Security and Medicare taxes. In most cases, they also save on state income tax and local income tax. Conversion is automatic at enrollment unless waived and once you participate, your participation continues automatically unless you waive it.

Annuitants are not eligible to participate in premium conversion except as described below.


You may change your participation in premium conversion during the FEHB open season. If you are currently participating and you think you may want to cancel your health insurance coverage or change your level of coverage, you may want to waive participation in premium conversion during an open season.

You wouldn’t receive the tax advantage that participation provides, but you would be able to cancel or change your level of coverage at any time. Employees participating in premium conversion may not cancel their coverage or change their level of coverage without a qualifying life event. Qualifying life events include marriage, birth of a child, or change in a spouse’s employment.

Enrollment or participation ends if you terminate or are terminated from federal government employment. If you are eligible and elect to participate in Temporary Continuation of Coverage (TCC), you pay those premiums directly on an after-tax basis.

Federal retirement benefits, Thrift Savings Plan and life insurance benefits are not affected by participation in premium conversion.


Premium Conversion for Reemployed Annuitants

All participants in premium conversion must have their FEHB premiums deducted from their pay as employees, not from their retirement annuities. In order to allow eligible reemployed annuitants an opportunity to participate in premium conversion, their FEHB enrollment must be transferred from their retirement system to their employing agency.

Reemployed annuitants enrolled in the FEHB as of the effective date of conversion automatically participate, provided they are employed in a position that conveys FEHB eligibility and by an agency covered by premium conversion. Agencies must deduct FEHB premiums on a pre-tax basis from the pay of these individuals unless they waive participation in premium conversion.

If you are rehired in a position that conveys eligibility for FEHB coverage, you may enroll in FEHB under the same terms as any newly hired employee. You will automatically participate unless you file a waiver.


Your participation ends on the last day of the last pay period as an employee. When you separate from active service, your FEHB enrollment must be transferred back from your employing agency to OPM or the appropriate retirement system.