Fedweek

The Clinton administration says it soon will issue rules to allow employees of all executive branch agencies to pay their FEHB premiums with pre-tax dollars, as outlined in its recent budget proposal. It notes that similar plans already are available widely in the private sector as well as in state and local governments, the U.S. Postal Service, the federal courts and several small quasi-independent executive agencies in the banking sector. This is called a health insurance “premium conversion plan” in which the employee’s taxable income is reduced by the amount of health insurance premiums the employee would otherwise have to pay. It produces savings on federal, Social Security, Medicare and, if applicable, state and local income taxes. The government contribution toward premiums would not be affected.