Retiree ‘Premium Conversion’ Measures Reintroduced

Bills have been reintroduced in the House and Senate (HR-1231 and S-623) to allow federal retirees to participate in the “premium conversion” arrangement in which active federal employees may pay Federal Employees Health Benefits premiums with pre-tax money. While active employees have been eligible for the tax break–worth more than $400 a year on average-since late 2000, retirees are excluded because of a provision in the tax code. Similar bills to include retirees have been offered since then but have not come to votes, mainly because of concern that they would set a precedent for private sector retirees to get a similar tax break, at a large cost in lost tax revenues. Those budgetary considerations remain, although with the prime House sponsor, Rep. Thomas Davis, R-Va., now heading the House Government Reform Committee, the idea is expected to draw more attention in the current Congress. The main Senate sponsor is Sen. John Warner, R-Va.