Federal annuitants who are rehired by the government, unlike those who stay retired, can participate in the “premium conversion” arrangement under the Federal Employees Health Benefits program. That factor might help some retirees decide whether to be accept reemployment, as increasing numbers of them are doing because the government is eager to continue using their expertise. Generally speaking, active employees can participate in the arrangement but retirees cannot because of the tax code.
Rehired annuitants can get back into the premium conversion by having their FEHB premiums deducted from their pay as employees rather than 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.
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 in premium conversion unless you file a waiver.
Your participation in premium conversion ends on the last day of the last pay period as an employee. When you again separate from active service, your FEHB enrollment must be transferred back from your employing agency to OPM or the appropriate retirement system.
The same applies to FEDVIP vision-dental insurance, where participation in premium conversion is actually required for active employment.
In addition, federal retirees deemed to be retired “public safety officers” may pay up to $3,000 a year in health and long-term care insurance premiums with pre-tax money, so long as the distribution is made directly from the retirement system to the provider–as is commonly done with retiree premiums. “Public safety officers” for this purpose include law enforcement officers and firefighters.
Legislation has been pending in Congress for many years to allow all retirees to participate in premium conversion. While the measures attract co-sponsors, no progress has been made toward bringing the bills to a floor vote, largely due to concerns by congressional tax-writing committees that private sector retirees would ask for the same tax break.