[Federal Register Volume 65, Number 139 (Wednesday, July 19, 2000)]
[Rules and Regulations]
[Pages 44644-44649]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-18209]


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OFFICE OF PERSONNEL MANAGEMENT

5 CFR Parts 890 and 892

RIN 3206-AJ17


Health Insurance Premium Conversion

AGENCY: Office of Personnel Management.

ACTION: Interim rule with request for comments.

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SUMMARY: The Office of Personnel Management (OPM) is issuing interim 
regulations to enable employees to pay Federal Employees Health 
Benefits (FEHB) premiums with pre-tax dollars, as provided under 
section 125 of the Internal Revenue Code. These regulations establish 
the basic rules under which this premium conversion plan will operate, 
beginning October 2000.

DATES: This interim rule is effective September 18, 2000. Comments must 
be received on or before September 18, 2000.

ADDRESSES: Send written comments to Abby L. Block, Chief, Insurance 
Policy and Information Division, Office of Insurance Programs, 
Retirement and Insurance Service, Office of Personnel Management, 1900 
E Street NW., Washington, DC 20415-3666; or deliver to OPM, Room 3425, 
1900 E Street NW., Washington, DC; or FAX to (202) 606-0633.

FOR FURTHER INFORMATION CONTACT: Laurie Bodenheimer, (202) 606-0004, or 
email to [email protected].

SUPPLEMENTARY INFORMATION:

Background

    At the President's direction, OPM will implement a health insurance 
premium conversion plan for employees participating in the FEHB 
Program. The premium conversion plan is part of a ``cafeteria plan'' 
under Section 125 of the Internal Revenue Code. OPM will execute a 
separate plan document to comply with Section 125 requirements and will 
make that document available on OPM's website: www.opm.gov. OPM is also 
issuing separate instructions to personnel and payroll offices.
    The premium conversion plan will take effect on October 1, 2000. 
Under the plan, employees' health benefit premium withholdings are 
treated as a pre-tax salary deduction. Because premium conversion 
lowers employees' taxable income, it reduces their tax burden. The 
reduction in taxable income reduces the base for Federal income tax, 
Social Security and Medicare taxes, and, in most States and localities, 
State and local taxes based on income.
    While most Federal employees are currently not covered by a premium 
conversion plan, the Federal Judiciary, the United States Postal 
Service, and some smaller Executive Branch agencies with independent 
compensation-setting authority have already implemented their own 
premium conversion plans. Employees of those entities will not be 
covered by the premium conversion plan described here.
    All other employees in the Executive Branch of the Federal 
Government who are participating in the FEHB Program, and whose pay is 
issued by an Executive Branch agency, will automatically have their 
salary reduced (through a Federal allotment) and their FEHB premiums 
paid under the premium conversion plan. Also, individuals enrolled in 
the FEHB Program who are employed outside the Executive Branch, or 
whose pay is not issued by an agency of the Executive Branch, will have 
their salaries reduced and their FEHB premiums paid under our premium 
conversion plan if their employer, in coordination with their payroll 
office, agrees to offer participation in the plan. However, any 
individual enrolled in the FEHB

[[Page 44645]]

Program who does not want to participate in premium conversion may 
waive participation, subject to the limitations in these regulations.
    Premium conversion has no effect on: statutory pay provisions or 
the General Schedule; the amount of any employee's health insurance 
premium; or the amount of the Government share towards the FEHB premium 
on behalf of any employee. Base pay for retirement, life insurance and 
Thrift Savings Plan purposes is unaffected.
    To ensure that the premium conversion plan qualifies for pre-tax 
treatment of health insurance premiums, OPM is also amending its 
allotment regulations at 5 CFR part 550, subpart C in a separate 
interim rule issued simultaneously with this rule. Each employee 
participating in premium conversion will make an allotment to his or 
her employing agency in the amount of the employee share of the FEHB 
insurance premium. The agency will then use that amount to pay the 
employee's premium. The allotment will be automatic unless the employee 
elects to waive premium conversion.

Waiver of Notice of Proposed Rulemaking

    In accordance with section 553(b)(3)(B) of title 5 of the U.S. 
Code, I find that good cause exists for waiving the general notice of 
proposed rulemaking. An opportunity for public comment prior to issuing 
this rule is unnecessary and contrary to the public interest. In 
developing this regulation, OPM worked extensively with affected 
stakeholders. OPM followed the Internal Revenue Code to develop a plan 
document and regulations that comply with tax law and parallel the 
practices of private sector employers. It is necessary that payroll 
offices begin work on systems changes so that this benefit will be 
available at the start of Fiscal Year 2001--a logical time in terms of 
Federal agency budget and payroll administration.

Regulatory Planning and Review

    This regulation has been reviewed by the Office of Management and 
Budget in accordance with Executive Order 12866, ``Regulatory Planning 
and Review.'' Because this regulation has an economic impact exceeding 
$100 million annually it is defined by that Executive Order as being 
``economically significant.'' It is classified as a major regulation in 
accordance with the Congressional Review Act because of its economic 
impact.

Analysis of Costs and Benefits

    In OPM's view, the benefits of this regulation substantially 
outweigh the costs. Under this regulation, Federal employees with 
health insurance through the FEHB Program will begin paying their 
insurance premiums with pre-tax dollars, similar to how millions of 
private sector employees currently pay their health insurance premiums. 
The benefits of this change in tax status are significant: the Federal 
Government will become a more competitive employer and the tax 
liability of Federal employees will decrease.
    Costs of this regulation include a start-up cost in the first year 
to implement the program; a decrease in Medicare, Social Security and 
income taxes paid by Federal employees; and a decrease in Federal 
employer payments to the Medicare and Social Security Trust Funds. The 
benefits and costs of this regulation are described in more detail in 
the following sections.

Statement of Need for Proposed Action

    In his 2001 Budget, the President directed OPM to implement health 
insurance premium conversion. Premium conversion will bring the Federal 
Government in line with private sector practices regarding employee 
payments of health insurance premiums. Over 60 million private sector 
employees with employment based health insurance pay their premiums 
with pre-tax dollars. This regulation will take advantage of current 
law to allow over 1.5 million Federal employees, representing more than 
3 million lives including dependents, to have the same benefit as 
private sector workers. As a result, the Federal Government will become 
a more competitive employer and health insurance will become more 
affordable for Federal employees.

Examination of Alternative Approaches

    In order to implement the President's premium conversion directive, 
regulatory action is necessary. In developing this regulation, OPM 
considered various ways to put premium conversion into operation. OPM 
also hired a contractor with substantial experience in employee 
benefits tax compliance to write a plan document that conforms to IRS 
Section 125 rules.
    OPM met with those Federal agencies that have already implemented a 
premium conversion plan: the U.S. Postal Service, the Federal 
Judiciary, and some small Executive Branch agencies with independent 
compensation-setting authority. It studied the range of implementation 
issues that these organizations encountered, from payroll system 
changes and educational outreach to complying with the tax code, and 
identified the key issues that OPM would need to address. OPM has 
developed these regulations by using the ``best practices'' of other 
employers in terms of premium conversion program development and 
implementation.

Benefits Analysis

    Over the last few decades, the U.S. labor market has become 
increasingly competitive. Unemployment rates have hovered at about 4 
percent, the lowest rates since 1970. Labor force participation rates 
are at all time highs--67 percent in recent months, up from around 60 
percent in 1970. Given these tight labor market conditions, the Federal 
Government, like all employers, must use every means possible to 
attract and retain high quality employees. Currently, the Federal 
Government is at a competitive disadvantage in the labor market because 
its employees pay their health insurance premiums with after-tax 
dollars. In the private sector, many employees pay their health 
insurance premiums with pre-tax dollars, resulting in reduced tax 
liabilities and greater take-home pay. This regulation will eliminate 
the Federal Government's competitive disadvantage in this area, giving 
it an additional tool to attract and retain high quality workers and 
increase employee satisfaction.
    Another advantage of this regulation is that it lowers the tax 
liability of Federal employees. Under this regulation, Federal 
employees will enjoy the same benefit as private sector employees and 
no longer will pay income tax, Social Security tax or Medicare tax on 
their health insurance premium dollars. This tax cut increases the 
take-home pay of Federal workers; Federal workers enrolled in the FEHB 
Program can save over $430 per year on average.

Cost Analysis

    The costs associated with this regulation are the start-up costs to 
implement the premium conversion program; the decrease in Medicare, 
Social Security, and income taxes paid by Federal employees; and the 
decrease in Federal employer payments to the Medicare and Social 
Security Trust Funds.
    The start-up costs of this regulation will be incurred in the first 
year of the program as individual Federal Government Agencies update 
their payroll systems to accommodate

[[Page 44646]]

premium conversion and as OPM and individual Agencies educate the 
Federal employee population, including benefits officers, about the new 
program. OPM estimates the start-up cost to be $3 million in 2001, with 
$2.5 million coming from Agency implementation costs and the remaining 
$.5 million from educational outreach programs such as information 
pamphlets for employees and benefits officers. The cost estimate is 
based on an assumption that each of the 164 discrete non-Postal payroll 
systems would incur $15,000 in spending on systems analysis, 
programming, testing, and overhead.
    In Fiscal Year 2001, the tax benefit to Federal employees caused by 
premium conversion is estimated to be about $670 million; $550 million 
in Federal income taxes, $85 million in Social Security taxes, and $35 
million in Medicare taxes. The decrease in Federal employer payments to 
the Medicare and Social Security Trust Funds is estimated to be $85 
million and $35 million dollars respectively. Assuming that health 
insurance premiums will continue to increase at recent rates, the 
change in tax benefits and Federal employer payments from premium 
conversion is expected to grow at roughly a proportional rate in each 
subsequent year.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes 
certain requirements with respect to Federal rules that are subject to 
the notice and comment requirements of section 553(b) of the 
Administrative Procedure Act (5 U.S.C. 551 et seq.) and which are 
likely to have a significant economic impact on a substantial number of 
small entities. Unless an agency determines that a rule is not likely 
to have a significant economic impact on a substantial number of small 
entities, the RFA requires that the agency present an initial 
regulatory flexibility analysis at the time of the publication of the 
rulemaking describing the impact of the rule on small entities and 
seeking public comment on such impact. Small entities include small 
businesses, organizations and governmental jurisdictions.
    OPM has determined that this rule will not have a significant 
economic impact on a substantial number of small entities. The 
regulation does not impact small entities.

Unfunded Mandates Reform Act

    For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4), as well as Executive Order 12875, this interim-final rule does 
not include any Federal mandate that may result in an expenditure in 
any one year by State, local, or tribal governments, in the aggregate, 
or by the private sector, of $100 million or more.

Federalism

    We have examined this rule in accordance with Executive Order 
13132, Federalism, and have determine that this final rule will not 
have any negative impact on the rights, roles, and responsibilities of 
State, local or Tribal governments.

List of Subjects

5 CFR Part 890

    Administrative practice and procedure, Government employees, Health 
facilities, Health insurance, Health professions, Hostages, Iraq, 
Kuwait, Lebanon, Reporting and recordkeeping requirements, Retirement.

5 CFR Part 892

    Administrative practice and procedure, Government employees, Health 
insurance, Wages, Taxes.

U.S. Office of Personnel Management.
Janice R. Lachance,
Director.

    Accordingly, OPM is amending 5 CFR part 890 and adding part 892 as 
follows:

PART 890--FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM

    1. The authority citation for part 890 continues to read as 
follows:

    Authority: 5 U.S.C. 8913; Sec. 890.303 also issued under 50 
U.S.C. 403 p, 22 U.S.C. 4069c and 4069c-1; subpart L also issued 
under sec. 599C of Pub. L. 101-513, 104 Stat. 2064, as amended; 
Sec. 890.102 also issued under sections 11202(f), 11232(e), and 
11246(b) and (c) of Pub. L. 105-33, 111 Stat. 251; and section 721 
of Pub. L. 105-261, 112 Stat. 2061.


    2. Amend Sec. 890.301 to revise the heading and paragraph (e)(1) to 
read as follows:


Sec. 890.301  Opportunities for employees who are not participants in 
premium conversion to enroll or change enrollment; effective dates.

* * * * *
    (e)(1) Change to self only. (1) An employee may change the 
enrollment from self and family to self only at any time, except that 
an employee participating in health insurance premium conversion as 
provided in part 892 of this chapter may make this change only during 
an open season or on account of and consistent with a qualifying life 
event as defined in Sec. 892.101 of this chapter that affects 
eligibility for coverage.
* * * * *

    3. Amend Sec. 890.304 to revise paragraph (d)(1) to read as 
follows:


Sec. 890.304  Termination of enrollment.

* * * * *
    (d)(1) An enrollee may cancel his or her enrollment at any time by 
filing an appropriate request with the employing office except that an 
employee participating in health insurance premium conversion as 
provided in part 892 of this chapter may make this change only during 
an open season or on account of and consistent with a qualifying life 
event defined in Sec. 892.101 of this chapter that affects eligibility 
for coverage. The cancellation takes effect on the last day of the pay 
period in which the appropriate request canceling the enrollment is 
received by the employing office.
* * * * *

    4. Add part 892 to read as follows:

PART 892--FEDERAL FLEXIBLE BENEFITS PLAN: PRE-TAX PAYMENT OF HEALTH 
BENEFITS PREMIUMS

Subpart A--Administration and General Provisions

Sec.
892.101   Definitions
892.102   What is premium conversion and how does it work?
892.103   What can I do if I disagree with my agency's decision 
about my pre-or post-tax election?
Subpart B--Eligibility and Participation
892.201   Who is covered by the premium conversion plan?
892.202   Are retirees eligible for the premium conversion plan?
892.203   When will my premium conversion begin?
892.204   How do I waive participation in premium conversion before 
the benefit first becomes effective?
892.205   May I waive participation in premium conversion after the 
initial implementation?
892.206   Can I cancel my waiver and participate in premium 
conversion?
892.207   Can I make changes to my FEHB enrollment while I am 
participating in premium conversion?
892.208   Can I change from self-and-family enrollment in FEHB to 
self-only enrollment at any time?
892.209   Can I cancel FEHB coverage at any time?
892.210   Does premium conversion change the effective date of an 
FEHB enrollment, change in enrollment, or cancellation of 
enrollment?
892.211   What happens if I go on leave without pay (LWOP)?

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Subpart C--Contributions and Withholdings
892.301  How do I pay my premium?
892.302   Will the Government contribution continue?
892.303   Can I pay my premiums directly by check under the premium 
conversion plan?
Subpart D--Reemployed Annuitants
892.401   Am I eligible for premium conversion if I retire and then 
come back to work for the Federal Government?

    Authority: 5 U.S.C. 8913; 26 U.S.C. 125.

Subpart A--Administration and General Provisions


Sec. 892.101  Definitions.

    Days mean calendar days.
    Dependent means a family member who is both eligible for coverage 
under the FEHB Program and a dependent as defined in section 152 of the 
Internal Revenue Code.
    FEHB Program means the Federal Employees Health BenefitsProgram 
described in 5 U.S.C. 8901.
    Open Season means the period of time each year as described in 
Sec. 890.301(f) of this chapter when all individuals eligible for FEHB 
coverage have the opportunity to enroll or change their enrollment. 
These changes become effective with the first pay period that begins in 
the following year. For additional open seasons authorized by OPM, the 
effective date is specified.
    OPM means the Office of Personnel Management.
    Qualifying life event means events that may permit election changes 
as described in Treasury regulations at 26 CFR 1.125-4 and includes the 
following:
    (1) Addition of a dependent;
    (2) Birth or adoption of a child;
    (3) Changes in entitlement to Medicare or Medicaid for you, your 
spouse or dependent;
    (4) Change in work site;
    (5) Change in your employment status or that of your spouse or 
Dependent from either full-time to part-time, or the reverse;
    (6) Death of your spouse or Dependent;
    (7) Divorce or annulment;
    (8) Loss of a Dependent;
    (9) Marriage;
    (10) Significant change in the health coverage of you or your 
spouse related to your spouse's employment;
    (11) Start or end of an unpaid leave of absence by you or your 
spouse; or
    (12) Start or end of your spouse's employment.


Sec. 892.102  What is premium conversion and how does it work?

    Premium conversion is a method of reducing your taxable income by 
the amount of your contribution to your FEHB insurance premium. If you 
are a participant in the premium conversion plan, Section 125 of the 
Internal Revenue Code allows you to reduce your salary (through an 
employer allotment) and provide that portion of your salary back to 
your employer. Instead of being paid to you as taxable income, this 
allotted amount is used to purchase your FEHB insurance for you. The 
effect is that your taxable income is reduced. Because taxable income 
is reduced, the amount of tax you pay is reduced. You save on Federal 
income tax, Social Security and Medicare tax and in most States and 
localities, State and local income taxes.


Sec. 892.103  What can I do if I disagree with my agency's decision 
about my pre-or post-tax election?

    You may use the reconsideration procedure set out at 
Sec. Sec. 890.104 of this chapter to request an agency to reconsider 
its initial decision affecting your participation in the premium 
conversion plan.

Subpart B--Eligibility and Participation


Sec. 892.201  Who is covered by the premium conversion plan?

    (a) All employees in the Executive Branch of the FederalGovernment 
who are participating in the FEHB Program (as described in 5 
U.S.C.8901), and whose pay is issued by an agency of the 
ExecutiveBranch of the Federal Government, are automatically covered by 
the premium conversion plan. Certain reemployed annuitants may be 
considered employees for purposes of premium conversion, as described 
in subpart D of this part.
    (b) Employees of organizations that have established a premium 
conversion plan under separate authority prior to October 2000 may not 
participate in the premium conversion plan described here because they 
are already covered by their employing agency's plan.
    (c) Individuals enrolled in FEHB who are not employees of the 
Executive Branch of the Federal government or are not employees of the 
Federal government, will be covered by the premium conversion plan if 
their employer signs an adoption agreement that is accepted by OPM.
    (d) Individuals enrolled in FEHB who are appointed by an agency in 
the Executive Branch, but whose pay is not issued by that agency, will 
be covered by the premium conversion plan if the entity that makes 
their FEHB contribution signs an adoption agreement that is accepted by 
OPM.
    (e) Individuals may waive premium conversion by filing a waiver 
form with their employer in accordance with this part.


Sec. 892.202  Are retirees eligible for the premium conversion plan?

    No, only current employees who are enrolled in the FEHBProgram are 
covered by the premium conversion plan. Former employees are not 
eligible. If you are a reemployed annuitant, see subpart D of this 
part.


Sec. 892.203  When will my premium conversion begin?

    Your salary reduction (through a Federal allotment) and pre-tax 
benefit become effective with the first day of the first pay period 
beginning on or after October 1, 2000, if you are employed in a covered 
Executive Branch agency as described in Sec. 892.201(a). Otherwise, 
your salary reduction (through a Federal allotment) and pre-tax benefit 
will be effective on the first day of the first pay period beginning on 
or after the date that your employer officially adopts the premium 
conversion plan (see Sec. 892.201(c), (d)).


Sec. 892.204  How do I waive participation in premium conversion before 
the benefit first becomes effective?

    You must file a waiver form by the date set by your employing 
office, but not later than the day before the effective date of 
coverage. The waiver form is available from your employing office.


Sec. 892.205  May I waive participation in premium conversion after the 
initial implementation?

    Yes, but the opportunity to waive premium conversion is limited. 
You may waive premium conversion:
    (a) During the annual FEHB open season. The effective date of the 
waiver will be the first day of the first pay period that begins in the 
following calendar year;
    (b) At the same time as you sign up for FEHB when first hired or 
hired as a reemployed annuitant. Employees who leaveFederal service and 
are rehired after a three-day break in service or in a different 
calendar year also may waive;
    (c) In conjunction with a change in FEHB enrollment, on account of 
and consistent with a qualifying life event (see Sec. 892.101); or
    (d) When you have a qualifying life event and the waiver is on 
account of and consistent with that qualifying life event(even if you 
do not change your FEHB enrollment). You have 60 days after the 
qualifying life event to file a waiver with your employer. The waiver 
is effective on the first day of the pay

[[Page 44648]]

period following the date your employer receives the waiver.


Sec. 892.206  Can I cancel my waiver and participate in premium 
conversion?

    Yes, you may cancel a waiver and participate in premium conversion 
if:
    (a) You have a qualifying life event; the change in FEHB coverage 
is consistent with the qualifying life event; and you complete an 
election form to participate in premium conversion within 60 days after 
the qualifying life event; or
    (b) You cancel your waiver during an open season, including an 
extended open season authorized by OPM.


Sec. 892.207  Can I make changes to my FEHB enrollment while I am 
participating in premium conversion?

    Generally, you can make changes to your FEHB enrollment for the 
same reasons and with the same effective dates listed in Sec. 890.301 
of this chapter. However, if you are participating in premium 
conversion there are two exceptions: you must have a qualifying life 
event to change from self-and-family enrollment to self-only enrollment 
or to drop FEHB coverage entirely. (See Sec. 892.209 and Sec. 892.210.) 
Your change in enrollment must be consistent with and correspond to 
your qualifying life event as described in Sec. 892.101. These 
limitations only apply to changes you may wish to make outside open 
season.


Sec. 892.208  Can I change from self-and-family enrollment in FEHB to 
self-only enrollment at any time?

    If you are participating in premium conversion you may change your 
FEHB enrollment from self-and-family to self-only:
    (a) During the annual open season; or
    (b) Within 60 days after you have a qualifying life event.Your 
change in enrollment must be consistent with and correspond to your 
qualifying life event. For example, if you get divorced, changing to 
self-only would be consistent with that qualifying life event. If you 
adopt a child, a change from self-only to self-and-family coverage 
would also be consistent with that qualifying life event.


Sec. 892.209  Can I cancel FEHB coverage at any time?

    If you are participating in premium conversion you may cancel your 
FEHB coverage:
    (a) During the annual open season; or
    (b) Within 60 days after you have a qualifying life event.Your 
cancellation of coverage must be consistent with and correspond to your 
qualifying life event. For example, if you get married and your spouse 
is employed by a company that provides health insurance for you, then 
canceling FEHB coverage would be consistent with that qualifying life 
event. If you adopt a child, canceling coverage would not be consistent 
with that qualifying life event.


Sec. 892.210  Does premium conversion change the effective date of an 
FEHB enrollment, change in enrollment, or cancellation of enrollment?

    No. If you are participating in premium conversion, the effective 
date of an FEHB enrollment, change in enrollment, or cancellation of 
enrollment is the same effective date as provided in Sec. 890.301 of 
this chapter.


Sec. 892.211  What happens if I go on leave without pay (LWOP)?

    (a) Your commencement of LWOP is a qualifying life event as 
described in Sec. 892.101. You may change your premium conversion 
election (waive if you now participate, or participate if you now 
waive).
    (b)(1) You may continue your FEHB coverage by agreeing in advance 
of LWOP to one of the payment options described in paragraphs (b)(2), 
(b)(3), or (b)(4) of this section.
    (2) Pre-pay. Prior to commencement of your LWOP you may pay the 
amount due for your share of your FEHB premium during your LWOP period, 
if your employing agency, at its discretion, allows you to do 
so.Contributions under the pre-pay option may be made through premium 
conversion on a pre-tax basis. Alternatively, you may pre-pay premiums 
for the LWOP period on an after-tax basis.
    (3) Direct pay. Under the direct pay option, you may pay your share 
of your FEHB premium on the same schedule as payments would be made if 
you were not on LWOP, as described in Sec. 890.502(b) of this chapter. 
You must make the premium payments directly to your employing agency. 
The payments you make under the direct pay option are not subject to 
premium conversion, and are made on an after-tax basis.
    (4) Catch-up. Under the catch-up option, you must agree in advance 
of the LWOP period that: you will continue FEHB coverage while on LWOP; 
your employer will advance your share of your FEHB premium during your 
LWOP period; and you will repay the advanced amounts when you return 
from LWOP. (Described in Sec. 890.502(b) of this chapter.) Your catch-
up contributions may be made through premium conversion.
    (5) If you remain in FEHB upon your return from LWOP, your catch-up 
premiums and current premiums will be paid at the same time.
    (c) Your return from LWOP constitutes a qualifying life event as 
described in Sec. 892.101. You may change your premium conversion 
election (waive if you now participate, or participate if you now 
waive). The election you choose upon return from LWOP will apply to 
your current as well as your catch-up premiums.

Subpart C--Contributions and Withholdings


Sec. 892.301  How do I pay my premium?

    As a participant in premium conversion, instead of having your 
premium withheld from after-tax salary, your salary will be reduced 
(through a Federal allotment) by the amount equal to yourFEHB premium, 
which you will allot to your agency. The allotment from salary 
satisfies the FEHB premium payment requirement of 5U.S.C. 8906. Your 
employer is authorized to accept this allotment under 
Sec. 550.311(a)(8) and Sec. 550.312 of this chapter or, for employers 
not subject to those regulations, a similar mechanism.Your agency will 
use the allotment to pay your share of your FEHB premium. This will 
reduce your taxable income as described in Sec. 892.102.


Sec. 892.302  Will the Government contribution continue?

    Yes, your employer will still pay the same share of your premium as 
provided in the Federal Employees Health Benefits Act, and Sec. 890.501 
of this chapter. Employee allotments do not count toward the 
Government's statutory maximum contribution.


Sec. 892.303  Can I pay my premiums directly by check under the premium 
conversion plan?

    No, your employer must take your contribution to your FEHB premium 
from your salary to qualify for pre-tax treatment.

Subpart D--Reemployed Annuitants


Sec. 892.401  Am I eligible for premium conversion if I retire and then 
come back to work for the Federal Government?

    (a) If you are a retired individual enrolled in FEHB who is 
receiving an annuity and you are reemployed in a position that conveys 
FEHB eligibility and is covered by the premium conversion plan, you are 
automatically covered by premium conversion, unless you waive 
participation as described in Sec. 892.205.
    (b)(1) If you do not waive premium conversion, your FEHB coverage 
will be transferred to your employing agency, and your employing agency 
will assume responsibility for contributing the

[[Page 44649]]

government share of your FEHB coverage. Your coverage will be based on 
your status as an active employee and your employing agency will deduct 
your premiums from your salary.
    (2) If you elect to waive participation in premium conversion, you 
will keep your FEHB coverage as an annuitant, but your contributions 
towards yourFEHB premiums will be made on an after-tax basis. Your 
employing agency must receive your waiver no later than 60 days after 
the date you return to Federal employment. A waiver will be effective 
at the beginning of the first pay period after your employer receives 
it.
    (c) If you did not carry FEHB into retirement and you are 
reemployed as an employee in a position covered by the premium 
conversion plan, you may enroll in the FEHB Program as a new employee 
as described in Sec. 890.301 of this chapter. Upon enrolling in FEHB, 
you are automatically covered by the premium conversion plan, unless 
you waive participation as described in Sec. 892.205.
    (d) Your status as an annuitant under the retirement regulations 
and your right to continue FEHB as an annuitant following your period 
of reemployment is unaffected.

[FR Doc. 00-18209 Filed 7-14-00; 3:19 pm]
BILLING CODE 6325-01-D