[Federal Register Volume 66, Number 187 (Wednesday, September 26, 2001)]
[Rules and Regulations]
[Pages 49085-49086]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-24103]



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 Rules and Regulations
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  Federal Register / Vol. 66, No. 187 / Wednesday, September 26, 2001 / 
Rules and Regulations  

[[Page 49085]]



OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 550

RIN 3206-AJ16


Pretax Allotments for Health Insurance Premiums

AGENCY: Office of Personnel Management.

ACTION: Final rule.

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SUMMARY: The Office of Personnel Management (OPM) is issuing final 
regulations dealing with the use of OPM's allotment authority to allow 
for Federal Employees Health Benefits (FEHB) employee premium payments 
to be deducted on a pretax basis under section 125 of the Internal 
Revenue Code. The allotment regulations work in tandem with related 
FEHB regulations dealing with this premium conversion.

EFFECTIVE DATE: October 26, 2001.

FOR FURTHER INFORMATION CONTACT: Bryce Baker, (202) 606-2858, FAX: 
(202) 606-0824, or e-mail: [email protected].

SUPPLEMENTARY INFORMATION: On July 19, 2000, the Office of Personnel 
Management (OPM) published interim regulations (65 FR 44643) that 
allowed employees to pay their Federal Employees Health Benefits (FEHB) 
premiums through an allotment from the employee's pay to the employing 
agency. Use of this allotment mechanism allows FEHB premiums to be paid 
with pretax dollars, as permitted under section 125 of the Internal 
Revenue Code. The amendments to the allotment regulations were 
accompanied by a separate interim rule making necessary changes in the 
FEHB regulations (65 FR 44644) to allow this premium conversion.
    OPM received comments from one agency representative and two 
individual employees on the changes in the allotment regulations.
    The agency comment noted that a part of the allotment regulations 
not amended in the interim rule contained a reference to an obsolete 
Treasury regulation. It recommended that this be corrected in the final 
regulations.
    Section 550.311(a)(5) of title 5, Code of Federal Regulations, 
specifies that agencies must allow employees to have ``up to two 
allotments for savings under Department of the Treasury regulations as 
codified at part 209 of title 31, Code of Federal Regulations.'' 
However, the Treasury Department removed part 209 from its title 31 
regulations effective on January 27, 1997. (See 61 FR 68155, December 
27, 1996.) Part 209 dealt with certain wage, salary, annuity, and 
allotment payments for credit to the accounts of Federal employees and 
beneficiaries generally made by paper check. These payments are now 
made by electronic funds transfer and are regulated by part 210. Part 
210 does not impose a limit on the number of allotments for savings. 
Instead, it leaves the matter to the paying agency.
    We are revising Sec. 550.311(a)(5) to remove the obsolete reference 
to part 209 of title 31. The revised language provides that an agency 
must allow an employee to have ``at least two allotments for savings.'' 
Thus, the OPM regulations continue to require that agencies allow 
employees to have a minimum of two savings allotments, but there are no 
restrictions on the maximum number of savings allotment that may be 
permitted under an agency's discretionary authority in Sec. 550.311(b).
    An individual commenter questioned why only health insurance 
premium payments under the FEHB Program could be deducted on a pretax 
basis. The commenter is a civilian employee who is covered by certain 
health insurance programs established for retired military members. At 
the President's direction, the allotment regulations were amended to 
provide specifically that FEHB premiums may be deducted on a pretax 
basis. Section 550.311(b) provides that pretax allotments are permitted 
only when there is an authority (i.e., statute, Executive order, 
Presidential directive, or OPM regulations) specific to Federal 
employees. For example, certain transportation fringe benefit 
allotments may be made on a pretax basis as allowed by 5 U.S.C. 7905(b) 
and Executive Order 13150, April 21, 2000.
    Another commenter expressed concern about whether Federal employees 
would be provided with information on the impact that pretax FEHB 
premium allotments would have on Social Security benefits, so that they 
could make an informed decision on whether to waive participation in 
premium conversion. In fact, prior to implementation of premium 
conversion, OPM provided agencies with extensive information about the 
premium conversion program to share with employees. That information 
included a sample employee handout with a section highlighting the 
Social Security benefit issue and a financial worksheet with a section 
on estimating the impact on a person's Social Security benefits. (See 
Benefits Administration Letter 00-215 issued by OPM's Retirement and 
Insurance Service on August 24, 2000.) This information also was made 
available on OPM's website.
    These final regulations adopt the interim regulations without any 
changes to the amendments contained in the interim regulations. 
However, as described above, we are making a correction dealing with 
the obsolete reference to a withdrawn Treasury regulation.

E.O. 12866, Regulatory Review

    This rule has been reviewed by the Office of Management and Budget 
in accordance with Executive Order 12866.

Regulatory Flexibility Act

    I certify that these regulations will not have a significant 
economic impact on a substantial number of small entities because they 
will apply only to Federal agencies and employees.

List of Subjects in 5 CFR Part 550

    Administrative practice and procedure, Claims, Education, 
Government employees, Wages.

U.S. Office of Personnel Management.
Kay Coles James,
Director.

    Accordingly, the interim rule amending part 550 of title 5 of the 
Code of Federal Regulations, which was published at 65 FR 44643, is 
adopted as a final rule with the following change:

[[Page 49086]]

PART 550--PAY ADMINISTRATION (GENERAL)

Subpart C--Allotments and Assignments from Federal Employees

    1. The authority citation for subpart C of part 550 continues to 
read as follows:

    Authority: 5 U.S.C. 5527; E.O. 10982, 3 CFR 1959-1963 Comp., p. 
502.

    2. In Sec. 550.311, paragraph (a)(5) is revised to read as follows:


Sec. 550.311  Authority of agency.

    (a) * * *
    (5) At least two allotments for savings;
* * * * *
[FR Doc. 01-24103 Filed 9-25-01; 8:45 am]
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