[Code of Federal Regulations]
[Title 5, Volume 2, Parts 700 to 1199]
[Revised as of January 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 5CFR892.102]

[Page 474]
 
                    TITLE 5--ADMINISTRATIVE PERSONNEL
 
          CHAPTER I--OFFICE OF PERSONNEL MANAGEMENT (Continued)
 
PART 892--FEDERAL FLEXIBLE BENEFITS PLAN: PRE-TAX PAYMENT OF HEALTH BENEFITS PREMIUMS--Table of Contents
 
            Subpart A--Administration and General Provisions
 
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.