Premium Conversion
How does it work?
The employer’s payroll department simply deducts the portion of the employee’s premiums
pre-tax and sends it to the insurance provider. This pre-tax deduction can be taken for the
employees and their tax dependents on qualified insurance premiums.
Employee enrollment in Premium Conversion is usually done automatically. When automatic
enrollment is in place employees who do not wish to participate will have to write a letter
to the employer’s payroll department expressing that they do not wish to have pre-tax deductions
taken from their paycheck.
Some employer’s make enrollment optional- if this is the case employees will need to fill out
and sign an enrollment form each year.
Once the participant enrolls to have pre-tax deductions taken from his or her paycheck, the
deduction amount cannot be changed until open enrollment. The only time a participant can change
their payroll deduction amount is if they have a status change event, ie. birth, death, loss of
coverage etc.
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