MSC Premium Conversion


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About The Premium Conversion Program

The MSC Premium Conversion Program allows City employees who have payroll deductions for health insurance premiums and optional riders to increase their take-home pay.Read More

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The Medical Spending Premium Conversion Program enables eligible employees to pay for their health plan premium deductions on a pre-tax basis, thereby reducing their gross income for tax purposes.

Currently, health plan deductions for basic and/or optional benefits are deducted from your salary. For tax purposes, payments made on a before-tax basis effectively reduce the salary on which your taxes are computed by the amount of the health plan deduction.

Therefore, Federal and Social Security taxes that must be withheld are reduced. The net effect will be that you receive more money in your paycheck.


Eligibility

Find out if you are eligible to participate in the MSC Premium Conversion Program.Read More

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Employees eligible to participate in the Medical Spending Premium Conversion (MSC) Program are those covered by:

  • New York City health insurance, and
  • The Citywide contract, or
  • The Management Benefits Fund.


Agencies include:

  • Mayoralty
  • Health + Hospitals (H+H)
  • Housing Authority
  • City University of New York (CUNY)
  • School Construction Authority (SCA)
  • Department of Education (DOE)

 

Employees of cultural institutions, libraries and DOE charter schools may be offered a Premium Conversion Program through their individual institutions. Please contact your Benefits Manager for additional information.


Enrollment

Enrollment in the Premium Conversion Program is automatic.

Health insurance benefit premium payments will be deducted automatically from your paycheck on a pre-tax basis. If you currently do not have a payroll deduction for health insurance, this program does not affect your tax status. 


Change Premium Payments from Pre-Tax to Post-Tax

While automatically enrolled on a pre-tax basis, you are able to choose post-tax premium payments if you wish.Read More

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In order to do this, you must obtain, complete and submit a Medical Spending Conversion (MSC) Premium Conversion Enrollment/Change Form available at your Agency's Human Resources Department, or by contacting the MSC Administrative Office directly at (212) 306-7760.

 

After You Have Completed the Form

The completed form should be returned to your Agency's Human Resources Depatment for completion of the benefit section and to sign the MSC Enrollment/Change Form and send it to the MSC Administrative Office for processing.

Changing from pre-tax to post-tax or vice-versa can be done during the annual Health Benefits Fall Transfer Period. However, employees must choose to pay on a pre-tax or post-tax basis for an entire Plan Year.


Mid-Year Changes

In certain circumstances, such as a change in family status or employment, employees can change their tax status in the program.Read More

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Enrollment in the Premium Conversion Program remains in effect during the Plan Year and your status cannot change unless an approved Qualifying Event occurs mid-year.

 

Similarly, employees who waived enrollment in the Premium Conversion Program may enroll mid-year only if they incur a Qualifying Event listed below:

  • A change in family status such as marriage, divorce, annulment or legal separation;
  • The death of a participant, spouse, or dependent;
  • The birth or adoption of a child who will be the participant's dependent;
  • The attainment of the maximum age for coverage of a dependent child;
  • The participant becomes divorced and is required under court order to provide health insurance coverage for eligible dependent children;
  • A choice of another carrier (e.g., resulting from a move out of an HMO service area);
  • A participant has a change in title which necessitates a change in health plan (e.g., Med-Team participants must be DC-37 members; Metropolitan participants must be H+H employees);
  • The start or termination of employment (benefits) of participant or participant's spouse for any reason including retirement;
  • A change in spouse's coverage that is significant and outside the spouse's control (e.g., due to termination of employment or benefit reduction);
  • A spouse has a change in employment status that results in a change for health insurance coverage (either acquiring or losing eligibility for coverage);
  • A change in employment status from part-time to full-time, or vice-versa, by the participant or the participant's spouse;
  • The taking of, or returning from, an approved unpaid leave of absence by the participant or the participant's spouse;
  • An increase in the employee's health insurance contribution amount by more than 20%.


Note: Participants will not be allowed to make changes inconsistent with the Qualifying Event.


Effect on Salary, Taxes and Other Benefits

Find out how the Premium Conversion Program affects your salary, taxes & benefits.Read More

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Effect on Gross Salary

There is a reduction in the taxes withheld from your gross salary.

 

The reduction in gross salary will be shown on your Form W-2, under IRC 125, at the end of the year. Please note, you must add back the amount listed as IRC 125 on your Form W-2 to your state/city gross wages.

 

The unadjusted gross salary will only appear on your last paycheck of the year as a year-to-date figure. Some agencies may show individual gross salaries differently depending on the software and payroll systems in use.

 

Tax Savings

Savings will vary and be based on, among other things, your health plan option, whether you have individual or family coverage, the number of withholding allowances that you claim for tax purposes and the amount of your income. There will be savings on federal as well as Social Security taxes (FICA).

 


Effect on Other Benefits

Social Security Tax (FICA): You will save on Social Security taxes due to the Premium Conversion Program. However, based on current Social Security law, Social Security benefits at age 65 will be slightly less as a result of the Premium Conversion Program. The effect would be minimal and would be offset by the amount saved in taxes today.

Pension: The Premium Conversion Program will have no effect on your pension contributions or benefits.

Deferred Compensation: Participation in the Premium Conversion Program will have no effect on your participation in a 457, 401(k), Roth 401(k) or 403(b) plan.


Download FSA Program Forms and Brochures

Learn more about your W-2 Wage and Tax Statement from the Office of Payroll Administration

Learn more about Social Security from the Office of Payroll Administration

Have a Question? See the MSC Premium Conversion Program FAQs