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Premium Conversion (pretax) Benefit

Program Basics

State of Iowa employees who work at least 1040 hours/year, have the option to pay their share of health, dental and supplemental term life insurance premiums with pretax* dollars. Employees are automatically enrolled in this plan and may elect out of the plan. Participating in the Premium Conversion Plan helps you...

  • Decrease taxes
  • Increase net take-home pay

The term pretax, for purposes of the Premium Conversion Plan, means "before federal, state and FICA taxes". Your pretax premium amount will reduce the amount of wages reported to social security. The effect on your social security benefit will be proportional to the amount of total pretax premiums you pay.

Example: a $504 tax savings in one year

No Premium Conversion

Premium Conversion

Savings

Gross Income
$36,000
$36,000
 
Expenses run through Premium Conversion
0
(-$1,800)
 
Taxable Income
$36,000
$34,200
 
Federal Tax*
(-5,400)
(-5,130)
270
State Income Tax*
(-1,926)
(-1,830)
96
FICA
(-2,754)
(-2,616)
138
Income After Taxes
$25,920
$24,624
 
Expenses after taxes
(-1,800)
0
 
Your Spendable Income
$24,120
$24,624
$504
This employee reduced taxes by $504 by utilizing the Premium Conversion benefit!

* Based on estimated federal tax of 15% , state tax of 6%, and FICA of 7.65%

Premium
Conversion
Benefit