Davis Lauds Committee Passage of Premium Conversion Bill

Press Release

Davis Lauds Committee Passage of Premium Conversion Bill

The House Committee on Oversight and Government Reform today approved legislation by a voice vote that will allow federal civilian and military retirees to pay their monthly health-care premiums from pre-tax dollars and allow active-duty military to apply a pre-tax rebate to the supplemental insurance most personnel purchase to cover gaps in TRICARE.

"Time is of the essence," said Rep. Tom Davis, the bill's sponsor. "According to government estimates, this legislation would result in average savings of $820 a year for federal annuitants. With increases in healthcare premiums far surpassing increases in cost-of-living adjustments, this legislation would help balance the books for federal and military retirees."

Davis' legislation currently has 263 cosponsors. The bill had 340 cosponsors in the 109th Congress and was approved unanimously by the Government Reform Committee in June 2005. The bill has received broad bipartisan support since its initial introduction in the 106th Congress. "I am hopeful that sufficient momentum has finally built up behind this proposal to see results this Congress," Davis said.

Section 125 of the Internal Revenue Code allows employers in the public and private sectors to permit their employees to pay for health insurance with pre-tax dollars, wages excluded from both income and Social Security payroll taxes. These so-called "premium conversion plans" are also available to most employees of large private sector companies. The tax code, however, does not provide authority for employers to make premium conversion benefits available to their retirees. Davis' bill addresses this disparity. The bill now moves to the Ways and Means committee docket. Davis said he will work to encourage the Ways and Means Committee to take up this premium conversion in the next tax bill considered by the House.

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