SENIOR SENATE FEDERAL PROPOSAL NO. 7

INTRODUCED BY SENIOR SENATOR LUNDIN

LEGISLATIVE COUNSEL’S DIGEST

SFP 7: FEDERAL ANNUITANTS: HEALTH PREMIUMS.

UNDER EXISTING LAW, CERTAIN EMPLOYEES, INCLUDING EMPLOYEES OF THE FEDERAL EXECUTIVE AND LEGISLATIVE BRANCHES, MAY PAY THEIR SHARE OF HEALTH INSURANCE PREMIUMS WITH WAGES EXCLUDED FROM BOTH INCOME AND SOCIAL SECURITY TAXES UNDER A CONCEPT KNOWN AS “PREMIUM CONVERSION.”

THIS MEASURE WOULD MEMORIALIZE THE CONGRESS AND THE PRESIDENT TO ENACT LEGISLATION THAT WOULD AMEND SECTION 125 OF THE INTERNAL REVENUE CODE TO MAKE FEDERAL ANNUITANTS ELIGIBLE FOR “PREMIUM CONVERSION,” THEREBY ALLOWING THOSE PERSONS TO PAY THEIR SHARE OF HEALTH INSURANCE PREMIUMS WITH PRETAX RATHER THAN AFTER TAX DOLLARS.

VOTE: MAJORITY.

SFP 7: RELATING TO FEDERAL ANNUITANTS

WHEREAS, SECTION 125 OF THE UNITED STATES INTERNAL REVENUE CODE, OTHERWISE KNOWN AS “PREMIUM CONVERSION,” ALLOWS EMPLOYERS IN THE PUBLIC AND PRIVATE SECTORS TO ALLOW THEIR EMPLOYEES TO PAY HEALTH INSURANCE PREMIUMS WITH WAGES EXCLUDED FROM INCOME TAXES AND FROM SOCIAL SECURITY PAYROLL TAXES; AND

WHEREAS, THE CONCEPT OF “PREMIUM CONVERSION” EXTENDS TO EMPLOYEES OF THE FEDERAL GOVERNMENT, INCLUDING EMPLOYEES OF BOTH THE EXECUTIVE AND LEGISLATIVE BRANCHES; AND

WHEREAS, “PREMIUM CONVERSION” IS ESTIMATED TO SAVE THE AVERAGE FEDERAL WORKER ABOUT $434 PER YEAR; AND

WHEREAS, FEDERAL GOVERNMENT ANNUITANTS, WHO ARE PERSONS RETIRED FROM FEDERAL GOVERNMENT EMPLOYMENT, AND OTHER RETIREES, HAVE NOT BEEN INCLUDED IN THE “PREMIUM CONVERSION” CONCEPT; AND

WHEREAS, IT WOULD BE APPROPRIATE TO EXTEND THE CONCEPT OF “PREMIUM CONVERSION” TO FEDERAL ANNUITANTS IN ORDER TO ALLOW THESE PERSONS TO BENEFIT FROM PAYING FOR HEALTH INSURANCE WITH PRETAX DOLLARS IN THE SAME MANNER AS FEDERAL EMPLOYEES; NOW, THEREFORE, BE IT

RESOLVED, BY THE SENIOR SENATE AND THE SENIOR ASSEMBLY, JOINTLY, THAT THE SENIOR LEGISLATURE OF THE STATE OF CALIFORNIA AT ITS 2006 REGULAR SESSION, A MAJORITY OF THE MEMBERS VOTING THEREFOR, HEREBY PROPOSES THAT SECTION 125 OF THE INTERNAL REVENUE CODE BE AMENDED TO ALLOW FEDERAL ANNUITANTS TO BE ELIGIBLE FOR “PREMIUM CONVERSION” SO THAT THEY MAY PAY THEIR SHARE OF HEALTH INSURANCE PREMIUMS WITH PRETAX DOLLARS; AND BE IT FURTHER

RESOLVED, THAT THE SENIOR LEGISLATURE OF THE STATE OF CALIFORNIA RESPECTFULLY MEMORIALIZES THE CONGRESS AND THE PRESIDENT TO ENACT APPROPRIATE LEGISLATION THAT WOULD ADDRESS THE CONCERNS SET FORTH IN THIS MEASURE; AND BE IT FURTHER

RESOLVED, THAT A COPY OF THIS MEASURE BE TRANSMITTED TO THE PRESIDENT AND VICE PRESIDENT, THE SPEAKER OF THE HOUSE OF REPRESENTATIVES, THE CHAIRPERSONS OF THE HOUSE AND SENATE COMMITTEES ON AGING, AND TO EACH SENATOR AND REPRESENTATIVE FROM CALIFORNIA IN THE CONGRESS OF THE UNITED STATES.

RN20061900405

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