The Empire Plan is a unique health insurance plan designed especially for public employees in New York State. Empire Plan benefits include inpatient and outpatient hospital coverage, medical/surgical coverage, Centers of Excellence for transplants, infertility and cancer, home care services, equipment and supplies, mental health and substance abuse coverage and prescription drug coverage.
NY15-28
TO: New York State Agency Health Benefits Administrators
FROM: Employee Benefits Division
SUBJECT: Pre-Tax Contribution Program (PTCP)
DATE: November 3, 2015
Each November employees may make changes which can affect their tax liability when enrolled in the New York State Health Insurance Program (NYSHIP). During the month of November, employees may choose either to participate or not to participate in the Pre-Tax Contribution Program (PTCP). During November, an employee enrolled in the PTCP may also make changes to his or her coverage which impacts the employee’s pre-tax deduction for the new plan year, absent a PTCP qualifying event1.
Choosing to Participate in PTCP
The PTCP is a voluntary program in which an employee’s share of the health insurance premium is deducted from his or her wages before taxes are withheld. Employees who participate in this program may lower their tax liability, but they also are restricted as to when they can make changes to their biweekly health insurance pre-tax deductions. Changes in pre-tax deductions during the plan year can only be made if a timely (within 30 days of date of event) request is made in response to a PTCP qualifying event, and the change satisfies the PTCP consistency rule2.
Employees can choose to participate in PTCP when they are first eligible for benefits. Employees may also change their PTCP status each year during the PTCP Election Period from November 1 through November 30. The change in status becomes effective for the new plan year.
If at the time the employee is first eligible for benefits, the employee does not elect to participate in PTCP, the employee will not be allowed to participate in PTCP for the remainder of that plan year. This means that all of the employee’s share of health insurance premium will be deducted after taxes have been withheld from wages. The employee can only request a change to his or her PTCP status during the next PTCP Election Period, in November.
Choosing NOT to Participate in PTCP
Employees who decline participation in PTCP have the employee’s share of the health insurance premium deducted from their wages after taxes are withheld. Employees who do not participate in PTCP have greater flexibility to make arbitrary changes to their NYSHIP coverage, as long they are consistent with NYSHIP rules.
Tax Savings Under PTCP
Employees who participate in the PTCP will have taxes (federal income taxes, Social Security taxes and most State and local income taxes) withheld based upon a lower income. Employees may have a lower tax liability for that year.
Restrictions Under PTCP
Under Internal Revenue Service (IRS) rules employees enrolled in PTCP may change their pre-tax payroll deduction for health benefits during the Plan year only after a PTCP qualifying event. In other words, in exchange for this reduction of tax liability, the employee agrees to maintain the same pre-tax health insurance deduction for the entire plan year unless the employee provides timely (within 30 days) notification of a qualifying event and the consistency rule is satisfied, which would allow the employee to make a change to the pre-tax premium deductions.
Qualifying Events Under PTCP
Pre-tax payroll deductions can be changed during the tax year only after one of the following PTCP qualifying events when the request is made timely and satisfies the consistency rule:
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Change in employee’s marital status
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Change in employee’s number of dependents
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Change in the employment status of employee, spouse or dependent that affects eligibility for health benefits
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Dependent satisfies or ceases to satisfy eligibility requirements for health benefits
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Change in place of residence or worksite of the employee, spouse or dependent that affects eligibility for health benefits
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Significant change in health benefits and/or premium under NYSHIP
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Significant change in health benefits and/or premium under the employee’s or dependent’s other employer’s plan
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COBRA events
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Judgment, decree or order to provide health benefits to eligible dependents
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Medicare or Medicaid eligibility
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Leaves of absence
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HIPAA special enrollment rights
A change in coverage due to a qualifying event must be requested within 30 days of the event (or within the waiting period if newly eligible) and must satisfy the consistency rule. Delays may be costly.
Arbitrary Changes for PTCP Enrollees
Beginning with the 2016 Plan Year, "split deductions" will be available to allow for an enrollee’s premium to be split between pre-tax and post-tax deductions. This allows for most arbitrary (non-qualifying) changes for PTCP enrollees to be made, by splitting off the resultant increase in the enrollee premium to be taken on a post-tax basis. The change also allows for PTCP enrollees to add non-federally qualified domestic partners to their coverage with the additional dependent premium taken on a post-tax basis. A PTCP enrollee is still not permitted to change his or her pre-tax deduction by changing or cancelling coverage in the absence of a PTCP qualifying event3.
A Policy Memo will be issued soon regarding NYSHIP rules and the Pre-Tax Contribution Program.
Employee Postings Regarding PTCP
Enclosed with this HBA memo is the Pre-Tax Contribution Program Fact Sheet, or Attachment A, which should be posted publicly for employees during the PTCP Election Period. Attachment A summarizes the differences between choosing to participate in the PTCP compared to not participating in the PTCP.
In addition to Attachment A, a chart titled, "Enrolled in Pre-Tax Contribution Program" was developed to assist HBAs with questions PTCP enrollees may have when requesting changes to their health coverage (e.g., adding or removing dependents, cancelling coverage, changing options, etc.).
If you have any questions, please contact the HBA Help Line at 518-474-2780.
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1Employees enrolled in PTCP may request a change to their coverage during November, however HBAs may not be able to process these requests in NYBEAS until the annual Option Transfer Period keying window is open. Refer to the annual Option Transfer Period HBA memo for these keying window dates.
2Under the "general consistency rule," an election change satisfies the consistency requirement "if the election change is on account of and corresponds with a change in status that affects eligibility for coverage under an employer’s plan." For example, if the change in status is the employee’s divorce, an employee’s election to cancel health coverage will apply only to the spouse (and stepchildren, if any) whose eligibility is affected by the divorce.
3NYSHIP rules do not allow enrollees to cover ineligible dependents. If a PTCP enrollee requests to remove an ineligible dependent from coverage, that request should be processed in NYBEAS. If the removal of that dependent results in a change from Family to Individual coverage, then enrollee will have a lower pre-tax deduction resulting in a higher taxable income. At the current time, we are unable to process this request and allow the enrollee to maintain the same pre-tax deduction. When this enhancement is available, it will be communicated.