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.
Learn more about your W-2 Wage and Tax Statement from the Office of Payroll Administration
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).
Learn more about Social Security from the Office of Payroll Administration
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.
Read the MSC Premium Conversion FAQ