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Paying for benefits
Find out your options for paying for your PEBB benefits.
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Eligible state agency and higher education institution employees may pay medical premiums and applicable premium surcharges with pretax dollars from their salary under the state’s premium payment plan. The premium payment plan is part of the Salary Reduction Plan under the Internal Revenue Code Section 125. See Washington Administrative Code (WA) 182-12-116 for more information.
If you are not a state agency or higher education employee, ask your payroll or benefits office if they offer a pretax deduction benefit under their own Section 125 plan.
Premiums and applicable premium surcharges are automatically deducted from your paychecks pretax, unless you request otherwise.
Why should I pay my monthly medical premiums with pretax dollars?
You take home more money because taxes are calculated after the premium and applicable premium surcharges are deducted. This reduces your taxable income, which lowers your taxes.
Do I need to complete a form to have my medical premiums withheld pretax?
If you are a new employee enrolled in PEBB medical and your employer offers this benefit, your payroll or benefits office will automatically deduct the premiums before calculating taxes.
If you enroll a nonqualified tax dependent (such as a state-registered domestic partner, their child, or an extended dependent), submit a Declaration of Tax Status form to indicate whether they qualify as a dependent for tax purposes under IRC Section 152, as modified by IRC Section 105(b). If your dependents do not qualify as your tax dependent, their monthly medical premiums will appear as posttax deductions from your paycheck. However, you will be able to make premium payments for your own insurance coverage with pretax deductions.
If your premium and applicable premium surcharges are automatically deducted from your paychecks, the deductions will be taken before taxes unless you request otherwise. Exception: If you enroll a state-registered domestic partner and they do not qualify as an Internal Revenue Code Section 125 dependent, then the $50 monthly spouse or state-registered domestic partner coverage premium surcharge (if it applies to you) will be a posttax deduction from your paychecks.
Submit a PEBB Premium Payment Plan Election/Change form to waive (opt out of) participation in the premium payment plan no later than 31 days after you become eligible for PEBB benefits (Your eligibility date is generally the first day of employment; check with your payroll or benefits office). See WAC 182-12-114 for more information.
Can I change my mind about having my medical premiums withheld pretax?
You may change your participation (enroll or opt out) during the PEBB Program's annual open enrollment or when a special open enrollment event occurs as described in WAC 182-08-199.
If you have your medical premiums deducted pretax, it may also affect the following benefits:
- Social Security—If your base salary is under the annual maximum, participation in the premium payment plan reduces your Social Security taxes. However, your lifetime Social Security benefit would be calculated using the lower salary.
- Unemployment compensation—Participation in the premium payment plan also reduces your base salary used to calculate unemployment compensation.
To comply with a federal or state mandate, your employer may also remove you from the premium payment plan, with notice, to prevent excess tax deferral.