The Hidden Tax Advantages in Your FERS Benefits (And Why Open Season Is the Perfect Time to Rethink Them)

Hi Friends, Mike Lanway here with AllAboutFERS.com

If you’re a FERS employee, you’ve got access to one of the most robust benefits systems available in the workforce today. But many federal employees don’t realize that some of the most valuable benefits you have are doing more than just protecting you or giving you coverage—they’re actually helping reduce your tax burden.

Today I want to help you see your benefits from a new angle—a tax angle—especially as we approach Open Season, the annual window when you can reassess and update your coverage.

Let’s walk through this together.

First, Understand the Broader Value of Your Benefits

Most of us think about our federal benefits primarily in terms of protection—health insurance, life insurance, dental, vision. These are tools that offer peace of mind and safety nets for life’s “what-ifs.”

But there’s a second layer of value that often goes unnoticed:

Many of these benefits reduce your taxable income.

Every dollar you put toward a qualified benefit—whether it’s through your health plan, vision or dental insurance, or your Thrift Savings Plan (TSP)—is a dollar that potentially reduces the income you’re taxed on.

Why Open Season Matters

From the first Monday in November to the first Monday in December, federal employees have the chance to reevaluate their benefit elections. Most people approach this period thinking:

• Do I like my doctor?
  
• Am I comfortable with my co-pays?
  
• Is this coverage enough?

But what if you also asked:

• Can this benefit help lower my taxes?
  
• Is there a plan that offers both value and a tax advantage?
  
• Am I leaving tax savings on the table?
  

When you take this broader view, Open Season becomes more than just insurance shopping—it becomes a financial planning opportunity.

Practical Examples of Tax-Smart Decisions

Let’s make this real. Here are a few ways your FERS benefits may be helping you reduce your tax bill:

• FEHB (Federal Employee Health Benefits) premiums are typically paid pre-tax. That means they reduce your taxable wages and can significantly shrink your annual tax liability.
  
• Dental and Vision Insurance through FEDVIP may offer pre-tax payment structures depending on how they’re administered.
  
• Flexible Spending Accounts (FSAs) allow you to set aside pre-tax money for out-of-pocket medical, dental, and dependent care costs.
  
• TSP Contributions, especially traditional (non-Roth), reduce your current taxable income and grow tax-deferred.
  

The key takeaway is this: Your benefits are more than just services—they are tax strategies in disguise.

Don’t buy a benefit just for the Tax Break—But Don’t Ignore It Either!

Let’s be clear: you shouldn’t choose a benefit just to save money on taxes. But if there’s a plan you’re going to use anyway—and it offers a built-in tax break—then that’s smart planning.

You’re not just protecting yourself, you’re maximizing the value of your compensation package. That’s what good stewardship looks like. That’s what planning looks like.

Take a Fresh Look at Your Situation

If you’ve dismissed a benefit in the past because you thought you didn’t need it, or if you’ve stuck with the same plan year after year just out of habit, this is the year to look again.

There may be opportunities sitting right in front of you—opportunities to:

• Protect yourself and your family
  
• Plan ahead for healthcare needs
  
• And lower your tax bill at the same time
  

Let’s not leave that on the table.

Want to Learn More?

We’re building out a library of resources at AllAboutFERS.com, and I invite you to explore what’s there. We’re not just here to teach rules—we’re here to help you think differently about what’s in front of you.

Because when you understand your benefits fully, you can start making decisions that bring clarity, peace of mind, and real financial value—both now and in retirement.

Take care of yourself. And if you ever want help thinking things through, we’re here for you.

All my best,
Mike Lanway