New Feds Will Owe the Government Retroactive Pension Contribution Payments …

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In the waning days of 2013, Congress agreed to a budget deal that would increase pension contributions for federal employees hired on or after Jan. 1, 2014.

The Obama administration has announced it will delay the start of the higher deductions until all the government’s pay systems have been updated to accommodate the now three-tier contribution structure. This will likely not occur until the summer, according to a federal employees union, at which point workers hired in 2014 will owe back payments retroactive to when they came on board.

These debts will be collected from the employees’ paychecks in up to $25 increments until the balance is paid back in full. The American Federation of Government Employees took issue with this set up, saying it “add[s] insult to injury” for workers already seeing smaller paychecks.

“It is wrong to treat this failure on the part of the employer to operationalize its payroll deduction system for as long as 17 pay periods as a case where employees have incurred a ‘debt for underpayment’ to the government,” AFGE President J. David Cox Sr. wrote in a letter to the Office of Management and Budget. “This mistake is solely the responsibility of the agencies.”

Cox called for OMB to waive the higher contribution until the government’s pay system processors are able to implement it. If it declines to do so, Cox said, employees could end up owing Uncle Sam up to $1,300 in back payments.

The 2013 Bipartisan Budget Act required feds hired in 2014 and beyond to contribute 4.4 percent of their salaries to their pensions in the Federal Employees Retirement System. Workers hired after 2012 contribute 3.1 percent, and all others pay just 0.8 percent.

The delay occurred because software for the Defense Civilian Pay System could not be updated in time, according to AFGE. Guidance on the Defense Finance and Accounting Service website said the updated DCPS programming will not be in place until July 27.

“Once DCPS is updated and your [human resources] office submits the personnel actions to the pay system, your retirement contributions will be computed accurately and deducted from your pay account every payday,” the agency wrote. “Unfortunately, DFAS must collect from you all of the under deductions before that date.”

DFAS said it will send a debt notification letter to each employee to let them know the total they owe and their options for repayments.

“We encourage you to save a portion of your pay now to help lessen the impact of repayment,” it wrote. The agency also created a tool to help employees calculate what they will owe.

The Agriculture Department’s National Finance Center, which provides payroll services for more than 650,000 federal employees, issued guidance in March saying workers will “receive a bill for the monies owed for the employee portion of retirement funds not previously collected” once the programming has been updated. NFC advised agencies to remind their employees they could set aside money in advance to repay their future debts.

OMB declined to comment on how it would respond to AFGE’s letter. 

(Image via NAN728/Shutterstock.com)

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