Pay and Benefits, Post-Holiday and Post-Cliff

Lots of federal compensation news, but few actual changes as the New Year begins.

The last week has been a blur for everyone tuned into the fiscal cliff drama. The marathon legislative sessions on Capitol Hill between Christmas and New Year’s Day produced lots of federal compensation news but because of the evolving nature of the debate, it was tough to keep track of what actually squeaked through.

Here’s a recap of what happened this past week regarding some federal pay and benefits:

  • House-backed pay freeze extension: The big federal compensation news this week was the last-minute legislation the House passed to extend the salary freeze on civilian feds through 2013. Republican lawmakers managed to push through a bill on New Year’s Day that would block a scheduled salary increase for federal employees this spring, as well as prevent a raise for lawmakers from taking effect. But the new Congress convenes at noon on Thursday, making Senate action on the pay freeze extension legislation extremely unlikely.

    That means the 113th Congress will have to start from scratch on any legislation that addresses federal pay. The current civilian federal pay freeze expires on March 27, when the continuing resolution funding the government runs out. It’s highly likely that Republican lawmakers in the 113th Congress will introduce stand-alone legislation or include language in a larger bill that would extend the freeze past the end of March. Members of Congress, who have denied themselves pay increases since 2009, also voted to freeze their pay in 2013. That provision was included in the final fiscal cliff package.
  • COLAs: The final compromise avoiding the fiscal cliff does not include a switch to a less generous formula for computing retirees’ annual cost-of-living adjustments. Before Christmas, House Speak John Boehner, R-Ohio, and President Obama reportedly agreed to replace the current formula with what’s known inside the Beltway as the chained CPI. That would have resulted in lower COLAs for retirees, including federal and military retirees, over time. It almost made it into the final deal, but after some political horse trading, Senate Republicans agreed to take it out when several Democratic lawmakers publicly decried it (even though the White House supported it). Because the move to a chained CPI has many supporters on both sides of the aisle, watch for it to come back around this year.
  • Transit subsidy: The fiscal cliff package also increases the mass transit subsidy benefit for commuters, including many federal employees. The benefit, which fell to $125 per month in 2012 because Congress failed to extend it, will now be $240 per month through 2013, matching the current parking benefit for commuters. The mass transit benefit will be retroactive to Jan. 1, 2012.
  • New federal hires: Federal employees hired after Dec. 31, 2012, and those with less than five years of federal service rehired after that date, must pay an additional 2.3 percent into their pensions, bringing their total pension contributions to 3.1 percent. The measure, which Congress passed in February to help pay for an extension of the payroll tax holiday in 2012, also applies to new congressional employees and newly elected lawmakers.

    Current feds are protected for now from having to contribute more to their defined retirement benefit, but there is Republican and Democratic support for eventually making federal pensions less generous. Several legislative efforts were floated during 2012 that would have forced feds to contribute more to their pensions but they all failed, except for the one applying to new hires. Look for this to come back up again in the next two months during debate over dealing with the automatic spending cuts that have been delayed until March 1 and negotiations over raising the debt ceiling. Obama also could recommend, like he did last year, that feds contribute more to their pensions in his February fiscal 2014 budget proposal.
  • Thrift Savings Plan and federal taxes: The Senate on Tuesday approved House-passed legislation that would allow the Internal Revenue Service to tap Thrift Savings Plan accounts to collect unpaid federal taxes. H.R. 4365, sponsored by Rep. Ann Marie Buerkle, R-N.Y., would ensure TSP accounts are subject to a law that allows the IRS to collect unpaid federal taxes by levy -- the process of ordering a third party to turn over property of taxpayers who are delinquent. The 1986 Federal Employees Retirement System Act protects some assets in TSP accounts from levy. FRTIB asked Congress to clarify whether the IRS had the authority to levy the TSP funds of civil servants who are delinquent on their taxes.

    The Congressional Budget Office has estimated that the bill would result in an additional $24 million in revenue from 2013 to 2022.

    According to an IRS report, more than 98,000 federal civilian employees owed more than $1 billion in unpaid federal income taxes in 2010, while retired civilians had a tax delinquency tab of $470 million. More than 83,000 military retirees owed nearly $1.6 billion in unpaid taxes in 2010 and active-duty service members owed about $111 million, the IRS report found. The tally does not include federal employees or military service members who owe taxes but have repayment agreements.

    Still, federal workers have a better compliance rate than the general public: more than 96 percent of feds pay their taxes on time and do not owe the government money.

Travel Advisory

The General Services Administration last week announced the creation of a governmentwide travel advisory committee, which will review existing federal travel policies and processes, “beginning with the methodology by which annual adjustments are made to the federal per diem rate,” according to a GSA press release. GSA is accepting applications for committee members, who will include representatives from the travel industry as well as local and state governments.

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