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Another Effort to Fix Tax Issues for Relocating Feds, the Pay Raise Is Almost Ready, and More

A weekly round-up of pay and benefits news.

A bipartisan group of senators has renewed its push to provide a legislative fix for an unintended consequence of the 2017 tax law overhaul that caused thousands of federal workers to incur large tax bills when they moved for work.

Last year, federal employees relocating for their agency found that a deduction for government payments associated with moving costs for household goods had been stripped from the tax code. As a result, many saw one-time deductions from their paychecks of up to $7,000.

The General Services Administration last May came up with a temporary fix, authorizing agencies to pay relocation income tax allowances and withholding tax allowances to cover the increased tax liability. But that policy did not cover around 5 percent of federal employees asked to move for work.

Last week, senators from both parties reintroduced legislation to ensure that all federal employees who qualify to have their moving costs reimbursed by the government are also repaid for any taxes owed on those payments.

The Relocation Expense Parity Act, introduced by Sens. Mark Warner, D-Va.; Tim Kaine, D-Va.; Susan Collins, R-Maine; Mazie Hirono, D-Hawaii; and Chris Van Hollen, D-Md., expands the definition of who is eligible for payments to cover relocation reimbursement-related tax bills, called “gross up” payments, to include all feds who are eligible for relocation reimbursement, from new to retiring employees.

“Straddling our loyal public employees with part of the cost of their employment-related relocation is not just wrong, it’s also a disservice to our workforce,” Warner said in a statement. “This legislation will make sure that the government does not push these costs onto our workers or inadvertently deter talented individuals from accepting positions that may force them to relocate.”

Collins said: “When federal employees are required to relocate to continue their public service in a different part of the country or the world, they should not have to worry about paying additional federal taxes on their reimbursement for moving costs. Although the vast majority of federal workers are fully reimbursed for this additional cost, this bipartisan legislation would ensure that the remaining 5 percent of affected workers are fairly compensated for their moving expenses.”

Meanwhile, acting Office of Personnel Management Director Margaret Weichert on Wednesday gave reporters an update on the status of implementing the 1.9 percent 2019 pay raise for federal workers approved last month, saying it is in the “final clearance” stages.

In February, Congress passed an appropriations package that included a 1.4 percent across-the-board pay increase for federal civilian employees and a 0.5 percent average increase in locality pay, retroactive to the first full pay period of 2019. Weichert said she shares the frustration of employees still awaiting the pay raise, but described the delay as a result of the “complexity” of the federal pay system.

“It’s an EO that unleashes the retroactive pay. You’re dealing with pay tables that are so highly complex,” Weichert said. “It is exceedingly legalistic as to how we get this squared away. And so the challenges are actually not, as some have [speculated], the payroll processing. It’s purely a lawyering activity.”

Elsewhere on the OPM front, Weichert last week authorized a program for federal workers to donate excess leave to colleagues impacted by the wildfires last November in California.

In a memo to agency heads, Weichert established an emergency leave transfer program related to the disaster. The program allows federal employees to donate unused annual leave to employees impacted by the disaster who need to take time off to get back on their feet.

In the memo, Weichert stressed that this program, the fourth recent leave transfer authorization, is separate from another emergency leave transfer program related to wildfires in California that occurred last October.