WASHINGTON – American Federation of Government Employees National President J. David Cox Sr. today has asked the Office of Management and Budget to forgo the collection of back retirement taxes from new federal employees to avoid placing a large financial burden on them.
Under the Bipartisan Budget Act of 2013, federal employees hired after January 2014 are required to pay 4.4 percent of their salaries into the Federal Employees Retirement System, which is 1.3 percentage points higher than the tax increase imposed on those hired in 2013 and 3.6 percentage points higher than the tax imposed on those hired prior to 2013.
However, the Obama administration recently announced that it will be unable to begin processing the additional retirement tax until late July or early August. AFGE has learned that the delay is due to the Defense Civilian Pay System’s inability to update its software programs prior to that time.
The delay means thousands of federal employees hired since the start of the year will suddenly find themselves up to $1,300 in debt to the U.S. government and will be required to pay their employer at least $25 per pay period until the debt is satisfied.
“New federal employees already are facing lower salaries than their peers as a result of this higher retirement tax. Now they’re going to be hit with this mountain of debt once the government gets around to start collecting the taxes,” Cox said. “Talk about adding insult to injury. These workers should not be on the hook for these back payments when they’re not responsible for the delay.”
Cox formally requested the waiver in an April 28 letter to OMB Deputy Director for Management Beth Cobert, citing a statute in Title 5 that authorizes agency heads to waive collections of erroneous payments.
“The agencies’ inability to collect these retirement payments in a timely manner certainly constitutes a case that justifies waiver under this authority. The unpaid amounts should be treated as erroneous payments by the employer, not debts incurred by the employees,” Cox wrote.