AFGE Asks OMB to Forgo Collection of Back Retirement Taxes from New Federal Employees

By on April 29, 2014 in Current Events, Pay & Benefits with 82 Comments

The American Federation of Government Employees is asking the Office of Management and Budget to forgo collecting back retirement taxes from new federal employees to avoid placing an undue financial burden on them.

Under the Budget Act of 2013, federal workers 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. According to AFGE, the delay is due to the Defense Civilian Pay System’s inability to update its software programs prior to that time.

Because of the delay, newly hired federal employees could potentially find themselves up to $1300 in debt to the government and would be required to pay at least $25 per pay period until the debt is satisfied. Consequently, AFGE wants the debt to be waived.

“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,” AFGE president J. David Cox, Sr. said.

He added that the unpaid amounts should be treated as erroneous payments by the employer rather than debts incurred by the employees.

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Ian Smith is one of the co-founders of FedSmith.com. He enjoys writing about current topics that affect the federal workforce. Ian also has a background in web development and does the technical work for the FedSmith.com web site and its sibling sites.

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