Why Your Federal Annuity Check Went Down (Continued)

Why did the amount of money in your paycheck go down? The controversy and the uproar continues.

A couple of weeks ago, we ran an article entitled Why Did Your Federal Annuity Payment Go Down?

Usually, when composing and publishing a news item, we have a good idea of how popular (or, at least, how much people will read at article) when we make it public. This article was a surprise. We had run a few articles about how Congressional passage of the Bush tax rates late in December would create problems for payroll offices, including problems with pay tables that would not be available in time for January paychecks.

But, to our surprise, the popularity of the article exceeded expectations. A few days after our initial article, OPM issued new information which we publicized in another article: OPM Speaks Out: Why Your Tax Withholding Went Up and Your Federal Annuity Check Went Down.

So, as we explained in the initial article, here is what happened: Additional money was deducted from the annuity checks of federal employees who are retired. The extra deduction, in addition to  higher health premiums for many people, and the second year in a row without a COLA increase, resulted in less pay for many retirees. And, while news articles had been discussing all of these topics, the combination of events really hit home for many people when they saw the actual reduction in the number of dollars available to them to spend on stuff like food, rent, clothing and entertainment.

As a result of the uproar, NARFE (National Active and Retired Federal Employees Association) has also issued an advisory note to its members also advising their members of a new hotline number that retirees can use to change the federal tax withholding on their monthly annuity payments. Here is the notice issued by NARFE:

“In response to high call volume, the Office of Personnel Management has established a new Tax Hotline that retirees can call to change the federal tax withholding on their monthly annuity payments. The number is 800-307-8298.

The increased call volume is a result of a change in federal tax withholding in 2011. Most federal annuitants discovered an increase in federal income tax withholding in their monthly annuity payments for 2011 starting with the February 1, 2011, annuity payment. This increased withholding along with increases in premiums for Federal Employees Health Benefits Program insurance premiums resulted in a substantial decrease in their net check.

Many annuitants and survivors want to change their federal tax withholding and have experienced busy signals and long waits calling the Office of Personnel Management’s (OPM’s) Retirement Information Office line. In response, OPM established the new Tax Hotline, 800-307-8298.”

As we advised our readers, often to no avail, reducing the amount of tax money being withheld from your check does not impact the total amount of taxes you may owe when you file your tax return. In other words, you can have OPM reduce the amount of money being withheld from your annuity payment but, be forewarned, you may owe more money to the IRS next year or you may get a smaller refund.

The only way to be certain is to check with your tax adviser or to be very good at filling out your own tax forms so that you can project what your tax liability may be next year.

The tax hotline number can be used to change your tax withholding. It is not designed to be a number of registering a complaint about the changes some readers have experienced.

About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources. Follow Ralph on Twitter: @RalphSmith47