As of Friday afternoon, we have the largest stimulus spending bill passed into law in the country’s history of approximately $2 trillion dollars. That’s $2,000,000,000,000.
So, what’s in it that will be of interest to federal employees and retirees?
The New York Times has an excellent list of frequently asked questions and answers about the bill that is being updated continuously as new information becomes available. Much of the information below is a summary of some of what NYT has provided (as of the time of this writing) that will be of most interest to federal employees.
Here is some very important information: this is a very new situation and the information has been changing rapidly. When it comes to your personal situation, especially on matters such as the Thrift Savings Plan or your personal taxes, seek professional advice from the appropriate individuals, i.e. your financial advisor, tax preparer, your local human resources office, and/or the TSP. None of what is written here is to be construed as financial or tax advice.
It’s Christmas in Washington! Lawmakers have said they are sending out direct payments to Americans coming soon to your bank account. Well, maybe; it turns out that not everyone is eligible.
The largest checks would be $1,200 per taxpayer plus $500 per child tax rebate.
But the catch is that not everyone qualifies for the payment. Here’s what the New York Times wrote about these payments:
Single adults with Social Security numbers who have an adjusted gross income of $75,000 or less would get the full amount. Married couples with no children earning $150,000 or less would receive a total of $2,400. And taxpayers filing as head of household would get the full payment if they earned $112,500 or less.
Above those income figures, the payment decreases until it stops altogether for single people earning $99,000 or married people who have no children and earn $198,000. According to the Senate Finance Committee, a family with two children would no longer be eligible for any payments if its income surpassed $218,000.
You can’t get a payment if someone claims you as a dependent, even if you’re an adult. In any given family and in most instances, everyone must have a valid Social Security number in order to be eligible. There is an exception for members of the military.
These would be one time payments, and the qualifying income levels are based on 2019 tax year income.
USA Today noted that a last minute provision of the bill made it so that individuals with little to no tax liability will now be able to receive the $1,200 payments as well.
Forbes has a simple calculator you can use to determine what your payment would be under this bill based on your filing status and income earned last year.
Do you have to file an application to get the payment? Most likely not if the IRS has your information on file already from past taxes.
Treasury Secretary Steven Mnuchin said recently, “…most of these [stimulus payments] will be direct deposit. So we call them checks in the mail, but most of them will be direct deposits. It will be within three weeks. We’re determined to get money in people’s pocket immediately.”
At the time of this writing, the IRS had this statement on its website:
At this time, the IRS does not have any information available yet regarding stimulus or payment checks, which remain under consideration in Congress. Please do not call the IRS about this. When the IRS has more specific details available, we will make it available on this page.
Update: The IRS said that the payments will be sent directly to most individuals via direct deposit to their bank accounts in the next three weeks.
Obviously, this has just changed with the bill now becoming law, so no doubt the agency will be providing more information on the stimulus payments very soon. It will be posted on the special coronavirus section of the IRS website.
What about retirees? These payments would also be sent to people who receive Social Security retirement and disability payments. Same goes for veterans or eligible unemployed people.
As I read this information, if you have a Social Security number and a qualifying adjusted gross income under the cutoff threshold, you’ll get a check, even if you are receiving an annuity. However, let me reiterate once again: Check with a tax professional if you have questions about your situation.
Retirement Savings Accounts
Suspension of Required Minimum Distributions (RMD)
The required minimum distributions on retirement savings accounts have been suspended for 2020. The idea here is that since the stock market has been falling, taking a distribution (and therefore selling holdings in the account) would be done at lower prices, leaving you with less money. If you opt to not take the RMD this year, you may get more bang for your buck next year, if the stock market goes back up by then, but there are no guarantees that it will of course.
The RMD suspension does not apply to pensions, however.
Side note: FedSmith author Michael Wald had an interesting article about the suspension of RMDs this year you may want to read.
Early Withdrawals from Retirement Plans
In the event you take an early withdrawal from an IRA or a workplace retirement plan, you are able to do so without the usual 10% penalty. However, the withdrawal has to be due to the COVID-19 coronavirus to qualify for this. Also, you could spread any taxes due on the withdrawal out over a three year period, and you could put the money back into the account during the three year period if you chose to.
So who qualifies? People who have tested positive or have a spouse or dependent who have tested positive for COVID-19 qualify. If you experienced any one of a variety of negative economic consequences as a result of the virus you may qualify also, so again, check with a tax professional if you think you might be eligible.
As of the time of this writing, the Thrift Savings Plan has posted this statement about the new law:
President Trump has signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law. This law seeks to address the economic impacts of the coronavirus (COVID-19), and it includes provisions concerning retirement plans. We will update you as specific details become available.
In other words, official details as to how the new law relates to your TSP account will be coming soon. Until then, I would suggest that no one make any assumptions about how the TSP will implement the new law.
If you have a qualifying federal student loan, payments will automatically be suspended until September 30.
The New York Times notes that contacting the loan servicing operations is difficult right now, but if you keep an eye on your online account over the next few weeks and check the amount due, you should be able to see if the amount due has been reset to show no payment is currently due.
You should also be getting a notice within a few weeks now that the bill is a law with information on eligibility for your loan and details on how the suspended payments will work.
What’s Not in the Bill
The House introduced its own bill that had some specific provisions for federal employees. These are not in this bill. According to AFGE:
Provisions left out of the bill would have provided hazard duty pay for front-line federal workers, mandated telework across federal agencies, allowed federal employees unable to work to use weather and safety leave, removed barriers for confirming cases of COVID-19 among federal workers, and nullified three anti-worker executive orders that have prevented federal unions from providing input and guidance into agency decisions affecting workers’ health and safety.
AFGE did note, however, that the bill that was signed into law “…helps protect federal employees by boosting agencies’ telework capacity, enhancing security screening at federal buildings, and funding deep cleaning of federal worksites.”
It is possible that if Congress passes yet another stimulus spending bill (or bills; it’s already been brought up believe it or not) that it might contain more provisions specific to the federal workforce. As always, we will keep you posted of any new information that unfolds.