Uncertainty remains about federal pay, benefits in payroll tax cut bill

The House has blocked the Senate\'s version of a two-month payroll tax cut extension.

By Jolie Lee
Federal News Radio

(Updated: 1:05 p.m.)

The House has blocked the Senate’s version of a two-month payroll tax cut extension.

In a legislative maneuver, House Republicans prevented the bill from coming to a vote and instead sent it to a House-Senate conference committee, where differences can be worked out.

If Congress does not pass the tax cut extension, the payroll tax would rise 2 percentage points on Jan. 1.

The Senate passed its version Saturday by a sweeping 89-10 vote. The Senate then promptly left Washington for the holidays. Senate Majority Leader Harry Reid (D-Nev.) says he won’t allow bargaining until the House approves the Senate’s short-term measure.

Provisions impacting feds in House bill passed last week:

  • Extends the current two-year federal pay freeze another year, through 2013.
  • Beginning in January 2013, increases pension contributions by 0.5 percent annually, until it reaches 2.3 percent in 2015.
  • For federal employees with less than five years of federal service, increases pension contributions by 3.2 percent.
  • For new hires, changes the salary calculation for annuities to the highest five years of service, rather than the current highest three years of service.

The Senate bill pays for the tax cut without impacting federal workers’ pay and benefits. Instead, the bill increases fees charged by Fannie Mae, Freddie Mac and the Federal Housing Administration by one-tenth of 1 percentage point.

However, the year-long House version of the payroll tax cut bill — passed last week includes the fee increases, as well as provisions that would impact federal employees’ pay and benefits.

Among those provisions, the House bill calls for eliminating the annuity supplement that’s paid in addition to the monthly Federal Employees Retirement System (FERS) benefits, starting January 2013.

The supplement “represents what you would receive for your FERS civilian service from the Social Security Administration (SSA) and is calculated as if you were eligible to receive SSA benefits on the day you retired,” according to the Office of Personnel Management website.

“From everything I know, the House is hoping that they’ll vote on a bill that puts some of these provisions back in, that could include this annuity supplement as well,” said Julie Tagen, legislative director of NARFE, in an interview with Federal News Radio.

The Associated Press, and Federal News Radio’s Jack Moore and Michael O’Connell contributed to this story.


House GOP to reject stopgap payroll tax cut

House payroll tax bill could mean return of federal retirement cuts

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