TO: FEA Members Worldwide
FROM: FEA Washington DC Office
RE: Taxes on allowances and proposed cuts to feds benefits
DATE: May 8, 2018

Below are updates on a pair of issues with hugely negative implications for federal workers, including FEA members.

TAX ON ALLOWANCES/MOVING EXPENSES

As you probably know by now, the tax plan passed by Congress and signed by the President last year redefined employer-paid and reimbursed moving expenses as taxable income for everyone except active-duty service members. This means that the costs associated with PCS moves, whether voluntary or not, are now taxable for FEA members. This is creating massive problems for FEA members who are relocating this year, whether due to retirement, separation from DoDEA, or a transfer (including excess) to a new location.

FEA is working with NEA and our Coalition partners in other federal labor organizations to seek relief for those employees affected by this unfair tax hike. We are also going to the Pentagon and to DoDEA to see if any solutions can be found. This issue has been bought up by a number of elected officials recently and we are told GSA and the IRS are looking into the issue.

We have been made aware of a list on the DFAS Web site of those reimbursements that are and are not taxable. We are checking on the accuracy of that list.

FEA will continue working this issue and will inform our members if there is any specific action for you to take. We know there are a lot of questions and anger being generated over this issue; we are hopeful a solution can be found this tax year.

PROPOSED CUTS TO FEDS’ RETIREMENT

OPM last week sent to the Speaker of the House proposed legislative language that, if approved by Congress, would decimate the retirement benefits of federal workers and make federal service a far less attractive option for employees.

OPM’s language, based on proposals that have been called for by President Trump for some time, would make the following harmful changes to retirement:

* Basing retirement pensions going forward on an employee’s high five years of salary, instead of the current high three years. The way the proposal is written would seem to indicate the change would affect all current and future retirees.
* Eliminating all COLAs for FERS retirees — both current and future retirees — and reducing the COLA for CSRS retirees by 0.5 percent .
* Eliminating annuity supplements for new FERS retirees and survivor annuitants who retire before age 62, when Social Security kicks in.
* Increasing the amount of all employees’ basic pay that they must pay toward their retirement by one percent each year until they are paying one half of the “normal cost” for their retirement. The other half would be paid by the government. Based on the current “normal cost” of 14.5 percent of base pay to cover retirement, employees would eventually be required to pay 7.25 percent of their base pay to cover their retirement. That “normal cost” percentage for feds would go up or down in future years in order to be at parity with the government’s cost towards their retirement. Most longtime feds currently pay 0.8 percent of their basic pay toward retirement, with newly-hired feds paying 4.4 percent.

Keep in mind that, in addition to the harmful proposals above, the Trump administration has already proposed freezing pay for all federal employees in 2019.

Clearly, if this package of anti-worker cuts were enacted, federal service would become far less attractive. Combined with the harmful tax situation described in the first item above, it would make the task of attracting and retaining qualified employees much harder for an agency such as DoDEA. The fact that many of these proposals would harm the benefits longtime federal employees and retirees have already earned — breaking faith with those employees after they have put in decades of federal service — is particularly heinous.

FEA, NEA and our Coalition partners will be fighting these harmful proposals, which the White House wants to include in this year’s National Defense Authorization Act (NDAA) — the same Act in which DoDEA is trying to insert its proposal to strip employees of their rights and protections. Other harmful cuts to federal benefits were proposed last year by the White House but did not make it through Congress. We are hopeful that Congress will again realize that attempting to solve its budget issues on the backs of working people is neither fair nor conducive to maintaining a stable, experienced federal work force.

Through the previously implemented pay freeze on most feds and other changes to benefit programs enacted in the past decade, federal employees have already seen their benefits reduced by nearly $200 billion. These latest proposals would cut those benefits by another $143 billion over the next decade.

How can the federal government hope to continue recruiting workers if this is how it treats its employees?

FEA will continue to fight these proposals and inform our members of new developments.