New federal employees could be hit with big retroactive pension deductions after a new system is implemented. (Siri Stafford / Getty Images)
The Office of Management and Budget should forgo collecting up to $1,300 in back pension contributions from new federal employees, a union chief said in an April 28 letter.
J. David Cox, the president of the American Federation of Government Employees, said OMB has been unable to implement the withholding for higher contributions from employees hired this year until agencies upgrade their systems. However, OMB plans to collect back contributions once the structure is up and running in July or August.
Under the Bipartisan Budget Act of 2013, federal employees hired after January 2014 are required to pay 4.4 percent of their salaries into the Federal Employees Retirement System, while those hired in 2013 pay 3.1 percent. Employees hired before 2013 contribute 0.8 percent.
Under the law, an agency head can waive the collection of erroneous payments. If they choose not to, affected employees will see smaller paychecks until the early contributions are collected.
“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,” Cox said.
He said the union believes the delay was caused by Defense Civilian Pay System's inability to update its software in time and should not be taken out of employee paychecks when its fixed.
“The agencies’ inability to collect these retirement payments in a timely manner certainly constitutes a case that justifies waiver under this authority. The unpaid amounts should be treated as erroneous payments by the employer, not debts incurred by the employees,” Cox wrote.
OMB did not respond to requests for comment.