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Posted at 7:18 PM ET, 12/10/2010

Social Security tax break treats federal workers differently

By Joe Davidson
Post Editor

The Senate is fixing legislation that would result in most federal employees missing a proposed tax holiday.

At the same time, another group of federal workers, and some state and local employees, are scheduled to get no tax holiday at all, even as Congress and the administration prepares to freeze federal pay for two years.

The legislation would implement the agreement on taxes reached this week between Obama and Congressional Republicans. It reduces the amount paid by employees in Social Security payroll tax from 6.2 percent to 4.2 percent.

Federal employees covered by the Federal Employee Retirement System pay 7 percent of their salary into the Civil Service Retirement and Disability Fund, with Social Security getting 6.2 percent of the salary.

"As a result, if their Social Security payment is reduced to 4.2 percent, the amount they would be required to pay into the CSRDF would increase from 0.8 percent of salary to 2.8 percent," Joseph A. Beaudoin, president of the National Active and Retired Federal Employees Association, said in a letter to senators. "We believe that supporters of the payroll tax holiday would want to resolve this unintended inequity."

Congress has inserted language into the tax agreement legislation that would allow FERS employees to benefit from the tax break, according to congressional and employee organization sources. Under the proposed fix, FERS employees would pay 4.2 percent of their salary in Social Security taxes next year, like most other Americans.

Employees covered by the Civil Service Retirement System and some state and local government employees are not slated to get any tax break. The reason - they don't pay Social Security payroll taxes, so they can't pay 2 percent less than zero. CSRS-covered employees, however, do pay 7 percent of their salary toward their pensions.

"Unless the tax cut plan includes a one year, 2% reduction for employee contributions to CSRS, federal employees under that system will be seeing not only a pay freeze but the lack of a 2% tax cut that both private sector and federal employees covered by FERS, will benefit from," said Colleen M. Kelley, president of the National Treasury Employees Union, in a letter to the Senate. "NTEU believes this unequal treatment of federal employees is unfair and urges that a one year, 2% reduction in employee contributions to CSRS, or similar remedy, be included in any payroll tax holiday legislation."

At this point, however, there is no legislation that would give CSRS and the state and local public employees the tax holiday. The Office of Management and Budget said it is studying the issue.

Leave your thoughts in the comments section below

By Joe Davidson  | December 10, 2010; 7:18 PM ET
Categories:  Workplace Issues  
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Comments

Will you get real! These folks haven't had their retirement dollars turned into IOUs that their children and grand chlidren will have to pay again; 2.54 trillion and counting. They've built real retirement estates with their contributions. Politicians haven't spent their retirement dollars on something other than intended. Bottom line is if you want to exchange deals be my guest, but until then; chill! For a real solution to the SS issue: http://www.slideboom.com/presentations/257908/Social-Security---The-Issue-%26-The-Plan

Posted by: pappyg | December 11, 2010 7:20 AM | Report abuse

Federal employees are getting hit from all sides and nobody gives a dam. Their FERS retirement is a laughable pension. It's so ludicrous and the public doesn't even know it. The public has been so brainwashed into believing federal employees are overpaid that the they cheer when seeing damages to federal workers.

This country needs new jobs, elimination of outsourcing, a reformed tax system that taxes persons on a level playing field, and not attacks on wages as Obama is attempting to do. Where's the "Change" that was promised? I don't see any change; what I see is misdirection and increased harm to U.S. citizens.

Posted by: USDA | December 12, 2010 7:29 PM | Report abuse

Pappyg,
What do you think is in the Civil Service Trust Fund. The same IOUs that are in the Social Security Trust Fund. They continue to take money out of our paychecks and use it to balance the budget.

Posted by: smclennan1 | December 13, 2010 11:06 AM | Report abuse

As a recent retiree from the federal government of 36 years I am disappointed that Social Security is now becoming the target again of the new administration. It seems that every time the budget needs to be tweeked the SS is the target of choice. In my opinion if the elected officials who are supposed to represent us would forego some of the exhorbitant fees they receive the rest of us would be able to survive without pennypinching and hoping for a COLA when every year for the past 2 years even retirees have been put on the back burner. We are still citizens who have to survive just like the employed government workers who can at least get step increases to tide them over.

Posted by: MB2007 | December 13, 2010 11:18 AM | Report abuse

How are they being treated differently?? If you pay into SS you get a deduction not hard to understand. Folks on CRS can change Jan 1 if they think its the smart move

Posted by: EugeneRobinson1 | December 13, 2010 11:22 AM | Report abuse

i think the union is over reaching when bemoaning that csrs employees aren't getting the tax break that fers employees will get on their social security payroll tax. csrs employees, all of whom have at least 24 or 25 years of service, will receive a defined benefit (aka a pension) when they retire. how many people today, either in the private sector or federal service, can look forward to a pension. very few. i suspect any fers employee would happily trade his/her social security tax break for membership in the csrs.

Posted by: brigidquinn | December 13, 2010 11:56 AM | Report abuse

"How are they being treated differently?? If you pay into SS you get a deduction not hard to understand. Folks on CRS can change Jan 1 if they think its the smart move"

CSRS employees do not pay into SS, therefore they are not being given the 2% reduction that FERS employees will receive. Many state and local government employees also do not pay into SS. FERS employees on the other hand pay 7%, with 6.2% going to SS and the remainder going into the CSRDF, which is not associated with CSRS employees. The CSRDF will pay a smaller retirement to FERS employees, that is to be combined with SS and a Thrift Savings Plan(401k). This plan was signed into law by St Ronnie and added all new fed employees to the SS rolls. CSRS employees had a chance to change to FERS about 25 years ago.

Posted by: flyonthewall | December 14, 2010 2:00 PM | Report abuse

Here we go again. Politicians are so clueless. Why don't you ask us peons instead of asking upper management. Reagan called himself saving social security and used the federal employees to do that. So they got screwed. The way people pay into social security doesn't even make any sense. And stop borrowing from it and using us to fix it. I may not pay into social security but I do pay into medicare. And guess what I can't even use it when I retire. By the time I am eligible I'll probably be dead. Stop paying people that has never put into social security. Yes, they do and that's a fact. A wife can get social security payments based upon her husband's quotas while he's alive and receiving social security. A wife can't receive any money from government retiree when her husband retires unless he takes out widow benefits and then he has to be dead in order for her to receive it. This is one screwed up system. Why don't you try stopping that.

Posted by: Chorusgirl | December 14, 2010 2:04 PM | Report abuse

I retired as employee with 30 years federal employment in the Veterans Administration. I had also qualified for Social Security retirement for separate, non-federal work. I was informed that because of Congress' punatitive "Windfall" reduction legislation that I would only receive about quarter of what I was due from Social Security. When I asked if I had worked the 30 years for the British government in medical research instead of the VA and applied for full Social Security would I get it. "Certainly" was the answer. I also asked if I would get full Social Security retirement if I had been a murderer in prison for the 30 years instead of working for the government. The answer was the same,"Of course." And again we see the Congress and President punishing federal employees because it is popular with mislead voters. They should instead recognize and fairly treat public servants. After all Federal Employees support them by inventing and developing innovative prosthetic limbs and devices that soldiers and civilians wear. Most of which resulted from medical research programs of the Veterans Administration. It amazes me that those drawn to public service continue to serve when their bosses continue to berate them.

Posted by: RetFed36 | December 14, 2010 2:29 PM | Report abuse

CSRS is a retirement system paid totally by the employee. FERS is a Social Security based retirement system matched up to 10% by the government. FERS was the Federal Governments attempt to get all of us CSRS employees to change to the FERS system. Most of us saw through their guise.

Federal employees under CSRS can pay into SS if they moonlight outside of the government job, which many in the lower levels do. So if we pay into SS, we are entitled to SS. It's just like working for a big company like GE, paying into their retirement system and then paying into SS. NO difference. Therefore, if I, a CSRS employee has paid into both, I should be able to collect from both. But, the people in Washington who make the rules decided that that was double dipping. So my SS will be "offset" (how do you like that big word for stealing" for every $3 I get in CSRS pension, I will loose $1 in SS. I paid into it. Furthermore, I will not be able to collect as a survivor under my husband for the same type of "offset." CSRS and SS are two separate and distinct systems, but I get penalized because ALL federal workers are nothing but guinnea pigs in the eyes of the Washington elite that can vote themselves a raise any time they want, behind closed doors. The Washington elite gets their salary, with COLAs I might add, for the rest of their lives.

So stop belly aching everyone, especially those who are not part of the system and knows not what they are talking about. Put your energy into IRAs, 401ks, and other sources of growing your own retirement income without depending on the government, as we will not be able to depend on SS for much longer. In case you have not noticed, we, America, are going broke at the hands of the current and recent past Washington elites. Get over it and take care of yourselves.

I understand the current administration even wants to get their hands on and take the money in IRAs, 401ks, and other pension funds because there is so much available. "Ain't that somethin." All at the hands of the hard-working middle class.

Posted by: sassylassie | December 14, 2010 2:34 PM | Report abuse

People who don't have to pay into social security don't get the social security kickback? Shocking!

Posted by: getjiggly1 | December 14, 2010 4:18 PM | Report abuse

What happens to those of us who are in CSRS Offset (pay into both CSRS and social security)?

Posted by: AFanonymous | December 14, 2010 4:22 PM | Report abuse

Come on folks you don't really believe that Congress or the present President give a hoot about Federal Workers or for that matter anyone else. It is like someo are of the comments above said they meaning Congress have brain wash the people into believing that all Federal workers or over paid. All that needs to be done to solve the problem is for Congress to quit dipping into the Social Security fund for any of there off the wall needs. Social Security would be solvent then.

Posted by: csydgaff2002yahoocom | December 14, 2010 4:32 PM | Report abuse

Gobble gobble gobble. Fed employees and retirees need to contribute. Not be the only ones, but congress will do what they want regardless. NARFE shilling like AARP for keeping ALL CURRENT BENEFITS is not helpful. We do make good money and do have decent health insurance and retirement (CSRS best! but FERS not too bad either!) Stop whining. All must pitch in. All must be TAXED not just the so-called wealthy. The "Poor" which equals rich in most parts of the world, must contribute too and not just take take take. Many agencies should be waxed. I worked for DOD 32 years, but even in DOD, there's fat. I worked out on the front lines on ships supplying the navy with food, ammo, etc. Not a paper pusher. Soooo, let's help the country (can't do that under Cho' Mamma Obama's administration) but we can try! Social security and welfare folks need to contribute and pay the donkey!

Posted by: marinerduck | December 14, 2010 6:27 PM | Report abuse

I also want to know what happens with CSRS-Offset. Anyone know?

Posted by: ohiomaid | December 14, 2010 8:46 PM | Report abuse

I am a retired federal employee. I'm at a complete loss to understand how with Social Security in such bad shape supposedly, that the Social Security tax is being cut by 2% for most working people. Second, I have a small federal pension, but rely mostly on Social Security. Social Security hasn't received a COLA. Why can't a stimulus be given to everyone, including CSRS workers and retirees??? Retirees really can use money as health care premiums have gone up as well as other costs. I just don't understand why this tax cut, and why retirees also can't get something.

Posted by: brendaG1 | December 15, 2010 9:39 AM | Report abuse

5 U.S.C. ยง 831.1003 Deductions from pay.

(a) {T]he employing agency ... must withhold 7 percent of a [CSRS Offset] employee's Federal wages ... . The difference between the [2011-2012] OASDI tax [4.2%] and the full amount withheld under this paragraph [7%] is the CSRS deduction [2.8%].

Posted by: drnecesiter | December 16, 2010 12:30 PM | Report abuse

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