- The Washington Times - Monday, March 23, 2009

For many people, the promise of a $250 check — their share of the mammoth economic stimulus package — is not such a big deal. Some probably even consider it a joke.

For tens of thousands of retirees, however, the watchword is show-me-the-money. They are depending on — and can’t wait for — the extra income to arrive. The issue for them is simple: When does the check go in the mail? Many people will get their payments in June. For others — including tens of thousands of retired federal workers in this year — it is a little more complicated. And less satisfying. Their payment will be in the form of a $250 tax credit that is not the same as cash in hand.

The original stimulus plan excluded federal retirees entirely, but persistent lobbying by the National Active and Retired Federal Employees persuaded lawmakers to include the ex-feds, too. NARFE has one of the largest political action committee funds composed of voluntary donations from the association’s politically savvy membership.

So how will the payments work? Retirees who get Social Security benefits (regular, disability or SSI) and persons who get Veterans or Railroad Retirement benefits are in line to automatically get the $250 payments in June. If an individual gets benefits from Social Security and the VA, or Social Security and the RR retirement system, the payment will be made to them via Social Security.

For retired federal and postal workers and many other retirees of state and local governments, the system is different.

Jill Crissman, assistant legislative director of NARFE, explains it this way: “Government retirees, including federal retirees, who worked under a non-Social-Security-covered pension system and who do not otherwise receive SS, VA or RR benefits and who therefore will not receive the above payment, are eligible to apply for a $250 refundable tax credit on their 1040 for tax year 2009 (Note: not tax year 2008).” Ms. Crissman said her association — and the millions of retirees who will benefit — “are currently awaiting IRS tax guidance for this new tax credit.” The regulations that will implement the tax credit are currently in the works.

Sick leave incentive

Under current rules, one group of federal workers has a major financial incentive not to use sick leave. Those people, all covered by the old Civil Service Retirement System, get a lifetime payment for staying well.

When they otherwise qualify for retirement-based on age and length of service, the CSRS workers can apply their unused sick leave toward their service time. Many employees have two or more years of sick leave built up. Each one year of unused sick leave will increase their starting retirement benefit (which is fully indexed to inflation) by 2 percent.

The problem for the majority of working feds (people hired after the 1980s) is that they are under a different retirement plan. The Federal Employees Retirement System offers them a better 401(k) plan and Social Security coverage. However, they are under a use-it-or-lose it sick-leave system, which may explain why so many FERS employees burn up lots of sick leave (sometimes all they have) in the year before they retire.

That will change if the Senate goes along with a proposal to treat both groups — CSRS and FERS employees — the same when it comes to unused sick leave. The House is moving quickly on the change, which is part of a much-larger bill that would give the FDA greater control over tobacco. The controversial plan is called the Family Smoking Prevention and Tobacco Control Act, or FSPTCA.

That bill, which cleared its first House hurdle last week, would also give members of the uniformed military services who enroll in the federal Thrift Savings Plan (the government’s in-house 401(k) plan) matching contributions from the government similar to those enjoyed by civilians under the FERS retirement plan. It would also authorize the board that runs the TSP to offer investors the option to setup a Roth IRA within the federal 401(k) plan.

All of the above are part of the FSPTCA, which is expected to have smooth sailing on the House side of the Capitol. A similar provision passed the House last year but got bogged down in the Senate. Part of that was because the Senate was preoccupied with election-year politics. That won’t be a factor this time around. The other factor was objections from tobacco-state senators who fear that the FDA would do damage to some of their states’ largest (legal) cash crop. That will still be a factor — perhaps a major stumbling block — when the Senate again reconsiders the plan that is stuffed with goodies for members of the civilian and military federal family.

Mike Causey’s column runs Mondays. He can be reached at 202/895-5132 or mcausey@federalnewsradio.com.

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