- The Washington Times - Tuesday, January 15, 2002

Congress and the Internal Revenue Service this year will make some big-bucks tax decisions that directly affect feds and retirees.
At issue: whether to tax as income the value of frequent-flier miles that federal and military personnel earn on official travel. Until now, feds using them could be reprimanded, fined, fired and criminally charged.
President Bush signed a bill in December that allows them, and Foreign Service officers, to use mileage points old or new.
The IRS will rule shortly. Betting is that it will say the mileage points should be considered part of taxable income, making them less attractive to some folks.
For guidelines on the frequent-flier benefit program, check out the gsa.gov Web site.
Should federal retirees get the same health insurance premium tax break, officially known as “premium conversion,” already available to private-sector workers and federal employees?
Premium conversion is designed to make health insurance more affordable for everyone. Under it, workers pay their premiums with pretax dollars. It’s similar to what happens with 401(k) plan contributions. The payments don’t show up as income, and that generally lowers the tax bite.
Retirees don’t have the break because it would require a change in the tax code. The National Association of Retired Federal Employees is pushing for the perk, but it’s a long uphill battle that the Treasury Department is likely to oppose.
What to do about the tax status of the new long-term care health insurance the government could begin offering as early as March. Will should the government let the payments be made on a pretax basis?
The argument is that it is better for people who need special health care to get it through their own insurance company than through government facilities. The counterargument is that it would cost the Treasury tax revenue as would premium conversion.

Long-term care
The program that promised universal coverage at bargain-basement rates for 20 million members of the federal family has apparently hit the wall of reality.
When Congress and the Clinton administration set up the program, it was billed as a model employer perk that would cover members of the federal family from employees and retirees to parents, in-laws, brothers and sisters, etc.
Politicians said it would provide top-notch coverage at premiums 10 percent to 20 percent lower than those many individuals could get buying LTC on their own. But skeptics like Arthur Stein of Cassady & Co. Inc. in McLean wondered aloud if the government could deliver.
Mr. Stein is an expert on LTC and he also sells LTC insurance. When the program was being set up, he said it was unlikely that retirees and some federal workers could get top-notch, if any, coverage at low premiums.
Now he says there are indications that premiums “may not be cheaper than private, individual policies … no one will be guaranteed coverage. Even employees may be denied coverage because of their health.”

Special raters
Although special-rate employees engineers, scientists, some medical and some clerical personnel get paid more than regular federal workers, they usually get smaller January pay raises.
Like this year. Most white-collar civil servants in the Washington area will get a 4.77 percent raise. But the special-raters, in most cases, will be limited to 3.6 percent. That’s the base federal pay raise nationwide before city-to-city locality adjustments are cranked in.
Special raters don’t get any locality adjustments unless their pay levels drop below non-special-rate employees in the same pay grades and longevity steps.
But that has no impact on the back pay settlement ranging from $1,000 to $30,000 per person that 212,000 current and former special raters will get for pay raises denied them between 1982 and 1988. Those employees included nearly 40,000 GS 2 through 7 clericals in the Washington area, plus another 40,000 retirees nationwide.
The National Treasury Employees Union, which won the very long legal battle, says it will be four to 10 months before the government starts sending out those back pay checks. Yes, they will include interest. Lots of interest. Total cost of the payback: $173.5 million.
The government will pay the money. The painful part is where it gets that money.

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