- The Washington Times - Monday, November 1, 2004

Many federal civil servants don’t know it, but they are getting what can be a significant tax break, thanks to the premium conversion option.

Workers with the option can pay their portion of health insurance premiums — which can range up to several thousand dollars a year — with pretax dollars. That results in savings of at least $250 in their overall federal-state tax bills.

The rub is that premium conversion is available only to working people. Those who are retired, whether from federal, state or local government or from the private sector, can’t use it unless and until Congress changes the law. President Clinton extended the tax break to workers, but the tax code must be changed before it will benefit feds once they have retired.

One of the first items of business of the new Congress will be the reintroduction of legislation by Rep. Thomas M. Davis III, Virginia Republican, and Sen. John W. Warner, Virginia Republican, that gives retirees the premium conversion perk. Their bill, which has widespread Democratic support, cleared the civil service oversight committees of the House and Senate this year. But the House Ways and Means Committee, the traffic cop for legislation involving taxes, didn’t hold hearings, mainly because of the estimated revenue loss to the Treasury.

President Bush supports the tax break as a way to encourage retirees to buy better insurance. John Kerry — if that’s who wins the election — is likely to back it, too. The hurdle is the House tax-writing committee and the Senate Finance Committee. They must give premium conversion for retirees the green light before any 2005 vote.

Time off to vote

Thousands of feds who work in the metro Washington area commute from West Virginia, Pennsylvania and Delaware. We have even heard of an intrepid couple who work at the Pentagon but live in North Carolina.

Under federal guidelines, civil servants are supposed to have three hours of clear time — either before they start working or after work — to vote. If you qualify — because of your commute and your home state’s poll hours — take advantage of the break.

Pay raise

Unless the lame duck Congress has a sudden burst of energy, the congressional portion of your January white-collar pay raise may not be official until mid-January. The 1.5 percent set by President Bush is OK. But the 2 percent add-on from Congress — to bring the federal raise up to the military’s 3.5 percent increase — still has to be approved.

The good news is that it will happen, as it did this year when Congress was late. But it will be a costly exercise — putting two raises into effect at two different times — and getting both the retroactive and the new raises to workers.

At least one agency didn’t get retroactive pay to its employees until late August this year. The Department of Veterans Affairs also had a problem that grew out of the tardy raises and overpaid some employees.

Retiree COLA

Although the federal pay raise is still up in the air, the cost-of-living adjustment (COLA) for retired feds, military retirees and people getting Social Security is set at 2.7 percent.

It is effective in December and will show in annuity checks deposited or mailed out in early January. Unlike pay raises, which are subject to political and budgetary considerations, the COLA is automatic and indexed to the rise in inflation from the third quarter of the current year over the third quarter of the previous year.

Mike Causey, senior editor at FederalNewsRadio.com, can be reached at 202/895-5132 or [email protected].

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