December 14, 2010
by Mike Causey
Has the proposed Social Security tax cut triggered a mini-civil war in your office?
Is there a workplace chill between older workers under the old Civil Service Retirement System who wouldn't get any tax break, and their younger colleagues in the Federal Employees Retirement System who would benefit?
Most of the federal workforce is covered by the FERS plan. But roughly half a million long-time feds are in the older CSRS program. They pay the Medicare tax but do not contribute to Social Security.
As proposed by the President, people who pay into Social Security (which is most American workers) would have their payroll tax cut by 2 percentage points next year. The idea is that the temporary cut would put more money in people's pockets and they would spend more and stimulate the economy.
The two percent "raise" is a big deal to lots of people. Congress will almost certainly approve a 2-year federal pay freeze proposed by the White House, although military personnel are in line for a 1.4 percent raise in January.
Federal health insurance premiums are going up an average of 7 percent next month. That will be especially tough for retirees who didn't get a cost of living adjustment this year, and who won't get a COLA in 2011.