Lawmakers Demand Answers on Payroll Tax Deferral, and More

A group of 17 Democratic lawmakers on Wednesday demanded more information from the Trump administration about its efforts to defer payroll taxes through the end of 2020.

Although the measure, authorized in a presidential memorandum last month, is said to be optional for private sector employers, payroll processors throughout the federal government reportedly will begin deferring payroll taxes for federal workers later this month, spurring outcry from employee groups.

Citing the uncertainty of granting deferrals, but not forgiveness, of taxes that pay for programs like Social Security, a group of House lawmakers led by Rep. Don Beyer, D-Va., sent a letter to Treasury Secretary Steve Mnuchin, Acting Office of Personnel Management Director Michael Rigas and Agriculture Secretary Sonny Perdue—whose department's payroll processor, the National Finance Center, processes pay for around 600,000 employees across 160 agencies—demanding additional information about the initiative and how it is being implemented.

“We are concerned about a lack of cross-agency coordination regarding this significant change for the federal workforce,” the lawmakers wrote. “We are especially alarmed that after many businesses and groups, including the U.S. Chamber of Commerce, have expressed concern about the ramifications of deferral for employers and employees, federal public servants are being used as guinea pigs.”

Absent action from Congress, employees whose payroll taxes are deferred will be expected to reimburse the U.S. Treasury for the taxes that weren’t taken out of their paychecks, and if they fail to do so, they could face penalties and interest payments as early as May 2021. And it remains unclear what happens to employees who leave the federal government or retire before the end of the deferral period.

“Despite Secretary Mnuchin’s previous statement that ‘we can’t force people to participate,’ the [National Finance Center’s] notice language is not explicit as to whether the postponement is optional for employers, much less for employees,” the lawmakers wrote. “Additionally, the only direction provided about employees who separate from their employers prior or during 2021 is that the employer ‘may make arrangements’ to collect the taxes.”

The lawmakers demanded information from the administration on how agencies are informing employees of the upcoming increase in take-home pay, and the eventual decrease in 2021, as well as whether federal workers will be able to opt out of having their payroll taxes deferred. Additionally, they asked how agencies would “recover” payroll taxes from employees who leave federal service before the end of 2020.

“The stated goal of the presidential memorandum is to ‘put money directly in the pockets of American workers,’” the lawmakers wrote. “Do you support a pay increase [in excess of the planned 1% across-the-board raise] for federal workers?”

The Office of Personnel Management this week reportedly confirmed that the annual open season for benefits under the Federal Employees Health Benefits Program will begin without delays in early November this year.

According to a document obtained by FedSmith, open season for federal employee health insurance will run from Nov. 9 until Dec. 14. During that time period, federal employees will be able to enroll in new coverage, change their insurance plans under FEHBP or the Federal Employee Vision and Dental Insurance Program, or opt out of insurance coverage for 2021.

Last month, OPM announced its new contracts for FEDVIP beginning in 2021, where the number of dental insurers available will increase from 10 to 12, while the total number of vision insurance carriers will grow from four to five.

OPM is expected to share more information about open season by early next month.