New Tax Break For Retirees?

Wednesday - 3/4/2009, 4:00am EST

George Bernard Shaw once said "Youth is such a wonderful thing. It's a shame to waste it on the young," or words to that effect.

Much the same thing could be said about active duty federal workers who don't appreciate some of the things they got until they lose them.

When the typical federal or postal worker retires, several things change:

  • Their income drops.

  • They lost a valuable tax break that helps many of them afford better health insurance at a time, and an age, when they need it most.

The vast majority of working feds get a major tax break. They are allowed to pay their health premiums with pre-tax dollars. It reduces their federal tax bite by anywhere from $300 to $800 a year. Not a fortune, but a big help, especially in these economic times. The perk, called Premium Conversion, is automatic in the sense that people get it unless they decline it. As a result many working feds don't know they have the tax-break until they become retired feds and lose it.

Premium Conversion (PC) is available to working feds. President Clinton extended it to them via Executive Order years ago. But it will take an act of Congress before PC can be extended to federal-military retirees. The tax code must be changed.

Congress has been working on extending PC to federal (and now military) retirees for years, but it hasn't gone anyplace regardless of which political party controlled the key committees - House Ways and Means and Senate Finance - that must approve it.

But things could be about to change.

Groups pushing PC for retirees think they have a good shot this year. Congress and the White House are controlled by the same political party. And some new political heavyweights have agreed to help move the legislation through Congress. Sen. Jim Webb (D-Va.) has introduced a bill (S. 491) to extend PC to active and retired military personnel as well as to retired civil servants. Reps. Chris Van Hollen (D-Md.), Frank Wolf (R-Va.) and Gerry Connolly (D-Va.) have introduced a companion bill (H.R. 1203) in the House.

So how would PC work, and what are it's chances?

At 10 a.m. today on our Your Turn with Mike Causey radio show, Dan Adcock will answer those questions. He's in a position to know because he's legislative director of the National Active and Retired Federal Employees association. Most, but not all, of NARFE's members are retired. But it and other groups are worried about what happens when still-on-the-job feds retire and lose a valuable tax break many don't know they have. Until they lose it.

At 10:30 a.m., we'll talk about the 2010 federal pay raise. National Treasury Employees Union President Colleen Kelley believes feds deserve more than the 2 percent proposed by the President. She and other union leaders believe civil servants should at least get the 2.9 percent raise proposed for members of the uniformed military.

Kelley also discusses how she thinks taxpayers are being short-changed because the IRS (by order of Congress) is using private debt collectors to bring in long-delinquent taxes. Two of the contracts are up for bid and Kelley says Congress should end the program

Listen at 10 a.m. EST on your computer at www.federalnewsradio.com or, in the DC area, on WFED 1500 AM. If you have questions about any of the subjects, e-mail them to me at: mcausey@federalnewsradio.com

Nearly Useless Factoid

A new study has found those who use controlled anger to express their opinions at work are three times more likely to be promoted than those who suppress their frustrations.

To reach me: mcausey@federalnewsradio.com