Details are continuing to emerge—too slowly, many federal employees are saying—on procedures for repaying the debt that many owe to the Social Security system due to the suspension of those withholdings over September-December 2020.
The situation regarding collection mirrors in many ways the situation when the suspension first started, when employees similar complained of a lack of information.
Under a presidential memo, the standard 6.2 Social Security (FICA) withholding was not taken from pay distributions for a biweekly pay period in which an employee’s earnings subject to that tax were below $4,000. That resulted in an indebtedness ranging from several hundred to several thousand dollars that must be repaid by the end of this year—starting with the first pay period of the year that will end on Saturday (January 16).
The latest guidance from largest payroll processor, the Defense Finance and Accounting Service, answers in the negative one question many employees have raised: whether they can choose their repayment terms—for example, by paying a lump-sum so that they can get it over with. DFAS—which services payroll for Energy, HHS, VA and several other smaller agencies along with DoD—said that choosing payment terms is not allowed under IRS policy.
That mirrors the situation at the start of the suspension, in which many employees sought to continue paying those taxes as normal rather than receive a temporary boost in take-home pay that they would have to repay in 2021.
DFAS earlier had announced that it will increase regular Social Security withholdings to make up the difference over the first 24 pay periods of this year, through the one ending December 4.
However, the second-largest, the National Finance Center, which services payroll for Treasury and DHS, among others, has since said that it will spread out the collection over 26 pay periods starting with the distribution for the last pay period of 2020—a distribution that affected employees should be receiving around now, if they haven’t already—and through the pay period ending December 18.
An NFC fact sheet says that those who separate from the government, for retirement or other reasons, before the shortfall is repaid will receive a debt collection notice with instructions to pay the difference directly to the NFC. The DFAS has said that it would first withhold any remaining amount due from an employee’s last pay check before beginning a debt collection process.