The government’s largest payroll processor has said that it will collect debts to Social Security over 24 pay periods—starting with the one that began Sunday (January 3) and ending with the one that ends December 4—in light of the recent change in law regarding collection of such debt.
The notice is the latest from the Defense Finance and Accounting Service—which handles payroll for DoD civilian and military personnel, HHS, Energy, VA and some smaller entities—on collection of amounts due because of the suspension of Social Security withholdings over the last four months of 2020.
Under an August presidential memo, the 6.2 percent Social Security or “FICA” tax was not withheld during a biweekly pay period in with Social Security-taxable earnings were below $4,000. That likely affected the majority of federal employees apart from the Postal Service, which had the choice of opting out and did.
The result is that affected employees now must repay amounts ranging from several hundred to several thousand dollars, depending on their pay rates. While that originally had to be paid by April 30, the recently enacted budget wrapup law for the current fiscal year extended that through December 31.
The notice from DFAS said that affected employees can see the amount that is to be collected by subtracting the OASDI year-to-date deductions figure from the OASDI year-to-date benefits figure on their final 2020 leave and earnings statements. Also, beginning this month those statements “will show the amount of 2020 deferred OASDI collected in that pay period, as well as the remaining balance to be collected.”
The notice makes no mention of any option for employees to choose a repayment period other than 24 equal deductions.
It further repeats information presented earlier stating that for those who retire or otherwise separate from federal employment during 2021 before the amount due is repaid in full, “the unpaid balance will be collected from your final pay. If there are insufficient funds to collect the full amount, you may receive a debt letter with instructions for repayment.”
For those who separated in 2020 after the suspension began, it says, DFAS will pay the shortfall to the IRS and individuals will receive notices with instructions on how to reimburse DFAS.
Of the four major payroll providers, DFAS has consistently been the most forthcoming in providing information about the Social Security tax suspension. The others have not issued similar statements but there is a likelihood that their policies will be similar.