FEHB Withholdings Issue Clarified

The Office of Personnel Management has sent out guidance to agencies on how to handle payroll withholdings for their employees in the CSRS-Offset retirement system who participate in the “premium conversion” arrangement in the Federal Employees Health Benefits program, in which premiums are paid from pre-tax money. The issue relates to a change in the way retirement deductions are handled if those employees pass the maximum salary for Social Security deductions-which CSRS-Offset employees pay up to that limit, currently $84,900. OPM indicated that some payroll offices have been using incorrect procedures, resulting in employees being overpaid. In Benefits Administration Letter 02-304, OPM said it will not require those payroll offices to change their procedures before tax year 2003 but notes that that affected employees might have to be assessed a “catch-up” withholding when their basic pay reaches the Social Security deduction maximum.