In two prior experiences of federal employees receiving retroactive raises, in 2003 and 2004, such increases affected not only salary but also some benefits. There has been no change in law or other policy in the meantime that would change that interpretation. That would mean:
* taxes and retirement contributions will be withheld from the retroactive amount at regular rates;
* if the raise moves an employee into the next higher $1,000 bracket for Federal Employees Group Life Insurance Basic and Option B insurance, an additional amount will be withheld to reflect the higher premium that comes with the higher coverage;
* since deductions for FEHB, FEDVIP and FLTCIP insurance and for FSA accounts already have been withheld from previous pay distributions for the period, there will be no additional deductions for them; and
* Thrift Savings Plan investors who invest on a percentage of salary basis will have additional investments withheld retroactively and FERS employees will receive additional agency matching contributions as applicable—however, lost earnings are not payable since a retroactive pay increase is not considered an agency “error” subject to restoration of lost earnings. There would be no impact on those who invest on a dollar amount per pay period basis.