Federal employees affected by the Trump administration-imposed change in their Social Security payroll tax withholding could start seeing the impact in the pay distributions they receive later this week or early next week for the pay period that ended Saturday (September 12).
While payroll providers generally act in concert, there remains some question regarding whether all of them made it effective with that pay period—or whether it will be effective with the one that started Sunday and will run through the 26th.
Among the major providers, the Defense Finance and Accounting Service has publicly confirmed that it put the change in effect in the biweekly pay period and for which pay distributions are upcoming. DFAS is the largest of the four main providers, handling the payroll for DoD civilian personnel (and military personnel, who also are affected) plus Energy, EPA, VA and HHS.
Another, the Interior Business Center, meanwhile has said it is “working towards implementing the payroll tax deferral for pay period 19 with an electronic funds transfer (EFT) pay date of September 18, 2020, or September 22, 2020, depending on your agency pay calendar.”
The IBC added that unlike executive branch agencies—other than the Postal Service, which as a semi-corporate entity had the discretion whether to carry out the change and has decided not to—judicial branch agencies for which it provides payroll services have the option to opt out. It said it would provide information on those decisions as it becomes available.
Meanwhile, OMB issued a memo last Friday stating that “to the maximum extent feasible,” agencies “are to implement the deferral for the next pay period”—presumably meaning the period that started Sunday, two days after the memo.
OMB also said agencies are to “continue to inform and educate employees concerning the payroll tax deferral, including its anticipated impact on individuals’ paychecks over the course of the coming months”; many employees say just that sort of information has been lacking, however.
Under the change, employees who have Social Security taxes withheld from their pay—meaning that those under CSRS are excluded—will have that 6.2 percent tax suspended through the end of the calendar year for any pay period in which their gross salary is below $4,000.
For example, for an employee earning $85,000 annually, about the average federal salary, that tax comes to about $200 per pay period. Assuming that the change became effective with the pay period that ended Saturday and continues through December 31, it would apply for nearly nine full pay periods.
The tax typically is identified on leave and earnings statements as the Social Security tax or the OASDI tax. Contrary to how some media outlets have reported it, the change does not affect Medicare taxes, federal income taxes or other taxes regularly withheld from pay.