The federal pay raise ranging by locality from 2.42 to 3.21 percent that in most cases takes effect Sunday (January 2) will have a spill-over impact on several benefit programs, as well.
The impact of that raise will arrive in pay distributions reflecting the first full pay period of the new year, which ends on the 15th. Depending on the payroll provider, employees typically receive a pay distribution late in the week following the end of a pay period, or early in the week subsequent to that.
When that distribution is made, employees will want to check their pay statements for accuracy, with the first step being to double-check that it reflects the raise paid in their locality (for their official duty station, not their place of residence, if the two are in different localities). An additional consideration is that the pay cap, which rising to $176,300, will affect employees at or near the top of grade GS-15 in several more localities in 2022 than it did in 2021 (in the highest-paid locality, the San Francisco area, it applies to step 4 and up and also to the top step of GS-14).
That pay distribution also reflect 2022 FEHB or FEDVIP premium rates as well as flexible spending account elections made during the open season that ended in early December. (The same is true of the January annuity payment for retirees under the former two programs; retirees are not eligible for FSA accounts.)
Note: Raises under the wage grade system are paid at differing times of the year by locality on a fiscal year cycle, in some cases retroactively; those employees should check their payroll offices if they are uncertain of the effective date. The timing of raises for those in pay-for-performance systems such as the SES also may vary.
For those with life insurance under the FEGLI program, a raise may increase the amount of coverage, and thus the premiums, under Basic and Option B coverage. The former provides coverage equal to annual pay rounded to the next $1,000, plus $2,000. The latter provides coverage of between one and five times annual salary after rounding to the next $1,000. A pay raise does not affect the cost of coverage under Option A (a flat $10,000 benefit) or Option C (coverage on a spouse and eligible children).
A pay raise also increases the value of payments for unused annual leave for new retirees, since those payments reflect what the person would have been paid by remaining employed for an equivalent period.
Under the Thrift Savings Plan, employees may invest by percentage of salary or by dollar amount per pay period. Investments based on a percentage of salary increase automatically with a raise, as do agency contributions for those under FERS. FERS employees making investments based on a dollar amount per pay period might wish to consider increasing them to capture additional matching contributions; the automatic 1 percent of salary contribution will increase along with their salary rate even if they do not. (Also see related story.)
The raise meanwhile will boost benefit calculations for those retiring in the future by increasing their “high-3” salary figure, which along with time of service is the two main elements in that calculation. Those projecting a benefit for retiring within the next 12 months should remember that high-3 is based on the highest 36 consecutive months of salary, not the salary rate paid in the last three calendar years in which they worked.