Q: When is a 20% pay cut really a 24% pay cut? When is it a 30% pay cut?

I received an email today from some Defense bean-counting types with an xls spreadsheet that calculates your federal employee take-home pay under administrative furloughs (sequestration).

I was a bit hesitant to ‘leak the memo’ here, but Commander, Fleet Activities Yokosuka (CFAY) has already beaten me to the punch (h/t to Stars and Stripes).

I ran the numbers for myself and for one of my colleagues using the spreadsheet– the calculations look accurate.

On the surface, you’d think that a 20% cut in gross pay would end up being a 15-18% NET cut in pay after taxes, since you may drop down in tax brackets.
However, absent any actions by the employee (like cutting allotments or TSP witholding), this is NOT the case- In my instance, NET pay will drop by 24%. I checked numbers for one of my colleauges in a middle pay-grade- his pay will drop by 30% (again, absent any changes to his TSP or allotment withholding).

Reasons-

The following dollar figures do not drop when gross pay is cut:
– FEHB Premiums
– FSA (Flex Spending Account) Allotments
– Other Allotments

Takeaways:

  1. Use the spreadsheet to calculate your Net Pay under Administrative Furlougs… it will be sobering.
  2. For federal employees in lower pay grades, it looks like the furlough punch will sting even more.  This is because FEHB premiums and FSA allotments are a greater percentage of income (similar to arguments that Gas Taxes disproportionally affect the poor, as the ‘income challenged’ pay a higher percentage of overall income to refuel the tank).
  3. Finally, note that you can’t change FSA allotments or FEHB premiums outside of Open Season or a ‘Life Changing Event’.  Ouch.

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