Two riders in The American Taxpayer Relief Act of 2012 (the Fiscal Cliff Deal) apply directly to Federal Employee Benefits. They are:
1) Increasing the Transportation Incentive Program (TIP), a program to incentivize federal employees to use mass transport or vanpools, to a monthly stipend of $240. The language in the bill restores parity between commuter expenses for parking (currently $240/month) vs. mass transport (was $125). They are now both set at $240, retroactive to 01 January 2013.
2) Ability to convert money in your employer-sponsored 401k account to the employer-sponsored Roth 401k account (if offered by the employer).
Just like the creation of the Roth TSP, It will probably take the TSP 12-18 months to catch up with this provision, but my prediction is that it will happen. This provision in the Fiscal Cliff Deal was put there as revenue grab to get income taxes now (immediately upon 401k conversion to Roth 401k) vs in the future (eventual withdrawals from 401k). My take on the conversion is that it is probably a bad idea to convert a Traditional IRA/401k to a Roth IRA/401k right now unless you are absolutely certain you will be in a higher marginal bracket when you retire.
As an aside, “The American Taxpayer Relief Act of 2012”? If my recollection is correct, this was created and passed by both houses of congress on January 02, 2013…
I’ve updated the recent analysis about Fiscal Cliff (aka Sequestration) impact on your wallet, now that we have a ‘Fiscal Cliff Deal’ struck on 02 January 2013.
There’s also a good synopsis of the ‘Deal’ done by Fidelity Investments.
Graphic click will take you to the updated GubMints ‘Fiscal Deal’ analysis post:
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This will help them improve the decision tool for next year’s FEHB Open Season.
Happy New Year!
(Update 3/21/2013. The Continuing Resolution to fund the federal government through end of FY13 extends the federal employee pay freeze through FY13).
By Executive Order, the Federal Pay Freeze in effect since 2009 will be lifted on March 27th, 2013.
Most federal employees (including those on the General Schedule) will see a 0.5 percent increase in their top line.
What you’ll take home at the end of the day is still uncertain. As mentioned here before, other items which could negate or even make 2013 a net loss in federal take home pay include:
- Expiration of the Payroll Tax.
- Increase in your FERS contribution/salary withholding.
- Increase in FEHB Premiums.
- 50% cut in the Health Care Flex Spending Account under ObamaCare.
That said, even a token increase of 0.5% is a much-needed morale boost for federal employees.