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What if negotiated raises and federal pay freeze collide?

By Joe Davidson
Washington Post Staff Writer
Monday, December 20, 2010; 7:45 PM

How will the salaries of federal employees whose wages are negotiated through collective bargaining be affected by the two-year pay freeze proposed by President Obama?

The White House intends to answer that with a presidential directive after Congress gives final approval to the freeze. The Senate was expected to vote on it Tuesday; it has already been approved by the House.

After the freeze is approved, Obama will issue a directive that contains guidance on implementation, including how negotiated increases should be handled, according to the Office of Management and Budget. Bloomberg Businessweek previously reported the presidential directive.

Wages are set through collective bargaining for some federal employees, including air traffic controllers, though that is not the case for most U.S. government workers.

Neither OMB nor the National Air Traffic Controllers Association would comment on the extent of White House authority over negotiated increases. It is not clear, for example, if Obama could block a scheduled 3 percent raise in 2011 for controllers or if he would have to affirmatively exempt them from the freeze in order to allow the increase.

The same is true for workers in other agencies with collective bargaining agreements covering wages.

"It is not clear how any pay freeze would impact these employees since they do not get annual across-the-board comparability adjustments," said Colleen M. Kelley, president of the National Treasury Employees Union. "The increases called for under these agreements are tied to employee work performance that already has been accomplished."

Kelley said her labor organization has negotiated signed compensation agreements for employees under alternative pay systems (other than the main General Schedule) in the Federal Deposit Insurance Corp., the Securities and Exchange Commission and the National Credit Union Administration.

Freeze for contractors

Energy Secretary Steven Chu has announced a two-year halt on salary increases and bonuses for department contractors who manage the day-to-day operations at certain agency sites, including national laboratories.

Chu's announcement Friday is in line with the two-year pay freeze that Obama has asked Congress to impose on most federal employees.

"As our nation continues to recover from these challenging economic times, households and small businesses across the country are making sacrifices," said Chu. "In this spirit, we are asking our contractor employees, who are doing important research, operations, and environmental cleanup work, to join the federal workforce in playing a part."

An Energy spokesman said the department has greater authority to monitor the salaries of contractors than is found in other agencies.

The freeze, which begins Jan. 1, will affect about 75,000 workers at 28 sites. At facilities that have already approved increases, there will still be a two-year freeze, but it will start in the contractors' next salary cycle, according to the Energy Department.

"Our national labs, the country's crown jewels for leading research and development, will continue to attract and retain the nation's top scientists and pursue some of the most important discoveries that will lead us into the 21st century," Chu said.

CSRS Offset and taxes

Readers who participate in a federal retirement program known as the Civil Service Retirement System Offset want to know if they will get the 2 percent Social Security tax holiday that Congress approved for next year.

The answer is yes.

CSRS Offset employees pay into Social Security and, as a result, they will get the reduction in the payroll tax included in the tax relief bill, according to Rep. Gerald Connolly (D-Va.). "Congressman Connolly will continue to monitor this issue closely to make sure that federal employees under CSRS Offset are treated equitably under the legislation," a Connolly spokesman said.

CSRS Offset participants pay into Social Security and receive a benefit from that system that causes an equal reduction, or offset, in their civil service annuities. CSRS Offset generally applies to employees who had been under CSRS, left the government, and then returned under certain circumstances.

The tax break would not apply to other employees under CSRS, because they do not pay Social Security taxes. They pay all of their payroll taxes toward the civil service retirement fund and receive their entire benefit from that fund.

About 80 percent of federal employees are under the Federal Employees Retirement System. They pay into Social Security at the same rate as private-sector workers and will benefit from the payroll tax cut.

Federal union leaders did press Congress, unsuccessfully, to allow a 2 percent tax cut to CSRS employees who do not pay Social Security taxes.

Staff writer Eric Yoder contributed to this column.

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