Thousands of long-service federal workers who planned to retire or quit their jobs later this year are holding off until January so they can qualify for a windfall benefit making them eligible for Medicare coverage even if they contribute only a few dollars to the Social Security program.
Starting next year, U.S. workers will begin paying the Medicare tax portion of Social Security. That amounts to 1.3 percent of salary on amounts up to about $31,000 a year.
But under a "grandfather" provision in the new tax law, some feds who pay into Medicare for only a "short time" -- perhaps even as little as one day -- will qualify for Medicare when they reach eligibility age. For most people that is 65.
When they approved the federal-worker Medicare tax the Reagan administration wanted, Senate-House conferees put in language that will allow employes to qualify for Medicare coverage, even if they pay only a tiny portion of the tax required of nonfederal employes.
Normally, to qualify for Medicare an individual must have worked (and paid the full Social Security tax of just over 6 percent) for 10 years.
The next question is the definition of what is a "short time" for paying the Medicare tax. It could be as little as one day, or perhaps a full two-week pay period. That will be decided shortly by the Office of Personnel Management.
The point is that the grandfathering provision will be a major break for many U.S. workers.
The vast majority of federal workers are not covered by Social Security by virtue of their U.S. jobs. They have their own retirement system. They have not paid Social Security taxes unless it was for work performed elsewhere in a nonfederal job covered by Social Security.
Because of the grandfather provision, feds will be able to count their government service time (10 years is needed) to qualify for Medicare coverage if they leave government next year after the Medicare tax goes into effect. They can also combine federal and private sector work time to meet the eligibility time requirements to get Medicare coverage.
Normally 6,000 to 8,000 feds retire in December. But many, as they become aware of the Medicare benefit, are withdrawing their retirement papers. Some will work the required length of time in January to pay the minimum amount of the Medicare tax, and then become eligible for full Medicare coverage.