SEQUESTRATION FACT SHEET #3

SEQUESTRATION FACT SHEET #3

By Jeff Bratko, Steward AFGE Local 704

Sequestration Fact Sheets #1and 2 explained that sequestration will result in automatic, spending cuts in most discretionary spending by Federal Agencies.  Sequestration Fact Sheet #2 discussed a few ways that employees can prepare for sequestration and avoid falling off their own fiscal cliff.  This fact sheet contains additional tips and suggestions to help employees prepare for sequestration.

How you may be Impacted and Things you can do to Minimize the Damage

  • The Thrift Savings Plan (TSP) – One possible impact of the sequestration is a furlough of 4 or 5 weeks between January 2, 2013 and the end of September 2013.  It is not known if such furloughs will be done a day at a time, a week at a time, or multiple weeks at a time. TSP Bulletin OC 95-4 (5/2012) describes the impact of a furlough on your TSP contributions. If there is a furlough and you do nothing about your TSP contributions, you will end up contributing less than anticipated in 2013.  Employees, who need to increase their net pay during a furlough so that they can meet essential living expenses, may have to reduce their TSP contributions.  Employees who want to maximize their TSP contributions may need to adjust the biweekly TSP contribution amount to ensure they reach their goals (if possible).   Keep in mind that the younger you are the more a furlough will impact your TSP savings in the long term unless you find a way to increase your TSP contribution in 2013 to make up for any reduction in contributions due to a furlough. 
  • TSP Loans – The TSP bulletin on the issue of TSP loans and furloughs is not the most helpful document.  For those of you with TSP loans, keep in mind that furlough days in a pay period do not automatically alter your obligation to ensure that you make the fully biweekly loan repayment each pay period.  See TSP Bulletin OC 95-4 (5/2012).  The payroll office will not automatically adjust the amount of the loan payment if you are furloughed; the full loan payment must be made.  That could cause big problems given that your net pay will be reduced during a furlough.  There are ways to delay repayment but I suggest you contact TSP directly for information if the bulletin mentioned above does not answer your questions about how you can deal with this kind of problem.  No doubt they will be swamped with calls during January if a lot of employees are furloughed so you may want to call this year with any questions.
  • Tax Changes – As if the sequestration was not enough, keep in mind that the income tax cuts and the social security payroll tax reduction are scheduled to end in January. That means your net pay will be reduced when those taxes go up.  For those of you that get a large income tax refund every year, you may want to consider checking on whether you are having too much withheld each pay period. Higher taxes in 2013 means you might not expect as large a refund in 2014.  Nevertheless, despite the higher tax rates you may still be having too much withheld each pay period. You may need that money if we are furloughed and reducing your withholding might be cheaper in the long run than the interest on loans or credit card payments if you plan to use those vehicles to offset any shortfalls during a furlough.  Because the impact of the tax increases and changes in withholding can be complicated, you may need to contact a tax adviser to determine how to ensure you pay enough taxes, but not too much, so that you can meet current expenses despite the cut in your net pay.
  • Transit Subsidy – My guess is that the Agency may have a hard time maintaining the current transit subsidy level if sequestration occurs.  For those of you that get the transit subsidy, you may end up paying for more of your own transportation costs in 2013.  You may be able to offset such cuts by working episodic or regular flexiplace more often.  Keep in mind that you can work both episodic and regular flexiplace in the same pay period if you have sufficient portable work and get approval from your supervisor. If you have a portable project in FY 2014 that is not time sensitive, you may want to push it into calendar year 2014 to make maximum use of episodic flexiplace.
  • Make the Agency pay you What it Owes you – A lot of employees do not claim expenses for which they are entitled to be reimbursed.  Some employees work extra hours without compensation when they are entitled to some kind of compensation.  Some employees even buy their own supplies.  This has to stop if we are furloughed (and should be stopped no matter what happens).  You cannot keep subsidizing the federal government if the reward is to be furloughed without pay.
  • Hoard Supplies – It may sound terrible but the fact is that budget cuts mean less money for already scarce supplies.   Replenish your stash now so that you will have the supplies you need to get your work done.

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