FERS Annuity: after tax paycheck deduction

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tomwood
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FERS Annuity: after tax paycheck deduction

Post by tomwood » Mon Oct 07, 2019 1:28 pm

As I understand FERS, there is a 4.9% after tax deduction for all employees who started after 2013. Since this deduction comes out of each paycheck & calculated after taxes are removed, is there any advice or strategy to claiming no dependents on W-4 to have the least amount deducted as possible? I’m in the group that wants to claim many dependents and have $0 refund each April but is this an exception?

Ybsybs
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Re: FERS Annuity: after tax paycheck deduction

Post by Ybsybs » Mon Oct 07, 2019 1:34 pm

That's an interesting idea. Does reducing your payments in reduce your ultimate payments out though?

rich126
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Re: FERS Annuity: after tax paycheck deduction

Post by rich126 » Mon Oct 07, 2019 1:44 pm

Ybsybs wrote:
Mon Oct 07, 2019 1:34 pm
That's an interesting idea. Does reducing your payments in reduce your ultimate payments out though?
That answer has to be no. The pension is calculated on your average salary over your highest 3 years times years of service, with a bonus if you wait to retire at age 62.

The contribution amount is to aid the funding of the pension but doesn't change your payout.

camich27
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Re: FERS Annuity: after tax paycheck deduction

Post by camich27 » Mon Oct 07, 2019 2:49 pm

I believe the FERS contribution calculation is based on your basic rate of pay and that the level of tax withholdings is immaterial.

Mako
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Re: FERS Annuity: after tax paycheck deduction

Post by Mako » Mon Oct 07, 2019 3:33 pm

camich27 wrote:
Mon Oct 07, 2019 2:49 pm
I believe the FERS contribution calculation is based on your basic rate of pay and that the level of tax withholdings is immaterial.
This is correct, according to my paychecks. OT and bonuses don't change it either.

Topic Author
tomwood
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Re: FERS Annuity: after tax paycheck deduction

Post by tomwood » Mon Oct 07, 2019 5:40 pm

camich27 wrote:
Mon Oct 07, 2019 2:49 pm
I believe the FERS contribution calculation is based on your basic rate of pay and that the level of tax withholdings is immaterial.
Thank you. So I should keep the dependents on my w4?

Topic Author
tomwood
Posts: 376
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Re: FERS Annuity: after tax paycheck deduction

Post by tomwood » Mon Oct 07, 2019 5:40 pm

Mako wrote:
Mon Oct 07, 2019 3:33 pm
camich27 wrote:
Mon Oct 07, 2019 2:49 pm
I believe the FERS contribution calculation is based on your basic rate of pay and that the level of tax withholdings is immaterial.
This is correct, according to my paychecks. OT and bonuses don't change it either.
Thank you

gclancer
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Joined: Sat Apr 27, 2013 10:34 am

Re: FERS Annuity: after tax paycheck deduction

Post by gclancer » Mon Oct 07, 2019 6:44 pm

camich27 wrote:
Mon Oct 07, 2019 2:49 pm
I believe the FERS contribution calculation is based on your basic rate of pay and that the level of tax withholdings is immaterial.
+1 for those interested your FERS annuity (contribution rate for most hired after Jan 1 2014 (not 2013) is 4.4% (not 4.9%)) is a percentage of your “basic pay.” The types of pay included in “basic pay” can be found here: https://uscode.house.gov/view.xhtml?req ... umpTo=true

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grabiner
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Re: FERS Annuity: after tax paycheck deduction

Post by grabiner » Mon Oct 07, 2019 8:55 pm

tomwood wrote:
Mon Oct 07, 2019 1:28 pm
As I understand FERS, there is a 4.9% after tax deduction for all employees who started after 2013. Since this deduction comes out of each paycheck & calculated after taxes are removed, is there any advice or strategy to claiming no dependents on W-4 to have the least amount deducted as possible? I’m in the group that wants to claim many dependents and have $0 refund each April but is this an exception?
"After tax" for a payroll deduction has a different meaning here from what you are thinking. A pre-tax payroll deduction (for example, health insurance, traditional TSP) reduces your wages for tax purposes; an after-tax deduction (FERS, Roth TSP) does not affect your wages. This is independent of how it is determined. For example, pre-tax health insurance reduces your Social Security wages, and thus the after-tax SS deduction; pre-tax TSP does not.
Wiki David Grabiner

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