House Committee Backs Tax Help for Employees and Retirees




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House Committee Backs Tax Help for Employees and Retirees

By Stephen Barr, The Washington Post
September 26, 2003

The House Government Reform Committee approved bills that would provide federal retirees with a tax break on their health insurance premiums and would allow more government employees to sign up for tax-free transit subsidies.

The committee, chaired by Rep. Thomas M. Davis III (R-Va.), approved the bills on voice votes.

Davis, who sponsored the retiree bill, said the measure "provides a means of relief from rising health care premiums." Supporters estimated that it would save the typical retiree $400 annually.

Rep. James P. Moran Jr. (D-Va.) said the transit bill, which he sponsored, would expand the availability of transit vouchers, which can be worth as much as $100 monthly, and help ease traffic congestion in the Washington area. "Using transit is one of the most cost-effective, environmentally sound and efficient ways for federal employees to get to their workplace," Moran said.

The vote on the retiree bill came after three years of effort on the part of Davis and the National Association of Retired Federal Employees, a 400,000-member group that has lobbied for "premium conversion," as it is called.

Davis 's bill would alter the tax code and allow civil service and military retirees to pay their Federal Employees Health Benefits Program premiums on a pretax basis. It also would permit active-duty military personnel to take a tax deduction on their Tricare health insurance supplemental premiums.

Since 2000, federal employees have paid their health insurance premiums with pretax dollars through a premium conversion program. But the tax code does not allow the perk to be extended to retirees.

"The premium conversion benefit helps federal workers pay for their health insurance and this tax relief could also enable federal annuitants living on fixed incomes to bear this burden," said Charles L. Fallis, president of NARFE. Last week, FEHBP announced premiums would increase by an average of 10.6 percent in 2004.

Davis told his colleagues that "it is important for this committee to make a statement" on the proposed retiree tax break because the bill must also receive the approval of the House Ways and Means Committee.

The Ways and Means panel has shown little interest in the issue, in part because of the bill's cost -- perhaps $7 billion over 10 years -- and concerns over whether the tax break should be extended to all retirees, not just those who worked for the government.

Moran's bill to expand transit benefits would convert an April 2000 presidential executive order into law.

The order directed Washington area executive branch agencies to provide their employees with a tax-free transit subsidy, now worth $100 per month. The program has more than 130,000 participants, Moran said.

The Moran bill would expand the subsidy to the legislative and judicial branches, the U.S. Postal Service, the Smithsonian Institution and other agencies not covered by the executive order.

In addition, the bill would authorize federal agencies to provide shuttle bus service between their offices and transit stations operated by Metro, MARC and Virginia Railway Express.

Interim Funding

Employees at the Transportation Department and a few other agencies worried about possible furloughs can breathe a bit easier. Congress appears on track to approve a continuing resolution that would keep federal agencies in business next month.

The fiscal year begins Oct. 1, but only three of the 13 appropriations bills for fiscal 2004 have been sent to the White House.

Yesterday, the Senate completed work on the defense spending bill, a day after it received House approval. The bill would provide an average 4.1 percent pay raise for military personnel and would increase "danger pay" for troops in Iraq and Afghanistan from $150 to $225 a month.