The Source Tax Bill and other legislative goodies

A number of important bills for feds are wending their way through Congress. Here are some of the highlights:

The Source Tax Bill, which bars states from taxing the retirement income of former residents now living elsewhere, was signed by President Clinton. An amendment to the bill, however, allows states to tax retirement benefits of feds who leave the country and/or renounce their citizenship to avoid taxation.

The issue of source tax income is a contentious one. Opponents contend that permitting a state to tax former residents on their retirement income subjects these pensioners to the income taxes of two states—the state where they now reside and the state where they lived when they built up their pension equity. The counter argument is that because entitlement to the pension was obtained while residing in another state that did not tax a portion of the pensioner's income as it went into his/her retirement fund, that state now should be entitled to tax the benefits being drawn from that fund.

Another bill, H.R. 782, the Federal Employee Representation Improvement Act of 1995, was unanimously approved by the House in late October. This legislation restores the right of employee associations to represent their members before their agencies. Introduced by Congressman Frank Wolf (R-Va.), the bill is in response to a Justice Department advisory opinion that limits the ability of employee associations to represent their members.

Another piece of legislation has been introduced by Rep. Albert Wynn (D-Md.) that would help federal employees who are trying to retire early. Wynn's bill would reduce penalties early retirees are ordinarily expected to incur, i.e., the 2 percent per-year reduction in benefits. Under Wynn's bill, H.R. 2525, the reduction for early retirement would be relaxed on a graduated scale for workers between the ages of 50 and 54. A 50-year-old worker would receive a reduction of 1.75 percent per year for each year under the age of 55. Those 51 years old would incur a 1.5 percent per-year reduction. Those age 52 would incur a 1 percent reduction. Those age 53 would incur a .75 percent per-year reduction, and workers age 54 and over would incur a .5 percent reduction.

While no legislation is pending, the House Civil Service subcommittee held hearings in late October on the issue of performance and accountability within the government. It's not a very well-kept secret that feds are hardly ever fired for poor performance. Also evaluated were various attempts (unsuccessful, I might add) to motivate employees through performance management "systems."

Testifying before the House subcommittee were representatives of the Merit Systems Protection Board. MSPB said a recent survey found 78 percent of managers believe they have poor performers in their organization, but only 23 percent say they proposed demotion or removal of such employees. The most frequently cited reason for such behavior is a manager's fear that employees' attitudes toward discipline would have an adverse impact on the rest of the organization.

Funny, but in the private sector the prevailing view is just the opposite—by disciplining employees, you shake up the troops and make them aware of the fact that their employment is contingent upon satisfactory performance.

Twenty percent of managers in the study who said they had poor performers indicated they didn't take punitive measures because they were fearful they wouldn't have the support of higher-level management. I can believe that. Many managers are left to twist slowly in the wind after taking an adverse action against a poor performer.

Ironically, Evangeline W. Swift, director of policy and evaluation at MSPB, argued that government supervisors' perceptions are inaccurate. According to Swift, "Most removal actions that are taken against employees are not even contested, and when they are contested the management decision is upheld in the majority of cases." Who should know better than Swift, whose agency almost always sides with management in labor/management disputes.

I'm not sure where I stand on this issue. On the one hand I'm in favor of accountability, but on the other hand, I do not favor wanton disregard for employee's rights. It's a tough call; I'd appreciate your views on this subject.

To my loyal readers:

I'd like to announce an exciting new development. While I've been churning out this column for the past 10 years, I've also been writing on personal finance and taxes for a number of well-known publications. The advice in these articles has been on the mark often enough that I have acquired a sizable following of readers. This audience was noticed by the folks at FCW, and they've asked me to create a new on-line publication. Called "Bureaucratus Moneyline," the column is filled with dollars-and-sense advice on topics that are important to feds.

I'll look at the types of issues readers have asked me about over the years—the advantages of the various retirement strategies and plans, life insurance options and health care. The focus will be on getting your money's worth.

The premiere column is on FCW's home page on the Internet at http://www.fcw.com. You can review it for free, but future issues must be paid for. I hope you find it useful. If there are topics you would like me to address, e-mail me with the ideas.

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Bureaucratus is a retired federal employee who is a regular contributor to Federal Computer Week. You can read his column on FCW's Web page at http://www.fcw.com or send e-mail to bureaucratus@fcw.com.

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