5 C.F.R. Appendix A to Subpart H of Part 550—Information on Computing Certain Common Deductions From Back Pay Awards
Title 5 - Administrative Personnel
Title 5: Administrative Personnel
PART 550—PAY ADMINISTRATION (GENERAL)
Subpart H—Back Pay
Appendix A to Subpart H of Part 550—Information on Computing Certain Common Deductions From Back Pay Awards
To determine the net back payment owed an employee, an agency must make certain required deductions. (See §550.805(e)(3).) To compute these deductions, an agency must determine the appropriate base or follow other rules, consistent with applicable law. Some deductions, such as tax deductions, are not subject to OPM regulation. To assist agencies, this appendix summarizes the rules for certain common deductions. For further information on Federal tax deductions from back pay awards, please contact the Internal Revenue Service directly or review relevant IRS publications.
------------------------------------------------------------------------ How to Compute Type of deduction the deduction------------------------------------------------------------------------(a) Mandatory employee retirement contributions.............. Compute the deduction based on the basic pay portion of gross back pay before adding interest or applying any offset or deduction .(b) Life insurance premiums.................................. Compute the deduction based on the basic pay portion of gross back pay before adding interest or applying any offset or deduction .(c) Social Security (OASDI) and Medicare taxes............... Compute the deduction based on adjusted gross back pay (gross back pay less the offset for outside earnings under § 550.805(e )(1), but before adding interest) . The deduction may be reduced dollar- for- dollar by the amount of any Social Security or Medicare taxes that were withheld from erroneous payments made in the same calendar year as the back pay award, but only if_ (1) Those erron eous payme nts were actua lly recov ered by the Gover nment by offse tting the back pay award as provi ded in § ; 550.8 05(e) (2); and (2) Those withh eld taxes have not alrea dy been repai d to the emplo yee. Note: Social Security taxes are subject to the applicabl e Social Security tax wage base limit. In addition, see IRS guidance regarding possible correctio n and refunding of Social Security and Medicare taxes withheld from erroneous payments in a prior calendar year.(d) Federal income tax withholdings.......................... Compute the deduction based on adjusted gross back pay (gross back pay less the offset for outside earnings under § 550.805(e )(1), but before adding interest) less any part of back pay not subject to income tax deduction s, such as nonforeig n area cost-of- living allowance s and contribut ions to the Thrift Savings Plan that are deducted from the pay of the employee. The deduction may be reduced dollar- for- dollar by the amount of any Federal income taxes withheld from erroneous payments made in the same calendar year as the back pay award, but only if_ (1) Those erron eous payme nts were actua lly recov ered by the Gover nment by offse tting the back pay award as provi ded in § ; 550.8 05(e) (2); and (2) Those withh eld taxes have not alrea dy been repai d to the emplo yee. Note: Additiona l Federal income tax withholdi ngs from the interest portion of the back pay award may be required by the Internal Revenue Service in certain specific circumsta nces.------------------------------------------------------------------------
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[64 FR 69179, Dec. 10, 1999] 
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