THE FISCAL CLIFF AND HOW IT AFFECTS PAYCHECKS

FROM: U.S. DEPARTMENT OF DEFENSE

Fiscal Cliff Legislation Affects Military, Civilian Paychecks
American Forces Press Service

WASHINGTON, Jan. 4, 2013 - The legislation that President Barack Obama signed Jan. 2 that postponed the fiscal cliff means changes to military and civilian paychecks, Defense Finance and Accounting Service officials said today.

The legislation increases Social Security withholding taxes to 6.2 percent. For the past two years during the "tax holiday" the rate was 4.2 percent.

The increase in Social Security withholding taxes affects both military and civilian paychecks, officials said.

For civilian employees, officials said, this will mean a 2 percent reduction in net pay.

For military personnel, changes to net pay are affected by a variety of additional factors such as increases in basic allowances for housing, subsistence, longevity basic pay raises and promotions. Service members could see an increase in net pay, no change or a decrease, military personnel and readiness officials said.

For military members, Social Security withholding is located on their leave and earnings statement in the blocks marked "FICA taxes" -- for Federal Insurance Contributions Act.

DOD civilians will see the change on their leave and earnings statement under "OASDI" -- for old age, survivors, and disability insurance.

Reserve component members will be the first to see potential changes in their net pay as a result of the law, DFAS officials said. Changes will be reflected in their January paychecks.

Active duty military personnel will see pay adjustments in their January mid-month paycheck and will be reflected on the January leave and earnings statement.

DOD civilians will see social security withholding changes reflected in paychecks based on the pay period ending December 29, 2012, for pay dates beginning in January.

DFAS stresses that all personnel should review pay statements carefully.