"2024 Federal Employee Pay Increase: How Much, When It Takes Effect, and Other Employee Benefits Affected"
The 5.2 percent pay increase is an average based on the “employment cost” index which is a gauge of private sector wage growth. The pay increase is split into two parts, namely: (1) A 4.7 percent pay increase for all federal employees, no matter which area of the US they work; and (2) A remaining part of the pay increase that varies according to the local salaries of comparable private sector jobs. For example, employees in the Washington, DC – Baltimore, MD area will receive a 5.31 percent pay increase. Employees working in the Seattle-Tacoma area of Washington state will see the largest pay increase of 5.7 percent while those employees working in the Miami, FL area will receive the smallest pay increase of 4.94 percent.
When Will the 2024 Federal Employee Pay Increase Become Effective?
Example 1. Dawn is a federal employee, working in Washington, DC. Her 2023 “adjusted basic pay”, as shown on her most recent SF 50 (Notice of Personnel Action) is $102,450. Based on a 2024 federal pay increase of 5.31 percent for federal employees working in the Washington DC area, Dawn’s 2024 “adjusted basic pay” will increase by 5.31 percent (1.0531 times $102,450) to $107,890. Dawn should receive an updated SF 50 reflecting the 5.31 percent pay increase sometime in late January or early February 2024.
Other Federal Employee Benefits Affected by the 2024 Pay Raise
- CSRS and FERS retirement contributions. A CSRS-covered employee contributes every two weeks via payroll deductions 7 percent (0.8 percent if a CSRS Offset employee) of his or her bi-weekly gross salary into the CSRS Retirement and Disability Fund. A FERS-covered employee contributes 0.8 percent, 3.1 percent or 4.4 percent (depending on which year the employee was initially hired into federal service) every two weeks into the FERS Retirement and Disability Fund. Since both a CSRS employee’s and a FERS employee’s salary will be increasing on average 5.2 percent because of the 2024 pay increase, the amount contributed to the CSRS or FERS Retirement and Disability Funds will also increase on average 5.2 percent.
Ed hosts a Retirement Planning Webinar for FERS and CSRS Employees -
- FERS-covered employee’s agency automatic 1 percent of gross pay TSP contribution. FERS-covered employees receive from their agency an automatic 1 percent of gross pay (current year SF 50 “adjusted basic pay”) contribution from their agency. Since all FERS-covered employees will be receiving an average increase of 5.2 percent in their SF 50 “adjusted basic pay”, the automatic 1 percent of gross pay TSP contributions from their agencies will increase on average 5.2 percent during 2024. The following example illustrates:
Example 2. James is a federal employee covered by FERS. He lives and works in Seattle, Washington and during leave year 2023, James’ SF 50 “adjusted basic pay” is $142,900. Based on a 2024 federal pay increase of 5.7 percent for federal employees living and working in the Seattle-Tacoma, WA geographic area, James’ salary will increase by 5.7 percent (1.057 times $142,900) to $151,045. James’ automatic 1 percent of gross pay TSP contribution that his agency makes to his TSP account will increase from $1,429 to $1,510 during 2024, an increase of $81.
- FEGLI life insurance coverage. Federal employees who are enrolled in the Federal Employees Gorup Life Insurance (FEGLI) will see an increase in some of their life insurance coverage amounts. In particular, the FEGLI Basic Insurance Amount (BIA) and the FEGLI Option B (Multiple of Salary) coverage will increase by the amount of the pay increase. An employee’s FEGLI BIA life insurance coverage is equal to the employee’s current year SF 50 “adjusted basic pay”, rounded up to the next $1,000 plus $2,000. The following example illustrates:
Example 3. Sharon is a federal employee, age 48, working and living in the Washington, DC area. She is enrolled in the FEGLI BIA. During 2023, her SF 50 “adjusted basic pay” is $112,700. Her FEGLI BIA is therefore $113,000 ($112,700 rounded upward to the next $1,000) plus $2,000, or $115,000. Sharon’s SF 50 “adjusted basic pay” during leave year 2024 will increase by 5.31 percent (1.0531 times $112,700) to $118,684. Her FEGLI BIA life insurance coverage will increase effective the first day of the new leave year 2024 – January 14, 2024 - to $121,000 ($118,684 rounded up to $119,000 plus $2,000).
An employee who is enrolled in the FEGLI Option B (Multiple of Salary), together with FEGLI BIA, has the following life insurance coverage with Option B: 1,2,3,4 or 5 multiples of current year SF 50 “adjusted basic pay” rounded up to the next $1,000. The following example illustrates:
Example 4. Peter is a federal employee, age 56, working and living in the Miami, FL area. He is enrolled in the FEGLI BIA and Option B with 4 multiples of his adjusted SF 50 “adjusted basic pay”. During leave year 2023, Peter’s salary is $138,500. His FEGLI BIA insurance coverage is therefore equal to $139,000 plus $2,000, or $141,000. His Option B insurance coverage is equal to 4 multiples of $139,000, or $556,000.
Peter’s SF 50 “adjusted basic pay” during leave year 2024 will increase by 4.94 percent (1.0494 times $138,500) to $145,341. Peter’s FEGLI BIA life insurance coverage will increase, effective the first day of the 2024 leave year - January 14, 2024, to $148,000 ($145,341 rounded up to $146,000 plus $2,000). His Option B, Multiple of Salary, FEGLI life insurance coverage will increase, effective the first day of the 2024 leave year - January 14, 2024, to 4 multiples of $146,000, or $584,000.
Employee Social Security Wages (CSRS Offset or FERS Employees) and Medicare Wages (All Employees)
In addition to federal salaries increasing on average 5.2 percent during leave year 2024, an employee’s Social Security wages (CSRS Offset and FERS employees) will also increase on average 5.2 percent (until the wages reach $168,600 which is the 2024 Social Security maximum wage base). Social Security wages are subject to FICA tax (6.2 percent of wages paid by both the employee and employee’s agency) up to the annual Social Security maximum wage base.
All employees, no matter the amount of their salary, are subject to the Medicare Hospital Insurance Tax (HIT) equal to 1.45 percent of an employee’s salary. The employee’s agency matches the employee Medicare HIT. This means that all employees will pay on average an additional 5.2 percent Medicare HIT during 2024.
Employee Action Plan to Confirm They are Receiving the Full Amount of the 2024 Federal Employee Pay Increase
Federal employees are advised to confirm they are receiving the full amount of the 2024 federal employee pay and benefits increases resulting from the average 5.2 percent pay increase. The following are specific recommendations for what employees should confirm:
- Updated SF 50 (Notice of Personnel Action). Sometime in late January or in February 2024, all employees should receive an updated SF 50 in their Electronic Official Personnel Folder (eOPF). Employees should confirm all of the updated information on their eOPF is correct. Specifically, they should check on their SF 50: (1) Box 12A - Basic Pay; Box 12B – Locality Pay; Box 12c -Adjusted Basic Pay and Box 27 – FEGLI. They should also confirm the information in Box 30 (Retirement Plan) and Box 31 (Service Computation Date – Leave) is correct.
- First Leave and Earnings Statement (LES) for the 2024 Leave Year. Employees should confirm: (1) Bi-weekly gross pay that reflects the average 5.2 percent pay increase; (2) Employee TSP contributions (traditional TSP and Roth TSP); (3) FERS employees- agency TSP matching contributions and agency TSP automatic 1 percent of SF 50 “adjusted basic pay” contributions; (4) 2024 FEHB program bi-weekly premiums; (5) if enrolled in the Federal Employee Dental and Vision Program (FEDVIP), 2024 FEDVIP dental and/or vision insurance premiums; (6) if enrolled in FEGLI, verify amount of coverage and bi-weekly premium cost for FEGLI BIA and any FEGLI optional coverage; and (7) if enrolled in the Federal Long Term Care Insurance Program (FLTCIP), confirm any changes in premiums which took effect January 1, 2024.
Employees who have problems or questions about their updated pay and benefits for 2024 resulting from the average 5.2 percent pay increase and changes to FEHB program premiums, FEDVIP premiums, and FLTCIP premiums, are advised to contact their Personnel Office or Human Resources Office for assistance.
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Edward A. Zurndorfer is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Life Underwriter, Chartered Financial Consultant, Chartered Federal Employee Benefits Consultant, Certified Employees Benefits Specialist and IRS Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, and EZ Federal Benefits Seminars, located at 833 Bromley Street - Suite A, Silver Spring, MD 20902-3019 and telephone number 301-681-1652. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.
