Payroll Reminders for Year End 2024 and New Year 2025

MEMORANDUM

DATE: November 26, 2024
TO: Federal Personnel and Payroll System (FPPS) User Group Representatives, Servicing Personnel Offices, and Payroll Coordinators/Liaisons
FROM: Lisa Puente, Deputy Chief, Payroll Operations Division
SUBJECT: Payroll Reminders for Year End 2024 and New Year 2025

There are several upcoming changes that may impact employee leave and earnings for pay periods (PPs) at the end of 2024 and the beginning of 2025, and/or may be of interest to them. The Interior Business Center (IBC) is requesting Servicing Personnel Offices (SPOs), and Payroll Coordinators/Liaisons to please share this updated information with all employees.

Section Categories: (Some items may require employees to take action)

• Calendar Details and Information: Leave Year, Number of Pay Periods, Payroll Schedule Calendar, and Taxable Earnings Year
• Deductions: Benefits and Donations
• Electronic Funds Transfer (EFT) Pay Dates Reminder (Newly Added Category in 2024)
• Payroll Changes and Pay Limitations
• Tax Related Deductions and Implications
• 2024 Tax Forms

Calendar Details and Information:

Leave Year

• The 2024 leave year ends Pay Period (PP) 2025-02 January 11, 2025
  • Employees in the six-hour leave category will get their extra four hours in PP 2025-01, the last full PP of the calendar year. 
• The 2025 leave year is from PP 2025-03, January 12, 2025, through PP 2026-02, January 10, 2026
  • Employees in the six-hour leave category will get their extra four hours for 2025 in PP 2026-01, the last full PP of the calendar year.  

Number of Pay Periods

• There are 26 PPs in a calendar year 2024.
  • The final official pay date will be December 24, 2024
• Calendar year 2025 will also have 26 PPs.  

Payroll Schedule Calendar

• To download and save the 2025 Payroll Schedule, visit the following link: IBC Payroll Schedule Calendars.

Taxable Earnings Year

• The 2024 taxable earnings year is PP 2024-01, beginning December 17, 2023, through PP 2024-26, ending December 14, 2024. 
• The 2025 taxable earnings year is PP 2025-01, beginning December 15, 2024, through PP 2025-26, ending December 13, 2025.

Deductions (Benefits and Donations):

Combined Federal Campaign (CFC)

• All Federal employees participating in the CFC are directed to one giving system.
  • The Office of Personnel Management has contracted with the Give Back Foundation for employees to make CFC pledges. 
• To sign up, select charities, and set up new donor contributions for 2025, visit the following link: https://cfcgiving.opm.gov/welcome no later than January 15, 2025.
• According to 5 C.F.R. 950.701, payroll deductions will begin with the first PP after January 15, 2025, PP 2025-04, for 26 PPs, and will end PP 2026-03.  

Dental and Vision Benefits

• Dental and vision coverage authorized in 2024 automatically continues in 2025, though some premiums may change for 2025.
• For additional information, to view the new rates, or to make changes during the open season, employees can visit the following link: https://www.benefeds.gov/.

Federal Employee Health Benefits (FEHB)

• FEHB coverage authorized in 2024 automatically continues in 2025, though some premiums may change for 2025. 
• Coverage under a newly elected health plan is effective the first day of the PP beginning on or after January 1, 2025, PP 2025-03.
  • Enrollees will remain covered and receive the 2024 benefits of the previously elected plan until coverage under the new plan becomes effective.
• Employees in terminating or reduced coverage plans should make a new election during the open season. For additional information, refer to our user group communication dated November 4, 2024, with the subject: “2024 Federal Employee Health Benefits (FEHB) Open Season and Terminating Plans”.

Federal Employees' Group Life Insurance (FEGLI)

• There are no changes to the FEGLI rates, which can be viewed at the following link: Program Information (opm.gov)

Flexible Spending Accounts (FSA)

• Unless re-authorized by the employee, pre-tax deductions for the FSA Program automatically stop after PP 2024-26.
• For pre-tax FSA deductions to occur in 2025, new elections must be made during the Open Season from November 11 through December 9, 2024.
• For additional information and/or to make open season changes, employees can visit the following link: FSAFEDS.

Thrift Savings Plan (TSP) – Traditional and Roth Contributions

• In 2025, the maximum elective deferral limit for TSP contributions will be $23,500, up from $23,000 in 2024.
• Deduction changes to be effective in PP 2025-01 can now be made through Employee Express (EEX) by entering “12/15/2024” in the Future Effective Date field.
  • EEX allows changes to the Effective Date up to 90 days in advance. Employees can change TSP deductions at any time.
• The combined total of tax-deferred traditional and Roth after-tax contributions cannot exceed the elective deferral limit in any year. 
• Unless changed or canceled by the employee, 2024 biweekly contribution amounts or percentages automatically carry over into 2025.
• Employees who reach the Internal Revenue Service (IRS) maximum contribution limit before the end of the year will not be able to have further employee contributions and may lose any government matching contributions for the rest of the year, if applicable. 

Spillover Method for TSP Catch-Up Contributions (Formerly Thrift Catch-up Contributions (TCC) and Roth Savings Catch-up (RSC))

• As a reminder, on January 1, 2021, the Federal Retirement Thrift Investment Board implemented a new method for catch-up contributions called the “spillover”.
  • Spillover will apply to all active employees who are at least 50 years of age or older and exceed the IRS annual deferral limit.
  • Employees will receive government matching contributions in the spillover method.
  • Eligible employees will have contributions automatically count toward the IRS catch-up limit.
• Catch-up contributions can be made up to an extra $7,500 annually in 2025, unchanged from 2024.
• Once the $23,500 elective deferral limit for TSP is reached, any additional contributions “spillover” is applied to the extra $7,500 catch-up limit.
• Like in 2024, no elections will need to be entered into EEX.
  • However, spillover contributions should be included with regular traditional and/or Roth contributions when making elections in EEX.
  • Please refer to the ‘Thrift Savings Plan (TSP) – Traditional and Roth Contributions’ section above, regarding government matching contributions and when updates should be entered into EEX.
• The chart below provides two examples (dollar amount contributions) for calculating PP election amounts in EEX. In each scenario, the TSP Traditional Maximum contribution must be met before any Catch-up contributions can “spillover”:

Electronic Funds Transfer (EFT) Pay Dates Reminder:

The EFT pay date is determined by the pay processing group to which your agency's data is assigned in the FPPS.  The pay date should be when funds should be deposited into an employee’s bank account.  Some financial institutions may advance funds prior to the EFT pay date.  We ask that you remind your employees that IBC is unable to address any deposits made prior to the established EFT pay date.  

Below is a table that reflects the EFT pay date by pay processing group and the “official pay date” for all agencies is the second Tuesday following the end of the PP.  If you are unsure of which pay processing group your agency is in, you can review the Pay Processing Group - Report.       

Payroll Changes and Pay Limitations:

Aggregate Pay Limitation

• For the Office of Personnel Management’s (OPM) Fact Sheet, visit the following link: Aggregate Limitation on Pay (opm.gov).
• As a reminder for 2025, the statutory limit on pay applies to most employees exempt from the Fair Labor Standards Act (FLSA) (see 5 U.S. Code 5307). 
• Although basic pay is never cut back, some allowances, differentials, bonuses, or awards may even be cut back and be deferred to the following year.
• Retention, recruitment, or relocation incentives authorized under 5 U.S. Codes 5753 and 5754, may cause employees to exceed the aggregate limitations on pay and may be reduced or suspended. 
• The aggregate pay limitation is generally Level 1 of the Executive Schedule.  

Annual Premium Pay Limitation

• For the OPM’s Fact Sheet, visit the following link: Maximum GS Pay Limitations (opm.gov).
• As a reminder for 2025, the annual premium pay limits defined in 5 U.S. Code 5547(b)
• For employees exempt from the FLSA, if regular pay is projected for the year plus Title 5 overtime, night differential, standby pay, availability pay, administratively uncontrollable overtime, Sunday Premium, or Holiday worked to reach the limits, no additional premium payments may be paid. 
• Compensatory time may not be substituted for overtime that is not payable.
• The annual pay limitation is greater than the annual rate of GS-15, step 10 for each locality, or Level V of the Executive Schedule.

Leave and Earnings Statement (LES)

• Employees should carefully review their LES for any changes that would affect their pay. 
  • If there are any questions, please have them contact the IBC Customer Support Center (CSC), using the information provided in the “Contact Information” section at the end of this memorandum.

Adjustments of Certain Rates of Pay

• If there are any authorized increases to the rates of basic pay or salaries of the statutory pay systems for 2025, they will be effective the first full PP of the year, PP 2025-03. The processing PP will depend upon receipt of the tables and time for testing. A separate user group communication will be sent out regarding pay raise processing.

Tax-related deductions and Implications:

Form W-4 Claiming Exempt Withholding

• To continue an employee’s exemption from withholding in 2025, the IRS requires those claiming exemption from withholding to fill out a new Form W-4, Employee's Withholding Allowance Certificate, no later than February 18, 2025. Please note specific deadlines below are earlier than February 18, 2025.   
• If entering the Federal Tax-Exempt status through EEX, please enter that transaction no later than February 7, 2025, to allow time for processing.
• If a new Form W-4 has not been entered into EEX or the FPPS between January 1 and February 7, 2025, the employee’s Federal withholdings status will be changed to the highest possible withholding. If action is entered after February 7, 2025, it may not update in time to avoid tax withholding for PP 2025-04.
  • The IRS has not yet updated the 2025 Form W-4 but once available employees can visit the following link: Form W-4 Employee's Withholding Certificate. 
• The IBC will soon update the Federal Income Tax Withholding Formula for 2025, which may be viewed by visiting the following link: Federal, State, and Territorial Income Tax Withholding Formulas. 
  • Before utilizing the formula, employees contributing pre-tax deductions should first subtract those deductions from their biweekly gross pay.

Occupational Privilege Tax

• Certain localities require an Occupational Privilege Tax be taken from employees in their jurisdiction.
• When working within a specific district, the Occupational Privilege Tax is levied. 
• While some localities withhold the tax in the first full PP of the year, the actual deduction will depend on the locality’s withholding requirements.

 State and Local Taxes

• To ensure taxes are being withheld from the correct state and/or locality, we encourage every employee to review their LES.
  • If an employee notices taxes are being withheld for the incorrect state or locality, or if they are still being withheld for a city the employee no longer lives or works, they should contact their payroll liaison, personnel office, or the IBC CSC, using the information provided in the “Contact Information” section at the end of this memorandum, as soon as possible. 
• For additional information, refer to our user group communication dated September 22, 2022, with the subject: “Updated State, City and County Income Tax Withholding related to Official Duty Station”.
• We have limited capability to correct prior year tax errors, and 2024 errors not identified until 2025 may require the employee to file a tax return to recover taxes withheld for the wrong tax entity.
• Wages for non-taxing states are not reported on Form W-2, Wage and Tax Statements.

Social Security (OASDI) Tax and Medicare Taxes

• The Social Security Administration increased the 2025 maximum earnings to $176,100; there is no wage base limit for Medicare tax. 
• For 2025, the Social Security and Medicare tax rates remain the same for all wages, at 6.2% and 1.45%, respectively.
• Individuals with earned income of more than $200,000 pay an additional 0.9 % in Medicare taxes.
  • The tax rates shown above do not include this additional 0.9 %. 
• Details can be viewed by visiting the following link: 2025 Social Security Changes - COLA Fact Sheet (ssa.gov).

Transportation (Commuting) Benefits

• The IRS has not yet announced the 2025 rates as they are contingent on legislation that has not been finalized.
• Once rates are available, they can be viewed in the Publication 15-B, Employer’s Tax Guide to Fringe Benefits, Fringe Benefit Exclusion Rules section, ‘Transportation (Commuting) Benefits’ subsection, ‘Exclusion from wages’ at Publication 15-B, Employer's Tax Guide to Fringe Benefits.

Voluntary Tax Allotments

• Since these allotments are remitted to the locality on the employee’s behalf, the amount of ‘estimated’ tax deductions withheld through a Voluntary Tax Allotment will be reflected on Form W-2 in Box 14 as item 8 - Estimated Local Tax. 
  • These amounts are only estimated.
  • Reconciliation occurs when the employee files an applicable tax return with the locality.    

2024 Tax Forms:

Form W-2

• The target date for access to view and print the Form W-2 in EEX is January 11, 2025.
  • Currently, only approximately 57% of active employees have elected electronic Form W-2s via EEX. 
  • To ensure the protection of Personal Identifiable Information (PII), please encourage employees to elect to receive their Form W-2 electronically in EEX no later than December 26, 2024.
• For all employees who did not elect to turn off the hard copy, a printed Form W-2 will be mailed to the employee’s address of record no later than January 31, 2025.
  • Please have employees who are expecting a mailed Form W-2, verify the address listed on their latest electronic LES in EEX.
• To ensure receipt of the mailed Form W-2, any address change must be processed in EEX or by the SPO no later than December 13, 2024.

Form 1095-C 

• The target date for access to view and print the Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, in EEX is January 11, 2025. 
  • Currently, only approximately 41% of active employees have elected electronic Form 1095-C via EEX. 
  • To ensure the protection of PII, please encourage employees to elect to receive their Form 1095-C electronically in EEX prior to December 26, 2024.
• For all employees who did not elect to turn off the hard copy, a printed Form 1095-Cs will be mailed to the employee’s address of record no later than March 3, 2025.
  • For any questions about Form 1095-C, visit the following link: https://www.irs.gov/forms-pubs/about-form-1095-c
  • Please have employees who are expecting a mailed Form 1095-C, verify the address listed on their latest electronic LES in EEX.
  • To ensure receipt of the mailed Form 1095-C, any address change must be processed in EEX or by the SPO no later than December 13, 2024.

Contact Information:

If you have any questions, please contact the IBC CSC at Payroll_Helpdesk@ios.doi.gov or 1-866-367-1272.