| Who is entitled? |
Employees receiving back pay under 5 U.S.C. 5596--the back pay law--are entitled to interest. Exception: Interest is not payable on awards under title VII of the Civil Rights Act of 1964 or the Age Discrimination Act of 1973. |
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| Effective Date |
Interest is payable on all decisions that became final on or after December 22, 1987. |
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| Computation Rules |
- compounded daily
- the interest rate is the rate the Internal Revenue Service (IRS) pays on tax overpayments (recomputed quarterly)
- begins to accrue on the effective date of the withdrawal of pay, allowances, or differentials
- accrual of interest may be ended on any date not more than 30 days before the interest is paid to the employee
- computed after deducting from back pay award the employee's outside earnings (prorated), but before making any other deductions.
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| Computer Program |
The Office of Personnel Management has provided agencies with a computer program to compute interest. You may download this program from OPM's Web site. |
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| To Update the Interest Rate |
Check OPM's Web site, or call the IRS Federal Tax Information Line (1-800-TAX-1040) and ask for the overpayment rate. |
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| FICA Status |
IRS has ruled that interest on back pay is not wages for Federal Insurance Contributions Act (FICA) purposes. |
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| References |
Statute: 5 U.S.C. 5596(b)(2)
Regulation: 5 CFR 550.806 |
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