Breakout Session

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(No Transcript)
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Overseas Allowances and Differentials
Breakout Session 1403 Diane K. Whitmoyer,
CPCM Vice President, Contracts
Procurement DAI Monday, April 23, 2007 250 PM
350 PM
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Disclaimer
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Background

• The Department of State Standardized Regulations
  (DSSR) are the overriding regulations for
  allowances and benefits available to all U.S.
  Government civilians assigned to foreign areas.
• Check agency-implementing regulations because
  they may be more restrictive than the DSSR but
  cannot go beyond the scope of the DSSR.
• Foreign Affairs Agencies implementing
  regulations are found in volume 3 Foreign Affairs
  Manual (FAM) 3200 and volume 3 Foreign Affairs
  Handbook (FAH) 3FAH-1 H-3200.

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Types of Allowances

• There are five general types of allowances and
  benefits
• (1)  Foreign Travel Per Diem Allowances
• (2)  Cost of Living Allowances
• (3)  Recruitment and Retention Incentives
• (4)  Quarters Allowances
• (5)  Other Allowances

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Foreign Travel Per Diem

• The Office of Allowances establishes per diem
  rates for foreign areas.  The rates consist of a
  maximum lodging portion and a maximum meals and
  incidental expenses (MIE) portion. 
• The General Services Administration establishes
  per diem rates in the continental United States
  (CONUS).  The Department of Defense establishes
  per diem rates for non-foreign locations outside
  of the continental United States, such as Alaska,
  Hawaii, or Guam. 

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Foreign Transfer Allowance (FTA)

• The purpose of the FTA is to help defray an
  employees extraordinary but necessary and
  reasonable costs when he/she transfers to a post
  in a foreign area.   
• The FTA has four parts
• (1)   The Miscellaneous Expense Portion See DSSR
  242 for precise calculations. 
• (2)   The Wardrobe Expense Portion is granted
  when an employee transfers across two climatic
  zones to his/her new foreign post of assignment. 
  
• (3)   The Predeparture Subsistence Expense
  Portion is granted to assist employees with the
  costs of temporary lodging, meals, laundry, and
  dry cleaning that are incurred when an employee
  transfers overseas -- the Partial Flat Rate
  Method and the Total Actual Subsistence Method.
• (4)   The Lease Penalty Expense Portion is to
  offset a lease penalty unavoidably incurred by an
  employee when transferring overseas. 

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Home Service Transfer Allowance (HSTA)

• Helps defray an employees extraordinary but
  necessary and reasonable costs when he/she
  transfers from a post abroad to a post in the
  United States.  The HSTA is also available to
  family members who relocate to the U.S. following
  the death of an employee assigned to a foreign
  area.
• The HSTA is similar to the Foreign Transfer
  Allowance.  The HSTA has a miscellaneous expense
  portion, a wardrobe portion, a lease penalty
  portion and a subsistence expense portion. 

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Temporary Quarters Subsistence Allowance (TQSA)

• Granted to an employee for the reasonable cost of
  temporary quarters, meals and laundry expenses
  incurred at post, not to exceed 90 days.
• For the first 30 days, TQSA is 75 of per diem
  for the first occupant and 50 of perdiem for
  each additional occupant over 12 and 40 for
  under 12.
• TQSA expenses are supposed by receipts.
• TQSA cannot be paid at the same time as LQA or
  COLA

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Living Quarters Allowance

• Granted to an employee to help defray the annual
  cost of suitable, adequate living quarters for
  the employee and his/her family at a foreign post
  where government-leased or owned housing is not
  provided. 
• The LQA rates are designed to substantially cover
  the average employees costs for rent, utilities,
  required taxes levied by the local government,
  and other allowable expenses. 
• Begins the date expenses for quarters are
  incurred at new post or the day after termination
  of TQSA.
• May continue for up to 60 calendar days during
  authorized leave with pay and other authorized
  absences.

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Extraordinary Quarters Allowance (EQA)

• An employee and eligible family members at a
  foreign posting may receive EQA when they are
  required to partially or completely vacate their
  permanent quarters because of renovations/repairs
  or unhealthy or dangerous conditions. 
• The employee may continue to receive post (cost
  of living) and LQA when receiving EQA. 

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Separate Maintenance Allowance (SMA)

• SMA is designed to help an employee who is
  compelled by reasons of dangerous, notably
  unhealthful or excessively adverse living
  conditions at the foreign post of assignment, or
  for convenience of the Government, or because of
  family considerations, to defray the additional
  expense of maintaining family members at another
  location. 
• Flat annual allowance varying by family size.
• There are three types of SMA  Involuntary,
  Voluntary and Transitional.
• Involuntary SMA is paid when family members are
  prohibited from residing at the foreign post.  
  Children are eligible for Involuntary SMA until
  they reach 21 years of age.
• Voluntary SMA is paid when family members may go
  to a foreign post but opt not to for personal
  reasons.  Children lose eligibility for voluntary
  SMA when they turn 18, unless they are still in
  secondary school (e.g., high school).
• Transitional SMA may be paid after an evacuation
  (a) to assist the employee with additional costs
  incurred to settle family members into permanent
  housing after an evacuation and conversion of
  post to an unaccompanied status (b) to allow a
  child in the final semester of the current school
  year to complete that school year (c) if an
  employee and/or family members cannot return to
  post for reason(s) beyond the employees control.

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Education Allowance

• Assists an employee in defraying those costs
  necessary to obtain educational services (grades
  K-12) that would normally be free of charge in
  the U.S.   The allowance is based on the least
  expensive adequate school at post. 
• The regulations also provide a special needs
  allowance in lieu of the at post or away from
  post education allowances, as well as additional
  funds for supplementary instruction.  Children
  who are home-schooled are also eligible for some
  education allowance funding.  
• Supporting documentation is required for
  reimbursement.

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Educational Travel

• Permits one round trip annually between a school
  attended in the U.S. and the foreign post of
  assignment.   This benefit is primarily intended
  to reunite a full-time student attending
  undergraduate college, technical or vocational
  school with the employee/parent serving the U.S.
  government in the foreign area.   However,
  educational travel may be paid for a child in
  grades 9 through 12 instead of the education
  allowance described above. 
• Educational travel cannot be paid at the same
  time as the education allowance and should not be
  confused with the transportation component of the
  away from post education allowance.  
  Educational travel can commence from either the
  school or the post, but only one round-trip
  between school and post is allowed annually.  

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Post Allowance (COLA)

• Commonly referred to as the cost of living
  allowance, this is an allowance based on a
  percentage of spendable income, i.e., money you
  can put your hands on to spend on goods and
  services. 
• Flat amount varying by employee salary, family
  size, and post
• Short term employees are not eligible for COLA
• Stops if
• The employee receives TQSA
• On the 31st calendar day of absence from post
• Date home leave commenced or official travel for
  which per diem is payable
• The last day of employment or departure from post

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Post-Differential

• Meant to compensate employees for service at
  places in foreign areas where conditions of
  environment differ substantially from conditions
  of environment in the continental United States
  and warrant additional compensation as a
  recruitment and retention incentive. 
• It is paid as a percentage of basic
  compensation. 
• In addition to being paid to permanently assigned
  personnel, post differential may also be paid to
  employees on extended detail either from the U.S.
  or from foreign posts.
• Post differential STOPS
• When the employee is absent from post for more
  than 42 days
• As of close of business on the day of departure
  from post en route to the US for any period of
  leave
• If leave is taken in a foreign area enroute to
  the US, on the date of arrival in the US

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Danger Pay

• The danger pay allowance provides additional
  compensation for employees serving at designated
  danger pay posts. 
• Paid as a percentage of basic compensation. 
• In addition to being paid to permanently assigned
  personnel, danger pay may also be paid to
  employees on temporary duty or detail to the
  post.
• Begins the date of arrival at post.
• Terminates the day the employee departs post for
  any reason to a country not designated for the
  danger pay allowance.
• Paid only for hours for which basic compensation
  is paid.

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Other Incentives

• Six day work week can be authorized in certain
  circumstances.
• Sunday Pay is premium compensation of 25 over
  the basic for each hour of regular work performed
  on a given Sunday (not to exceed 8 hours). Not
  common.
• Other allowances (e.g., danger pay) are not
  provided on other than base pay

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Service Need Differential

• Difficult to Staff Incentive Differential
  (DTSID)- aka Service Need Differential This
  differential is paid to an employee assigned to a
  differential post after an agency has determined
  that especially adverse conditions of environment
  warrant additional pay as a recruitment and
  retention incentive to fill the employees
  position at that post.  Also known as the Service
  Needs Differential, the differential is a
  percentage of basic compensation (15). 
• DTSID and Danger Pay compensation together may
  not equal more than 25 of an employees basic
  pay. 

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Other Allowances at Post

• Rest Recuperation is to provide the employee a
  rest period at a location having different
  environmental conditions than those at the post
  of assignment.
• Must be assigned for a minimum of 24 months
• May not be taken within 6 months of the beginning
  or end of the tour.
• Home Leave is leave earned for service abroad for
  use only in the United States, Puerto Rico, or a
  US possession.
• Up to 15 workdays of leave time (in addition to
  any annual leave the employee may elect to take
  for each year of service overseas. Maximum
  accruable home leave is 45 workdays.

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Taxation of Allowances

• The Internal Revenue Service considers
  incentive allowances (Post Differential, Danger
  Pay, and Difficult to Staff Incentive
  Differential, SMA, Sunday Pay) as additional
  compensation they are included in gross income
  for federal income tax purposes. 
• Other allowances under the DSSR are considered
  reimbursements for the extraordinary expenses
  due to a foreign assignment and are not taxed.   

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Recent U.S. Tax Law Changes

• The Tax Increase Prevention and Reconciliation
  Act of 2005 (the Act) which includes changes to
  the U.S. Foreign Earned Income (FEI) exclusion,
  Housing exclusion, and the manner in which income
  tax is computed for individuals entitled to these
  foreign exclusions. These changes are effective
  for tax years beginning after December 31, 2005.
• The Act accelerates inflation indexing of the
  maximum 80,000 foreign earned income exclusion.
  Previously, indexing for inflation was to begin
  after 2007. With this change, the maximum foreign
  earned income exclusion for 2006 will be 82,400.
  
• Under prior law, the housing exclusion amount was
  equal to the excess of a taxpayer's qualified
  housing expenses over a base housing cost amount.
  For calendar year 2006 the base amount would have
  been 12,447. All housing costs above this amount
  would have been excludable. The Act limits the
  housing exclusion to 30 of the taxpayers FEI
  exclusion, reduced by the base amount. Thus, the
  maximum housing exclusion for calendar year 2006
  is now 11,536.
• Lastly, an exclusion with progression clause
  has been added. As a result, the excluded income
  (i.e., the amounts excluded under the Foreign
  Earned Income and Housing exclusions) is added
  back for purposes of determining the rates of tax
  applicable to the non-excluded income.

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Best Practices

• Put your employee agreements in writing and
  signed off on by both parties.
• Note that allowances are subject to change.
• Develop checklists for use during recruiting
  stage and estimating process.
• Not all allowances are a given. May need
  contractual authorization.
• Determine a process for updating the payroll
  system when they do change.

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References

• DSSR 010 Authorities for establishing the
  allowances/benefits
• DSSR 030 Determining eligibility for the
  allowances/benefits under the DSSR
• DSSR 040 General definitions used for the DSSR
  (however, if there is a specific definition at a
  chapter, that definition will pertain for that
  chapter)
• DSSR 070 All reporting requirements for reports
  used to determine the allowances and instructions
  for use of the SF-1190 for claiming the
  allowances. Now incorporates former DSSR 950
  Retail Price Schedule Handbook.
• DSSR 100 Quarters Allowances (including LQA and
  TQSA)
• DSSR 200 All the cost of living allowances
  (Post Allowance, Transfer Allowances, SMA,
  Education, Educational Travel)
• DSSR 900 Instructions for understanding all
  columns of DSSR 920
• DSSR 960 Valuable training/learning resource
  which contains the SF-1190, worksheets for TQSA,
  LQA, EQA, FTA, HSTA, EDA, EPW and the Omnibus
  Exhibit of helpful points on Post Allowance,
  SMA, Educational Travel, Post Differential and
  Danger Pay
• The Department of State Standardized Regulations
  (DSSR) are maintained by the Office of Allowances
  within the U.S. Department of State. Changes to
  the DSSR are proposed through the interagency
  clearance process and through union consultation.
  
• Internet access to the DSSR   www.state.gov/m/a/a
  ls and the FAMhttp//foia.state.gov/REGS/Search.a
  sp