In January, I notified you that NTEU had reached a settlement agreement with HHS regarding a process for paying retroactive transit subsidies to eligible employees for the period from January 1, 2012, through December 31, 2014, pursuant to two arbitration awards requiring the agency to provide “make whole relief” to impacted employees. In the settlement agreement, NTEU reserved the right to challenge the agency’s decision to withhold taxes on retroactive transit subsidy payments pursuant to the arbitration awards and the settlement agreement.
NTEU has filed a national grievance to formally challenge the agency’s decision to pay these claims only after withholding taxes. NTEU asserts that these payments are not subject to income tax because the laws at issue increased the maximum non-taxable amount of the transit subsidy retroactively. In the alternative, NTEU asserts that the “make whole relief” ordered by the arbitrator pursuant to the Back Pay Act requires HHS to “gross up” payments to employees so that they will be made whole for the violation of the parties’ collective bargaining agreement entitling them to transit subsidies up to the retroactive nontaxable limit.