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Tuesday, July 29, 2008

Big Yellow Tax[i]

There still exists some confusion in various quarters about the tax status of the attorney fee reduction in benefits on August 1, 2008. PERS has communicated with me that these reductions will be taken POST-TAX. To put this another way, your gross benefit (before taxes) on August 1, 2008 will reflect the 2% COLA. After all taxes are calculated and deducted, the attorney fee will come out once from the net benefit (after taxes). So, it is quite likely that the cost of the attorney fee reduction will be about what your COLA is after taxes. I expect few peoples' net benefit to change significantly from June to July. After this month (August 1), the net benefit should be higher by the exact amount of the attorney fee reduction.

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