New York City’s Reservists Are Asked to Return Iraq Pay
By ANDY NEWMAN
September 23, 2006
When they were called up for military service in the wake of 9/11, hundreds
of uniformed city workers in the Reserves faced the suspension of their city
health and pension benefits. The city offered them an option: it would keep
paying their salaries and continue their benefits, but when they returned
they would have to repay the city their city salary or their military pay,
whichever was less.
On its face, the offer made sense. And many reservists had only a few days
to get their affairs together before shipping out — hardly enough time to
consult accountants. Nearly all took the deal. As the war dragged on, more
than 1,600 city employees, mostly police officers, signed up for the
Now the bills from the city are coming due, for far more than many veterans
imagined they would have to pay — as much as $200,000 — and often for more
money than they ever received.
The city is demanding that the veterans repay their gross salaries, even
though they never saw about a third of the money, which went for taxes and
other deductions. The commissioner of administrative services, Martha K.
Hirst, said veterans should be able to get back the difference between gross
and take-home pay by amending their tax returns. But several tax accountants
said the city had created an accounting quagmire.
David Gitel, a tax accountant in Manhattan, said that if the employees paid
the money back over several years — which many will have to do — rather than
in a lump sum, they could lose thousands of dollars in income-tax and social
“It’s an interesting experience,” Mr. Gitel said.
For now, the Police Department, which waited as much as four years to begin
asking for the money back in the spring, is stepping up its collection
efforts. On Thursday, hundreds of officers received letters in their pay
envelopes threatening legal action if they did not make repayment
arrangements within 15 days.
A city official, who was unwilling to be identified lest he incur his
colleagues’ anger, gave an explanation for the delay. “People have been
talking about it here for some time, about getting around to doing it,” he
said. “It’s probably the hero thing. Why make a top priority of telling
somebody to give back money when they just went off to war?”
Under the terms of the deal, nontaxable military housing and food allowances
also count as military pay. Those allowances can nearly double military pay,
in some cases making it more than city pay. Many veterans who did not read
the fine print said they thought they would have to repay only their modest
military take-home base salary.
On Monday, the City Council will consider a resolution by Councilman Michael
E. McMahon of Staten Island to ask Mayor Michael R. Bloomberg to stop
counting military allowances as income.
Assistant Police Chief Michael Collins said that after the letters went out
on Thursday, many officers contacted the department to begin repayment. The
department hopes to recover more than $15 million, he said.
Other officers said the system needed to be overhauled. “We have to change
it,” Detective David Goodman, treasurer of the Police Department post of the
Veterans of Foreign Wars, said at a gathering on Tuesday of about 50
officers at the Army base at Fort Hamilton in Brooklyn, “so that when you
come back you’re not paying money for having gone to war for your country.”
Detective Goodman added that since the war effort relies increasingly on
reservists, it behooved the city to make enlistment attractive.
Ms. Hirst said the city was “looking at” the possibility of not counting
military stipends as income, but she thought that in any case the benefits
program was an excellent one.
“The city works out very, very friendly repayment agreements,” she said.
Many officers said the four-year delay had reinforced their impression that
the city did not intend to come after them for the money at all.
Officer Jake Marino, a five-year police veteran who was in the Military
Police in Iraq in 2004, recalled that while he was preparing to go, his
contact in the department’s military-leave office told him, “As far as
paying back the money, I don’t think you have anything to worry about.”
Many officers put one of their two salaries right in the bank, and some used
it to make up for the loss of overtime pay. Others who started out saving
the excess began to spend it when they did not hear from the city as time
“Like most middle-class Americans,” said Michael Donohue, a police sergeant,
“you get a windfall, you fix the roof and the sidewalk and pay off
credit-card debt.” Sergeant Donohue, a command sergeant major in the Army
Reserves who spent much of last year at Abu Ghraib, estimated that he owed
the city $100,000.
The benefits plan was intended to let employees keep the larger of the two
salaries. An officer paid $80,000 by the city and $60,000 by the military
would owe the city $60,000 upon his return. And an employee paid $80,000 by
the military and $60,000 by the city would also owe the city $60,000.
Administrative Services officials said that employees who pay the money back
in a lump sum get an amended federal W2 tax form for the year they drew two
salaries and would be able to get a full refund of the excess taxes they
Employees who pay the money back by payroll deduction, though, could deduct
the money from their income only in the year in which they pay it back,
This causes two problems, said Mr. Gitel, the tax accountant. One is that an
employee would probably be in a higher tax bracket during the year she drew
two salaries than when she paid the money back. The other problem, Mr. Gitel
said, was that there was no way for the employee to get back the extra
Medicare and Social Security contributions she made while drawing two
salaries. These shortfalls could easily total $10,000, he said.
An Administrative Services official said last night that the city had just
obtained commitments from accounting firms to provide free advice to
The city could have set its plan up differently. The state has a similar
plan for its employees, but it pays them the difference, if any, between
their military and state salaries, so they do not have to pay anything back.
The state employees’ contributions to their pension accounts are not made
while they are on leave, but the much larger state contribution is still
Laurence A. Levy, deputy counsel to Mayor Rudolph W. Giuliani in 2001, said
the city’s method seemed a better way to protect the employees’ benefits.
“In Operation Desert Storm, many of the families didn’t get health benefits,
and it caused tremendous financial hardship,” he said. “We wanted to keep
Sergeant Donohue said he appreciated the city’s good intentions. “We’re not
asking for a pity party or a handout,” he said. “But maybe there’s a little
more reasonable way for them to be approaching this.”