RETIREMENT & BENEFIT SERVICES DIVISION MEMORANDUM
June 26, 1997
TO THE HEADS OF ALL STATE AGENCIES
ATTENTION: | Personnel and Payroll Officers |
SUBJECT: | SEBAC V - Employer "Pick-up" of Employee Retirement
Contributions
|
- INTRODUCTION
Comptroller's Memorandum No. 97-23 entitled "SEBAC V", dated May
12, 1997, described an important change in the method of payment
for mandatory retirement contributions required of State Employees
Retirement System (SERS) Tier I, Tier II hazardous duty and Tier
IIA members.
Specifically, the mandatory employee contributions required of
these contributory SERS members will be picked up by the employer
under Internal Revenue Code, Section 414(h) effective with the pay
period from July 4, 1997 to July 17, 1997 (check date: August 1,
1997). This means that such contributions will be made on a pre-
tax basis; accordingly, no federal or state income taxes will be
withheld from mandatory, payroll-deducted employee retirement
contributions. The employer pick-up applies exclusively to
mandatory retirement contribution deductions; it will have no
effect on purchase of retirement credit payments or retroactive
contribution payments made through the Comptroller's payroll system
or on any other basis. For affected SERS members, this change will
increase the amount of their net paychecks while reducing the
taxable wages reported at the end of the year to the Internal
Revenue Service and the Department of Revenue Services; it will
not, however, lower gross wages for determining retirement and
social security benefits.
As stated in Memorandum No. 97-23, you should be aware that by
decreasing taxable gross income, the employer pick-up may affect
employees who defer a high percentage of their salary through the
deferred compensation (457) plan or the tax-sheltered annuities
(403b) program. If you anticipate this potential problem, you
should notify the employees to which it applies.
A message advising SERS members of this change will be included
with paychecks dated July 18, 1997; a copy of the check insert is
attached to this memorandum.
The Comptroller's Payroll Services Division will be making the
changes to the payroll system necessitated by this provision of
SEBAC V effective July 4, 1997; the rest of this memorandum is
devoted to outlining the subsequent changes in agency payroll
procedures.
- PAYROLL PROCEDURES
It will be necessary for the Payroll Services Division to create
new D/OE's to keep pre-tax contributions separate from post-tax
contributions to facilitate federal and state reporting
requirements, as well as processing check reversals. In an effort
to simplify the transition, Payroll Services will change the taxing
options on the existing D/OE's making them pre-tax deductions. The
new D/OE's will contain the year to date post tax deductions made
for 1997.
After the processing for check date July 18, 1997 is complete, all
of the monies in the current D/OE's will be moved to the new D/OE
(listed below). Since these D/OE's are for informational purposes
only, agencies will not be able to code transactions using the new
retirement D/OE's. The new D/OE's will, however, exist on each
employee master file record for your review. Effective January 1,
1998, the new D/OE's will be deleted.
Also included in the chart below, are the D/OE's for the new Tier
IIA deductions. As with all other retirement deductions, agencies
may not process credit overrides for these D/OE's.
Existing D/OE Pre-tax as of 8/1/97 | New DOE Post-tax deduction | D/OE Description |
36 | 91 | ST RET Fund A |
37 | 92 | ST RET Fund C |
38 | 93 | ST RET Fund B |
4A | 94 | SERS H Plan B |
4B | 95 | SERS H Plan C |
4C | 96 | SERS H Plan A |
4D | 97 | SERS H Plan B |
4E | 98 | SERS H Tier II |
* 4N | N/A | SERS Tier IIA |
* 4P | N/A | SERS H Tier IIA |
| | |
* These are new retirement deductions. |
Processing Check Reversals
If you find it necessary to process a check reversal that has a
post-tax retirement deduction (check dates January 3, 1997 through
July 18, 1997 inclusive), you must clearly indicate on form COP-9
that the retirement deduction listed was a post-tax deduction.
Payroll Services Division Staff will ensure that the appropriate
retirement D/OE is adjusted.
Questions may be directed as follows:
- Payroll procedures (on-line) 860-702-3463
- Payroll procedures (RJE) 860-702-3462
- Check reversal procedures 860-702-3456
- CONCLUSION
General questions regarding the pre-tax contributions may be
directed to the Retirement & Benefit Services Division's Data Base
Unit at 702-3517; questions regarding payroll procedures should be
directed to the Payroll Services Division as indicated in Section
II of this memorandum.
Very truly yours,
STATE EMPLOYEES RETIREMENT COMMISSION
NANCY WYMAN, SECRETARY EX OFFICIO
BY:
Steven Weinberger, Director
Retirement and Benefit Services Division
Attachment - Check Insert
To: Tier I, Tier II Hazardous Duty, and Tier IIA Members of the
State Employees Retirement System
Effective with the paycheck dated August 1, 1997 (pay period July
4, 1997 to July 17, 1997), your mandatory retirement contributions
will be made on a pre-tax basis under Internal Revenue Code,
Section 414(h).
This change will increase the amount of your net paycheck while
reducing the taxable wages reported at the end of the year to the
Internal Revenue Service and the Department of Revenue Services.
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