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August 2018 CAR Newsletter

TOP STORY

 

Merit Billing

Title 74, Section 840-1.18 of the Oklahoma Personnel Act requires the administrative expenses and cost of operating the Merit System shall be paid by the various divisions of the state government included within the Merit System, and each such agency shall be authorized to include in its budget estimates of its pro rata share of such costs, and shall  remit such shares quarterly from departmental or agency funds to the Office of Management and Enterprise Services who shall deposit such shares to the credit of the General Revenue Fund of the State Treasury. 

In addition, the director shall maintain accurate records reflecting the cost of administering its provisions and at the close of each quarter-year period shall summarize said costs. 

Several agencies have recently asked for more documentation regarding the cost of administering merit billing. On an annual basis, each individual of the OMES Human Capital Management  division is evaluated for the percentage of their time dedicated to the merit system. For example, an individual whose duties include classification and compensation may have 100 percent of their time towards the merit system while another individual whose duties include flex benefits auditing will have none of their time dedicated towards the merit system. Each individual’s total payroll cost is then multiplied by the merit percentage. The sum of the merit payroll is compared to the total HCM payroll. For FY 2019, the payroll percentage is 36.6 percent dedicated towards the merit system. That percentage is then multiplied by the total HCM appropriated budget so that it includes space, IT costs, overhead, etc. For FY 2019, the appropriated budget is $4.9 million. On a quarterly basis, the amount billed will be $448,350 ($4,900,000 * 36.6% / 4 quarter). Each agency that has classified employees is billed their pro rata share based upon the number of classified employees for each month. For example, an agency has 200 classified employees for July, 180 classified employees for August, and 190 classified employees for September. The quarter bill is determined as follows:

 

  Agency Classified Total Statewide Percentage Monthly Agency Share
July 200 11,000 1.818% $148,450 $2,717.00
August 180 10,900 1.651% $149,450 $2,467.42
September 190 10,800 1.759% $149,450 $2,628.83
Total       $448,350 $7,813.25

Based upon the above example, the agency would be billed $7,813.25 for merit billing. This is typically on an HCM bill type from OMES but it is not for HCM systems such as payroll.


ACCOUNTING

 

Notice on Deposit Corrections Usage

The functionality that allows agencies to create their own deposit corrections was established to allow for efficiencies in deposit corrections.  This process must be used only to correct deposits or deposit transfers in the system.  The deposit correction must have backup including the original deposit or deposit transfer number that is being corrected.  It is recommended that the deposit number being corrected is included in the description field of the deposit correction.   Deposit corrections must net to zero and should only include treasury class-fundings.

If you have questions about whether the use of a deposit correction is the appropriate action, contact the Central Accounting and Reporting group for clarification.


Late Payment To Vendors - New Interest Rate - FY 2019

The FY 2019 interest rate applicable to late payments to vendors has been set at 1.15 % per annum, or $0.003 per $100 per day, which will be in effect July 1, 2018, through June 30, 2019.  This interest rate is provided by the state treasurer based on the average interest rate for 30-day time deposits of state funds during the last calendar quarter of the last preceding fiscal year. (O.S. 62 § 34.71& 34.72 and O.S. 74 § 500.16A. and OMES Prompt Payment Rules/Regulations)


PAYROLL

Payroll Fraud

Within the past week, two state entities have been the targets of phishing scams aimed at fraudulently changing employee direct deposit information. 

Immediate Steps to Take:

  • OMES recommends all agencies immediately pull all Payroll Change/Direct Deposit forms from their public websites and move the forms to an intranet or distribute by employee request only. 
  • Additionally, until otherwise notified, personnel who handle employee payroll direct deposit procedures should verify ALL requests for changes to direct deposit by directly contacting the employee by phone and verifying information such as employee ID number, employment start date, etc. 
  • Agencies may want to set a time delay when changing direct deposit information to decrease the chance of the theft of wages.

Tips on how to protect yourself from this scam:

  • Roll your cursor over the links received via email and look for inconsistencies. If it is not the website the email claims to be directing you to, then the link is to a fraudulent site.
  • Never provide credentials of any sort via email. This includes after clicking on links sent via e-mail. 
  • Be suspicious of any payroll change requests that come from a personal or outside email address. It is important to note that email addresses will often look like they come from an internal source. Instead of replying to the email, start a new email thread to the employee's internal organizational email account.
  • Call the OMES Service Desk at 405-521-2444 or contact the appropriate IT or security support for your organization if you receive a suspicious phone call or email. 

 

Additional Payroll Fraud Information

Agencies are reminded that employees must submit a signed and dated Automatic Deposit Transmittal (HCM-73) form along with a voided check or official document from the financial institution showing the financial institution’s routing number and the employee’s account number. If both documents are not provided by the employee, the change should not be completed in the HCM system.

If it’s discovered that an employee’s banking information was submitted fraudulently, the employee should contact the HR/Payroll Department immediately along with the authorities. Agency IT personnel also should be notified if any correspondence was by email.

If the individual is also established in the Vendor File, please contact Victoria Baker at Victoria.Baker@omes.ok.gov or 405-522-3093.

For helpful information and tips, please visit the Oklahoma Cyber Command website.

The National Automated Clearing House Association website also has general information on electronic payment security along with a document for protecting against fraud.

 

Employee Moving Expense Payments Are Taxable

The 2017 Tax Cuts and Jobs Act suspends the tax free exclusion of qualified moving expenses paid to or on behalf of an employee by an employer. The suspension period is for tax years beginning Jan. 1, 2018, through Dec. 31, 2025.

Authorized moving expenses paid, directly or indirectly, to or for an employee will be taxable as wages and must be processed through the payroll system. This includes payments made with the P-card and those processed through accounts payable.

If paying the employee directly (through accounts payable) or a third party for moving expenses, the agency must notify its payroll department of the amount paid. The amount must process through the payroll system as non-paying, taxable earnings so that the amount will be taxed and properly reported on the employee’s W-2. The earnings code MOV, Moving Expense, will only tax the amount; no amount will pay out. This code is to be used when the amount has been paid to the employee through accounts payable or by P-card. The amount should be processed through payroll on the employee’s next paycheck. Delaying until the end of the year could cause a hardship for the employee by taking the taxes out during the holidays. Delaying could also cause issues with collecting the employee taxes if the employee has terminated employment.

For any amounts that must be paid directly to the employee through the payroll system, taxes will be withheld from the gross amount and the employee will receive the net payment. The earnings code HE4, Moving Expense Reimbursement, is set up to tax the amount and pay out the remainder to the employee.

 

OK Child Support – Medical Support Orders

Please review thoroughly any medical support orders received on employees and respond accordingly. Child Support Services is required to send a National Medical Support Notice and an Income Withholding Order within two business days after the date CSS is notified of an employee who is an obligor in a child support case. Additionally, you may receive a NMSN for an employee who is the custodian of a child if the child support order requires that person to provide health insurance for that child.  Employers and insurers must comply with the NMSN. A NMSN consists of four documents and the total amount withheld for child support, health insurance premiums, and cash medical support cannot exceed the Consumer Credit Protection Act withholding limits. The Oklahoma Child Support Employer Services Unit Employer Handbook provides guidance for employers when a NMSN is received. Once an agency receives the NMSN, please follow the instructions and process the notice timely. Any delays in processing the notice could result in a follow-up from CSS and potentially put the agency at risk of sanctions for failing to comply with the notice.


Federally Funded Agencies with Defined Contribution (Pathfinder) Plan Employees

Agencies should not be charging federal programs for amounts remitted to the OPERS Defined Benefit plan for employees who are on the Pathfinder plan.  The expenditure code for the non-allowable portion is 513300, which is used for deduction codes SRDM9 and SRDM10. OMES is reviewing options for a solution in the HCM system.

In the interim, public query GO_PY_PAY_DEDUCTION_DIST can be used to provide agencies with retirement details. The query prompts you to enter the Company and PayRunID. The results provide the retirement information for employees; the deduction codes, amounts, account codes, combo code and the funding stream.


Social Security Administration Notification of Name/SSN Errors

The Social Security Administration has started mailing educational correspondence to employers that submit Forms W-2 containing employee names and Social Security Numbers that do not match SSA’s records. This letter is to provide employers with resources to help ensure accurate year-end reporting. Employers may also receive letters in 2019 if there are any name/SSN errors on W-2 reporting. The letters come directly to OMES.  Agencies will be notified of any name/SSN errors on the report that applies to the agency.


Internal Revenue Service Information Reporting Penalties

Along with the SSA letters discussed in the article above, IRS information reporting penalties may apply for failure to file and failure to furnish correct information returns. A penalty for failure to file correct information returns can be up to $260 per form, indexed annually. A penalty for failure to furnish a correct information return could also apply to the same error if an employer furnished an incorrect form to an employee and also failed to file a correct Form W-2. If both penalties are assessed, the amount could be as much as $520 per Form W-2. In addition, the penalty applies to the ACA reporting Form 1095-C.  For one employee with an incorrect Name/SSN combination who receives both a W-2 and a 1095-C, the total penalty could be as much as $1,040. IRS enforcement of accuracy related penalties is evolving and penalty assessment may be increasing.

OMES verifies, through the SSA website, employee name and SSN combinations in the HCM system several times throughout the year. Agencies with mismatch results are notified and are required to provide the necessary changes to ensure year-end reporting is correct. This process helps to ensure accurate reporting and reduces the risk of information reporting penalties.


Employee Name and Social Security Number Entries in HCM

When entering a new employee’s name and Social Security Number or updating a current employee’s name, please verify the name and SSN being entered is exactly as it appears on the employee’s Social Security card. This is critical in reporting not only the W-2 wages at year end but the Affordable Care Act required health offer/coverage information. If the name and SSN does not match the Social Security Administration records, the employee’s wages may not be credited to their Social Security account. Additionally, if the name and SSN do not match, the employee may not be reported correctly for ACA purposes which could result in an IRS letter to the employee for possible lack of health coverage or an IRS letter to the agency for possibly not offering coverage.

Beginning Sept. 8, 2007, the Social Security Administration updated the Social Security card.  The number holder’s name will always be printed on two lines, with the last name printed directly below the first and middle names. If you receive a prior version from an employee and are unsure, please ask the employee to verify the first, middle, and last names.

Additionally, compound names do not need to be hyphenated. If an employee provides a name with an apparent compound or multiple last names, ask the employee which name is the beginning of the last name and which (if any) is the middle name.

Please update the employee’s name in the HCM system as instructed in the COR301 Part II manual beginning on page 42 (Navigation:  Workforce Administration > Personal Information > Modify a Person).  You can enter the name that the employee currently uses as their paycheck name if desired, so that their paycheck will continue to reflect the same name as in the past but the employee record and W-2 information should match the social security card.


Compensation to Employees and Former Employees, Including Settlements

All compensation to employees and former employees, no matter what form, constitutes wages unless specifically excluded by the Internal Revenue Code. This includes stipends, allowances, employee lawsuits and settlements, gifts, prizes, awards and fringe benefits to name just a few. Before compensation is given to employees or former employees, agencies must determine the correct method of payment (payroll vs accounts payable) and reporting required (W-2, 1099, or none). In an audit, the IRS will focus on the reason for the payment.

NOTE: Attorney’s fees paid on a settlement are reportable to the plaintiff if the settlement is a reportable settlement. For attorney fees paid through accounts payable, the amount must be reported to Beth.Brox@omes.ok.gov. The attorney will automatically receive a 1099-MISC reporting the amount in Box 14 if the correct account code is used on the voucher payment. The plaintiff reporting will require a manual entry and must be reported to OMES for proper reporting of the amount.

If the payment settles a lawsuit, the auditor will focus on the basis of the lawsuit. The IRS has a recorded webinar that provides valuable information for the taxability of lawsuits and settlements. Agency payroll, finance, human resources and legal departments should obtain the knowledge needed to accurately process compensation to employees or former employees. Agencies are responsible for complying with IRS requirements for withholding and reporting.

If an agency has a settlement agreement that requires the payment be processed through accounts payable instead of the payroll system to expedite processing, and the payment is reportable as compensation, then applicable federal, state and FICA taxes must be remitted to OMES on the same day the item is processed/provided to the individual. If taxes are not withheld on the payment, the agency must gross up the amount and pay both the employee and employer share of taxes. The employee’s record will be updated for year-end reporting. If additional guidance is needed, please contact Lisa Raihl at 405-521-3258 or lisa.raihl@omes.ok.gov.

NOTE: The Internal Revenue Service has determined that Oklahoma public school teachers receiving payments from a state agency are to be treated as employees of the state. As such, any payments to teachers need to be evaluated to see if the payments should be considered wages. If so, the amounts must be paid through the payroll system, not accounts payable, to be reported on Form W-2 by the paying agency.


Volume 29, Number 02
Fiscal Year-2019
August 7, 2018


TRAINING

Payroll Law 2018

Presented by Fred Pryor Seminars

Aug. 16, 2018 – Oklahoma City
Aug. 17, 2018 – Tulsa
Dec. 18, 2018 – Tulsa
Dec. 19, 2018 – Oklahoma City

For more information, please visit their website


OKC American Payroll Association Monthly Lunch & Learn Chapter Meetings

OKC American Payroll Association

Monthly Lunch & Learn Chapter Meetings

11:30 a.m. to 1 p.m.
Friday Aug. 17, 2018

For more information, please visit their website


2018 Oklahoma Payroll Conference

Presented by the Oklahoma City and Northeastern Oklahoma Chapters of the American Payroll Association 

Sept. 20–21, 2018

Metro Technology Center
Springlake Campus
1900 Springlake Drive, OKC, OK 73111

For more information please visit their website


APA Preparing for Year End and 2019

Presented by American Payroll Association

Friday, Oct. 26, 2018 - Tulsa

For more information, please visit the APA website


Certified Government Financial (CGFM) Training Program

Sponsored by the AGA-OKC Chapter

Nov. 5-9, 2018

OMES EGID Building
Landmark Towers
3545 NW 58th 5th Floor
Oklahoma City, OK 73112

Fee:$1,200 Early Bird Discount if payment is received by Oct. 5, 2018; $1,500 if payment is received after Oct. 5, 2018. All payments must be received by Nov. 4, 2018.

This five-day course is being offered Monday through Friday, Nov. 5-9. The fee includes study materials but does not cover meal costs. Candidates are required to make their own travel and lodging arrangements. Seating is limited. Recommended CPE credit: 40 hours.

For more information contact Riley Shaull at riley.shaull@oesc.state.ok.us or agaokc@gmail.com

  Contacts



State Comptroller:
Lynne Bajema, CPA
405-522-5577
lynne.bajema@omes.ok.gov

OMES Services CAR Accounting:
Jennie Pratt, CPA, CGFM
accounting@omes.ok.gov

Agency Business Services/Deputy State Comptroller:
Steve Funck, CPA, CGFM
carfinancialsharedservices@omes.ok.gov 

Financial Reporting Unit:
Matt Clarkson, CPA
matt.clarkson@omes.ok.gov

Transaction Processing Manager:
Steve Wilson
405-521-4679
steve.wilson@omes.ok.gov

Statewide Accounts Payable:
Courtney Cowart
OMESTPAccountsPayable@omes.ok.gov

Replacement Warrants:
OMESTPReplacement.Warrants@omes.ok.gov

Voucher Processing:
OMESTPVouchers@omes.ok.gov

Payroll Transaction Processing:
Elsa Kunnel
payrolltransprocess@omes.ok.gov

Payroll Reporting:
Lisa Raihl, CPA
405-521-3258
lisa.raihl@omes.ok.gov

Purchase Cards and Travel (Online Booking) Assistance:
Linda Powell
pcard@omes.ok.gov

Vendor Registration:
Victoria Baker
405-522-3093
victoria.baker@omes.ok.gov

Vendor File Maintenance:
vendor.form@omes.ok.gov

Vendor Remittance Updates:
Updates to remittance contact for vendor payment notification.
remittance@omes.ok.gov

OMES Service Desk:
405-521-2444 or toll-free 866-521-2444
servicedesk@omes.ok.gov