Employer News | Quarterly Newsletter |Summer 2019

• New Payroll Technicians: Understanding PERS Salaries
• Do a Paycheck Checkup Now!
• Address Change Requests for Terminated Employees
• Make Whole Agreements
• Payroll Summaries
• Submitting Beneficiary Designation Forms to Empower Retirement
• Prior Fiscal Year True up effective July 31, 2019
• Return to Work Vs. Bona Fide Separation
• Employer On-Behalf Funding for Fiscal Year 2020
• Social Security’s Top Baby Names of 2018

When a PERS member retires, the Division will request the date of the last day worked and salary for the last year of employment. This is so we can calculate the member’s benefit accurately.

Please Note: For PERS compensation we need the salary earned in the calendar year, not what was paid.

Example:

                                                             Total: $18,600 for 9 payrolls

This example shows the salary schedule for a PERS member. Please note the full amount shows $18,600.

If submitted, this would be incorrect per PERS regulation 2 AAC 35.228 because the first payment (12/31/YY), was earned in the prior calendar year. The correct amount would be $16,600.

If you have any questions regarding salaries, please contact your regional counselor:

Northwest 
DRB Regional Counselor: Brandon Roomsburg, brandon.roomsburg@alaska.gov 

Fairbanks, Schools/University 
DRB Regional Counselor: Natasha Golovatiuk, natasha.golovatiuk@alaska.gov 

Mat-Su Valley 
DRB Regional Counselor: Mark Rosier, mark.rosier@alaska.gov

Southeast 
DRB Regional Counselor: Dawn Bonnett, dawn.bonnett@alaska.gov

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It’s important to revisit your tax withholding, especially if major changes from the Tax Cuts and Jobs Act (TCJA) affected the size of your refund this year. Even if you did a paycheck checkup last year, you should look again to account for differences from TCJA or any life changes that may have occurred. A paycheck checkup can help you see if you’re withholding the right amount of tax from your paycheck. Too little could mean an unexpected tax bill or penalty.

Visit IRS.gov/payments/tax-withholding and follow the step-by-step instructions for the Withholding Calculator. It will lead you through a paycheck checkup and you can use the results from the withholding calculator to determine if you should:

• Complete a new Form W-4, Employee's Withholding Allowance Certificate, and submit it to your employer.
• Complete a new Form W-4P, Withholding Certificate for Pension or Annuity Payments, and submit it to your payer.
• Make an additional or estimated tax payment to the IRS before the end of the year.

New W-4 Form for 2020

On May 31, 2019, following feedback from the payroll and tax communities, the IRS issued an early draft of the 2020 W-4 (PDF) for public comment.

The revised form implements changes made following the 2017 Tax Cuts and Jobs Act, which made major revisions affecting taxpayer withholding. The redesigned form W-4 no longer uses the concept of withholding allowances, which was previously tied to the amount of the personal exemption. Due to changes in the law, personal exemptions are currently not a central feature of the tax code.

“The new draft Form W-4 reflects important feedback from the payroll community and others in the tax community,” said IRS Commissioner Chuck Rettig. “The primary goals of the new design are to provide simplicity, accuracy and privacy for employees while minimizing burden for employers and payroll processors.”

The IRS expects to release a near-final draft of the 2020 form W-4 in mid-to-late July to give employers and payroll processors the tools they need to update systems before the final version of the form is released in November.

To make additional improvements to this initial draft for 2020, the IRS is now accepting comments for 30 days. To facilitate review of this form, IRS is also releasing FAQs about the new design.

The IRS cannot respond individually to those who submit comments, but the agency does appreciate the feedback and will consider all comments received.

The IRS reminds taxpayers that this draft Form W-4 is not for current use but is a draft of the form to be used starting in 2020. Employees who have submitted a form W-4 in any year before 2020 will not be required to submit a new form merely because of the redesign. Employers can continue to compute withholding based on the information from the employee’s most recently submitted form W-4.

For 2019, taxpayers should continue using the current Form W-4 (PDF).

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What are Make Whole Agreements?
Make whole agreements recompenses the employee as if the causative event did not happen. Generally, the employee is reinstated and made whole with back pay and any applicable wage increase. All benefits are to be restored as though never interrupted. This includes medical, pension and contributions to social security, SBS, and PERS/TRS eligible members. All income is taxable under IRS rules.

Arbitration Awards and the Division of Retirement and Benefits
When an arbitration award occurs, a copy of the award must be sent to the Division for review. The Division will confirm the details of the award and ensure it is compliant with the plan’s statutes. If it is a make whole agreement, the review determines how the payment will be reported so the payments can be allotted to their appropriate payroll period. If it is determined not to be a make whole, and is instead a lump sum payment, the next step would be to check if the payment is or is not PERS or TRS eligible compensation. If not, then it would not be reported.

The award should be sent to the attention of Larry Davis at larry.davis@alaska.gov, for review, approval and reporting instructions.

Effects on Service and Salaries
Generally, make whole agreements will increase a member’s service and salaries. Care must be taken when reporting salary and contributions to the Division of Retirement and Benefits.

Reporting Requirements (No Pension Spiking!)
If the full amount of the make whole agreement is reported in a single year, it would artificially increase that year’s PERS/TRS compensation.

This results in an inflated annual salary that could spike a member’s pension benefit, which is not allowed. All salaries must be reported in the actual payroll periods in which they would have been earned.

Implementation for Retired Members
A make whole reinstatement to employment will change the member’s eligibility for retirement. They may be required to repay retirement benefits received during the period of reinstatement.

Our retirement processing team will treat this as a return to work over payment of benefits.

The member’s retirement benefit will be recalculated once the make whole salaries and service are reported. They will be notified of the amount of overpaid benefits.

Remember—salaries must be reported in the actual payroll periods, so work with your Division of Retirement and Benefits payroll contact.

Implementation for Former Members
Under statutes, if a member had applied for and/or received a refund of their account, subsequent contributions must be refunded. The member cannot choose to allow the funds to remain in their former account or use the make whole payment to reinstate their tier.

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Employers, please send payroll summaries to the employer payroll email at doa.drb.employerpayroll@alaska.gov. Do not use your active payroll contact or the active payroll email. The employer payroll inbox is monitored by the Division of Retirement and Benefits accounting section, which is where all current payrolls should be sent for processing.

The active payroll inbox, DOA.DRB.ActivePayroll@alaska.gov, is intended to be used by employers to communicate with your payroll contact regarding eReporting questions, pre-tax transfers or other payroll issues.

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Submitting Beneficiary Designation Forms to Empower Retirement

DCR Plan Beneficiary Designation forms need to be submitted directly to Empower Retirement, not to the Division of Retirement and Benefits. Until the employee has an account established with Empower, all forms will be rejected. Beneficiary designation forms should not be submitted to Empower until 15 days after the employee’s first payroll has been submitted. The employee must wait until their first payroll has processed before setting up their beneficiary designations online.

Submitting beneficiary forms online is the preferred method of Empower. It is the most efficient and helps reduce the chance of further errors. If assistance is needed, Empower can be reached at (800) 232-0859.

If submitting the beneficiary designation online is not an option, please mail or fax the completed form to Empower.

Mail:
Empower Retirement
PO Box 173764
Denver, CO
80217-3764

Fax:
Empower Retirement
1-303-801-5800

Please note that a separate Beneficiary Designation form must be submitted for each plan in which the employee is a member.

Should the employee require a paper form, please contact your designated payroll contact for the most up-to-date copy. Each plan has its own form with the plan number on it, located in the upper right-hand corner. The forms can also be found online at Empower Retirement. Once a member is logged in to their account, click “plan forms option” in the menu on the right-hand side of the account page. Once selected, the member will have the available forms to choose from, including the beneficiary designation form should they need it for future purposes. 

Please note that all Defined Benefit Beneficiary forms are still submitted to the Division of Retirement and Benefits.

If you have any questions, please contact our office toll free at (800) 821-2251 or e-mail us at doa.drb.activepayroll@alaska.gov.

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The Division calculates needed DCR true-up adjustments daily and provides them in eReporting. The true-up adjustments correct for over and/or under-reporting of the following contributions:

• DCR Employer match (ER);
• DCR Occupational Death & Disability (ODD);
• DCR Retiree Medical Plan (RMP);
• DCR Health Reimbursement Arrangement (HRA); and
• Defined Benefits Unfunded Liability (DBUL).

All prior fiscal year true-up transactions not added as an adjustment to a payroll, will be automatically posted to the employer over/short account on July 31, 2019. If you have any questions regarding the true-up process or about specific true-up records in eReporting, please connect with your payroll contact.

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In the past year, we have received feedback from employers who would like more clarity regarding “Back to Work” employees, and how it relates to the “Bona Fide Separation” policy. The biggest concern seems to be revolving around when the Bona Fide Separation rules apply for retired employees returning to work.

To clear up the confusion, we have provided several common examples:

Example # 1 
An employee who has separated from employment and is not eligible to retire, becomes a deferred member. If they return to work, either the same employer or not in a contributing position, the member would continue to accrue service, and would not be affected by the Bona Fide Separation policy.

Example # 2
A separated, but not retired employee returns to work for the same employer but contributes to a different or alternate plan. When the employee becomes eligible to retire by the age stated in the plan they previously separated from, the member would not be able to retire in that plan until they sever their employment with the employer to observe the Bona Fide Separation rules.

Example # 3
A separated employee, who has not retired (deferred vested) returns to work for the same employer and is hired as an excluded class, temporary hire, contract employee or emergency hire. The Bona Fide Separation rules do not apply as there is no in-service distribution. However, if the member later becomes eligible to retire by age, the member is not eligible to retire until they sever their employment with their employer to observe the Bona Fide Separation Rules.

Example #4
A retired employee returns to work for the same employer and is hired as an excluded class, temporary hire, contractor or emergency hire. This would be a in-service distribution and the member would need to be sure they are separated for the necessary period of time to abide by the Bona Fide Separation rules.

“Bona Fide Separation” rules apply when a PERS, TRS or JRS member retires and then later returns to work for the same employer under non-contributing positions. These rules were adopted on January 1, 2018 by the Plan Administrator to prevent in-service distributions. These rules provide guidelines for how and when a “Return to Work” retiree can return without risk to the employee and without risk of plan disqualification. Any situation where a retired employee returns to work should be discussed with your regional counselor prior to any discussions with potential return to work employees.

For more information, please visit the Bona Fide Termination Regulations webpage.

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On-behalf funding for PERS and TRS employers for Fiscal Year 2020 (FY20) is provided by House Bill (HB) 39 (Section 35). HB 39 passed during the 2019 legislative session and was recently signed into law. The bill provides a set amount of funding to reduce the PERS Employer Effective Rate to 22% and the TRS Employer Effective Rate to 12.56% for FY20.

The on-behalf funding is applied with the processing of each employer payroll. Employer on-behalf funding statements will be sent via email to payroll and finance contacts. For PERS on-behalf funding questions or statement copies, please email Tamara Criddle at tamara.criddle@alaska.gov or call (907) 465-2279. For TRS on-behalf funding questions or statement copies, please email Walter Agne at walter.agne@alaska.gov or call (907) 465-5711.

For PERS and TRS employer on-behalf funding provided in HB 39, the Division of Retirement and Benefits will apply payments for complete payrolls through pay period end date June 30, 2020. Fiscal year 2020 (July 1, 2019 to June 30, 2020) complete payrolls must be received in our office by July 15, 2020, to be processed with HB 39 employer on-behalf funding.

A complete payroll is defined as a payroll that has all elements needed to process the payroll. This includes the funds necessary to process the payroll, including a correct memo if the payment is a wire or push ACH. Additionally, the payroll summary and the employer payroll detail are part of a complete payroll.

For other questions, please email Christina Maiquis at christina.maiquis@alaska.gov or call (907) 465-1845.

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Emma and Liam are once again North America’s most popular baby names in 2018. This is the fifth year Emma has held number one and the second year for Liam. Abigail and Jacob fell off the top ten for the first time since 2000 and 1992 respectively, while Harper makes a comeback and Lucas makes it in for the first time.

Alaska’s Most Popular Names from the Past:

• 1960: Mary and David
• 1980: Jennifer and Michael
• 2000: Hannah and Michael
• 2018: Aurora and Oliver

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