Employer News | Quarterly Newsletter | Summer 2020

• EmCon 2020
• Annual Statutory True-Up
• TRS 2020/2021 School Year Reporting—Don't Forget to STAT Back Employees!
• Attention Teachers: Those School Expenses Might Be Tax Deductible
• IRS Letter 2800C and Employer Federal Income Tax Withholding
• Major Changes to Retirement Plans Due to COVID-19
• Annual Census Audits

October is fast approaching, which means it is almost time for the Division of Retirement and Benefits to host its biannual employer conference. However, due to the COVID-19 pandemic, we will not be hosting the three-day event in person. In its place, we have developed a “Conference in a Box” theme that will be mailed to all participating public and political subdivisions.

This year has been a roller coaster of challenges for everyone and we could not in good conscience host this event in person and ask employers to travel during a pandemic. While we will miss presenting the employer conference, we still want to provide an effective and informative event for all attendees.

In October 2020, the Division will mail out our “Conference in a Box” to all participating public and political subdivisions. These boxes will contain informative resources and tools ranging from benefits education, payroll, finance, and more. Including information from the State Social Security Administration, and our partners at Empower Retirement Services. Our goal for this year’s conference is to ensure we are supplying employers with the most up-to-date information and tools to better assist you and your employees. Together we can continue to effectively administer our shared retirement and benefit plans.

We will greatly miss seeing you this year, but we look forward to our continued partnership and support for our mission of guiding Alaskans to a lifetime of well-being. Hopefully, in October 2022 we will host our next Employer Conference in person. We look forward to seeing you then.

The annual statutory true-up occurred on July 20, 2020. The statutory true-up results in any true-up balances that an employer did not take during the Fiscal Year being moved to the employers over/short account. Please get in touch with your payroll contact to see if you have a new over/short balance due to the statutory true-up. 

The Division calculates DCR true-up adjustments daily and provides them in eReporting.

Please review the true-up report with each payroll submission. All true-up records for each year listed need to be adjusted with each payroll submission, even if it is a net zero adjustment. The true-up will allocate the contributions to the proper money type.

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).

If you have any questions regarding the true-up process or any specific true-up records in eReporting, please contact your payroll contact. 

As the beginning of the school year approaches, it is time to revisit the beginning of year reporting procedures for the Teachers’ Retirement System (TRS). All Teachers who were put on TSE at the end of the school year need a STAT event entered when they return to work. Please report the following on your first payroll (pay period end, or PPE, date on or after July 1, 2020) for school year (SY) 2021:

• Return to work date (STAT record) for each teacher for the new school year,
• Part-time teachers’ service percentage level (FTE of teacher’s SY21 contract) must be reported on their STAT record that returns them to work, and
• Personnel change records such as, address changes, marital status changes, and birth date corrections, as needed.

Please check the Tier/Plan for a new employee prior to reporting them as a new hire. To check on a new employee, please visit the Employer Access Login and use the “Employer Access” program.

If teachers were not put on TSE at the end of the school year, a TSE event will need to be entered for the day after the last day worked for the school year or June 30, 2020. Once this is completed, a STAT will need to be entered when they return to work.

If you have questions, please reach out to your payroll contact or e-mail us at doa.drb.activepayroll@alaska.gov.

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School may look a little different this year, but eligible teachers and other educators can still deduct certain unreimbursed expenses on their tax return next year.

Who is considered an eligible educator? 
The taxpayer must be a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide. They must also work at least 900 hours a school year, in a school that provides elementary or secondary education as determined under state law.

Important information about this deduction:
Educators can deduct up to $250 of trade or business expenses that were not reimbursed. As teachers prepare for the school year, they should be reminded to keep receipts after making any purchase to support claiming this deduction.

If the educator is married and both are eligible educators who file their return using the status "married filling jointly", the deduction is $500, with no more than a deduction of $250 each.

Qualified expenses are amounts the taxpayer paid themselves during the tax year.

Examples of expenses the educator can deduct include:

• Professional development course fees
• Books
• Supplies
• Computer equipment, including related software and services
• Other equipment and materials used in the classroom

Additional Information:

• Topic Number 458 Educator Expense Deduction 
• Publication 5349, Tax Planning is for Everyone

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The IRS sends the letter 2800C, also called a “lock-in” letter, to instruct employers to follow a specific federal income tax withholding arrangement for an employee who does not have enough income taxes withheld from their wages. The employee has 60 days from the date of the letter to discuss the determination with the IRS before the withholding arrangement takes effect. Starting 60 days after the date of the letter, the withholding rate in letter 2800C is locked in and the employer must begin withholding from the employee at that new rate.

There are two situations in which the employer may withhold at a rate that is different from the rate in Letter 2800C. The first occurs if the employee submits a new form W-4 with a statement supporting a decrease in their withholding rate and the IRS approves. In this situation, the IRS will inform the employer and the employee with a letter 2808C. Letter 2808C specifies the changes to the employee’s withholding rate that have been approved by the IRS. The changes in letter 2808C are effective immediately. There is no 60-day waiting period.

The second situation involves increasing the rate of withholding above what is stated in the “lock-in” letter. This situation occurs if the employee submits a new form W-4 that results in more withholding than the rate in the “lock-in” letter. In this situation, the employer may accept and process the employee’s request. The employer must disregard any new form W-4 the employee submits that decreases the amount of withholding. Employers should block the employee’s access to make changes to online forms W-4 if that access may allow the employee to decrease their withholding below the rate specified in a letter 2800C. Employers that do not withhold federal income tax from their employee as instructed by a “lock-in” letter will be liable for paying the additional tax required to be withheld.

For more information, check out the Q & A's on Withholding Compliance and view our Lock-In Letter video.

Qualified individuals affected by COVID-19 may be able to withdraw up to $100,000 from their eligible retirement plans, including IRAs, between January 1 and December 30, 2020.

These coronavirus-related distributions aren’t subject to the 10% additional tax that generally applies to distributions made before reaching age 59 and a half, but they are still subject to regular tax. Taxpayers can include coronavirus-related distributions as income on tax returns over a three-year period. They must repay the distribution to a plan or IRA within three years.

Some plans may have relaxed rules on plan loan amounts and repayment terms. The limit on loans made between March 27 and September 22, 2020 is raised to $100,000. Plans may suspend loan repayments due between March 27 and December 31, 2020.

Qualifications for Relief
The law defines a qualifying person as someone who:

• Has tested positive and been diagnosed with COVID-19.
• Has a dependent or spouse who has tested positive and been diagnosed with COVID-19 and experiences financial hardship due to them, their spouse or a member of their household:
  • Being quarantined, furloughed, laid off, or having reduced work hours.
  • Being unable to work due to lack of childcare.
  • Closing or reducing hours of a business that they own or operate.
  • Having pay or self-employment income reduced.
  • Having a job offer rescinded or start date for a job delayed.

Employers can choose whether to implement these coronavirus-related distribution and loan rules. Qualified individuals can claim the tax benefits of coronavirus-related distribution rules even if plan provisions are not changed. Administrators can rely on an individual's certification that they’re a qualified person.

Important Note: The Division of Retirement and Benefits has elected to allow for coronavirus-related distributions. Qualified members of the SBS-AP and DCP plans may request an in-service distribution of 25% of their account or $25,000 maximum, whichever is less, between both plans. Qualified members who have terminated employment may request up to an amount not to exceed $100,000 from their SBS-AP and/or DCP accounts. For more information, visit Alaska.gov/DRB.

Required Minimum Distributions
People who already took a required minimum distribution from certain retirement accounts in 2020 can now roll those funds back into a retirement account. The 60-day rollover period has been extended to August 31, 2020.

Under the relief, taxpayers with required minimum distributions from certain retirement plans can skip them this year. Distributions that can be skipped were due in 2020 from a defined-contribution retirement plan. These include a 401(k) or 403(b) plan, as well as an IRA. Among the people who can skip them are those who would have had to take the first distribution by April 1, 2020. This waiver does not apply to defined-benefit plans.

Additional information:

• Guidance for Coronavirus-Related Distributions and Loans from Retirement Plans Under the CARES Act
• Q & A for Coronavirus-related Relief for Retirement Plans and IRAs
• Guidance on Waiver of 2020 Required Minimum Distributions