9 Pay Versus 12 Pay Implementation

Effective FY2013, the base pay for all faculty and staff members serving on less than 12 month contracts will be distributed over 12 months. •

The switchover will occur the academic year 20122013.

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Converting the gross monthly draw from a 9 month to a 12 month pay schedule distributes salary equally in each of 12 months of the payroll period.

Appointment

Required or Not? • There is a grandfather clause provided for those employees who may be eligible to retire in the next three years. – Discuss process for communicating election to be grandfathered.

• Employees starting mid-year will be required in their next full contract year. • All other Union Eligible Faculty will be required to go on 12 pay.

What is the difference between Contract Dates and Payroll Dates • A lot of confusion can occur between Pay Dates and Contract Service Dates, especially when dealing with 9–, 10-, or 11-month service employees paid over 12 months. • Service or contract date refers to the dates the employee actually works or provides service for the University. • Pay Dates are the corresponding dates for which the employee is paid for those services.

Compensation

Example of Salary Distribution • Academic-year contract EXAMPLE 9 PAY 9 from September 2011 through May 2012 (example: $50,000.00 / 9 or $5,555.56 for nine months). If contract amount or dates do not change.

9 PAY 12 from September 2012 through August 2013 (example: $50,000.00 / 12 or $4,166.67 for twelve months) if contract amount or dates do not change.

Let us review an example with deductions NEXT.

CONTRACT PAID OVER 9 MO. EXAMPLE -Allow for rounding Description:

9 Pay Example 9 mo/Sept-Apr

May

Allow for rounding: Annual Salary: $50,000 Total Pay Summary: Monthly Gross Monthly Deductions Monthly Net

5,555.55 x

9

Amount x 8

Total Annual Deductions

50,000.00

5,555.56 2,261.15 3,294.41

Deduction Summary: Fed Income Tax - Married 0 Social Security (.042) Medicare ( .0145) Retirement Dep. Health $300 spouse +2/ 42 Dental Enhanced EE +3 Vision EE +3 Disability Medical Reimbursement Life Insurance 2X age 45 Parking Sept - April only Subtotal Deductions Sept - April Deductions May

Annual Total 9 month

Amount x 1

723.22 196.43 67.82 333.33 465.00 144.00 44.55 17.10 225.00 29.70 15.00 2,261.15 x8

5,555.56 1,531.36 4,024.20

50,000.00 19,620.56 30,379.44

884.14 233.33 80.56 333.33

6,669.90 1,804.77 623.12 2,999.97 3,720.00 1,152.00 356.40 136.80 1,800.00 237.60 120.00 19,620.56

1,531.36 x1

18,089.20 1,531.36

19,620.56

9 over 12 Pay Example

CONTRACT PAID OVER 12 MO. EXAMPLE - Allow for rounding Description

Allow for rounding: Annual Salary $50,000 4166.67 Monthly Assigned Salary 5555.56-4166.67 = Deferred Amount Accrued/Paid over 9 Months Total Off-Contract Payment Pay Summary: Monthly Gross Monthly Deductions Monthly Net Deduction Summary: Fed Income Tax - Married 0 Social Security (.042) Medicare ( .0145) Retirement Dep. Health $300 spouse +2/ 42 Dental Enhanced EE +3 Vision EE +3 Disability Medical Reimbursement Life Insurance 2X age 45 Parking Subtotal Total Annual deductions

Contract Salary Divided By 12 Pays 50,000 Divided by 12 4,166.67

Amount Deferred

Contract Period Amount

5555.56-4166.67 1,388.89 x 9 12,500.01 4,166.67

Off Contract Amount

4,166.67

4,166.67

x 9 37,500.03

x 3 12,500.01

Amount x 12

Total Base Contract

50,000.04

4,166.67 1,589.18 2,577.49

50,000.00 19,070.16 30,929.88

509.96 150.40 51.92 250.00 310.00 96.00 29.70 11.40 150.00 19.80 10.00 1,589.18

6,119.52 1,804.80 623.04 3,000.00 3,720.00 1,152.00 356.40 136.80 1,800.00 237.60 120.00 19,070.16

19,070.16

How are Summer Appointments Handled? • The employee will receive any additional overloads, summer appointments, and research appointments when earned and in accordance with system/university guidelines. • Summer Session Payments are paid as follows: – 4 Week Session – One payment at the conclusion of the session. – 8 Week Session – Two equal payments over the entire session. – 12 Week Session – Three equal payments over the entire session. – 16 Week Session – Four equal payments over the entire session.

Effort Certification? • The payroll system has created an earnings code that will take the regular payment and provide for an account of that regular payment to be saved. • Therefore, the regular payment is accounted for during the effort certification period. • The fact that the payment is saved to an account does not change the fact of the work completed. • The payroll system has the technology to handle both the effort certification as required under federal law and payroll payments paid over 12 payrolls.

Leave

Does this impact Leave? • Employees will still accrue their leave during their contract period. • Employees will use the leave request system to request eligible leave. • The payroll system will deduct leave during the pay period that leave was requested and used.

Benefits

Health and Flex Deductions • These deductions will be paid equally over 12 payrolls. • There will be a period of 4 months that employees may have benefits deducted to make up for June–August deductions for the transition year. • The plan year begins July and the 12 pay begins in September.

Supplemental Retirement • 457 – Contact June Larson (605-224-2230)

• 403(b) – These deductions are set up to be paid over 8 pays – They will automatically change to 12 pays – You may want to review the deduction amount – http://myretirement.sdbor.edu

AFLAC • These deductions are set up to be paid over 8 pays • They will automatically change to 12 pays • The Payroll Center/HR will work with the AFLAC representative to migrate these

Federal Income Tax • You may want to review your FIT to determine if you want additional changes. • You can make changes through SNAP directly without having to go to HR.

SDRS • Faculty members regardless of base pay periods receive credit for all quarters even if not currently on summer appointment. Therefore, the payment of the payroll over 12 payrolls will have no effect on the quarters and credit received. • If employee terminates at the end of the 12 pays (August 21), they would be eligible for an extra quarter of service due to payment crossing over to the next quarter. • If faculty member terminated in May, then they would not receive that extra quarter. • Please contact your local SDRS representative or contact the Pierre SDRS office at www.sdrs.sd.gov.

SDRS Calculations – ESTIMATE ONLY •

If a faculty member was paid over 9 months at $5,555.55 and then had a summer appointment that paid them over two months in the summer at $5,555.55 for each month, their quarters will still receive credit as if they did not work over the summer appointment. The total salary for the 12 months would be $61,111.10. This is because a payment was made in each quarter.

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If a faculty member was paid over 12 months at $4,166.67 and then had a summer appointment of two months at $5,555.55 for each month, their quarters will still receive credit as if they did not work over the summer appointment. The total salary for the 12 months would be $61,111.10. This is because a payment was made in each quarter.

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If the final year is 105% greater than the previous year, this is when a faculty member may be capped. Therefore, as identified in both examples, the salaries are not different in total. SDRS reviews the highest 12 consecutive quarters to help mitigate penalty if a payroll change is made such as above.

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Please contact your local SDRS representative or contact the Pierre SDRS office at www.sdrs.sd.gov.

Separations

Grandfather Status • Employees that are eligible to retire are able to request to be grandfathered in. This grandfathering clause was to hold employees harmless from the implementation of the payroll to 12 months. • The period of time grandfathering exists is a three-year period starting with AY12-13. • It is important for you to communicate with SDRS to determine what is the best choice for your circumstance.

How Do I Elect Grandfather Status? • Employees who believe they would elect to be grandfathered in must communicate that with the Human Resources Office at the University. • They will be required to provide the benefit statement from SDRS (or website).

What Happens If I Elect Grandfathering Status and I do not Retire? • The grandfathering is for a period of three years only. • If the faculty member does not retire, they will have elected to be moved to payroll over 12 months. • This could impact your retirement and you should have clear communication with the South Dakota Retirement System to fully understand the impact of this type of decision.

Once on 12 Pay, What are my Termination Options? • You can either remain on payroll and receive benefits through the end of the payroll period (i.e., August 21) and receive an extra quarter of retirement service, OR • BOR Policy 4:36 allows for employees to voluntarily terminate and receive payment of the remaining contract. – Employment status will be ended – Benefits will cease at that point

Questions • Discussion/Questions • Thank you for your time – We would like to assist as much as we can in understanding this change/transition.