BN - Deduction Prepay Process (Part II, Disburse Money)
The Deduction Prepay process can be used for employees who will be taking either a Short Work Break or Leave of Absence and need to have insurance premiums paid during that time. The process takes money in advance and then disburses it later when insurance premiums are due. This document focuses on the second part of the process related to disbursing the Prepay money that has been set aside.
The Deduction Prepay process is used for employees who are planning a leave and need insurance premiums to be paid while they are gone. In some cases, the employee is in an Academic (C-Basis) position and will be taking a Short Work Break from that position during the summer. In other cases, the employee may be taking a Leave of Absence or Short Work Break for other reasons, such as medical, professional or seasonal. Prior to the leave, money needs to be collected in advance for payment of future premiums. While the employee is on leave, the prepaid money will be disbursed to cover insurance deductions during the leave.This document will describe the procedures for the second part of the process: Disbursing Money. The disbursement process is the same regardless of whether the employee is on a Short Work Break (related to Summer Prepay) or other LOA.
- Employee is actively enrolled into insurances.
- Employee's Deduction Prepay Balance is sufficient to cover insurance premiums.
The first step in the Prepay disbursement process is to create a paysheet for employees who would not normally be paid during the specified pay period. This is achieved by an automated process that is run on the first official day of payroll processing. Please note that the official day of payroll processing is called "1st Batch Prelim Calc" on Payroll calendar.
To ensure that this step is successful for all of your employees, please validate all of the following prior to the first official day of payroll processing for the applicable pay period:
- The 'HR Status' of the Benefits Primary Job for each employee must be active. The most common reason why an employee is terminated in error is because the Expected Job End Date (EJED) is wrong. That's why it is very important to run the EJED query when notified by the Service Center HR Team and to modify the EJED, where needed, prior to the deadline.
If an employee is terminated in error and re-hired, then you must check to see if the benefits were terminated, too. If so, then you (or your centralized Benefits Office) will need to reinstate the benefits using an ADM event.
- The Benefits Primary Job for each employee must be on a Short Work Break or Leave of Absence.
- If the employee will be working in a Summer Service or Summer Session job, then it must be entered on a different Empl Rcd other than the Benefits Primary Job.
The automated process that disburses (a.k.a., refunds) money from an employee's Prepay balance is run on Tuesday night of a typical payroll processing week. The goal is to disburse exactly the amount of money needed (to the penny!) to cover the amount of the employee's insurance deductions. The end result is a $0 net paycheck that includes all of the employee's normal insurance deductions (e.g., Health and Life, but not ERA or TSA).
You can use Review Paycheck to view the Prepay disbursements once they have been added to the paycheck. Below is an example of a $0 paycheck that shows Prepay disbursing (refunding) to pay for several different insurance deductions:
There are several requirements for successfully disbursing money from the employee's Prepay balance. Below is a list of requirements and action that you can take to maximize the chance for success:
1. 'HR Status' of employee's Benefits Primary Job must be active.
- Establish an effective level of collaboration between the Human Resources and Benefits functions for your campus so that there is good communication about employees who have a Prepay balance and should not be terminated without notifying the Benefits Administration.
- [Recommended for Future] Review the Coverage Termination Date Report (in Cypress) on a daily basis. This report includes every employee from the date the termination is entered into Job through the termination effective date. Please note that this report is pending changes, as of April 2014. It will only be partially helpful until the changes are made, which are still pending.
- If an employee is terminated in error and re-hired, then determine if the benefits were terminated, too. If so, then you (or your centralized Benefits Office) will need to reinstate the benefits using an ADM event.
- If the employee is appropriately terminated (in the past) and has a Prepay balance, then contact the Service Center to submit a WiscIT requesting that the balance be refunded.
2. The employee's Benefit Primary Job must be eligible for benefits.
- Watch for employees whose Benefit Program changes to LMT or NON. If the change was not appropriate, then fix the problem that caused the BN Program to change.
- If an employee who is eligible for benefits (e.g., Grad) terminates all jobs other than Student Help (SH), contact the Service Center to submit a WiscIT requesting that the Prepay balance be refunded. This can be done on the SH job during biweekly payroll processing.
- If an employee who is eligible for benefits (e.g., FA) retires and then moves into a No Pay Basis job (e.g., Rehired Annuitant), contact the Service Center to submit a WiscIT requesting that the Prepay balance be refunded. The refund must be done using an off-cycle check.
3. The employee must be enrolled in at least one insurance plan that has the same tax class (i.e., After-Tax, Before-Tax or Taxable) as the existing Prepay money.
The examples below further explain this requirement. Please contact the Service Center to submit a WiscIT if you need to move Prepay money from one "bucket" to another, or to refund money for a plan that is voluntarily cancelled.
Example A- Employee with State Group Life:
An employee currently has a Prepay balance in the After-Tax, Before-Tax and Taxable "buckets". They are enrolled in all of the State Group Life plans and must pay additional tax (i.e., imputed income) on some of them. They are enrolled in SGL-Basic (Before-Tax and Taxable), SGL-Supplemental (Before-Tax and Taxable), SGL-Additional (After-Tax and Taxable), and SGL-Spouse/DP & Dep (After-Tax). Assuming that all other requirements are met, the Prepay money will disburse from the After-Tax bucket to pay for SGL-Additional and SGL-Spouse/DP & Dep; from the Before-Tax bucket to pay for SGL-Basic and SGL-Supplemental; and from the Taxable bucket to pay for the imputed income on SGL-Basic, SGL-Supplemental and SGL-Additional.
Example B – Employee with AD&D and Individual & Family:
An employee currently has a Prepay balance in the After-Tax and Before-Tax "buckets" and is beginning a Short Work Break. They are enrolled in AD&D (After-Tax), Individual & Family Employee (After-Tax) and Health (Before-Tax). Effective in June, They voluntarily cancelled the AD&D coverage. Assuming that all other requirements are met, the Prepay money will still disburse from both buckets to cover the remaining deductions for Individual & Family Employee (After-Tax) and Health (Before-Tax). Without manual intervention, the Prepay After-Tax bucket will still have a balance when the employee returns to work in September since it was not needed for AD&D. Prepay money will gradually disburse to pay for the Individual & Family Employee deduction each pay period until the Prepay balance is $0.
Example C – Employee with only Before-Tax funds, moved to an After-Tax program:
An employee currently has Prepay money only in the Before-Tax "bucket" and is beginning a LOA in May. Effective June, they voluntarily changed to an After-Tax Benefit Program. As a result, the tax class for the Health insurance is now After-Tax. If the employee has no funds available in the After-tax “bucket”, Prepay will not disburse. If funds need to be moved to an After-Tax “bucket” from a Before-Tax “bucket’, please submit a WiscIT to the service center with this request.
Note: When moving funds to accommodate this situation, the transfer would need to occur prior to the payroll confirmation. In addition, there will be tax implications that ultimately reduce the total amount of Prepay money available during the LOA.
4. There must be sufficient Prepay money (in the correct "bucket") to cover each individual benefit deduction in full. Deductions that cannot be taken will go into Arrears.
Example A- Employee is short funds and needs to be setup in Benefits Billing:
Prepay deductions were taken in March and April, and were planned to be taken in May to cover an employee's Short Work Break. The employee was terminated in error in May and not corrected until after the payroll confirmation. Once the Prepay deduction for May was missed, the system will refund one moneys of deductions, leaving one month remaining in available funding.
In this case, there is sufficient Prepay money to cover each of the June deductions. After June, there is no money remaining for July or August deductions. To cover the required funding for the insurances the employee needs to be enrolled in Benefits Billing. Note: policy does not permit two months of deductions to go into Arrears.
Example B- Coverage Change, Single to Family, employee needs to be setup in Benefits Billing:
An employee currently has Prepay deduction taken for March through May under single coverage collected and is beginning a Short Work Break. In June the employee got married, and would like the insurance change to be effective June. The funds collected for their insurance were based on Single coverage and now they are projected to fall short of funds.
Since 3 months of funding was collected, it is likely monies will be disbursed for full June coverage. The system will only make full payments, and coverage for July and August will likely fall short. If no action is taken, the Health deductions will not be disbursed for July or August and the employee will go into Arrears.
Example C – Biweekly employee on LOA with 1 month of Health going into Arrears:
A biweekly-paid employee had a positive Prepay balance in the Before-Tax "bucket" and is currently on their last month of LOA. As a result of a voluntary change in the Benefit Program to After-Tax, the funds changed the Prepay balance from the Before-Tax bucket to the After-Tax bucket. Prepay was disbursed for the last two "A" pay periods to cover her Health deduction. Now the Prepay balance for this month is insufficient to pay for the full amount of the Health deduction.
In this case the Health deduction will not be taken and the payment will go into Arrears. Since this is the employee’s last month of LOA and they are returning to work, policy allows the Health deduction to remain in Arrears for one month. The deduction will be taken from their next earnings on the first paycheck upon returning to work. Note: It is recommended to notify the employee of the temporary increase in deductions to cover the Arrears.
Example D – Biweekly employee on LOA with 1 month of Health going into Arrears and enrolled in ICI:
The employee in Example C is also enrolled in ICI (After-Tax). Although the Health deduction goes into Arrears due to insufficient Prepay money, if there is still enough money to cover the ICI deduction. Prepay will disburse to cover the ICI deduction, which will then not go into Arrears and is taken while they are on LOA.
After the Short Work Break or LOA
Once the employee returns from the Short Work Break or LOA, it is important to confirm that all deductions were taken correctly and that Prepay disbursed appropriately. If there is a legitimate reason why the remaining Prepay balance needs to be refunded (e.g., employee switched from Family to Single coverage due to divorce during the summer), please contact the Service Center to submit a WiscIT and request that the Prepay balance be refunded. Even if you have access to the UW Payline Adjustment Page, you cannot enter a payline adjustment to refund Prepay money using that page.