Under Deducted

[J Simmons]

A school district contracts with EEs on a 12-month basis each year. Some EEs' pay is stretched out over the entire 12 months while others over just the 9 month school year. Due to a payroll error, 1/12 of the cafeteria plan-elected annual health insurance premiums were held out of an EE's pay that was paid on the 9 month basis. Payroll should have had 1/9 of the annual amount of premiums held out each month, since the EE only receives a paycheck over those 9 months. All other similarly situated Ees had 1/9 held out of each of their 9 monthly checks for the year.

The EE in question is willing to pay for the 3 months coverage, but that EE and the district's payroll are wondering if there is anyway to effect this in a tax-free situation.

Any suggestions will be appreciated.

[masteff]

I'm assuming, since it's a school and it's now June, that the 9-months have ended and no more paychecks in the plan year on which to fix the problem.

Do they have the ability in their payroll system to reverse the last paycheck and rerun with a larger deduction? The employee would then write a check to the school for the difference. The school would have to be sure the changes in payroll taxes flowed thru on their next filing. That's how our payroll manager would have fixed if you could convince her this was important enough.

How recent was the last paycheck (June 15th, where it's easier to go back, or May 1st which is much tougher)?

[QDROphile]

What did the election say?

[LRDG]

I have collected personal checks from employees for the premium amount, less payroll tax such as Federal, State, Municipal, FICA savings, and adjusted payroll records retroactively.

For example, I would collect a personal check for $73.00, representing the uncollected premium of $100, less $27.00, or 27% total tax savings on the premium, and adjust EEs' payroll records.