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Lump-Sum Payment Reversal (LSP "Back Out") and Re-Entering: Frequently Asked Questions (FAQs)
Background and Update
HB 2189 (2005) makes lump-sum vacation and compensatory time payments subject salary for PERS Tier One/Tier Two (Chapter 238 Program) Individual Account Program (IAP) member contributions retroactive to January 1, 2004. This does not apply to OPSRP (Chapter 238A) IAP members who have a different definition of IAP subject salary.
The PERS Board and staff understand employers and members are concerned about how to administer and fund this retroactive IAP contribution and earnings adjustment. PERS held a series of meetings with stakeholders regarding this issue and has received numerous comments and recommendations from employers and member representatives.
The PERS Board is actively considering use of the Contingency Reserve to cover the contributions and earnings associated with this retroactive adjustment. A decision is expected in November 2006 after IAP remediation is completed and we have more precise IAP account balance and earnings information. If the Board approves use of the Contingency Fund, we will determine a method to reimburse employers for the contributions that will be charged when the lump-sum amounts are re-entered.
While awaiting that Board decision, it is important that employers report all lump-sum payments (LSPs) to PERS in an accurate and timely manner, including re-entering the retroactive lump-sum amounts.
Q) What does this mean for employers?
A) Amounts entered into the lump-sum payout field of the DTL2 screen before April 30, 2006, were not treated as subject salary for member IAP account contributions but were treated as subject salary for PERS Tier One/Tier Two (Chapter 238 Program) employer contributions.
Statute now requires that all LSPs made back to January 1, 2004, must be treated as subject salary for PERS Tier One/Tier Two IAP contributions. As such, they must be removed from the Lump-sum Payment (LSP) field and then entered in either the new Lump-sum Vacation Payment (LSVP) or the LSP field, as appropriate, to become subject salary for PERS Tier One/Tier Two (Chapter 238 Program) member IAP contributions.
To maintain accurate accounting for these actions, employer contributions were "backed out" with the LSP and gross salary amounts on April 29, 2006, at the time EDX version 4.1 was installed. A special report dated May 6, 2006, includes this data. Those employer contributions will show as credits on employer statements. When the lump-sum amounts are re-entered in either the LSP or LSVP fields, employer contributions will be assessed again and will be charged first against any employer contribution credits remaining on employer statements.
Q) The new DTL2 screen has two fields, LSVP and LSP. What is the difference between them, and how should I use them?
A) On the new DTL2 screen, amounts entered in LSVP and LSP fields will be considered subject salary for PERS Chapter 238 Program (Tier One/Tier Two) member contributions to the IAP. LSP and LSVP amounts are used differently in the calculation of final average salary at retirement for Tier One and Tier Two members.
Employers can use the Payment Categories table on the PERS Employer website to determine what should be entered in the LSVP field; other non-LSVP lump-sum payments which may be subject to member IAP account contributions should be entered in the LSP field. This table has a complete breakdown of payment types and their subject or non-subject status.
An example of the new DTL2 screen is shown at the end of these questions.
Q) How should retroactive contributions be reported through the EDX system?
A) Report retroactive IAP member account contributions be using the original method by which the contributions would have been made. Example: Retroactive contributions, originally reported as MPPT, would still be reported as MPPT. Employers should enter DTL2-05 positive adjustment records and also make the appropriate distinction between LSP and LSVP.
Q) What is the deadline for employers to re-enter the lump-sum amounts reversed or "backed out" during the EDX v4.1 installation completed April 30, 2006?
A). Changes to lump-sum pay and lump-sum vacation pay (as a result of HB 2189) can be submitted to PERS any time during 2006. If these contributions are submitted after the close of the reporting period for 2006 (i.e., after the 2006 annual reconciliation), they will be considered prior year adjustments and the employer will be billed for the earnings that would have been paid.
We anticipate the 2006 annual reconciliation will end on or before March 1, 2007, and we will provide more information as that time approaches.
Q) How is PERS helping employers with the required re-entry of lump-sum amounts?
A) As part of the EDX v4.1 installation, all amounts remaining in the LSP field of DTL2 records for PERS Chapter 238 Tier One/Tier Two members with pay dates back to January 1, 2004, were reversed or "backed out." Those amounts were entered in a single Demographic and Adjustment Report, dated May 6, 2006. That date was chosen to separate this report from other employer reports.
PERS has provided the information necessary to make the required adjustments. PERS will not create ".dat" files for those employers who report PERS data through automated payroll systems, nor can PERS manually re-enter employer information.
Q) How can employers ensure they receive e-mails about this and other subjects from PERS?
A) Employers must make sure their e-mail addresses are current on the EDX system. If other individuals in an employer's organization wish to be on the distribution list for e-mails, they should notify PERS at the address below.
Sample DTL2 fields used in LSP adjustments:
Pay Date - This will be the pay date of the original DTL2 record, sometime between January 1, 2004, and April 30, 2006.
Reported Wage Code – This should be "05" for a positive adjustment.
Subject Salary field – There should be no changes necessary in this field for LSP adjustments. NOTE: Any lump-sum payout amount still considered non-subject salary, for whatever reasons, should be entered in the non-subject field.
Lump-sum Payoff – Lump-sum amounts other than vacation time payoffs that can be considered subject salary should be entered in this field. Employers should review the Payment Categories table on the PERS Employer website if unsure about the "subject" status of a lump-sum amount and whether or not it is considered subject for IAP member account contributions.
Lump-sum Vacation Payoff – Lump-sum vacation time payoffs are entered in this field.
Gross Salary – When the May 6, 2006 Demographic and Adjustment Report was created, the gross salary amount was reduced by the amount of the "backed out" LSP. The gross salary should now be increased to represent the LSP amounts re-entered as LSP, LSVP, or non-subject salary.
MPPT, MPAT and EPPT – There should be changes in these fields for the LSP adjustments. Amounts entered in either the LSP or LSVP fields are now treated as subject for IAP member account contributions, and 6 percent of these lump-sum amounts must be entered in the appropriate contribution category. The contribution type (MPPT, MPAT, or EPPT) used for the original DTL2 should also be used for the LSP adjustment DTL2 record.
Employers, please recheck your math before submitting your records! Gross salary should represent the sum of all other salary categories.
Employers having further questions should contact PERS by e-mail at: PERS-employer.info.services@state.or.us