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Notice of Employee Termination document sample
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Voluntary and
Involuntary
Termination Benefits
Governmental Accounting
Standards Board 47
New Process/New DOS codes
GASB 47 went into effect July 1,
2005
Campus required to begin using
new DOS codes effective with FY
06/07 (July 1, 2006)
In order to comply with GASB requirements, new
reporting standards were accomplished as a manual
effort for FY 05/06
Why?
Governmental Accounting Standards
Board (GASB) Statement #47 requires two
classification types of termination benefits:
Voluntary: Voluntary termination benefits include
inducements to hasten separation from employment or as a
result of voluntary termination.
Involuntary: Involuntary termination benefits include
benefits provided as a direct result of an involuntary
termination.
Change to DOS codes
DOS Codes no Users will be prevented
from adding PLN and
longer available SEV to the EDB or paying
for use: terminal benefits using
these DOS codes for:
One-time payments
PLN (Pay in Lieu of
AP, FT
Notice)
Adjustments:
SEV (Severance Pay)
LX, RX
Timesheets:
TE and TX
Retro Processing
Users will still have the ability to process
the PLN (Pay in Lieu of Notice) and SEV
(Severance Pay) DOS codes in the
Distribution of Payroll Expense process;
that is, Payroll Expense Transfers
containing these DOS codes will not be
rejected.
Pay-in-Lieu
As noted in an earlier slide, the “PLN”
DOS code has been replaced as a
result of GASB47 regulations and must
no longer be used. Payment in lieu of
notice must now reflect involuntary
termination. The new DOS code ITP has
been established to comply with
GASB47 regulations.
Pay-in-Lieu, cont.
Pay in-lieu-of notice is considered to be wages. A claimant is not eligible to
receive unemployment compensation for the particular period following the
termination of employment for which payments were intended. A pay-in-lieu
of notice (ITP) payment is subject to the same terms and conditions as
regular pay. Benefits will be based on the ITP pay period end date, not the
pay period end date representing when the employee actually left. Likewise,
vacation and sick leave accrue based on the projected separation date.
When to use ITP
Employee does not have the option of Preferential Rehire rights or Severance pay. Layoff is
involuntary.
A Payment in-lieu-of notice is used at the HR Control Unit’s[1] discretion. It is not a mandated
type of payment.
How to use ITP
Separation date must be a projected date based on the agreement made with
the HR Control Unit.
Appointment/Distribution end dates and last day on pay status must be the
last day the employee actually worked.
AB2410 must be generated and distributed to employee for total owed
(including projected wages) on employee’s last working day.
[1] NOTE: the term HR Control Unit is being used to encompass both staff (HR Team) and academic (Division)
HR Payroll Personnel who might process severance pay.
ITP Example:
HR Control Unit offers a one month Pay-
in-lieu of notice. Employee’s last working
day is July 15, 2006.
HR Control Unit updates PPS with:
Separation date of 08/15/06
Last day on pay status date of 07/15/06.
Appointment end date of 07/15/06.
HR Control Unit prepares AB2410 with three
distribution lines:
Result:
Employee is paid as regular time (REG) for the
appropriate percentage through the actual last day
worked (line 1)
The remainder of July hours are paid as projected pay-
in-lieu (ITP) at the appropriate percentage for the
balance of the month (line 2)
The projected August hours are paid as pay-in-lieu (ITP)
at the appropriate percentage through the projected date
of 8/15. (line 3)
Terminal vacation paid must have an 08/31/06 pay
period end date. (line 3) Vacation and sick leave accrue
based on the projected separation date.
In this example, John Doe would have benefit coverage
through September 30, 2006 (August earnings,
September 1 premium).
AB2410 check for all pay due is given to John Doe on
July 15, 2006.
Distribution Of Payroll Expense
Two new object codes have been assigned for the
salaries, wages, and payouts related to Voluntary
Termination Benefits and Involuntary Termination
Benefits, 1610 and 1620 respectively.
The health and welfare benefits associated with the
wages and payouts will use the existing object codes.
The payroll system cannot directly charge benefits to
Object Code 8770 (Voluntary) or 8775 (Involuntary).
Thus, OP - General Accounting has distributed
instructions to Controllers that the health and welfare
benefits must be reclassified to the new object codes.
Campuses can use the month-end report that details the
benefit costs related to Termination Benefits.
New DOS Codes: Paytran only!
New voluntary and involuntary
termination DOS codes
established per GASB 47
requirements cannot be used
in the distribution line (ie: they
cannot be set up in PPS as
part of the employee’s EDB
record via the EAPP function)
The new DOS codes are only
for processing as pay input
DOS codes into a particular
payroll compute (ie: Payroll
transactions (Paytran)
only)
New DOS Codes, cont.
Some of the new Voluntary and
Involuntary DOS codes are BYA
DOS codes, while others require
pay rates with percentages or
hours.
New BYA DOS codes
DOS DESCRIPTION USAGE
Voluntary Termination – Settlement Payments
VTL Lump Sum
Voluntary Termination – By Agreement
VTS Severance Payments
Involuntary Termination – Settlement Payments
ITL Lump Sum
Involuntary Termination – By Agreement
ITS Severance Payments; for
example, one month
pay for each year
worked.
New Rated DOS codes
DOS DESCRIPTION USAGE
VTR Voluntary Termination – Pay in monthly
Regular Pay increments
ITR Involuntary Termination – Pay in monthly
Regular Pay increments
ITP Involuntary Termination – Regular Pay In
Pay In Lieu of Notice Lieu of Notice
What about TRM??
GASB 47 does not affect the
payment of terminal vacation
hours (TRM).
Units should continue to process TRM
hours on AB2410 final payments, as
usual.
Functional Guidelines
When an employee receives termination
benefits, the Distribution of payroll Expense and
General Ledger must records the cash-out
payments separately from other salaries and
wages and their associated fringe benefits.
Fringe benefits should include Retirement,
OASDI, Medicare, health insurance (medical,
vision, dental, life, and disability insurance),
Workers Compensation, and Unemployment
Insurance.
Definitions:
Voluntary Termination Benefits:
Benefits provided to The liability associated
employees as: with voluntary
an inducement to terminations becomes
hasten the termination recognized when both of
of services the following have been
a result of a voluntary completed:
early termination plan The employee(s) accepts the
(including early-retirement
offer, and
incentives)
The amount of the liability can be
estimated.
Voluntary Termination Benefits,
cont.
Expanded Health Care Coverage—If a terminated employee
receives health care coverage beyond the health care coverage
described above, and the cost of the expanded coverage is paid by
the University, it would qualify as a termination benefit as defined in
In general, the applicable
GASB Statement No. 47 for which a liability and expense should be
recognized at each individualPlacement Services— benefit is
Career Counseling or Job location. However, if this
These include:
benefits discussed in
Managers and senior professionals may be assisted with
being provided to an annuitant as part of the defined benefit OPEB Health:
outplacement services and career counseling, as a
plan through the OPEB Trust, it does not qualifyat thetermination
GASB Statement No. 47
benefit under the department. If No. 47. That situation is recognized
discretion of GASB Statement a terminated employee Expanded Health Care
receives career counseling or job through the application by
as a liability and expense at UCOP placement services paidof GASB Coverage
are those over and above
the University, it would qualify as a termination benefit as
Statement No. 45.
COBRA Benefits paid by
the normal benefits
defined in GASB Statement No. 47 for which a terminated
COBRA Benefits Paid By The University—If a liability and
employee should be recognized at each individual location. under
expense receives COBRA coverage beyond what is offered UC
provided upon
Cash Payouts and Following Termination—If a
University policy,at or the cost is paid by the University, it would
qualify as a terminationreceivesas defined in GASB Statement No.
terminated employee benefit cash payouts associated with Expanded Annuitant
termination that are not
47 for which a liability and expense should be recognized ator
an inducement to voluntarily terminate, either a lump-sum each
over a period of time, including payments made in lieu of
Health Care Coverage Not
individual location. However, if this benefit is being provided to an
provided through the
annuitant as part of the defined termination benefit through the
notice, they would qualify as a benefit OPEB plan as defined Provided by the OPEB
OPEB Trust, it does not qualify as a termination and expense GASB
in GASB Statement No. 47 for which a liability benefit under Plan
UCRP or the OPEB Trust
should be recognized situation is recognized as These
Statement No. 47. That at each individual location.a liability and
Other:
and are effectively an
payments must be distinguished from payments that may be
expense at UCOP through the application of GASB Statement No.
made for employee services already provided, such as cash
45.
Career Counseling or Job
inducement for the
out for the Annuitant Health Care Coverage Not Provided by
Expanded SMSPP, accrued vacation.
the OPEB Plan—If the University provides and pays for Placement Services
employee to terminate
enhancements to the annuitant health benefits for an employee who Cash Payouts at or
voluntarily terminates service, and for some reason (including
their services.
occurrences prior to the implementation of GASB Statement No. 45 Following Termination
in 2007–2008) the enhancements are not being provided as part of
the defined benefit OPEB plan through the OPEB Trust, it would
qualify as a termination benefit as defined in GASB Statement No.
47 for which a liability and expense should be recognized at each
individual location.
Voluntary, cont: Benefits not
applicable to GASB 47
COBRA/continuation voluntarily resigns
An eligible employee who health
Certain benefit
fromcoverage isemploymentemployees
University provided to normally receives
Senior Managers who eitherpurposes of this
healthcare benefits (for a voluntary or from the
Health Coverage
as a result of voluntarily separate
situations at the
document, healthcare benefits include medical,
University receive their accumulated SMSPP accruals,
involuntary termination of
plus dental and vision or layoff. The the entireis more
employment coverage) for
interest. However, the nature of the plan
If enhancements in the UCRP benefits, such as additional credit
COBRA
month to which he or she terminated arrangement
University either:
a deferred benefit compensation
related toUniversity, however, does not
for years of service, an increase in the benefit calculation
that provides a benefit in an additional month after
employment and for exchange for employee
multiplier, etc., contribute toward the cost of group
Senior Management
are provided an
If enhancements to theto areemployee who is part of the
the month than to annuitant health benefits
services, healthof termination. This benefit exchange
rather coverage provide a benefit in
terminates their services, they under COBRA. The
voluntarily
Severance Pay Plan
do not fit the definition being provided as
provided the OPEB Plan are provided pays
provided underin part because the Universityto the
for the early termination of services. Therefore,
defined benefitemployee must pay the full monthly
benefits premiumsthrough the UCRP, therefore they
pension plan on an advance
SMSPP is not a voluntarily benefit as basis.
an employee whoterminationterminates defined in GASB
of a termination benefit
are obligationsCOBRA premium.do not view this a termination
University UCRP and
of theemployees do not qualify as
Statement No. 47. does not meet the of the
their (SMSPP)
benefit that campuses being provided as part
services, they are would record under GASB Statement No.
This benefit
arrangement benefit through benefit,
definedthe SMSPPas a terminationtermination benefit, the
While benefit OPEB plan is not a the OPEB
as used in GASB
definition of a termination benefit
therefore it policy thesea the definition
47. This situation is recognized meetliability and expense of
as
Trust (anticipateddoes not application costs are a
under Universityto University has no1, 2007), of accrued
since the be the SMSPP of GASB
Enhancements to the
by UCOP througheffective July liability in
Universitytermination benefit. The benefit relates to a)Statement
Statement No. 47
therefore they are obligations of the OPEBliability
on an ongoing basis with the appropriate plan
connection and the continued
No. 27. the billing arrangement the University has with
and do notexists. Therefore, other than determining there
currently coverage. a termination benefit under
qualify as
Pension Benefits
GASB Statement No. 47 that ongoing benefit
is anits carriers accrual of its campusesunder existing
OR adequate as part for the SMSPP would Provided by the UCRP
program for there are no additional adjustments
record. Thispolicy,employees providing services to
University situation is recognized as a liability
that need to be considered as a result their active
the University and b) is related to through
and expense to the University by UCOPof GASB
are addressed through
service.
Statement No. 47.
the application of GASB Statement No. 45.
Expanded Annuitant
the UCRP or OPEB Health Care Coverage
Plan Provided by the OPEB
Plan
Involuntary Termination Benefits
Involuntary termination benefits are those
provided as a consequence of the
involuntary termination of services. As
stated in GASB Statement No. 47,
Paragraph 50:
In contrast to voluntary terminations,
involuntary terminations result from a
unilateral decision by the employer
Involuntary Termination
Benefits, cont.
For involuntary termination benefits, a
liability and expense is recognized when
all of the following have been completed:
A plan of termination has been approved by
those with the authority to commit the
University to the plan, and
That plan has been communicated to the
employees, and
The amounts can be estimated (reference
FASB Statement No. 5).
Involuntary: approval
Recognition of those in a position to approve a
plan requires the judgment of the Controller. For
University-wide plans, the President or The
Regents may be recognized as the appropriate
authority. For plans that involve a few individuals
or departments, the Academic and Staff Human
Resource Department (or other departments
depending on the situation) may be recognized
as the appropriate authority.
Involuntary Plan: defined
A “plan” of involuntary termination is one that:
Identifies, at a minimum, the number of employees to be terminated, the job
classifications or functions that will be affected and their locations, and the
dates that terminations are expected to occur, and
Establishes the terms of the termination benefits in sufficient detail to enable
employees to determine the type and amount of benefits they will receive if
they are involuntarily terminated.
However, if a plan of involuntary termination requires the employee to
render future service in order to receive termination benefits, the University
must recognize a liability and expense for the portion of involuntary
termination benefits that will be provided after completion of the future
service ratably over the future service period, beginning when the plan
otherwise meets the recognition criteria discussed above.
Involuntary Termination: Benefits Expanded Annuitant Health Care Coverage
Health Coverage—An employee separated through temporary
Not Provided by the OPEB Plan—If the
may continue to participate in the
lay-offUniversity provides and pays for University’s group
plan by paying his or her health premiums for
healthenhancements to the annuitant health benefitsup to four
Health Care:
Severance Pay—Managers, senior
Cash Payouts at or Following Termination—If
professionals or others may receive severance
Other:
(4) months beginning on the first day of the employee’s
for an employee who involuntarily terminates
temporary layoff. The University will(including three (3) months
a terminated employee receives cash payouts service, and for some reason pay up to
associated with an inducement to terminate, the
pay, at the discretion of the Chancellor, in of premiums.
Health Care Coverage
either a lump-sum or over a period of time,each
amount of one month of pay, or less, for For an Severance Pay
occurrences prior to the implementation of
employee terminated through temporary lay-off and not
GASB Statement No. 45 in 2007–2008) they
completed year of continuous University rehired, the three months of coverage would be subject to the
are not being provided as part of the defined
including payments made in lieu of notice, they
Expanded Health
service up to a maximum of six months of
would qualify as a termination benefit as defined Cash Payouts at or
benefit of Statement No. 47. However, if the employee is
requirementsOPEB plan through the OPEB Trust, it
in GASB Statement No. Managers who have
severance pay. Senior47 for which a liability would qualify as of the three month period,
rehired before the end a termination benefit as then the
Coverage
and expense should be receive financial
been terminated may recognized at each Following Termination
benefits would be treated as benefits provided to anaemployee
defined in GASB Statement No. 47 for which
assistance, subject to approval by the
individual location. These payments must be on leave without salary.
while liability and expense should be recognized at
Chancellor, the President, or The Regents as
Expanded Annuitant
distinguished from payments that may be made
required. Severance compensation may also
Career Counseling or
Expanded individual location.
each Health Care Coverage—If a terminated employee
COBRA Benefits Paid beyond what is offered
receives health care coverageBy The University—If under
for employee services already provided, such as
cash approved in the case of a faculty member
be out for the SMSPP, accrued vacation, etc.
Health Care Coverage Job Placement
a terminated employee of the expanded
University policy, and the costreceives COBRA coverage is
Careertenure or security of employment whose
with Counseling or Job Placement coverage beyond would offered under
paid by the University, itwhat is qualify as a termination benefit
Services—Managers and seniorthe interest of
resignation is deemed to be in professionals
Not Provided by the
the University; the authority in such cases rests
Services
University policy, and 47 for which a by the
as defined in Statement No.the cost is paid liability and
expense should be recognized at each individual location.
University, it would qualify as a termination
may be assisted with outplacement services and
with the President following consultation with However, if this benefit is being provided to an annuitant as
benefit as defined in GASB Statement No. 47
OPEB Plan
career counseling, at the discretion of the
the respective Chancellor, who must consult
department. If a terminated employee receives the defined benefit OPEB plan should the
part offor which a liability and expensethroughbe OPEB Trust,
with counseling or job placement services of
career the appropriate advisory committee(s)paid recognized as a termination benefit under GASB
it does not qualifyat each individual location.
COBRA Benefits Paid
the Academic Senate. Severance payments in
by the University, it would qualify as a termination
this regard does not include payments under
However, if this benefit is being provided as a
Statement No. 47. That situation is recognized to anliability and
expense at UCOP through the application of GASB Statement
benefit as defined in GASB Statement No. 47 for annuitant as part of the defined benefit OPEB
By The University
the a liability
whichSMSPP and expense should be No. 45.plan through the OPEB Trust, it does not
recognized at each individual location. qualify as a termination benefit under GASB
Statement No. 47. That situation is recognized
as a liability and expense at UCOP through the
application of GASB Statement No. 45.
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