"Notice of Employee Termination"
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 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.  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.