Payroll Deductions INSURANCE PREMIUMS AND INSTALLMENTS

Transcription

1 Payroll Deductions INSURANCE PREMIUMS AND INSTALLMENTS

2 Understanding Payroll Deductions Pre Tax vs Post Tax Policies (and Why it Matters) Premiums and Coverage Periods Installments Deduction Codes Explained Putting It All Together

3 Pre Tax vs Post Tax Policies What s the difference? Why does it matter? The difference is self explanatory, in that some insurance premiums will be deducted BEFORE applicable TAXES are calculated and deducted, LOWERING YOUR TAXABLE INCOME Because of this advantage, the IRS is less flexible regarding plan enrollments, changes and terminations Post Tax policies can be adjusted during the plan year by the participant, while Pre Tax policies require a QUALIFYING EVENT

4 Qualifying Events These have been determined by the IRS to curtail fraud and abuse of the pre tax status. Some examples of qualifying events are: Change in Marital Status Change in Employment Status Birth or Death of Dependent Separation from Services (Workers Comp & LOA) Court Orders

5 So, Which Deductions Are Pre Tax? PRE TAX Health (BCBS) Cancer (Colonial) Dental (IMS) Vision (Superior) Flex Accounts (Ameriflex) POST TAX Life (Colonial) Disability (Colonial)

6 Premiums and Coverage Period SAME MONTH AS DEDUCTION IMS DENTAL SUPERIOR VISION AMERIFLEX MONTH AFTER DEDUCTION COLONIAL BENEFITS HEALTH INSURANCE

7 Blue Cross Blue Shield & Colonial Deductions July 2015 Deductions August 2015 Coverage August 2015 Deductions September 2015 Coverage September 2015 Deductions October 2015 Coverage

8 Month Of Deductions IMS Dental Ameriflex Coverage period same as deduction Superior Vision

9 Deductions and Coverage Periods All insurance policies will have effective start dates for the 1 st of the month, while the termination dates will be the last of the month. There are no partial, or prorated, periods even in the event of a birth or death. This applies to both pre tax and post tax policies. Important to consider for policy changes and enrollments Why is this important? There may be extra deductions (or refunds )depending on first deduction and effective dates of coverage (or change in coverage).

10 An Example Jane Smith is hired as a TA on September 23 rd, and is eligible for coverage effective October 1 st. In October, she enrolls in both health and dental insurance. In her October paycheck, she will have 2x deductions for her health insurance, while only having 1x deduction for her dental. One of the health insurance deductions is for the September deduction period, which would pay for her October coverage. The second deduction is her regular deduction, for November coverage. Dental deduction would only appear once, as it pays for the same month of coverage.

11 Why This Is Important Depending on Ms. Smith s coverage election, initial deductions could have a major impact. The family coverage premium is If Ms. Smith grosses $ each pay period as a TA, and is set to have 2x deductions on her first paycheck, she may want to know about it. If she was unaware of 2x deduction to start her coverage on the 1 st of October, she will be panicked and very upset come payday. When employees do review their checks, it seems to be because their net amount was different than expected, and they may come to you asking about their deductions. It is important we are able to explain not only what came out of her check, but why it came out.

12 Variations to Consider If Jane Smith elected November 1 st as her effective coverage start date for medical, and October 1 st for dental, she would have 1x deduction of each in her October check. She would only have the one for health because she delayed the coverage start date to coincide with deduction periods. If she elected to start her health insurance on November 1 st, and her dental for November 1 st, she would not have dental deduction in October. There are rare instances of double deductions for the start of coverage for month of deductions/ premiums. They would occur when employees take more time to decide, or the forms are turned in near the end of a month (or after payroll has been written). If Ms. Smith elected health and dental coverage, for October 1 st, but did not turn the form in until the end of October, she would have her first deductions taken in November. This would cause a double deduction for her dental, and triple for her medical.

13 Deductions & Weighted Premiums Deduction amounts are determined by employment status 10x pay, 12x pay, and 20 pay Premiums for 10x and 20x pay are deducted over 10 months, during the school year, and have weighted premiums to account for the time without a deduction eligible paycheck Deduction codes are specific to pay frequency. For example: AMO10, AMO20, and AMO12 are the dental deductions. The 10 identifies a 10x pay employee and deduction, and the appropriately weighted premium. The premiums would be calculated by taking 12x the 12 month rate, and dividing by number of deductions / paychecks the employee would receive, to complete the yearly premiums. The deductions are set to the amount of the premium billed by insurance providers.

14 Installments The only type of coverage that does not use weighted premiums is health insurance. Blue Cross Blue Shield bills everyone, regardless of employment status, over a 12 month period, using a 12 month rate. Like the premium, installment deductions are pre tax. Installments are scheduled to be taken beginning in August through May. Because of this, hourly employees should have installments calculated using 18x pay periods. June serves as a period to capture missing installment deductions. To account for the premiums that must be paid during the summer, teachers and hourly employees pay an installment. Installment codes are plan and deduction frequency dependent: ipe8 = 80/20 plan (10 pay) ipe7 = 70/30 plan (10 pay) icdhp = CDHP plan (10 pay) 2ipe8 = 80/20 plan (20 pay) 2ipe7 = 70/30 plan (20 pay) 2icdhp = CDHP plan (20 pay)

15 How Installments Work Installment taken as deduction Payroll Escrowed Account Deposited into NHCS account for Summer Premiums Receives installments as premium payments in June, July and August BCBS

16 Calculating Installments The Total Balance Required for an installment is 2x the monthly premium The deduction is calculated as (2x monthly premium / # pay periods) = deduction For Example: Will Turner is a teacher with employee child(ren) coverage on the 70/30 plan. His monthly premium is Calculate his installment. ( 2 x ) / 10 = Installment What about the $0.04 difference? That will be taken as a 1x deduction, using the same deduction code.

17 Re Calculating Installments Not all installments are created equal even with the same coverage. Employees may change coverage throughout the year, go on a leave of absence, or might enroll mid year as a new hire. For Example: Emily Jones is a teacher with employee only coverage at the 80/20 tier, with a monthly premium of and an installment of In August, September and October, she pays the 2.71 installment. In October, she gets married, and wants to add her husband for coverage effective November 1 st, and her premium changes to each month. Calculate the new installment. ( x 2) (2.71 x 3) = Required Balance / 7 = Re-calculated Installment The required balance must be re calculated to account for the deductions she had to the point of change in coverage. The installment deduction is re calculated to adjust to the number of pay periods remaining. The 0.03 difference would be refunded in a 1x deduction refund.

18 Installments Other Changes If an employee makes a change in coverage resulting in a lower monthly premium, the installment would be lowered. In the event year to date deductions are greater than the required balance, a deduction refund would be given through payroll. In the event of a resignation or retirement, installments would be refunded through payroll. If an employee goes on leave, he/she would have the option to pay the installment via personal payment, or have an adjusted installment deduction upon return to work. Installments are all initially calculated based on the coverage premiums at the start of the school year, in August. They are all re calculated in December, to coincide with Open Enrollment policy and rate changes from October (for January 1 st coverage of the new year).

19 Practice Practice 1: Marvin Lewis is a teacher with employee spouse coverage at the 80/20 tier, with a monthly premium of Calculate his installment. Practice 2: Lawrence Timmons is a new hire as an hourly custodian in December, with employee only coverage at the 80/20 tier. His premium is each month. His first paycheck will be in January. Calculate his installment. Practice 3: Larry TC Guy is high school teacher and has employee family coverage at the 70/30 tier. His premium is each month. His school year started well, until his wife filed for divorce in February, so his coverage changed to Employee Children at How will this change his installment deduction? (Hint: This is a multi step problem) Practice 4: Kathy Bates is a teacher at a YRE school with employee spouse coverage at the 70/30 tier, with a monthly premium of Calculate her installment

20 Practice Answers Practice 1: x 2 = , / 10 = Answer: Practice 2: x 2 = 27.12, / 10 = Answer: 2.71 Note: 2 pay periods each month, 5 months (Jan May) Practice 3: x 2 = , / 10 = x 7 = x 2 = , = Refund Answer: Installment Refund of , no more installment deductions Practice 4: Trick Question! EOM & YRE employees do not have installments! Answer: N/A

21 Deduction Codes Explained Deduction codes will have identifiers attached, dependent on pay run. 10s are for Teachers, 20 for Hourly, and 12 for EOM and YRE employees. In the event a deduction code does not include the number, it is universal, or set, by default, to the 10 month status. Example: CLCR = Teacher, CLCR20 = Hourly, CLCR12 = EOM / YRE Health insurance codes are a little different. Teachers and EOM/YRE employees will use the same premium codes, because they are monthly deductions. Hourly deductions will have a 2 in front and will be for half of the monthly premium, as they are paid twice a month.

22 Anatomy of Deduction Codes The codes can be difficult to decipher due to the varying policies, rates and plan tiers. Below is a grouping of stripped deduction codes, for the base identifiers. Ameriflex = Café# and DCA# Colonial = CLCR#, DISB#, ULFE#, GTL# IMS Dental= AM # Superior Vision = VI # The blue hashtags represent the numeric identifier, based on pay frequency. The yellow blank lines indicate a variable that determines plan type employee Only, Children, Spouse, Family. The red line for vision indicates plan tier, standard (S) or deluxe (D). For an example, a dental policy for employee only, for a teacher, would be AMO10 It is important to note that Ameriflex and Colonial deductions will not carry a numeric identifier for teachers. They will be the base code, only.

23 Anatomy of Deduction Codes Medical The deduction codes for health insurance become convoluted because they carry the most variables and are voluminous. The State Health Plan incorporated Wellness Credits that discount the monthly employee side premium if completed. There are three types of credits, each with a different discount amount. There are also three plan types: 70/30, 80/20, and CDHP The codes are set up as PE # PE# # and CD # The PE is the base code for the 70/30 and 80/20 plans, while the CD represents the CDHP.

24 Anatomy of Deduction Codes Medical (Continued) PE 7 PE8 # CD # The base code on the left is for 70/30, middle is 80/20, right is CDHP. The 80/20 code has more variables, hence the different (albeit similar) format. The yellow line will be a letter representative of the coverage. Blank for Employee Only, a C for children, S for spouse, while family coverage will be PF7 instead of PE 7. The red line will house a letter, A through F, identifying completion of wellness activities. A has all completed, F has none completed. The green hashtag represents a number, 1 through 7, indicating plan type for 80/20 and CDHP NOTE Hourly employees will have a 2 in front of the deduction code.

25 Medical Codes Bonus There is another health insurance plan that is offered to certain eligible employees through the Affordable Care Act. It is the High Deductible Health Plan (HDHP), also referred to as the Bronze Plan. There would not typically be a payroll deduction, but the codes used are 2PHD and PHD. The billing system associated with this plan is complicated, in that employees pay their premium out of pocket, and NHCS pays the matching; they are not able to be combined through payroll. Most eligible employees will be Long Term Subs, part time hourly employees who consistently work 30 hours per week, and certain temporary full time employees.

26 Putting It All Together Bobby McGrew is a new hourly custodian at one of our schools. He met with a benefits counselor and has completed his enrollment forms for his insurance coverage. Identify what his deductions should look like based on the coverage he has chosen: Colonial Life Cancer $20 each month = Ameriflex Flex Spending $50 each month = Health Insurance, employee only, 70/30 $0 each month = IMS Dental policy, employee each month = Superior Vision policy, employee only, premium each month = (Hint: the premium plan uses the letter D)

27 Putting It All Together Answers Bobby McGrew is a new hourly custodian at one of our schools. He met with a benefits counselor and has completed his enrollment forms for his insurance coverage. Identify what his deductions should look like based on the coverage he has chosen: Colonial Life Cancer $20 each month = $10 Ameriflex Flex Spending $50 each month = $25 Health Insurance, employee only, 70/30 $0 each month = $0 IMS Dental policy, employee each month = $19.72 Superior Vision policy, employee only, premium each month = $5.53

28 Closing Notes and Questions When switching plans in Vision, Dental, or with Colonial, there may be premium adjustments, just like with health insurance. These are insurance deductions; there are also garnishments, retirement accounts, charitable contributions, and student loan payments. QUESTIONS? Call Chris Giannell in A gift for you: provide me your and I will send a deduction lookup file. Simply key the deduction in question and it will provide the deduction amount, description, tax status and vendor. This way, you won t have to memorize all potential deductions and their meaning. Thank you for your attention and participation!