Through the contribution reporting process, employers fulfill defined benefit and/or defined contribution plan reporting requirements. This process integrates information based on retirement systems for public employees, public safety employees, firefighters, and state judges whose employment status can be eligible, exempt, ineligible, or post-retired. All employers are required to transmit their contribution report files electronically.
When employers pay defined benefit contributions on behalf of members, they certify the continuing eligibility of those members. For retirement system eligibility requirements and definitions of exempt and ineligible employees, refer to the Membership section. For our definition of post-retired employees, refer to the Post-Retirement Employment section.
Employers are responsible for identifying each employee’s status with respect to an applicable Tier 1 or Tier 2 participation, reporting appropriate salary and contribution information, and making correct contribution payments. Our office provides annual training sessions to give employers the tools needed to administer retirement benefits and savings plans deposits accurately for their employees. We recommend all employees who send documents, contribution reports or contribution payments to URS attend these training sessions every year.
Our office makes information available on our website for employers to review and confirm their employees’ reporting history by retirement system and eligibility status. We work with employers to resolve system and status questions and errors. Our office conducts audits with employers in order to determine their compliance with reporting and certification requirements. We can charge employers with financial penalties when reporting errors result in the payment of an incorrect benefit or for failure to remit reports and contributions within the guidelines stated in the Period Report and Payment section.
Employers should report contributions with the same frequency as their payroll cycles, provided the cycle is biweekly, semimonthly, or monthly. We require employers report at least monthly.
Recent updates to our file layout now permit employers with multiple employee payroll cycles to designate those variables on one file. This change will ensure accurate service credit for all eligible employees. Call Employer Services at 801-366-7318 or 800-753-7318 for instructions on how to update file records.
Differentiating when employees earn their salaries and when they receive payment for earnings is an important aspect of contribution reporting. The report period represents when the employees have earnings. The tax year represents when the employees receive their paychecks.
For defined benefit purposes, our office uses period end dates to record salary earned and apply service credit. The salary amounts earned during a calendar year appear on the defined benefit annual retirement statement our office sends to employees (and is available online). When a qualified employee applies for retirement, our office uses these calendar year earnings to determine the amount of the monthly retirement benefit.
For defined contribution savings plans purposes, our office uses tax year to record salary received. By recording salary by tax year, we can assist employees who want to maximize contributions to their 401(k), 457(b), and/or IRAs. Maximums for these contributions are based on tax year earnings.
Our office qualifies types of compensation for employers to report as retirement-eligible salary for employees. We base these qualifiers on compensation definitions in specific Utah Code sections that appear in Compensation Definitions and on URS board resolutions. For example, overtime pay qualifies in some systems and does not qualify in others. The Compensation Table included later in this section summarizes qualifying and non-qualifying salary by retirement system.
Generally, contribution rates are effective from July 1 through June 30. Public schools (K -12) have contribution rates effective from September 1 through August 31. Employers use the rates in combination with retirement salary to determine payable retirement contribution amounts. When an employer has a report period that begins in June and ends in July, the rate payable for the entire report period is the new rate, even if the period end date falls on a weekend when most employees usually don’t work. Our office notifies employers of these rates each year prior to their effective date. (Refer to the Contribution Rates section.) They are also available in the Employers section on our website.
Different contribution rate categories exist. In noncontributory plans, only employer-paid contributions are required. In contributory plans, employer-paid contributions are required, and employee-paid contributions may be required.
Employee contributions to a defined benefit plan are based on the reported retirement salary and are treated as after-tax contributions, which are subject to income tax and social security and Medicare tax (FICA) purposes.
If the employer would like to “pick-up” the employee-paid contributions, formal action must be taken. This action must be taken in advance of the pick-up effective date, as the pick-up election may only be made prospectively. The IRS provides guidance regarding pick-up elections under IRS Code Section 414(h)(2). Please note that an employer may not pick-up contributions for members participating in the Tier 2 Public Employee Hybrid plan (See UCA § 49-22-301(3)). The pick-up option is only available to those participating in the Tier 2 Public Safety and Firefighter Hybrid plan (See UCA § 49-23-301(2)(c)).
To take formal action and to elect to pick-up employee-paid contributions under the Tier 2 Public Safety and Firefighter Contributory Retirement System, your organization needs to complete the Employer Election to Pick-Up Member Contributions: Tier 2 Public Safety and Firefigher document. This election must be supported through contemporaneous documentation (e.g., resolution, minutes, etc.). The formal documentation must show that the pick-up is not offered as a cash or deferred election. Coverage must also be mandatory for all employees in the select group affected.
If an employer picks-up the employee contributions and certain tests are met, then the employee contributions are considered employer contributions and excludable from gross income. The IRS looks for a couple of tests to be met to meet this consideration:
» The employer specifies that the contributions, although designated as employee contributions, are being paid by the employer. For this purpose, the employer must take formal action to show that the contributions on behalf of a specific class of employees will be paid by the employer.
» There is no cash or deferred election right with respect to designated employee contributions.
If the pick-up is not part of a salary reduction arrangement, it may be excluded from FICA taxes. The pick-up must be a salary supplement.
Under the Tier 2 Public Safety and Firefighter Contributory Retirement System, an employer who elects to pick-up contributions for employees who have selected the Hybrid Option must also make an additional non-elective contribution to employees who have selected the 401(k) Option equal to the pick-up amount.
For each reporting period, employers submit both contribution file details and payment, required electronically beginning July 1, 2011. The Employers must report each period as a separate file and notify URS of any prior period correction information independently. Negative amounts will not be processed as part of current file details (see the Adjustments section). Employers may submit multiple period reports at one time, if they provide separate electronic file data for each period. The URS Contribution File Developer’s Certification may be used as a guide on how to complete the electronic file.
Employers should submit contribution information and payment as soon as practical after the end of their payroll period, but not later than 30 days after the end of the pay period. Employers should submit file information only after all corrections or updates have been made to current period employee records, including military leave, workers’ compensation additions, employee Savings Plan deferrals and supplemental payments. For contribution information and payments not received within 30 days after the end of a payroll period, our office may charge interest and penalty fees to the employer. We recommend employers notify Employer Services if they experience unusual circumstances that delay their reporting.
Likewise, if an employer no longer has any eligible employees to report, URS requires notification of the change in status. This notice should be stated on official letterhead, be signed by an authorized administrator, and provide an effective date to discontinue reporting contributions. If the employer later hires eligible employees, our office should be notified by calling Employer Services. This process allows us to guide employers through setting up new web access and providing instructions for online certifications, electronic file transmissions, and ACH payments.
All contribution records on electronic files must include a valid fund number that matches the employee’s position and eligibility requirements. Employers can view available contribution fund numbers on their web page.
We encourage employers to maintain a reconciliation document, to confirm their file details match their payroll documents, before submitting electronic payments that may be out of balance.
Employers are required to include contribution records on their files for all exempt and post-retired employees, as long as these employees are actively working. Records flagged with the post-retired indicator should also include retirement salary. Post-retired employees may make deferrals to a URS qualifying plan only. Early retirement incentive payments are not eligible, in whole or in part, for contributions to the URS Savings Plans after retirement or separation from employment.
Include records for these employees only when they are participating in URS Savings Plans and/or have installment payments.
Next section contains a guide to assist employers in determining which employees to include in contribution reporting.
Use this table as a guide in determining which employees to include in contribution reporting and the applicable earnings, contributions, and payments to report to the Retirement Office. Please call Employer Services at 801-366-7318 or 800-753-7318, if you have questions about contribution reporting.
Key:
DB - Defined Benefit (Retirement/Pension Plans)
SP - Savings Plans (401(k), 457(b), and IRAs)
|
EMPLOYEES TO INCLUDE See Footnotes 2 and 3 for Employees to Omit |
R E P O R T | ||||
|
Earnings |
Contributions |
Payments | |||
|
Type of Employee |
DB Qualifying Salary1 |
Gross Salary |
DB Contributions |
SP Contributions |
Installment Payment |
|
DB Eligible |
Yes |
Yes |
Yes |
If Applicable |
If Applicable |
|
DB Ineligible2 |
No |
If Applicable |
No |
If Applicable |
If Applicable |
|
Tier 1 DB Exempt3 |
No |
Yes |
No |
If Applicable |
If Applicable |
|
Tier 2 DC Vesting3 |
No |
Yes |
No |
Yes |
If Applicable |
|
Post-Retired4 |
Yes |
Yes |
If Applicable |
If Applicable |
If Applicable |
1. See the Compensation Table (page 51) for types of salary that qualify to be reported and used in calculating DB contributions.
2. If an ineligible employee does not participate in URS Savings Plans and does not have an installment contract with our office, omit the employee record from contribution reporting.
3. Title 49 requires employers to report earnings for any Tier 1 exempt employee, as long as the status applies. (Tier 2 employees exempt from the DC four-year vesting period by choosing to participate in the Defined Contribution Plan rather than the Hybrid Retirement System.)
4. Report earnings for a post-retired member as long as the employee actively works for your organization.
As of July 1, 2011, employers are required to remit payment electronically or use their clearing account credit balance. Instructions for the ACH process or clearing account usage are available by contacting Employer Services.
If file corrections change totals by more than 10%, we contact the employer to request payment of the difference prior to finalizing the posting.
1. Determine the appropriate reporting frequency for each employee on the file. File formats now acknowledge these variables.
2. Evaluate and determine the appropriate retirement status for all employees on the file. (Use the inquiry option in the online certification application for accuracy.) For employees who are eligible for defined benefit plan membership, determine qualifying compensation to use as retirement salary.
3. Complete online certification or other status notification.
4. Update contribution reporting programs to accommodate any employee status or contribution-related changes, such as: marking employee status as “I” for ineligible, “X” for exempt, “P” for post-retired or “E” for eligible; increasing and decreasing employee savings plans deductions (401(k), 457(b), IRAs); starting and stopping deductions for installment payments; and modifying fields to calculate contribution rate increases or decreases.
5. Create the data file and/or report detail.
6. Transmit file data through the Employers section on the URS website.
7. Confirm file receipt through the “Pending Transmittals” tab. If payroll records match file details, submit the electronic payment. Reconcile any out-of-balance items, alert Employer Services before creating and transmitting a replacement file.