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Employee Information
Date: December 15, 2005
To: All Employees
From: Annette Parker and John Weis
Subject: Imputed Income, Changes to Pay Check/Pay Advices, and Preview of Changes in July 2006.
The beginning of a new calendar year will mark the next phase of the 1College project as the campus community will transition to a new Human Resource/Payroll system. The College will be using a system built on state-of-the-art technology that is geared toward providing greater employee service. The purpose of this memo is to describe briefly the upcoming changes related to pay statements, including the processing of Group Term Life Insurance benefits and the introduction of electronic pay advices.
Imputed Income for Group Term Life Insurance Benefits
Aside from the new look and convenient ways to access pay information, beginning January 1, 2006, there will also be slight changes in the way the College processes Group Term Life Insurance benefits for full-time employees. As you know, the College provides generous life insurance in the amount of three times an employee's base pay. Federal law requires that any coverage in excess of $50,000 be subject to federal taxes based on a graduated rate table. The amount of life insurance coverage in excess of $50,000 is multiplied by a premium rate based on an employee's age that results in a monthly amount of "imputed" income. This imputed income is taxable as a benefit and is, therefore, added to your applicable wage base for federal income tax, Social Security tax, and Medicare tax purposes. The College’s current processes for handling these taxes follow these guidelines, as specified by federal law.
So, how will this change in process beginning in January 2006 affect you? Below are details about two specific changes:
Firstly, although the taxable portion of the group life insurance benefit, that is, any benefit in excess of $50,000, is subject to federal income tax and is recorded on employees’ W-2s annually, the College is not required to withhold the tax from employees' paychecks. For most employees, this usually equates to a very small amount of money. Beginning in January 2006, therefore, the College will no longer withhold federal income tax for the excess life insurance benefit, keeping more of your money in your hands.
If you desire to continue deducting additional withholdings, all you have to do is complete a new W-4 form and submit it to HR Services. HR Services staff can assist you in this process. Assuming you do not elect to deduct additional federal income tax from your pay, the result of this change will be that federal income tax withholding from your paycheck will be reduced slightly in January.
Secondly, the federal government requires the College to withhold taxes on the life insurance benefit for Social Security and Medicare each month. In the current payroll system (being retired December 2005), the monthly amount of the taxable benefit is apportioned over each pay period of the month resulting in tax withholding in every paycheck. Beginning in January 2006, the social security tax on the life insurance benefit in excess of $50,000 will occur only once per month in the first pay period of each month. The result of this change will be slightly increased Social Security and Medicare taxes in the first paycheck of the month and slightly reduced taxes in subsequent pay periods of the month. For most employees, this will represent a very small deduction.
Because federal taxes on this benefit are calculated on a graduated scale, when employees reach the age of 55 or so, the amount of tax for the excess life insurance benefit may exceed the value of a premium for similar coverage an individual could purchase on his or her own. The College can permit an employee to decline coverage only in the case in which the tax withholding exceeds market rates for similar coverage. If you are in this age bracket and wish to decline the life insurance benefit, you can contact HR Services for additional information.
Electronic Pay Advices
Recently, each employee received a communication that provided details of the new electronic pay advice for employees who are paid through direct deposit and have a Dickinson College email account. The following is a sample of what the pay advice will look like when opened through either Microsoft Outlook or WebMail:
Changes that have been made to the new pay advice include:
- Employee ID replaces an employee’s Social Security Number for security purposes.
- A comment field is included below the current gross amount to provide payroll reminders to employees.
Each pay advice will be displayed in a printable, downloadable file that will be available for employee records. Employees will be able to view their pay advices regardless of whether they access email through Microsoft Outlook or WebMail. Please go to 1college.dickinson.edu/employee to view directions on obtaining your pay advice using either email system.
In order to provide these improved services to our entire community, every employee will be given a Dickinson email account and will have access to his or her pay advice on-line. However, those employees who do not have ready access to a computer and wish to continue receiving payroll notices through campus mail can do so by contacting HR Services.
Another Change is Coming July 1, 2006
Beginning with the first pay in JULY 2006, all employees at the College will transition to a bi-weekly pay cycle, that is, all non-student employees will be paid every two weeks. At the present time, support staff employees are paid bi-weekly or 26 times a year, but faculty and administrative staff are paid semi-monthly or 24 times a year. In order to bring real efficiencies to payroll processing, all employees will move to a bi-weekly or 26 times per year payroll cycle beginning July 2006. In January, we’ll provide you with a great deal more information about this change and will make a payroll planning calculator available to you during the flex-comp process in the spring.
For More Information
Please visit the HR Services web page (www.dickinson.edu/hrservices) and the 1College web page (http://1college.dickinson.edu/) for further updates and information regarding these enhanced services. We welcome your feedback regarding any of the upcoming changes. Please direct your comments or concerns to hrservices@dickinson.edu or call our team at Ext 1503.
