what you need to know before making deceased employee …...helpful tips keep an excel spreadsheet...

What you need to know before Making Deceased Employee

Payments

Agenda

❖Coordinating with other Departments/Agencies

❖Family

❖State Laws

Agenda

❖Payment Processing

❖Helpful Tips and Resources

Question

Have you ever had to make a deceased employee payment?

Coordinating with otherDepartments/Agencies

Departments/Agencies

❖Benefits

❖Human Resources

❖Investments


❖Legal

❖Accounts Payable

❖Payroll


❖Establish a Process

❖Create a Check List


Benefits-

❖Update Beneficiary Forms

❖Make sure benefits staff review the forms annually

❖Notify Third Party Vendors


Benefits-

❖Obtain a copy of the Death Certificate

❖Continuation of benefits for family


Human Resources-

❖Notify all Departments

❖Talk with the family

❖Coordinate company contributions and notifications


Human Resources-

❖ Sending a Condolence Letter

❖Terminate employee in HR System

❖Retrieving company property (Badges, Laptops, cell phone)

Question

Do you have a checklist for making and paying a deceased employee payment? If so what is on it?


Stock and Investments-

❖Value of Stock on date of death

❖Notify Broker


Stock and Investments-

❖ Initiate any distributions that are required

❖Recognize Income in year of death


Legal Department-

❖Contested Beneficiary Information

❖Difficult Situations


Accounts Payable Department-

❖ Uncashed Checks

❖Direct Deposit Reversal


Accounts Payable Department-

❖Obtain needed Tax Forms (W-9)

❖Create New Vendor


Payroll Department-

❖Update Payroll System

❖Determine Final Payment

❖W-2 Form


Payroll Department-

❖Understand Residential State Laws

❖Get all Forms needed to process final payout


Payroll Department-

❖Labor Costing ( Different Earnings Type)

❖Benefits Deduction Reporting -401 (k)/403 (b)

❖Notify Garnishment Agency, if applicable

FAMILY

Family

❖Get notification of Death

❖Letter/Package for Family

❖Meet with the Family if needed

❖Example of Family Letter

• Dear M ____________:

• On behalf of XXX Corporation, Department of Human Resources, please accept my condolences upon the death of <<first and last name>>.

• This letter summarizes important information regarding M____________’s <<pay; benefits; pay and benefits>>, including actions to be taken by <<XXX Corporation and benefits providers>>, and information requiring your attention. Department of Human Resources staff names and telephone numbers are also included for your convenience. If you desire clarification on any part of this letter or you need assistance, please do not hesitate to call.

• Pay

• M_______________'s final pay and leave payout must be paid to <<his; her>> Estate. To establish the Estate for this purpose, a Certificate of Qualification or Letter of Administration must be obtained from the Fiduciary Clerk of the County in which M______________ resided. Upon receipt of this documentation, XXX Corporation will issue payment to the named Executor or Administrator. A stamped, self-addressed envelope is enclosed for your convenience in returning the requested item. If you have any questions about this matter, please call Linda Dailey in the Payroll Division at (703) xxx-xxxx.

• Health and Dental Insurance

• Your <<health; dental; health and dental>> insurance coverage with XXX Corporation is paid through ____________. You may elect to continue your County <<health; dental; health and dental>> insurance for up to 36 months by participating in the COBRA coverage plan. Detailed information regarding the COBRA plan is included in this package. For more information, contact in the Employee Benefits Division at (703) xxx-xxxx.

• Group Term Life Insurance

• You are named as a beneficiary of M____________'s life insurance policy. Employee life insurance policies are provided by the Standard Insurance Company. A Standard Insurance representative will send you a beneficiary statement form. Please return the completed beneficiary form with a certified copy of the death certificate directly to Standard Insurance. If you have any questions regarding the group term life insurance, contact Jane Smith in the Employee Benefits Division at (703) xxx-xxxx

• If you would prefer to have a staff member meet with you to review this information, please call Susan Kirkman at (703) 324-3302, and she will arrange a meeting. If I may be of assistance to you with this or other County business, please feel free to contact me at (703) 324-3448.

• Sincerely,

• Director, Department of Human Resources

State Law

State Law

Determined by State the employee Lived In

❖Whom you can Pay

❖When you can pay

State Law

Determined by State the employee Lived In

❖What you can pay

❖Taxability of the payments made

State Law Examples- VA

State Maximum PayableWho you can make the check payable too

Conditions before Payment can be issued State Withholding

VA $15,000 Successor60 days after death, no qualification of

estate

Follow Federal Rules

State Law Examples- WV



WV

$800: or $5000 if more than 120 days after

death (includes pensions and funds allowed for funeral

cost)

Spouse, Adult Children, Parents, Siblings, or person paying the funeral expenses (in that

order)

Proper Demand and Application; absence of pending probate

proceedings


State Law Examples- GA


Conditions before Payment can be issued

State Withholding

GA$2500; All wages if

deceased was a state employee

Designated beneficiary; if none, spouse or

children's guardian (in that order) with out

administration of the state

No Provisions No Provisions

State Law Examples- FL



State Withholding

FL

Any unpaid wages due, including travel expenses and

reimbursements up to $300

Spouse, Children over the age of 18 or

Parents (in that order)No Provisions

No State Income Tax

State Law Examples- CT



State Withholding

CT All unpaid wages due

Surviving Spouse; if none then next of kin; if

none then funeral director or physician if they have a preferred

claim; or any person the court deems to have

sufficient interest

Small estate not over $40,000. Application

from surviving spouse or next of kin; affidavit of

debt from funeral director or physician or

any other creditor. Transfer or release

discharges of employer's debt


State Law Examples- CA

State Maximum Payable

Who you can make the check payable too


State Withholding

CA$15,000 (including any unused leave or other

compensation)

Surviving Spouse or Conservator

Affidavit of right and proof of identity


http://www.google.com/url?sa=i&source=images&cd=&cad=rja&docid=zWydwKHEgkFyKM&tbnid=rtfrcB7zxdCfhM:&ved=0CAgQjRwwAA&url=http://www.50states.com/flag/caflag.htm&ei=gKpXUY2UCeKA0AHj9IDQDg&psig=AFQjCNGWeQeOGet96R2OGm2dHVxJciT3fw&ust=1364786176268316

State Law Examples- NY



State Withholding

NY All unpaid wages due

(1) Within 30 days of death-designated

beneficiary or if none pay surviving spouse

(in that order)

(1) Within 30 days of death- affidavit from

spouse when wages do not exceed $30,000;





State Withholding


(2) between 31 days and 6 months same as above ( in that order);

a child over age 18, parent, sibling, niece or nephew (in that order)

(2) between 31 days and 6 months after death-

affidavit that states date of death, relationship,

no appt of administrator or executor, name and address of person to

receive the money and can not exceed $15000





State Withholding


(3) after 6 months to death distributee,

creditor or person who incurred funeral

expenses

(3) More than 6 months after death - affidavit

showing date of death, no executor or administrator

appointed, no surviving spouse or minor child or entitlement of payment

and can not exceed $5000


State Law Examples- ORTaxable

State Maximum Payable

Who you can make the check payable too


State Withholding

OR $10,000 Surviving Spouse, dependent child or their Guardian

No Provision

Wages earned but unpaid at

the time of death are subject to

withholding tax

State Law Examples- Other



DC, MD, PR,SD, SC

and others

No Provisions No Provisions No Provisions No Provisions

Processing the Payment

Question

What do you do if a direct deposit that has been sent to the bank but the payment will not be received until after death of your employee?


❖Pay Day is Friday and employee dies


❖What happens with the payment?

❖Employer may need to do a reversal or deletion of that deposit


❖Employee dies before cashing their paycheck

❖Employer should reissue the check to the employee’s personal representative/estate

❖Reported on the employee’s Form W-2


❖Wages Paid out in the same year as the Death

❖Follow State Law

❖Calculate Final Payment


•Example:

• Employee Jane Doe passes away on June 1, 2015. When Jane passed away her employer XXX Corporation owed her $2000.00 in wages and $1000.00 in accrued vacation pay.


•Paycheck Calculation

Salary $2,000.00

Accrued Vacation $1,000.00

Final Pay $3,000.00

Social Security Tax $ 186.00

Medicare Tax $ 43.50

Net Check $2,770.50


❖Wages Paid out in the same year as the Death

❖Report on the Employee’s W-2

❖Report on Form 1099-Misc


•W-2


•1099


❖Wages Paid out in the year after Death

❖Follow State Law

❖No Tax is withheld


❖Example:

❖Employee Jane Doe passes away on December 28, 2015. When Jane passed away her employer XXX Corporation owed her $2000.00 in wages and $1000.00 in accrued vacation pay. The final payment was made on January 10 2016.


•1099


❖Work with Accounts Payable to record payment and information has been verified

❖Send out letter explaining final payment


❖Example of Sample Letter:

Helpful Tips

Helpful Tips

❖Collaborate with all Departments

❖Make sure benefit information is updated at least annually

❖Have a Check List and written procedures and keep them updated

Helpful Tips

❖Keep an Excel Spreadsheet of Payments Made

Name Vendor # SSN# SAP ID# 1099 Wages/Gross FICA Taxable Wages Soc Sec Tax

EE Med Tax

EE FICA Tax Final Payout Comments

Estate of Jane Doe 1212121 123-45-6789 333333 $ 10,985.02 $ 10,985.02 $ 681.07 $ 159.28 $ 840.35 $ 10,144.67 Deceased in 2015

John Doe 1212123 987-65-4321 444444 $ 6,087.15 $ - $ - $ - $ - $ 6,087.15 Deceased in 2014 (prior yr)

$ 17,072.17 $ 10,985.02 $ 681.07 $ 159.28 $ 840.35 $ 16,231.82

Helpful Tips

❖Coordinate communication with the family

❖Utilize your reference material to make sure you are following the State Law before issuing the final payment

❖Be consistent and accurate when responding to the family

Resources

Resources❖APA Payroll Source

❖State Tax Websites

❖APA State Guide to Payroll

❖Internal Revenue Service website

❖Corporate Attorney

❖Your Service Provider

❖Payroll Subscription Library- Bloomberg BNA, Walter Coulter and others

Question

Did you learn something today that will help you when you have an employee pass away?

Questions

Thank You

Contact Information:

Linda Dailey

Payroll Compliance Supervisor

Fairfax County Government

email: [email protected]

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