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Date: October 30, 2015

Bulletin Number: SU-231

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Subject

Suspension of 403(b) Tax Sheltered Annuity Plans for Employees on Workers’ Compensation Leave

Purpose

To notify agencies that employee participation in tax sheltered annuity plans must be suspended while an employee is receiving paid Workers’ Compensation benefits.  Workers’ Compensation-related benefits are the statutory Workers’ Compensation benefit and any supplemental payments for on-the-job injuries.

Affected Employees

SUNY and Education Department employees who qualify for 403(b) tax sheltered annuity plans.

Effective Date(s)

Effective the first paycheck dated on or after January 1, 2016.

Background

Under IRS regulations, workers’ compensation-related benefits are exempt from Social Security and Medicare taxes.  Workers’ compensation-related benefits are also exempt from federal income taxes, New York State income taxes and local income taxes, if applicable.

Also, under IRS regulations, non-taxable workers’ compensation-related benefits are not eligible for 403(b) tax sheltered annuity plan contributions.

Agency Actions

Agencies are responsible for end dating payroll deductions in PayServ to suspend an employee’s 403(b) tax sheltered annuity plan contributions when the employee has been placed on paid Workers’ Compensation leave. 

If the employee wishes to resume 403(b) tax sheltered annuity plan contributions upon return from a paid Workers’ Compensation leave, the agency must insert a row to restart the 403(b) payroll deduction.

This applies to the following payroll deduction codes:

Deduction Code Description

404
405
408
415
432

Supplemental Annuity Prog
TIAA Special Annuity
SUNY TDA Fidelity
SUNY Tax Deferred Annuity
ED TDA Copeland

Locked_Query_083 (EE annuity contrib while on WC) has been developed in the PS Query database for agency use to identify employees who have both paid Workers’ Compensation leave and deductions for a 403(b) tax sheltered annuity plan in the same pay period.  Employees identified by Locked_Query_083 results must have their deductions end dated the day prior to the first day the employee receives paid Workers’ Compensation leave.

Locked_Query_083 should be run every pay period allowing sufficient time for agencies to enter any necessary PaySev transactions.  Please refer to the Agency Submission Schedule Job Aid for each payroll period’s exact date of agency On-Line Transactions Cutoff. 

NOTE: Please share this bulletin with the appropriate Human Resource personnel.

OSC Actions

OSC will review query results to ensure that agencies have ended employee 403(b) tax sheltered annuity contributions when an employee has begun to receive paid Workers’ Compensation leave.  OSC will not enter transactions to end employee 403(b) tax sheltered annuity contributions.

Questions

Questions regarding 403(b) tax sheltered annuity plans may be directed to the Payroll Deduction mailbox. 

Questions regarding Workers’ Compensation may be directed to the Workers’ Compensation mailbox.