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Effective Date: 07/01/05 |
Separation
It is the policy of the State of North Carolina that all payroll offices will follow established regulations and procedures when separating employees.
G.S. 143B-426.39 Powers and Duties of the State Controller
Separation from State service occurs when an employee leaves the payroll for reasons listed below:
The Personnel Office determines the amount of salary, longevity, bonus leave, unused vacation leave, or any other appropriate earnings that are payable to the separating employee. Resignation An employee may terminate services with the state by submitting a resignation to the appointing authority. Normally, it is expected that an employee will give at least two weeks notice prior to the last day of work. Unused vacation leave not to exceed 240 hours plus unused bonus leave is paid in a lump sum. Payment shall not be made for unused sick leave. It shall be reinstated if the employee returns within five years or it may be applied toward retirement if eligible to retire within five years. Voluntary Resignation Without Notice An employee who is absent from work and does not contact the employer for three consecutive scheduled workdays may be separated from employment as a voluntary resignation. A factor to be considered when determining whether the employee should be deemed to have voluntarily resigned is the employee's culpability in failing to contact his or her employer. Such separations as described above are voluntary separations from state employment and create no right of grievance or appeal. Unused vacation leave, not to exceed 240 hours, plus unused bonus leave is paid in a lump sum. Payment shall not be made for unused sick leave. It shall be reinstated if the employee returns within five years or it may be applied toward retirement, if eligible to retire within five years. Separation Due to Unavailability An employee may be separated on the basis of unavailability when the employee becomes or remains unavailable for work after all applicable leave credits have been exhausted and agency management does not grant a leave without pay, or does not extend a leave without pay period, for reasons deemed sufficient by the agency. Such reasons include, but are not limited to, lack of suitable temporary assistance, criticality of the position, budgetary constraints, etc. Such a separation is an involuntary separation and not a disciplinary dismissal as described in G.S. 126-35, and may be grieved or appealed. Unavailability Unavailability is defined as one of the two conditions listed below:
When an employee is separated while on leave without pay, any unused vacation leave not to exceed 240 hours plus unused bonus leave shall be paid in a lump sum. Payment shall not be made for unused sick leave. It shall be reinstated if the employee returns within five years or it may be applied toward retirement if eligible to retire within five years. When an employee is separated while in receipt of workers' compensation benefits, leave shall be administered in accordance with the Workers' Compensation Leave Policy. Retirement An employee may retire when the employee is eligible and applies for retirement benefits from the Teachers' and State Employees' Retirement System or the Law Enforcement Officers' Benefit and Retirement Fund. Unused vacation, or any portion, may be exhausted and the remainder paid in a lump sum (up to 240 hours) along with bonus leave. Unused sick leave may be applied toward retirement. Reduction in Force An employee may be reduced in force for reasons of shortage of funds or work, abolishment of a position, or other material changes in duties or organization. Unused vacation leave not to exceed 240 hours plus unused bonus leave is paid in a lump sum. Payment shall not be made for unused sick leave. It shall be reinstated if the employee returns within five years or it may be applied toward retirement if eligible to retire within five years. An employee who has been reduced in force and who does not obtain another permanent job in State government by the effective date of the reduction in force may be eligible for severance salary continuation when separated. For more information on severance salary continuation pay, refer to the Types of Pay section of this manual. Dismissal Dismissal is involuntary separation for cause in accordance with the provisions of the policy on Disciplinary Action, Suspension, and Dismissal. Unused vacation leave not to exceed 240 hours plus unused bonus leave is paid in a lump sum. Payment shall not be made for unused sick leave. It shall be reinstated if the employee returns within five years or it may be applied toward retirement if eligible to retire within five years. Appointment Ended An "Appointment Ended" separation occurs when an employee appointed to a position that is exempt from the State Personnel Act (EPA position) is terminated for reasons other than just cause from one of the following positions: Exempt positions appointed by the Governor Policy making positions Confidential assistants and secretaries Chief deputy or chief administrative assistant These separations may occur whenever the Agency Head or the Governor determines that the services of the employee are no longer needed. Unused vacation leave not to exceed 240 hours plus unused bonus leave is paid in a lump sum. Payment shall not be made for unused sick leave. It shall be reinstated if the employee returns within five years or it may be applied toward retirement if eligible to retire within five years. Death When an employee dies, the agency Personnel Office is responsible for submitting a PD-105 form to the Payroll Office indicating the employee’s separation by reason of death and the separation date. The last day of work or the day of death is the date separated, except in cases where an employee is exhausting leave prior to retirement. If the last day of work is the last workday in the month, the employee is paid for the full month. All pending payments to a deceased employee are processed in the following manner: Pending Payments Paper Checks If notice of the employee’s death occurs after the deadline for keying the deceased employee’s pay has passed, then any paper check payment generated from that payroll run is distributed by the Central Payroll Section as is. Otherwise, the payment is processed as noted in the “Liabilities” section of this manual. Direct Deposits If notice of the employee’s death occurs after the deadline for keying the employee’s pay, then no action is required. However, if the notice of death occurs prior to the payroll keying deadline, then the payment is processed as noted in the “Liabilities” section of this manual. Liabilities All payroll liabilities, which include unpaid wages and longevity, unused vacation leave (not to exceed 240 hours plus unused bonus leave), and other employee expense reimbursements must be made, upon establishment of a valid claim, to one of the following:
Payment shall not be made for unused sick leave. Payment to an Estate Using the Estate’s TIN Estate payments require a Tax Identification Number (TIN) for the estate. Payments are made to a personal representative of the estate, which may be either an executor or an administrator. An executor is nominated in a deceased employee’s will and is appointed by a court to settle the estate of a deceased individual. An administrator is appointed by a probate court to handle the estate of a person who died intestate, or without a will. A survivor or personal representative can apply for a TIN either by completing IRS Form SS-4 and submitting it through the mail or by telephoning the IRS at 1-800-829-4933 and applying for one over the phone. A TIN is provided immediately when applied for by phone. The IRS form is available at: http://www.irs.gov/publications/p559/ar02.html#d0e192 Gross wage payments of $10,000 or more are required to be processed as estate payments. Payment to a Beneficiary Beneficiary payments require the submission of one of the following complete forms:
These forms are available at the Administrative Office of the Courts website (www.nccourts.org) and are used to process smaller estate payments. To receive the payment as a beneficiary, the amount of gross wages must be less than $10,000. On Form AOC-E-203, the appropriate affiant indicated on the form must be either an heir, an executor named in the will, or a devisee named in the will. The affidavit must be notarized by the Clerk of Superior Court in the county of the decedent’s residence. Payment to the Clerk of Superior Court If neither a TIN or an Affidavit for Collection of Personal Property of Decedent form is provided as part of the request for payment, and the amount of gross wages is less than $5,000, or no known survivor is presented, then payment can be made to the Clerk of Superior Court for the county in which the decedent resided. The Clerk of Superior Court will not accept payments to an estate that elevate estate holdings beyond $5,000 in total. It is recommended that Payroll Officers or other agency or university staff members encourage survivors to either apply for a TIN or obtain an affidavit from the County Clerk of Superior Court. FICA Taxes For Social Security and Medicare tax purposes, salary and wage payments which are made by an employer to a third party on the behalf of a deceased employee after the calendar year in which the employee dies are not wages and should not be reported. Amounts earned by an employee and paid in the calendar year of his or her death are wages (to the deceased) and must be reported even though paid to a third party. Federal and State Income Taxes For federal and state income tax purposes, an employee’s tax year ends on the date of his or her death. Only salary or wage payments actually or constructively received up to the date of death are income to the deceased and subject to normal income tax withholding. These payments and any withheld taxes are to be reported on the deceased employee’s W-2 form, for the calendar year of the death. Payments made to a third party that represent unpaid compensation for services rendered by the decedent are not wages subject to federal or state income tax withholding. However, such amounts are included in the income of the estate or beneficiary, as appropriate, and must be reported on Form 1099-MISC, Statement for Recipients of Miscellaneous Income, as non-employee compensation in the calendar year received if $600 or more. If any deductions are processed against the payments made to the employee’s estate or beneficiary, the gross amount of the payment is reported on Form1099-MISC. Payments made to the Clerk of Superior Court must detail the gross amount less applicable deductions, but are not processed as 1099-MISC payments. Processing Payments in the Same Calendar Year as the Employee's Death Payroll Processing The gross of all payments due to the deceased is not subject to income tax withholding but is subject to FICA tax and retirement, if appropriate. The final payment is processed on a special payroll cycle and the balance of the payment, after FICA and retirement are deducted, is coded to deduction code 052, Reimbursement from Employee. The net pay amount must be zero. The amount of the 052 deduction is remitted to the agency by Central Payroll for deposit into a Payables Clearing account. All payments processed on the Central Payroll System are made payable to the deceased, not to the estate or the beneficiary of the deceased. Accounts Payable Processing The agency or university payroll office submits to Accounts Payable a request for payment to the estate, beneficiary, or Clerk of Superior Court. Payments to the Estate Payments made to the decedent’s estate are recorded with the gross pay coded as 1099-MISC reportable using the estate’s TIN as follows:
Payments are written to “The Estate of (deceased employee’s name), (personal representative’s name), Personal Representative.” Payments to the Beneficiary Payments made to the decedent’s beneficiary are coded using the beneficiary’s Social Security Number as follows:
Payments are made payable to “The Beneficiary of (deceased employee’s name), (beneficiary’s name), Beneficiary.” Payments to the Clerk of Superior Court Payments made to the Clerk of Superior Court in the county of the decedent’s residence are not flagged as 1099-MISC payments, but the procedure is the same otherwise: Line 1: Gross amount of salary/wages with an appropriate tax code (1099-MISC reportable) It is important that the payment remittance advice indicate that the payment is on the behalf of a deceased employee. All lines on the Accounts Payable transactions are charged to the same Payables Clearing account to which the original deposit was made. The net amount of the Accounts Payable check should equal the amount previously deposited to the Payables Clearing account. The Accounts Payable remittance advice should include the employee’s name, social security number, and date of death. For example, John Doe dies on September 19 and the deadline for processing his paycheck has not passed. His gross earnings are $1,000.00. His earnings are processed on the payroll system as exempt from income tax withholding but subject to FICA tax and retirement. The personal representative provides a TIN for the estate. The following transaction is processed in payroll:
Central Payroll remits the deduction code amount of $864.50 to the agency or university where it is deposited into a Payables Clearing account. The agency or university payroll office submits to Accounts Payable a request for payment to the deceased’s personal representative. The Accounts Payable check transaction is recorded as follows:
The Accounts Payable check is coded to the same account against which the original deposit was recorded and the balance in the Payables Clearing account should equal zero after the final payment is made:
Processing Payments in a Different Calendar Year from the Employee’s Death If the final payment is made in a different calendar year from the employee’s year of death, then no tax is applied. While the gross of all payments due to the deceased is not subject to income or FICA tax withholding, it may be subject to retirement, if appropriate. For liabilities that cross calendar years, processing payments more than ninety (90) days after the employee’s date of death, makes a retirement deduction and employer contribution optional. However, the payment of retirement contributions frequently provides a significant long term benefit to the deceased’s survivors. The final payment is processed on a special payroll cycle as tax exempt and the amount of the deduction (code 052) is for the full earnings, less applicable retirement. The balance of the payment, after retirement is deducted, is coded to deduction code 052, Reimbursement from Employee. The net pay amount must be zero. The amount of the 052 deduction is remitted to the agency by Central Payroll for deposit into a Payables Clearing account. All payments processed on the Central Payroll System are made payable to the deceased, not to the estate or the beneficiary of the deceased.ble retirement. Accounts Payable Processing The agency or university payroll office submits to Accounts Payable a request for payment to the estate, beneficiary, or Clerk of Superior Court. Payments to the Estate Payments made to the decedent’s estate are recorded with the gross pay coded as 1099-MISC reportable using the estate’s TIN as follows:
Payments are written to “The Estate of (deceased employee’s name), (personal representative’s name), Personal Representative.” Payments to the Beneficiary Payments made to the decedent’s beneficiary are coded using the beneficiary’s Social Security Number as follows:
Payments are made payable to “The Beneficiary of (deceased employee’s name), (beneficiary’s name), Beneficiary.” Payments to the Clerk of Superior Court Payments made to the Clerk of Superior Court in the county of the decedent’s residence are not flagged as 1099-MISC payments, but the procedure is the same otherwise:
It is important that the payment remittance advice indicate that the payment is on the behalf of a deceased employee. All lines on the Accounts Payable transactions are charged to the same Payables Clearing account to which the original deposit was made. The net amount of the Accounts Payable check should equal the amount previously deposited to the Payables Clearing account. The Accounts Payable remittance advice should include the employee’s name, social security number, and date of death. For example, John Doe dies on December 16 and the deadline for processing his paycheck has not passed. His gross earnings are $1,000.00. His earnings are processed on the payroll system as exempt from income and FICA tax withholding but subject to retirement. The following transaction is processed in payroll:
Central Payroll remits the deduction code amount of $940.00 to the agency or university where it is deposited into a Payables Clearing account. The agency or university payroll office submits to Accounts Payable a request for payment to the deceased’s personal representative. The Accounts Payable check transaction is recorded as follows:
The Accounts Payable check is coded to the same account against which the original deposit was recorded and the balance in the Payables Clearing account should equal zero after the final payment is made:
More information related to estate procedures is available in the North Carolina Estate Procedure Pamphlet at www.nccourts.org.
The agency Personnel Office is responsible for submitting to the agency's Payroll Office a PD-105 indicating the reason for separation and the number of leave hours payable to the separating employee. Accrued leave payments must be processed with the employee's last regular salary payment or on the next payroll processing cycle. Retirement, federal, state, and social security taxes are deducted from the leave payment, if applicable. The tax rate applied uses the employee's exemption elections. The calculation for accrued leave payment follows:
The calculation for bonus leave payment follows:
A salaried employee that separates from a state agency for the purpose of employment at another state agency is not eligible to receive payment for accumulated leave. All leave balances, including vacation, sick, and bonus leave, are transferred with the employee to the hiring agency. Deductions, however, do not transfer and the transferring employee is required to complete new deduction request forms for all appropriate deductions, including new W-4 and NC-4 forms. To avoid a lapse in deductions and to notify the hiring agency of any garnishments or levies, the employee may be provided a screen print (signed by the employee and the Payroll Officer) of all deductions applied at the previous agency, which may be used when adding the employee to the payroll system until new forms are completed. The income tax status of a transferring employee is dependent on the timing of salary payments at each agency. During the month in which the transfer becomes effective:
In both of these scenarios, the employee is taxed using the exemptions claimed on the W-4 and NC-4 forms. Any supplemental payments (bonuses, premium pay, etc.) made to the employee by the previous agency that are not processed with the employee's regular (prorated) salary amount are taxed using the current flat rate available at: http://www.ncosc.net/sigdocs/sig_docs/payroll/OSCPXA09_2005_Quick_Tax_Calculation_Sheet.pdf If the hiring agency cannot process the employee's payment during the first monthly payroll the employee is hired, then any prorated salary payments made to the employee by the hiring agency after the first C&R are also taxed using the current flat rate at: http://www.ncosc.net/sigdocs/sig_docs/payroll/OSCPXA09_2005_Quick_Tax_Calculation_Sheet.pdf
This policy applies to all state entities.
There are no exceptions to this policy.
There are no special terms for this policy.
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