Info Circ 99-p-017 - Paycheck Adjustments

Effective with the implementation of SHARP v7.0 in October, 1998, bi-weekly deduction amounts are no longer maintained for Flexible Spending Account (FSA) deductions. Instead, FSA deductions are calculated by subtracting the year-to-date FSA deduction amount from the employee's annual pledge amount and then dividing by the number of payroll periods remaining in the calendar year (including the payroll period being processed). This change, coupled with the fact that all payroll adjustments are treated as current year activity, means that agencies will need to follow specific procedures in order to accurately process a paycheck adjustment when the original paycheck was issued in a previous calendar year and the paycheck contains an FSA deduction.

For paycheck adjustments, the off-cycle payroll process will determine which paycheck deductions to calculate based on the earnings end date of the paycheck being adjusted. In the case of FSA deductions, the off-cycle will select the maximum effective-dated FSA benefit information which is less than or equal to the earnings end date on the paycheck being adjusted. The 'Annual Pledge' and 'Contributions YTD' from this effective-dated row will be used in calculating the FSA deduction for the paycheck adjustment; however, the number of payroll periods remaining in the calendar year will be based on the payroll period in which the adjustment is being processed.

To illustrate:

EXAMPLE

On-cycle paycheck #123456 was originally issued on May 15, 1998 for an FLSA nonexempt employee for the payroll period ending 05/02/98; the paycheck is for the earnings periods 4/19/98 through 4/25/98 and 4/26/98 through 5/02/98. There are 17 payroll periods remaining in the calendar year (including the period ending 05/02/98) at the time the on-cycle is calculated. The employee is enrolled in FSA benefits; the employee's current FSA row is for coverage effective 01/01/98 and reflects the following information: annual pledge amount = $2600.00 and contributions YTD = $900.00. The FSA amount calculated on paycheck #123456 is $100.00

In February 1999, the agency realizes the paycheck needs to be adjusted due to shift differential being underreported for the employee for the payroll period ending 05/02/98. The FSA row for the coverage period effective 01/01/98 now reflects the following information: annual pledge amount = $2600.00 and contributions YTD = $2000.00. The agency requests a paycheck adjustment for paycheck #123456 in the second off-cycle for the payroll period ending 02/06/99; there are 23 payroll periods remaining in calendar year 1999 (including the period ending 02/06/99). The off-cycle will calculate the FSA deduction for the adjustment check as follows: ($2600 - 2000) / 23 = $26.09. This adjustment will result in an FSA refund of $73.91 to the employee. If the contributions YTD had been equal to $2600.00 (ie, the annual pledge amount), the refund would have been for $100.00.

To prevent erroneous FSA refund/arrearages from occurring on paycheck adjustments which are processed in calendar year 1999 for paychecks issued prior to 1999 which also contain an FSA deduction, the following procedures should be followed:

Prior to requesting the paycheck adjustment on-line, the agency should contact the Benefits Unit in the Division of Personnel Services and request that a deduction override amount be entered on the appropriate FSA benefit row for the employee. The override amount should be for the amount deducted on the original paycheck (in the example above, the override amount would be $100.00).
Once the override amount has been entered, the agency should enter the paycheck adjustment request.
After the off-cycle has been generated, verify that the adjustment processed correctly.

Page last modified on: June 29, 2012

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