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395 - Payroll

Section: 395-10
Effective: 01/01/2003
Supersedes: 10/01/1982
Next Review Date: TBD
Issuance Date: 01/01/2003
Issuing Office: Business & Financial Services - Payroll

PPM 395-10 Policy [pdf format]
PPM 395-10 Supplement I [pdf format]


I.              RELATED POLICIES


A.            UCSD Policy and Procedure Manual (PPM)


200-21              Compulsory Health Insurance Program for Foreign Academic or Staff Employees


200-22              Unemployment Insurance


516-9.0             Workers' Compensation


B.            UCSD Policy and Procedure/Staff Personnel Manual (PPM/SPM)


250-415             Use of Sick Leave and Vacation:  Work-Incurred Injury or Illness 


250-775             Retirement


C.            Brochures


University of California Retirement System Plans


University of California Group Insurance for Employees and their Dependents


University of California Phased Retirement


II.             INTRODUCTION


The University's Payroll System automatically generates charges into the University's General Ledger representing employer contributions to various Employee Benefit programs.  A brief description of the programs funded by these charges and details of the computation and recording of these costs in the University's General Ledger is provided below.




The term “Employee Benefits” has several meanings within the University.  From the Personnel Office's point of view, it includes such items as vacation, sick leave, time off for jury duty and voting, and the merit and promotion programs. The cost of these is included in the Salary and Wages category of expense. In addition, Personnel also includes as Employee Benefits those programs paid entirely by the employee, but at a reduced rate due to the University's group purchasing power (i.e., accidental death and dismemberment, and automobile insurance).  However, within the University's accounting system the term “Employee Benefit Expenditures” includes only those programs described below which are paid in full or in part by the University and are recorded in the General Ledger as a non-payroll expenditure.



It should be noted that effective October 1, 1980, the San Diego Campus implemented a Vacation Accounting System to record vacation accruals and usage within departmental expenditure accounts. The current procedures for the Vacation Accounting System are set forth in Payroll Supervisor Don Suycott's letter to Administrative Staff, UCSD, and Departmental Timekeepers, dated May 11, 1981.


A.         Retirement


1.   University of California Retirement System


The University of California Retirement System (UCRS) is administered by The Regents of the University of California.


University academic staff eligible for membership in a retirement system are members of the University of California Retirement System (UCRS). However, due to a quirk in eligibility requirements prior to October 1, 1961, some faculty members carrying research titles were placed in the Public Employees Retirement System (PERS) and remain in that system today.


University staff employees hired on or after October 1, 1961, eligible for membership in a retirement system are members of the University of California Retirement System (UCRS).


Active members of the University of California Retirement System (UCRS), except safety class employees, had an opportunity on April 1, 1976 to coordinate their retirement system with the Federal Insurance Contribution Act (FICA) program (Social Security). All employees, except safety class employees, hired after April 1, 1976, who are required to belong to the University of California Retirement System (UCRS) are required to coordinate their retirement system with the Federal Insurance Contribution Act (FICA).


Additional compensation-Y Factor (compensation paid in addition to the base salary-X Factor), earned by Medical School Faculty who are members of the Medical School Clinical Compensation Plan is not covered compensation for regular retirement benefits. However, they are subject to a special retirement benefit if the benefit is paid from the plan's pooled income fund. The pay plan's incentive compensation-Z Factor is not covered compensation for any retirement purposes.


Faculty members in the Public Employees' Retirement System (PERS) have their special 3% contribution applied to the UCRS Fixed Annuity or, if they had requested, to the Variable Annuity plan. This special contribution is tax-deferred (not reported for tax purposes).


2.   Public Employees' Retirement System


The Public Employees' Retirement System (PERS) is administered by the State of California.


University staff employees hired before October 1, 1961, who were eligible for membership in a retirement system are members of the Public Employees' Retirement System, formerly called the State Employees' Retirement System (SERS).


Members of PERS had an opportunity, on November 30, 1961 and 1965 to coordinate their retirement system with the Federal Insurance Contribution Act (FICA) program (Social Security), formerly called Old Age Survivors, and Disability Insurance (OASDI).



The Public Employees' Retirement System also requires that the University of California pay an Administrative Service Charge for each PERS member working on a Federal contract or grant. As of July 1, 1972, this cost was no longer assessed as a direct charge to Federal contracts and grants, but is paid directly from a Systemwide account funded by an allocation of indirect cost recovery funds.


3.   Other Retirement Systems


On other campuses of the University of California there are employees who are members of two other retirement systems to which The Regents make matching contributions. Employees of the University's Agricultural Extension program who transferred from Federal Service prior to the inception of UCRS, are members of the Federal Civil Service Retirement System (FCSRS).


A few faculty members who belonged to the California State Teachers' Retirement System (CSTRS) prior to the inception of UCRS were permitted to remain in that system.


B.         Group Health Insurance


1.   Active Employee


Eligible University employees are permitted to participate in the University's Group Health Insurance Program. At the San Diego Campus, health plan coverage is available from one of the following organizations:


Blue Cross of Southern California


Prudential Health Care Plan


Kaiser Foundation Health Plan, Inc. - Southern California Region


Health Net


2.   Retirees


Effective January 1, 1977, the University initiated a policy to institute an equal assessment against all payrolls subject to retirement charges to cover the cost of the employer health insurance contribution for University retirees.


In the past, this cost has been covered by an appropriation of General Funds, irrespective of the fund source from which the employee has been previously paid. Owing to the increase in the cost of health insurance and the increasing number of retirees, and the fact that approximately one-half of this cost relates to employees retiring from other than general funds positions, this new policy was adopted.


C.         Group Dental Insurance


1.   Active Employee - Staff


Effective January 1, 1982, group dental insurance was offered to all eligible University of California employees. All employees were given the opportunity to enroll in one of two plans during the open enrollment period. Since that period, only new employees have been allowed to enroll in the dental insurance programs.


At the San Diego Campus, dental coverage is available from one of the following organizations:


Aetna Life and Casualty Co.


Safeguard Health Plans, Inc.


2.   Active Employee - Faculty


As noted above, all eligible UC employees were offered the opportunity to enroll in a dental plan. Those eligible faculty members who chose not to enroll in the group dental insurance program January 1, 1982 were automatically enrolled in an alternate benefit plan (binding through December 31, 1983). The alternate benefit plan is also available to new faculty members who elect not to participate in the dental program. Faculty members who enroll in dental insurance may cancel at any time, but are not then eligible for the alternate benefit.


The amount of the University contribution to be applied to the costs of the alternate benefit plan is determined by the faculty member's enrollment in health insurance.


3.   Retirees


For the same reason set forth for the Group Health Insurance Program in Section III.B.2. above, the dental program for annuitants is funded by assessing a set rate against all departmental payroll expenditures subject to retirement charges.


D.         Group Life Insurance


Effective July 1, 1974, each employee who is a member of a Retirement System other than the Public Employees' Retirement System is a recipient of $5,000 of employer paid term life insurance.


E.         Workers' Compensation Insurance


Eligible University employees are covered under the University's Workers' Compensation Insurance Program for injuries ``arising out of, or in the course of their employment.''  See PPM 516-9.0 for additional information.


F.         State Unemployment Insurance


Effective January 1, 1972, the University became subject to the California Unemployment Insurance Code. The administrative responsibility for this new employee benefit program was placed with the Unemployment Insurance Coordinator, located in the Staff Personnel Office, Bldg. 501, Warren Campus. See PPM 200-22 for additional information.


The cost of this program is paid for entirely by the University; there are no employee contributions involved.


Campus claims are paid by Systemwide, Controller's Office, from a risk sharing pool created by charges to departmental expenditure accounts. Claims are segregated by campus through the use of an employer account number assigned to each campus.


G.         Non-industrial Disability Insurance


Effective January 1, 1977, the University initiated a program to provide protection without cost through Non-industrial Disability Insurance (NDI) to eligible employees against the loss of income resulting from illness or accident not connected with employment. Employees may supplement this protection voluntarily by purchase of Short Term Disability Insurance (SDI). Both programs are designed to bridge the period between the end of salary continuance and the commencement of longer-term disability benefits under the University group life insurance and retirement programs, or both.


H.         Management Program Benefit Contribution


Effective October 1, 1979, University employees who were appointed to a position in the Management Program, title codes 0001-0799, became eligible for the Management Program Benefit Contribution. This benefit can be used in two ways. One, to reduce, or pay in full, expenses for certain voluntary insurance plans.  Or, two, to contribute to one of three programs in the UCRS Tax Deferred Annuity Plan.


I.          Phased Retirement


Phased retirement is a way for individuals to retire gradually by reducing their full-time employment commitment over a period of years. Effective July 1, 1980, University employees who are at least age sixty, and have twenty or more years of University service, may be considered for this program.


Unlike other employee benefits, the cost of the Phased Retirement Program will not be computed and charged to departmental accounts by the payroll system. Instead, the Accounting Office will prepare a financial journal entry to charge the fixed annual cost of the Phased Retirement Program to the appropriate departmental account.


IV.           PROCEDURE


A.         Rates


The University pays either all or a portion of the costs for the above programs based upon rates set forth in Supplement I.


B.         Operating Ledger  [Revised Effective 1/1/2003]


All Employee Benefit costs are recorded in the University's Operating Ledger to the same account/fund to which the gross salary is charged using ``Sub-budget 6'' and the appropriate object code related to the type of benefit.


The only exception to this rule is where the granting agency expressly prohibits the employee benefit charges as a direct expense against a particular grant (e.g., Federal Work Study, National Institute of Health Career Development Award). For these types of funds, departments will be required to provide an alternate unrestricted, discretionary fund to support the cost of Employee benefits. Once this information has been provided, a journal entry will be prepared to transfer the benefit cost.

                        [End Revision 1/1/2003]


C.         Computation


The computation of employee benefit charges is made by the UCSD Payroll System and reported monthly on the Distribution of Payroll Expense Report (D.O.P.E.). A copy of this report is maintained in each department as the official departmental record. In the report, the calculation of employee benefit charges is shown for each employee paid under a given account. Refer to Section III.I. regarding the special handling of the charges for the Phased Retirement Program.


D.         Recording and Distributing Costs


The expense distribution program is also the basis by which employee benefits are recorded (via Journal entry) in the departmental ledger and summarized by object code.  Refer to Section III.I. regarding the special handling of the charges for the Phased Retirement Program.




E.         Recording of Employee Benefit Liability


The expense distribution program credits various General Ledger liability accounts in amounts equal to the charges to departmental expenditure accounts.


The Accounting Office is responsible for reconciling these liability accounts and taking measures to remit or transfer these monies to the appropriate parties or accounts.