CIPPS Introductory Payroll Training

Welcome to Introductory Payroll Training !

CIPPS Introductory Payroll Training

Introduction of Trainers
Housekeeping
» Parking
» Rest rooms
» Emergency exits
» Telephones
» Breaks
» Refreshments
» Restaurants (lunch)
» Alternatives should the computer or equipment fails
Questions
 CIPPS Introductory Payroll Training

Payroll Function Overview

CIPPS System Overview

 Payroll Function Overview

 Paying employees
 Management Review/Audit of
payroll entries
 Reconciliations
 Adjustments
 Payroll Function Overview

 Preparation of regulatory
information
 Processing court ordered
withholdings
Money
Money!!
Taxes
Taxes!!
Benefits
Benefits!!
 CIPPS Introductory Payroll Training

Importance of payroll to the agency

• Cost of Personal Services and Fringe Benefits as a
percent of total agency expenditures

• Employee morale is affected by payroll

administration

• Payroll controls and administration go beyond the

system
 CIPPS Introductory Payroll Training

Importance of Payroll Administration to Agency Fiscal

Management
• High exposure area of responsibility

• Opportunity for fraud, unauthorized entry into CIPPS

• High risk function

• Potential for error

• Safeguard of assets
 CIPPS Introductory Payroll Training

• Agency Fiscal Management must be the controlling

party to ensure the accuracy of payroll and payroll
related expenditures.

• Management Review, Establishment of Policy, and

Adherence to Procedures are integral controls outside of
the system

• Payroll Administration goes beyond payroll processing.

Paying employees is only one facet of the responsibilities
of Payroll Administration
 CIPPS Introductory Payroll Training

Payroll Administration is comprised of several facets of

responsibilities
• Compliance with Federal and State Tax laws and Regulatory
reporting

• Compliance with Federal Labor Law for FLSA and Wage and
Hour Laws

• Administration of Benefits for employees (Retirement,

Healthcare, Group Life and Leave)

• Accounting of Payroll and Benefit Expenditures in CARS

 CIPPS Introductory Payroll Training

Agency Liability for Non-Compliance with Federal and

State Regulations

• Penalties for late filings

• Federal Income Taxes owed for W-4’s improperly

processed

• Amounts for underwithholding of Garnishments

 Payroll Function Overview

TYPES OF EMPLOYEES
 Salaried - Classified/Faculty
 Automatic-no pay transaction is required to pay the
employee
 Paid a predetermined amount
 Virginia Personnel Act
 Paid at the end of each current pay period if semi-
monthly, and at the end of the month if monthly

...more
 Payroll Function Overview

TYPES OF EMPLOYEES cont.

 Salaried - Classified/Faculty

Payment for faculty extends over the length of

the contract 9, 10, 11, or 12 months and may be
paid on a monthly or semi-monthly basis

Entitled to receive state provided benefits (i.e.,

healthcare, retirement, etc.)
...more
 Payroll Function Overview

TYPES OF EMPLOYEES cont.

 Hourly - Wage-Non Automatic- pay transaction is
required to pay the employee.
 Paid a predetermined hourly rate for hours worked;
 Payment is for a prior pay period rather than current;
 Not entitled to state funded benefits;
 Limited to 1500 hours in an anniversary year, and
 Automatically eligible for overtime.
 Payroll Function Overview

TYPES OF PAYMENTS AND PAYROLL

CALCULATIONS

Salary payments
Wage payments
Overtime payments (FLSA impact)
Shift Differential payments
...more
 Payroll Function Overview

TYPES OF PAYMENTS AND PAYROLL

CALCULATIONS cont.
Special Pays for Supplemental Payments
Any additional money to be paid to an employee:
• Moving/Relocation,
• Workers Compensation,
• Disability Benefits,
• Leave Payouts, etc.
 Payroll Function Overview

TYPES OF PAYMENTS AND PAYROLL

CALCULATIONS cont.
Special Pays for Fringe Benefits

• Imputed Life - Considered a benefit by the

Federal government if a “salaried” employee’s
annual salary exceeds $25,000
• The calculation is based on the employee’s age
and his annual salary rounded up to the next
thousand and doubled
...more
 Payroll Function Overview

TYPES OF PAYMENTS AND PAYROLL CALCULATIONS

cont.
• Imputed Life cont.
FICA taxes must be calculated and withheld

No income taxes are withheld but the amount is added to all

federal and state compensation for the employee at year end
on their W-2
...more
 Payroll Function Overview

WITHHOLDINGS FROM PAY

• Types of Deduction Calculations
Fixed Dollar Amounts

Percentages
• Based on Net Pay
• Based on Gross Pay
• Based on a combination of pays (Regular
plus Special) ...more
 Payroll Function Overview

WITHHOLDINGS FROM PAY cont.

Taxes
Federal Income Tax (FIT)
• W-4 Form for withholding
• W-4’s claiming exempt status
• W-5 for EIC filing
...more
 Payroll Function Overview

WITHHOLDINGS FROM PAY cont.

Taxes
>State Income Tax (SIT) Virginia and
other states
• VA-4 Form for withholding

>Reciprocal Taxing ( i.e. Maryland)

• Local Income Tax Withholding
...more
 Payroll Function Overview

WITHHOLDINGS FROM PAY cont.

Taxes
Social Security withholding terms:
• FICA (OASDI and HI)
• OASDI Rate/Limit - 6.2% up to the established
limit stated on the Social Security Administration
website (SSA.GOV)

• Medicare only (HI)

• HI Rate/ Limit - 1.45% with no limit

...more
 Payroll Function Overview

MANDATORY DEDUCTIONS
Types of Court Ordered Deductions
»Garnishments
»Tax Levies
»Child/Spousal Support
»Bankruptcy
»Garnishment Fee
 Payroll Function Overview

MANDATORY DEDUCTIONS cont.

Court Ordered Deductions
 Priority of withholding when more than
one is presented for an employee

 Honoring the garnishment period, i.e.,

voiding the check if distribution has not
been made
...more
 Payroll Function Overview

MANDATORY DEDUCTIONS
 Guaranteed Minimum Net Rule

 Fixed amount or percentage of pay

calculation options

Administrative Fees
 Payroll Function Overview

VOLUNTARY DEDUCTIONS
Benefits/Voluntary Deductions
– Savings Bonds (Series EE & Series I)
– Combined Virginia Campaign
– Supplemental Insurances and Annuities
– Third-Party Administrator
– VPEP-Prepaid Education
– Parking
 Payroll Function Overview

Flex Spending Accounts

 Limits for Dependent Care and Medical
Reimbursement

 Reporting on W-2 at year end

 Applicable Tax Deferrals

 Administrative Fees associated with FSA’s

 Payroll Function Overview

Deferred Compensation and Annuities

§ Limit on withholdings for an annual

period

§ Applicable Tax Exclusion

 Payroll Function Overview

Healthcare
 Different providers available to State employees

 Applicable Tax Exclusion

 Rates are determined by DHRM

Direct Deposit
– Direct Deposit of a Fixed Amount or a
– Percentage of Net Pay
 Payroll Function Overview

FRINGE BENEFITS CALCULATED AS AGENCY

PAID DEDUCTIONS cont.
Retirement
LTD Premium
Retiree Health Care Credit
Pays on which retirement is calculated
Agency paid Healthcare
Entitlement periods over and above normal employment
period, i.e., LWOP, COBRA, SDP
Group Life Insurance
Types of Pay on which Group Life is calculated
 Payroll Function Overview

ONE-TIME ADJUSTMENTS TO CURRENT PAY

& WITHHOLDINGS (OVERRIDES)
May be used to make a one-time adjustment:
To increase/decrease/stop a deduction for the current
pay period
To increase/decrease/stop certain income taxes for
the current pay period
To correct an error in compensation that occurred in
a previous pay period
To pre-pay certain deductions, due to LWOP, other
than 12-months paid, or to satisfy any “balance due”
 Payroll Function Overview

ONE-TIME ADJUSTMENTS TO CURRENT PAY

& WITHHOLDINGS (OVERRIDES)

Situations that may require a DEDUCTION

Override:
• an incorrect amount was established in the
employee’s permanent record when the
deduction was set up
• the employee wishes to increase or decrease
the deduction for one pay period only
 Payroll Function Overview

ONE-TIME ADJUSTMENTS TO CURRENT PAY

& WITHHOLDINGS (OVERRIDES)
Situations that may require a TAX override:
An error occurred when establishing the
employee’s tax elections, resulting in excess
tax being withheld
Excess tax was withheld on a special payment
Payments that should have been paid as non-
taxable were taxed when paid, or vice versa
 Payroll Function Overview

ONE-TIME ADJUSTMENTS TO CURRENT PAY &

WITHHOLDINGS (OVERRIDES)
The override feature should not be used to:
¨ Adjust FICA taxes
¨ Change current period taxes - without written
authorization
¨ Change current period deductions - without
written authorization
¨ Reduce taxes or deductions because the
employee is “short of funds” this pay period
 Payroll Function Overview

CORRECTIONS FOR PRIOR-PERIOD ERRORS

Two types: 1). Paid and 2). Non-Paid
Why they are needed:
To correct errors that occurred in a prior pay
period that may require
 a refund of a tax or deduction
 updating the employee’s record to
reflect a payroll transaction that was
handled “outside” the payroll system
 Payroll Function Overview

CORRECTIONS FOR PRIOR-PERIOD

ERRORS

Paid Updates (P/M)

– Refund a deduction withheld in error

– Refund excessive/erroneous taxes -
including employer portion, where
applicable
 Payroll Function Overview

CORRECTIONS FOR PRIOR-PERIOD ERRORS

Non-Paid Updates (+ / -)

Record in employee’s earnings record any item

that was handled outside the payroll system
(such as using a petty cash account to handle a
payroll item)
 Payroll Function Overview

CORRECTIONS FOR PRIOR-PERIOD ERRORS

+ / - Non-Paid Updates
» Record in employee’s earnings record any item
that was handled outside the payroll system (such
as using a petty cash account to handle a payroll
item)
+ / - Non-Paid Updates
» Transfer dollars paid as one type of pay that
should have been another (i.e., paid as “regular” -
should have been paid as workers compensation)
 Payroll Function Overview

REVIEW OF EDIT REPORTS

– Certain employee record changes

– Wage and overtime payments
– Batch Totals - ensure balanced batches
– Deduction amounts and totals per deduction
– Review gross-to-net calculations
– Certify gross payroll total
 Payroll Function Overview

Review of Pay Period Reports

Payments causing employees to appear on an
“excessive payment” report
Reconcile:
 Payroll Expenditures to CARS
 Deduction Reports and Report 10

 Items identified by comparison of payroll data to DHRM’s

records (personnel data)

New Employee Report to VEC (for Social Services’ Division of
Child Support Enforcement)
 Payroll Function Overview

Other Period Responsibilities

-Payments to Third-Parties
-Void Check Processing
-“Special” interim payments
– Provide agency management with overview of all
current payroll/verification items
NOTE: Stop Payments for Lost or Stolen Checks
MUST BE PROCESSED BY THE TREASURER’S
OFFICE
 Payroll Function Overview

MONTHLY RECONCILIATIONS/REVIEWS

Taxable Wages and Taxes Withheld

Fringe Benefits
» VRS - Retirement/Group Life/
Long Term Disability
» Healthcare
Expenditures to CARS
 Payroll Function Overview

QUARTERLY RECONCILIATIONS/REVIEWS
– IRS - Required Reporting
Reconciliation of Tax Deposits
Quarterly Certification of
Wages and Taxes
– Unemployment Wage Reporting to VEC
– Certification to DOA that records are accurate
and 941 reporting if correct
(Quarterly Reconciliation and Certification Form)
 Payroll Function Overview

ANNUAL RECONCILIATIONS/REVIEWS
 All routine quarter reporting requirements apply
to the 4th quarter
 Annual Certification of taxable wages and taxes
withheld for W-2 preparation
 Reporting to Department of Taxation
 VEC Reporting
 Remittance of all Required Tax/Other Forms-
Reciprocal State withholdings
 Payroll Function Overview

RECORDS RETENTION -
Mandates Issued By:

Department of Labor - Wage & Hour Div Fair Labor Standards

Act (FLSA)

Internal Revenue Service (IRS)

Internet address-IRS.GOV
Circular E

Other Applicable Publications

 Payroll Function Overview

RECORDS RETENTION - cont.

Mandates Issued By:
Auditor of Public Accounts
Department of Accounts
Commonwealth Accounting Policies and
Procedures Manual (CAPP), Section
21005 Recommended Retention Schedule
Individual Agencies
 Payroll Function Overview

RECORDS RETENTION
Source Documents Include:
– Time Cards/Sheets
(FLSA requires 4 years retention)
– Tax Forms
– Personnel Authorizations (P-3’s)
– All Documentation for Payroll Changes
NOTE: Most regulations require retention for 5 years,
or until audited, whichever is later.
 Payroll Function Overview

RECORDS RETENTION

– AUDIT REPORTS
Payroll and Deduction Registers
Reconciliations
Tax Deposit Information
 CIPPS System Overview

CIPPS MASTERFILES
» Employee
» Tax
» Data Entry File
» Pending
 CIPPS System Overview

CIPPS MASTERFILES -
EMPLOYEE:

– Official Employee Payroll Record

– Biographical Information
– Rate of Pay and Pay Entitlements
– Standard Deductions
– Federal Tax Elections
 CIPPS System Overview

EMPLOYEE MASTERFILE
Types of Pay (Report 10 information):
Regular
Overtime
Shift Differential
Special Payments
Imputed Life
VSDP Benefit
GROSS PAY
 CIPPS System Overview

EMPLOYEE MASTERFILE
HOURS WORKED
» Regular Hours
» Overtime Hours
» Shift Hours
» Special Pay Hours
TYPES OF DEDUCTIONS:
» Health care
» Savings Bonds
» Parking
 CIPPS System Overview

TAX MASTERFILE
– State Tax Elections
– Taxable Wage Accumulations
» Federal Taxable and Non-Taxable Wages
» FICA Taxable Wages
» State Taxable Wages
» State Unemployment Wages
– Tax Accumulations
» Federal Income Tax (FIT)
» Social Security Tax (OASDI)/Medicare Tax (HI)
» State Income Tax (SIT)
 CIPPS System Overview

PENDING FILE
» Holding file for valid pay transactions awaiting execution
into pay
» Based on date of transaction and frequency in which
employee is paid

DATA ENTRY FILE

» Current Pay Transactions
– Hours/Dollars - Overtime
– Special Payments - Overrides
 CIPPS System Overview

BATCH
BATCH TRANSACTIONS
TRANSACTIONS
»»Represent
Representactions
actions to
to be
be taken
taken for
for one
one pay
payperiod
period
only
only
»»Receive
Receive limited
limited editing
editingwhen entered--
when entered
––Edits
Edits for
for valid
validemployee
employeenumber
numberonly
only
-- No
No online
online edits for::
edits for
•• Overtime
Overtime eligibility
eligibility
•• Employment
Employment Status
Status
•• Pay
Pay type
type valid
valid for
for company
company use
use
 CIPPS System Overview

EDIT PROCESSING AND CERTIFICATION

When all batch transactions have been entered,
request edit reports for the group(s) of
employees being paid
Edit Reports
» Batch totals for hours and pay amounts
» Errors not detected during entry of transactions
» Correction of errors, request another edit or
proceed to payroll processing
 CIPPS System Overview

CERTIFICATION/REQUEST PAY

– Review Masterfile Changes

– Ensure all batch totals agree with manually
calculated control totals
– Review gross-to-net payroll calculation on last
edit report (Pre-Calc Report 10)
– Online Certification Screen
– Pay Processing
 Pay Cycle Overview
Agency DOA Third Parties

Keys Data Produces Receive:

Edit Reports Reports
Interface Tapes
Requests Edit FAD Deposits
Processes Payroll Microfiche Tape
Computes Fringes
Corrects Errors Produces:
Reports
Dept of Treasury:
Warrants
Signs Warrants
Certifies Payroll Creates:
Releases Checks to
Agency Files
Agencies
History Files
Receives: Performs:
Reports Reconciliations
Checks
Sends Warrants to Treasury
Microfiche
Sends Reports to Agency
 CIPPS System Overview

DOA Responsibilities
 Schedules the processing of all payrolls

 Follows guidelines regarding State, Federal, and FICA taxing

 Establishes and controls security to the system

 Performs CIPPS/PMIS audit

 Ensures all certified payrolls are processed by the due date

...more
 CIPPS System Overview

 Ensures timely response to agency questions and concerns

 Provides technical training to agency personnel

 Provides on-site assistance when justified

 Maintains agency level data regarding deductions, special

payments, shift differentials, and reports

 Develops and coordinates changes to CIPPS

 Maintains the CAPP Manual

 CIPPS System Overview

Agency Responsibilities
 Provides accurate and timely payments of employees

 Collects and submits payroll documents for regular,

overtime, shift differential, etc.

 Authorizes and certifies payroll data

 Establishes proper telecommunication equipment, lines

and internal security ...more
 CIPPS System Overview

 Retains source documents, reports and other records

 Verifies and updates employee masterfile changes

 Ensures separation of payroll functions

 Reviews and verifies the Gross Pay Limit Exceeded

Report (CIPPS Report 59)

 Ensures timely submission of all mandated regulatory

reporting
 CIPPS System Overview

THIRD PARTIES IMPACTED BY CIPPS

OUTSIDE OF STATE
– Courts, Federal and State Tax Authorities
– Third-Party Administrators
– Financial Institutions and Credit Union
– Virginia Employment Commission (VEC)
– Virginia Retirement System (VRS)
– Department of Social Services (DSS)