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Medicare Pickup and Retirement Pickup

How Is It Calculated?
How To Correct When It’s Been Missed?
Common Mistakes?
How Can This Be Avoided?
Resources?

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Medicare Pickup

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How is Medicare Pickup Calculated?

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Calculating Medicare Pickup

Medicare Pickup Applicable Gross Calculation:

Find Total Qualifying Annuity Amount.

All Section 125 Annuities + HSA Amounts

Calculate Medicare Applicable Gross.

(Gross - Total Annuity Amount)/98.55%

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Calculating Medicare Pickup

Employee Medicare Pickup Withholding Calculation:

Applicable Gross x 1.45%

Employer Medicare Pickup Withholding Calculation:

Applicable Gross x 1.45%

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Calculating Medicare Pickup

Example:

Employee is paid a Total Gross of $6,666.67.
Total Annuities (Section 125 Annuities and HSA) equals $130.00 ($90.00 + $40.00).

Calculation is as follows:

$6,666.67 - $130.00 = $6,536.67

$6,536.67/98.55% = $6,632.85 Applicable Gross

$6,632.85 x 1.45% = $96.18 x 2 = $192.36 Amount Withheld

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Calculating Medicare Pickup

What Happens With the Medicare Pickup Amount?

If an employee has full Medicare pickup, the Medicare Pickup Amount Withheld is added to the Total Gross and Applicable Gross on the Federal, State, City (if applicable and configured), and OSDI (if applicable) Payroll Items.

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Deeper Into City Taxing

How Do the Tax Employer Amounts and Medicare Pickup Flags on the City Payroll Item Work?
If the City Payroll Item Configuration>Employer Paid Amounts To Be Taxed>Tax Employer Paid amounts for these Payroll Items includes Medicare and the Tax Employer Amounts checkbox is marked, then the amount is treated as taxable wages and taxes are withheld each payroll..

10/72020

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Deeper Into City Taxing

If the City Payroll Item Configuration>Medicare Employer Paid Amounts To Be Taxed>Tax Employer Paid amounts for these Payroll Items does not include Medicare and the Tax Employer Amounts checkbox is marked, then the flag is ignored..

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Deeper Into City Taxing

If the City Payroll Item Configuration>Medicare Pickup checkbox is marked, the City Taxable Gross amount is increased by the Medicare pickup amount when employee’s W2 is created. The tax is not withheld on a per pay basis. The employee pays the taxes on this amount when they file their tax return.

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Deeper Into City Taxing

If the City Payroll Item Configuration>Employer Paid Amounts To Be Taxed>Tax Employer Paid amounts for these Payroll Items includes Medicare and the Tax Employer Amounts checkbox is marked and the Options>Medicare Pickup checkbox is marked, the Medicare Pickup checkbox is ignored, and the city tax is withheld each payroll.

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How Medicare Pickup Looks on Quarter Report/W2 Report vs Earnings Register

10/7/220

Earnings Register: $6,666.67 and Medicare Amount is $96.18 + $96.18

W2 Report:

Quarter Report:

Medicare Applicable Gross =

Total Gross - Section 125 - HSA/98.55%

W2 Report adds Medicare Pickup

to Federal Total Gross and

Applicable Gross, State Total and

Taxable Gross.

REMEMBER:

Section 125 Total includes HSA amount.

$90.00 + 40.00 = $130.00

Quarter Report:

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When Medicare Pickup Was Missed

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Payroll Item Error Adjustments

Go to Medicare Payroll Item:

Remove the 1.4500 amount in the Rate field
Update the amount in the Employer Rate to be 2.9000.

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Payroll Item Error Adjustments

In the Error Adjustments section, click Create.

Amount - Enter the original amount of employee Medicare withheld from the employee as a negative.
Date - Leave blank.
Description - Enter a description for auditing purposes.
Click Save.

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Payroll Item Error Adjustments

In the Employer Error Adjustments section, click Create.

Amount - Enter the original amount of board paid Medicare that was withheld by the board as a negative.
Date - Leave blank.
Description - Enter a description for auditing purposes.
Pickup - Checkbox unmarked.
Clicke Save.
Click Save.

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Payroll Item Error Adjustments

In the Employer Error Adjustments section, click Create.

Amount - Enter the amount of employee Medicare that should have been paid by board as a positive.

This is not the same amount as the amount refunded to the employee.

Date - Leave blank.
Description - Enter a description for auditing purposes.
Pickup - Mark the checkbox.
Click Save.

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Payroll Item Error Adjustments

In the Employer Error Adjustments section, click Create.

Amount - Enter the amount of board paid Medicare that should have been paid by board as a positive.

This is not the same amount as the amount refunded to the employee.

Date - Leave blank.
Description - Enter a description for auditing purposes.
Pickup - Leave checkbox unmarked.
Click Save.

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Payment That Should Have Included Medicare Pickup

Medicare Applicable Gross = $6,666.67 - $130.00 =$6,536.67

Medicare Withholding = $6,536.67 X 1.45% = $94.78

Medicare Amount Was:

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Quarter Report Prior to the Refund/Error Adjustments

$6,536.67

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W2 Report Prior to the Refund/Error Adjustments

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Payment That Should Have Included Medicare Pickup

Medicare Applicable Gross = $6,666.67 - $130.00 =$6,536.67

Medicare Withholding = $6,536.67 /98.55% = $6,632.54 X 1.45% = $96.18

Medicare Amount Should Have Been:

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Pay Report That Includes the Refund/Error Adjustments

Employee Error Adjustment = $-94.78
Employer Error Adjustment = -$94.78 without Pickup checkbox marked
Employer Error Adjustment = $ 96.18 with Pickup checkbox marked
Employer Error Adjustment = $96.18 without Pickup checkbox marked

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Quarter Report After the Next Payment That Includes the Refund

Medicare Amount Was:

$6,632.85

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W2 Report After the Next Payment That Includes the Refund

$6,632.85 + $6,632.85 = $13,265.70

$13,265.70 - $13,169.52 = $96.18

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Necessary Core>Adjustments

Core>Adjustment using Type Applicable Gross $96.18 needs to added.

New Checkbox -

Apply To Employer Pickup

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Quarter Report After the Next Payment That Includes the Refund

**Core>Adjustments can now be used to update the Applicable Gross to correctly report the Employee Contribution and Employer Pickup values.**

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W2 Report After the Error Adjustment

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Common Oversights

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Common Oversights with Medicare Pickup Corrections

If an employee has more than one Position/Compensation and has Section 125 and/or HSA Payroll Items, the system calculates a percentage of gross for each Position/Compensation to determine what percentage of the annuities applies to each.

The system does not have the ability to withhold Medicare pickup on OSDI Payroll Items - like City Tax Payroll Items.

USPSRFB-1903

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Common Oversights with Medicare Pickup Corrections

The employee is refunded the amount withheld and the same amount is added as the employer amount.

Medicare Pickup checkbox is not marked when the Core>Adjustment is created.

The system does not use the value in the Medicare Payroll Item>Rate (or Additional With Holding) field to calculate Medicare withholding. Instead, Medicare is withheld according to the system’s tables and the Employer Rate value (to determine the amount of pickup).

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Retirement Pickup on Pickup

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How is Retirement Pickup on Pickup Calculated?

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Calculating Retirement Pickup on Pickup

Two Types of Retirement Pickup on Pickup:

Pickup -> Benefit is not treated as compensation.

Pickup -> Benefit is treated as compensation.

Rate/Employer Rate

Values

Increased Compensation Checkbox

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Calculating Retirement Pickup on Pickup

Pickup -> Benefit is not treated as compensation:

SERS:

400 Payroll Item with 14.00% in the Employer Rate field and the Increased Compensation checkbox is not marked.

690 Payroll Item with the 10.00% in the Employer Rate field.

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Calculating Retirement Pickup on Pickup

Pickup -> Benefit is not treated as compensation:

SERS’s Example ->

Payment Details:

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Calculating Retirement Pickup on Pickup

Pickup -> Benefit is not treated as compensation:

STRS:

450 Payroll Item with 14.00% in the Employer Rate field and the Increased Compensation checked is not marked.

691 Payroll Item with the 14.00% in the Employer Rate field.

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Calculating Retirement Pickup on Pickup

Pickup -> Benefit is not treated as compensation:

STRS’s Example ->

Payment Details:

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Calculating Retirement Pickup on Pickup

Pickup -> Benefit is treated as compensation:

SERS:

400 Payroll Item with 15.40% in the Employer Rate field and the Increased Compensation checkbox marked.

14.00 X 10% = 1.40%
14.00 + 1.40 = 15.40%

690 Payroll Item with the 11.00% in the Employer Rate field.

10.00 X 10% = 1.00%
10.00 + 1.00 = 11.00%

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Calculating Retirement Pickup on Pickup

Pickup -> Benefit is treated as compensation:

400 Payroll Item

690 Payroll Item

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Calculating Retirement Pickup on Pickup

Pickup -> Benefit is treated as compensation:

$2,627.68 Total Gross and Applicable Gross

$289.04 Employer Amount

690 ->

400 ->

$2,890.40 Total Gross and Applicable Gross

$404.66 Employer Amount

Payment Details:

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Calculating Retirement Pickup on Pickup

Pickup -> Benefit is treated as compensation:

SERS’s Example ->

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Calculating Retirement Pickup on Pickup

Pickup -> Benefit is treated as compensation:

STRS:

450 Payroll Item with 15.96% in the Employer Rate field and the Increased Compensation checkbox marked.

14.00 X 14% = 1.96%
14.00 + 1.96 = 15.96%

691 Payroll Item with the 15.96% in the Employer Rate field.

14.00 X 14 = 1.96%
14.00 + 1.96 = 15.96%

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Calculating Retirement Pickup on Pickup

Pickup -> Benefit is treated as compensation:

450 Payroll Item

691 Payroll Item

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Calculating Retirement Pickup on Pickup

Pickup -> Benefit is treated as compensation:

$4,710.90 Total Gross and Applicable Gross

$751.86 Employer Amount

691 ->

450 ->

$5,370.43 Total Gross and Applicable Gross

$751.86 Employer Amount

Payment Details:

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Calculating Retirement Pickup on Pickup

Pickup -> Benefit is treated as compensation:

STRS’s Example ->

$5,370.43 Earnings

$751.86 Employer Pickup

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When Retirement Pickup on Pickup Is Missed

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SERS/STRS Corrections

Software Updates…..

To assist retirement payroll items being missed, several warnings have been added to the Pay Error Report.

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SERS/STRS Corrections

Warning - No payroll items are being withheld for Employee #: XXXXXXXXX.
Warning - Active STRS payroll item exists with no employee rate and no active STRS Annuity or Employer STRS payroll item exists for Employee #: XXXXXXXXX.
Warning - Active SERS payroll item exists with no employee rate and no active SERS Annuity or Employer SERS payroll item exists for Employee #: XXXXXXXXX Position #: X. Employer SERS payroll item exists for Employee #XXXXXXXXX: Position #: X
Warning - No active STRS payroll item exists for Employee #: Position X with Retirement Code STRS.
Warning - No active SERS payroll item exists for Employee #: Position X with Retirement Code SERS.

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SERS/STRS Corrections

Warning - Multiple active SERS payroll items exists for Employee #: (employee #), (employee name) Position #: (position # )
Warning - Multiple active Employer SERS payroll items exists for Employee #: (employee #), (employee name) Position #: (position # )
Warning - Multiple active STRS payroll items exists for Employee #: (employee #), (employee name) Position #: (position # )
Warning - Multiple active Employer STRS payroll items exists for Employee #: (employee #), (employee name) Position #: (position # )

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SERS/STRS Corrections

If the Increased Compensation checkbox is marked and the correct percentages are entered on the retirement payroll items:

The Total Gross and Applicable Gross on the 400/450 Payroll are inflated.

The Total Gross and the Applicable Gross on the 690/691 are not inflated.

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SERS/STRS Corrections

If the Increased Compensation checkbox is marked and the correct percentages are entered on the retirement payroll items:

The STRS Per Pay Report uses the 450>Total Gross value (the inflated amount) to list the Member Earnings and the Employer Pick Up is calculated by using the 591/691>Amount withheld field(s).

The Member Earnings are not included in the per pay submission file. The contributions are included - which are ‘withheld’ at the inflated amount. STRS calculates the earnings.

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SERS/STRS Corrections

If the Increased Compensation checkbox is marked and the correct percentages are entered on the retirement payroll items:

The SERS Per Pay Report uses the 400>Total Gross value to report the Member Earnings and the Employer Pick Up uses the 590/690>Amount withheld field(s).

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Retirement Pickup on Pickup Correction Scenarios

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SERS/STRS Corrections

What Happens if the Correct Percentages Were Used, but the Increased Compensation checkbox was not marked?

A Core>Adjustment to the 400/450 Payroll Item using the Type of Total Gross and Applicable Gross should be created.

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SERS/STRS Corrections

What Happens if the Incorrect Percentages Were Used, but the Increased Compensation checkbox was marked?

Total Gross,Applicable Gross, and Employer Amount on the 400/450 Payroll Item would not be correct.

Amount Withheld would on the 690/691 would not be correct.

Error Adjustments for the withholding side would need to be created and Core>Adjustments for the Total Gross, Applicable Gross would need to be created.

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SERS/STRS Corrections

What if Pickup on Pickup Were ‘Withheld’ From A Payment (like Severance) and Should Not Have Been?

Void the USAS disbursement and process a PO/disbursement for the correct amount.

Create a Core>Adjustment for the 400/450 Payroll Item using the Board's Amount of Payroll Item Type.

Create a Core>Adjustment for the 690/691 Payroll Item using the Board’s Pickup Amount of Payroll Item Type.

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SERS/STRS Corrections

What if Pickup on Pickup Were ‘Withheld’ From A Payment (like Severance) and Should Not Have Been?

Create Employer Error Adjustments on the 400/450 Payroll Item and the 690/691 Payroll Item as a negative value.

Create Core>Adjustments:

Payroll Item 400/450 with the Type Total Gross as a negative.
Payroll Item 400/450 with the Type Applicable Gross as a negative.
Payroll Item 400/450 with the Type Board’s Amount of Payroll Item as a negative.
Payroll Item 690/691 with the Type Total Gross as a negative.
Payroll Item 690/691 with the Type Total Applicable as a negative.
Payroll Item 690/691 with the Type Board’s Pickup Amount of Payroll Item as a negative.

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SERS/STRS Corrections

What if Pickup on Pickup Was Missed?

Refund the employee the 590/591 retirement amount withheld from the employee that shouldn’t have been.

Calculate the 690/691 retirement amount that should have been withheld.

Enter an Employer Error Adjustment for the 690/691 amount (as a positive).

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SERS/STRS Corrections

What if Pickup on Pickup Was Missed?

Add Core>Adjustments for the 590/591 Payroll Item for the Amount Withheld (as a negative). The Amount Withheld To-Date fields should be zero.

Add Core>Adjustments for the 590/591 Payroll Item for the Total Gross and Applicable Gross (as a negative). The Total Gross and Applicable Gross To-Date fields should be zero.

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SERS/STRS Corrections

What if Pickup on Pickup Was Missed?

Add a Core>Adjustment for the 400/450 Payroll Item for the Total Gross, Applicable Gross, and Board’s Amount of a Payroll Item for the difference in what the amount(s) were and what they should have been (as positives).

Post a 590/591 Payables Adjustment to offset the negative amount from the refund.

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SERS/STRS Corrections

What if Pickup on Pickup Was Missed?

There will be an amount owed to SERS/STRS for the difference in what was paid to SERS/STRS originally vs what should have been paid. This can be processed on the USAS side - along with account corrections.

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Common Oversights

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Common Oversights with Retirement Pickup Corrections

Miss creating the new, appropriate Payroll Items.

Incorrect percentages on the 400/450 and/or 690/691.

Increased Compensation checkbox isn’t marked.

Remember if the employee’s retirement pickup benefit is treated as compensation, the 400/450 Payroll Item>Increased Compensation checkbox must be marked and the Employer Rate needs to be inflated and on the 690/691 Payroll Item>Rate needs to be inflated.

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Common Oversights with Retirement Pickup on Pickup Corrections

Assigning Payroll Items at the Position level. Avoid unless a reason!

Core>Adjustments dates outside of the pay period begin and end dates.

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Let’s Work Together to Prevent This From Happening

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Collaboratively We Can….

Encourage employees to review their pay slips!
Use Payroll Item templates!!
Add setting up and verifying pickup to any and all checklists!!!

New Hire Checklists
Exiting Employee’s Checklists
Payroll Checklists
Month End Checklists
Calendar Year End Checklists
Fiscal Year End Checklists

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Collaboratively We Can…

Any chance you have, verify the information being sent to the reporting entities!!!!

Pay Reports
Pay Item Detail Reports
Payables Payment Reports and Payables Summary Reports
Retirement Reports
Quarter Reports

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