El Segundo Unified School District 641 SHELDON STREET · EL SEGUNDO, CALIFORNIA 90245 (310) 615-2650 · FAX (310) 640-8272
Date SUPERINTENDENT GEOFF YANTZ, Ed.D
TO: Employees Receiving Earned Salary Advance (ESA) Warrants
BOARD OF EDUCATION ANN M. COLES ROBIN K. FUNK TAMMY R. TAGAMI-REEVES WILLIAM J. WATKINS, Ed.D. LISA C. WILKIN
FROM: Payroll SUBJECT: Change in ESA Payment Calculations The final net payment issued on January 5 or 10 will result in an amount which will not be identical A September 2007 ruling by the Internal Revenue Service (IRS) established a requirement for mandatory tax withholding on all Earned Salary Advance (ESA) payments. The Los Angeles County Office of Education (LACOE) has provided manual solutions for the calculations since that time but will be implementing system modifications which will provide automatic updates to employee tax records at time of payment. to Effective with the ESA payments issued on December 19 or 22, 2008, and, in order to comply with IRS regulations, the ESA will be calculated using the IRS approved supplemental wage-tax method. This method is currently used with Los Angeles County district supplemental payrolls and will be the standard tax method used with the ESA payment each month. ESA Gross Amount Currently, the ESA and final payment amounts are very similar. However, the ESA is not one-half of net earnings for the month but is an advance of one-half of the monthly salary rate, less pre-tax reductions. Other types of earnings, such as stipends, overtime, cash-in-lieu, etc. are included on the final payment received after the close of the month. An example comparing the old and new calculations for the ESA and final payments is attached. A sample pay stub is also included. December 19 or 22 ESA Change The ESA net payment received on December 19 or 22 should result in a generally higher net pay than the old ESA net amount. This is the result of system conversion and a one time only non-aggregate tax calculation. All subsequent ESA advance calculations will use the IRS aggregate tax calculation. January 5 or 10 ESA Change The final net payment issued on January 5 or 10 will result in an amount which will not be identical to the ESA net payment. It may be higher or lower, depending upon each employee’s personal earnings and deductions. All pre-tax and post-tax deductions will be taken from the final payment, as is currently done. Post-tax deductions include W-4 additional tax withholding, Roth 403(b), after-tax benefits, etc. Dedicated to providing students and the community with an optimum learning environment that prepares educated, productive, compassionate citizens to meet the challenges of a global society in the 21st Century.
Change in ESA Payment Calculations Date Page 2
For payments issued after January 10, 2009, it is important for employees to understand that the ESA and final payments will no longer be nearly identical amounts. If you have large post-tax deductions, the final payment will most likely be different than you have been used to before this change. However, the sum of these two net amounts for the month will be comparable to the full-month net amounts received with the old method. Pay Stubs The pay stub for the ESA advance will display the ESA gross, pay-period ending date, current and year-to-date employee and employer tax bases, current and year-to-date tax amounts, and net payment. The pay stub for the final will include complete detail for all earnings and wage adjustments, all pre-tax and post-tax withholding, current and year-to-date tax bases and taxes, and net pay. Questions regarding the ESA taxation calculations should be forwarded to the Payroll office at (310) 615-2650 x220 Tracy Adams. Any questions requiring additional research will be forwarded to LACOE for further action.
Attachment No. 1 Urg. Bul. No. 208 SFS-A29-2008-2009
ESA CHANGE COMPARISONS
EMPLOYEE: JOHN DOE
ISSUE DATE GROSS OASDI DED MEDI DED FWT SWT
ESA CALCULATIONS BEFORE CHANGES
22-Dec
10-Jan
$1,889.00
$7,117.00 -438.41 -102.53 -670.80 -175.85 -3,641.35 $2,088.06 $3,977.06
DEDUCTIONS AND REDUCTIONS
NET
EMPLOYEE: JOHN DOE
ISSUE DATE GROSS OASDI DED MEDI DED FWT SWT
$1,889.00 TOTAL NET
ESA CALCULATIONS BEFORE CHANGES 25-Jan 10-Feb $1,889.00
DEDUCTIONS AND REDUCTIONS
NET
$1,889.00 TOTAL NET
7117.00 -438.41 -102.53 -670.80 -175.85 -3641.35 2088.06 $3,977.06
ESA CALCULATIONS AFTER CHANGES
ISSUE DATE GROSS OASDI DED MEDI DED FWT SWT
22-Dec
10-Jan
$2,931.00 -181.72 -42.50 -231.10 -33.54
$7,117.00 -256.68 -60.03 -231.15 -33.55 -4,683.35 $1,852.24 $4,294.38
DEDUCTIONS AND REDUCTIONS
NET $2,442.14 NEW TOTAL NET
ESA CALCULATIONS AFTER CHANGES 25-Jan 10-Feb
ISSUE DATE GROSS OASDI DED MEDI DED FWT SWT
2931.00 -181.72 -42.50 -439.65 -142.29
DEDUCTIONS AND REDUCTIONS
NET 2124.84 NEW TOTAL NET
7117.00 -256.68 -60.03 -231.15 -33.55 -4683.35 1852.24 $3,977.08
NOTE: Large after-tax deductions will be taken only on the final payment for each month. These would include withholding for Roth 403(b), credit union, additional W-4, and flat federal and state withholding, etc.
Attachment No. 2 Urg. Bul. No. 208 SFS-A29-2008-2009
SCHOOL DISTRICT OF LOS ANGELES COUNTY
PAY LOCATION
12345 XYZ SCHOOL DISTRICT EMPLOYEE NAME
EMPLOYEE ID
JOHN DOE
XXX-XX-0000
EARNINGS – COMPENSATION BASIS
DESCRIPTION
NL
ESA
PAY CYCLE
113
E4M
ADVICE DATE
ADVICE NUMBER
01-25-2009
1001000
FEDERAL STATUS /ALLOWANCES
STATE STATUS / ALLOWANCES
ADDITIONAL STATE ALLOWANCES
M / 01
M / 01
00
DEDUCTIONS/TAXES/MISC END DATE
RATE
01-31-2009
UNITS
7,117.00
AMOUNT
EMPLOYEE DEDUCTIONS
2931.00
CURRENT AMOUNT
YTD TOTALS
PRE-TAX REDUCTIONS
EMPLOYEE DEDUCTIONS
OASDI DED MEDCAR DED FWT SWT
181.72 42.50 439.65 142.29
620.12 145.03 1,191.90 413.38
181.72 42.50 8.79
620.12 145.03 30.14
EMPLOYER CONTRIBUTIONS
OASDI CON MEDCAR CON SUI
****** LEAVE BALANCES ******
CURRENT TAXABLE BALANCES
YTD TAXABLE BALANCES
VACATION SICK LEAVE COMP TIME
FEDERAL STATE MEDI GROSS OASDI GROSS CA SDI GROSS GROSS EARN’S
FEDERAL STATE MEDI GROSS OASDI GROSS CA SDI GROSS GROSS EARN’S
2,931.00 2,931.00 2,931.00 2,931.00 2,931.00
DISTRICT NAME
DISTRICT ADDRESS
XYZ SCHOOL DISTRICT
12345 MAIN STREET
SCHOOL DISTRICT OF LOS ANGELES COUNTY
PAY LOCATION
EMPLOYEE ID
XXX-XX-0000
EARNINGS – COMPENSATION BASIS
DESCRIPTION
NM
REGULAR
2,931.00
10,048.00
NET PAY
2,124.84
PAY CYCLE
113
JOHN DOE
GROSS PAY REDUCTIONS TAXES DEDUCTIONS
806.16
LOS ANGELES, CA 90000
12345 XYZ SCHOOL DISTRICT EMPLOYEE NAME
CURRENT PAY SUMMARY
8,793.31 8,793.31 10,002.00 10,002.00
E4N
ADVICE DATE
ADVICE NUMBER
02-10-2009
1001001
FEDERAL STATUS /ALLOWANCES
STATE STATUS / ALLOWANCES
ADDITIONAL STATE ALLOWANCES
M / 01
M / 01
00
DEDUCTIONS/TAXES/MISC END DATE
01-31-2009
RATE
7,117.00
UNITS
23.00
AMOUNT
7,117.00
EMPLOYEE DEDUCTIONS
CURRENT AMOUNT
YTD TOTALS
EMPLOYEE DEDUCTIONS PRE-TAX DEDUCTIONS
PERS RED ESA 125 KAISER DELTA PPO TSA 8303
558.69 2,931.00 24.00 22.00 650.00
1,117.38 5,862.00 48.00 44.00 1,300.00
256.68 60.03 231.15 33.55 290.00 204.00 3.66
867.80 205.06 1,713.05 650.93 580.00 408.00 7.32
859.52 256.68 60.03 50.00 12.56 441.25 931.43
1,719.04 876.80 205.06 100.00 42.70 882.50 1,862.86
EMPLOYEE DEDUCTIONS
OASDI CON MEDCAR CON FWT SWT ADD FWT ADD SWT LINA EMPLOYER CONTRIBUTIONS
PERS CON OASDI CON MEDCAR CON TSA 8303 SUI WORK COMP BENEFITS RETIREE BN ****** LEAVE BALANCES ******
CURRENT TAXABLE BALANCES
YTD TAXABLE BALANCES
VACATION SICK LEAVE COMP TIME
FEDERAL STATE MEDI GROSS OASDI GROSS CA SDI GROSS GROSS EARN’S
FEDERAL STATE MEDI GROSS OASDI GROSS CA SDI GROSS GROSS EARN’S
2,931.31 2,931.31 4,140.00 4,140.00 7,117.00
DISTRICT NAME
DISTRICT ADDRESS
XYZ SCHOOL DISTRICT
12345 MAIN STREET
Attachment No. 3 Urg. Bul. No. 208 SFS-A29-2008-2009
CURRENT PAY SUMMARY
11,724.62 11,724.62 14,142.00 14,142.00
GROSS PAY REDUCTIONS TAXES DEDUCTIONS
7,117.00 4,185.69 1,075.41 3.66
14,234.00
NET PAY
1,852.24
LOS ANGELES, CA 90000
