State Retirement Agency

1. State Retirement Agency Payroll Reporting Education Project Welcome Presenter: Laura Gorrell Presented: April 25, 2008

2. State Retirement Agency Overview This recorded presentation is a result of several live presentations held throughout the State of Maryland in 2007. The purpose of these presentations was to assist staff of participating employers to report their pension payroll data on an accurate and timely basis to the Maryland State Retirement Agency. Incorporated in this recorded version are many of the common questions that were asked during the live presentations. Agenda: * Introduction * Eligibility/Enrollment * Reporting * Adjustments

3. State Retirement Agency Introduction SRA’s Mission To administer the survivor, disability, and retirement benefits of the System’s participants, and to ensure that sufficient assets are available to fund the benefits when due. Vision A state that provides a fully-funded retirement system that is affordable to all participating employers and provides guaranteed adequate disability, survivor, and retirement benefits.

4. State Retirement Agency Introduction State Retirement Agency (SRA) Administers the SRPS Goals of SRA’s Administration of the SRPS: - Efficiently collect the required employer and employee contributions necessary to fund the System - Prudently invest assets to optimize returns while controlling risks - Effectively communicate to participants the benefits provided by the System - Pay benefits accurately and on time

5. State Retirement Agency Introduction SRA Needs… - Accurate enrollment and payroll data from employers - Timely reporting of this data in the proper formats In Order to… - Effectively communicate to participants and accurately pay monthly benefits to retirees.

6. State Retirement Agency Introduction You Need… - Up-to-date instructions (Employer Payroll Reporting Manual) - Clear understanding of expectations - Support for when you have questions In Order to… - Help ensure that members receive accurate information and retirees receive accurate payments.

7. State Retirement Agency Introduction Why this workshop? -To ensure that employers know how to properly enroll members, report payroll data and make adjustments to data when needed -To provide a forum to discuss reporting issues common to all employers -To strengthen the partnership between SRA and the employers -To help prepare SRA and employers for new requirements that will become effective with future phases of SRA’s new automated system, Maryland Pension Administration System (MPAS)

8. State Retirement Agency SRA is currently involved in a major technology project to replace its current Legacy computer system. This first phase of this new system, Maryland Pension Administration System (MPAS), will be put into place in 2009. MPAS will ultimately impact the way SRA processes incoming payroll data from the employers, but nothing will change before 2009. By ensuring that employers are submitting payroll data in the correct format now, any transition to MPAS requirements should be an easy and smooth process for SRA Payroll Team and the employers. Introduction 8

9. State Retirement Agency Introduction Project Goals: * Communicate up-to-date payroll reporting information to employers * Improve accuracy and timeliness of enrollment and payroll data * Provide a forum for discussion of issues related to enrollment and payroll

10. State Retirement Agency Eligibility/Enrollment Topics: - Who is eligible? - Enrollment Process - Consequences of Incomplete Enrollment - Employers’ Responsibilities - Common Enrollment Issues

11. State Retirement Agency Eligibility/Enrollment Who is eligible to participate? SRPS membership is mandatory for all employees who meet the following eligibility criteria: - Regular, full-time employees - Regular, part-time employees who are budgeted to work at least 500 hours/year or who actually work 500 hours in a fiscal year (retroactive to the beginning of the FY) An employee who meets these criteria cannot reject membership; they must be enrolled.

12. State Retirement Agency Common Questions 1. What do I do if I have an employee that was not budgeted to work at least 500 hours in the fiscal year, but works more than what was expected and exceeds 500 hours worked? 2. What do I do if I have an employee who was budgeted to work at least 500 hours in the fiscal year, but ends up working less than less than 500 hours? 3. What do I do if a person was properly enrolled in a prior fiscal year and was working at least 500 hours, but I know going into this fiscal year that they will not work at least 500 hours? Eligibility/Enrollment 12

13. State Retirement Agency What do I do if I have an employee that was not budgeted to work at least 500 hours in the fiscal year, but works more than what was expected and exceeds 500 hours worked? Since the employee was not budgeted to work at least 500 hours the employee would not have been enrolled when they began employment. As soon as you are aware that the situation has changed (the employee’s budgeted hours have increased or the employee is expected to work or actually worked at least 500 hours) you should: 1) Enroll the employee, 2) Begin reporting pension payroll data for the employee, and 3) Submit Prior Period Adjustments Forms (714s) to report the pension payroll data for the employee back to the beginning of the current fiscal year or their date of hire (if they were hired after the beginning of the current fiscal year) Eligibility/Enrollment 13

14. State Retirement Agency What do I do if I have an employee who was budgeted to work at least 500 hours in the fiscal year, but ends up working less than 500 hours? Since the employee was budgeted to work at least 500 hours the employee would have been enrolled when employment began and you would have been reporting pension payroll data from that hire date. The fact that the employee is no longer expected to work at least 500 hours does not change their status as a member. Once a person has been enrolled in the system they remain a member regardless of the number of hours worked in a fiscal year. Simply continue to report pension payroll data for this individual. Since this person would be a part-time employee you may need to change some of the data being reported to us (covered later), but the data should continue to be reported. Based upon this data the SRA will calculate the member’s service and eligibility credit earned at the end of each fiscal year. Eligibility/Enrollment 14

15. State Retirement Agency What do I do if a person was properly enrolled in a prior fiscal years and was working at least 500 hours, but I know going into this fiscal year that they will not work at least 500 hours? This question is similar to the previous question and the same answer applies: Once an employee has been properly enrolled as a member in the system based upon their position being budgeted to work at least 500 hours they remain a member and should continue to have pension payroll data reported for future years even when they are no longer budgeted or expected to work at least 500 hours. SRA will prorate their service credit based on actual hours worked in the fiscal year. Eligibility/Enrollment 15

16. State Retirement Agency Who is not eligible to participate? SRPS membership is not available for the following types of employees: - Temporary employees - Contractual employees A temporary or contractual employee cannot elect membership. Eligibility/Enrollment 16

17. State Retirement Agency Common Questions How does the SRA define a “temporary employee”? How does the SRA define a “contractual employee”? Eligibility/Enrollment 17

18. State Retirement Agency How does the SRA define “temporary employee”? A temporary employee is an employee whose appointment may not exceed 6 months. Eligibility/Enrollment 18

19. State Retirement Agency How does the SRA define “contractual employee”? The SRA uses the definition of contractual in §13-101 of the State Personnel and Pensions Article of the Annotated Code of Maryland which defines a “contractual employee” as an individual: who, under a written Agreement, provides temporary personal services for pay; who is not employed in a budgeted positions; and who has an employer-employee relationship with this employer in which the employer: (i) furnishes necessary tools and a place to work (ii) has the right to control and direct the details, means, and results of the performance of the services; and (iii) has the right to discharge the individual from employment. Eligibility/Enrollment 19

20. State Retirement Agency When should an eligible employee be enrolled? Eligible employees should be enrolled as soon as they begin employment. There is no waiting/probationary period for enrollment into SRPS for eligible employees. Eligibility/Enrollment 20

21. State Retirement Agency Eligibility/Enrollment MembershipEnrollmentProcess:Easy/Straightforward For each eligible employee, the employer must provide the following three documents so that SRA can properly enroll the member: 1) Completed Application for Membership (Form 001) form 2) Completed and notarized Designation of Beneficiary (Form 004) form 3) Copy of valid proof of birth date. Important Update: House Bill 472/Senate Bill 375 of the 2008 General Sessions will result in the assessment of fees to employers for each employee who is not properly enrolled.

22. State Retirement Agency Eligibility/Enrollment What is considered valid proof of birth date? For US citizens, a copy of valid proof of birth date document includes any one of the following: • - Unexpired driver’s license - Maryland Identification card • - Birth Certificate - Adoption record • - United States passport - Naturalization Records • - Census record from United States Bureau of the Census • - Military documentation from any branch of the United States Armed Forces • - Hospital birth record, certified by the custodian of record • - Statement of age card from the county health department or US Bureau of Vital Statistics • For non US citizens,Resident Alien Registration Receipt Card • Please make sure that on any copy of valid proof of birth date document • that the date of birth is clearly visible and readable. 22

23. State Retirement Agency SRA administers many separate plans of SRPS, including: 1. Teachers’ Retirement System (closed eff. 1/1/1980) 2. Employees’ Retirement System (closed eff. 1/1/1980) 3. Correctional Officers Retirement System 4. State Police Retirement System 5. Judge’s Retirement System 6. Law Enforcement Officers’ Pension System 7. Teachers’ Pension System 8. Employees’ Pension System 9. Legislative Plan 10. Police and Fire Plans (closed eff. 1/1/2005) Eligibility/Enrollment 23

24. State Retirement Agency Who determines which plan a member is enrolled? SRA will determine in which plan the member is eligible to enroll. The decision is in based upon: the employer, the position (job description/title), and past membership history of the employee in SRPS. SRA uses the information on the Application of Membership form to make this determination. In some cases, SRA may contact the employer for more information before determining the correct plan for the employee. Eligibility/Enrollment 24

25. State Retirement Agency Common Question Why does the SRA sometimes request that I submit a copy of the employee’s Job Description after I have already sent in the Application for Membership form and indicated the employee’s job title? The SRA primarily asks for a copy of an employee’s Job Description when trying to determine whether an employee should be enrolled in the Teacher’s Pension System. This is an important fiscal issue for the State of Maryland since the State pays the employer’s costs for teachers and the SRA is responsible for ensuring that only teachers are enrolled in the Teacher’s Pension System. To reduce the likelihood that the SRA will need to ask for the employee’s Job Description be as specific as possible when writing the job title, for example “Elementary School Math Teacher” instead of “Teacher”. Eligibility/Enrollment 25

26. State Retirement Agency Eligibility/Enrollment What happens if payroll data is reported for an employee who has not been properly enrolled in SRPS? The employee is placed in Automatic Enrollment (AE) status. Payroll data is still accumulated under the employee’s Social Security number, but the employee is not a member of the SRPS. The employee will receive an Automatic Enrollment letter which informs them that they have not been properly enrolled in SRPS. The employee will not be provided with an annual Personal Statement of Benefit (PSB). Should the employee die, the employee’s intended beneficiary may not be paid. Instead payment would be made to the employee’s estate. Important Update: Beginning in FY08 the employer will be assessed fees for each AE status employee.

27. State Retirement Agency Eligibility/Enrollment Common Question How do I know if I have any employees that are not properly enrolled and are therefore in Automatic Enrollment (AE) status? The SRA periodically provides reports to employers identifying employees in AE status. Additionally, you can request this information from our Data Control Division at anytime. 27

28. State Retirement Agency Eligibility/Enrollment In Brief, Employers' Responsibility for Enrollment… Ensure submission of… - Application for Membership (complete, accurate, legible and signed) - Designation of Beneficiary form (complete, legible, signed, and notarized) - Appropriate proof of birth date

29. State Retirement Agency Eligibility/Enrollment Common Enrollment Issues

30. State Retirement Agency Reporting Topics: - Important Definitions - Reporting for Full-time Employees - Reporting for Part-time Employees - Date Requirements - Formatting Requirements - Secure File Upload - Employer Pick Up Program - Common Reporting Issues

31. State Retirement Agency Reporting Important Definitions Pay Period Ending Date (PPED):Date on which the pay period ends. Your reported payroll data should only include days up to and including the PPED. PPED must fall in the employer’s annual payroll schedule. Note: Pay Period Ending Dates can cross over fiscal years. For example, the State’s pay period which began on June 20, 2007 ended on July 3, 2007. This was the first PPED for the 2008 fiscal year.

32. State Retirement Agency Important Definitions Pay Date: Date employees actually get paid. Reporting 32

33. State Retirement Agency Example of Pay Period Ending Date (PPED) and Pay Date: Pay periods for most state employees are bi-weekly. They begin on a Wednesday and end on a Tuesday. Employees then receive payment for this pay period on the second Wednesday after the pay period end date. Example: The pay period that began on Wednesday, September 26th ended on Tuesday, October 9th. Employees received payment for this pay period on Wednesday, October 16th. The Pay Period Ending Date (PPED) is 10/09/2007. The Pay Date is 10/16/2007. Reporting 33

34. State Retirement Agency Three Salary Types to be reported: Annual Earnable Compensation (aka Full-time Equivalent Salary) Actual Annual Compensation Pay Period Base Salary Reporting 34

35. State Retirement Agency Reporting Important Definitions Annual Earnable Compensation (AEC) (akaFull-time Equivalent Salary) - Total budgeted salary (from the salary schedule, Grade/Step) - For Full-time employees, the AEC equals Actual Annual Compensation - For Part-time employees, AEC equals the amount a Full-time employee would earn in the position - Report in full dollars only, round up or down to the nearest dollar…include no cents Note: AEC does not Include: Overtime, shift differential, bonuses, etc.

36. State Retirement Agency Reporting Important Definitions Actual Annual Compensation For Full-time members… The annual earnable compensation (usually from Salary Schedule, e.g., Grade 10/ Step 12 = $37,716) For Part-time members… The budgeted annual salary based on the part-time percentage. The Actual Annual Compensation should be the same from pay period to pay period unless the member received a pay increase. Note: Report in full dollars only, round up or down to the nearest dollar…include no cents.

37. State Retirement Agency Reporting Important Definitions Pay Period Base Salary: Actual Base Earnings for the pay period. Excludes: overtime, shift differential, bonuses, etc. Notes: - For full-time employees, the Pay Period Base Salary should remain constant, unless on Leave w/o Pay. - For part-time employees, Pay Period Base Salary could fluctuate depending on actual hours worked during the pay period. - Report actual earnings including dollars and cents, do not round to nearest $.

38. State Retirement Agency Common Question Why does the SRA need three different salary figures for each employee? We use the three different salary figures - Annual Earnable Compensation (AEC), Actual Annual Compensation (AAC), and Pay Period Base Salary (PPBS) - for different purposes based upon the system and plan that a member is enrolled in. AEC is used to calculate the average final salary for a member in one of our pension systems. AAC is used to calculate the average final salary for a member in one of our retirement systems. PPBS is used to determine when a member’s earnings have exceeded the Social Security Taxable Wage Base. In some plans members are not required to make employee contributions unless they earn more than the Social Security Taxable Wage Base. Reporting 38

39. State Retirement Agency Reporting Important Definitions Hours Worked Actual number of hours worked (not budgeted) during the pay period. Excludes overtime. Cannot be greater than the Total Standard Hours for the pay period. Note: For part-time employees, Hours Worked may fluctuate from pay period to pay period.

40. State Retirement Agency Reporting Important Definitions Standard Hours - Normal or regular hours for a full-time employee (equivalent position) - Does not include overtime - Should not be less than the Actual Hours Worked for the pay period Notes: * The employer sets the standard hours for employees, but they must be consistent across classifications * SRA minimum requirements for teacher members and ten-month employees is 30 hours per week. SRA minimum requirements for twelve-month employees is 35 hours per week.

41. State Retirement Agency Common Question How should I report “Hours Worked” and “Standard Hours” for elected and appointed officials? Elected and appointed officials are paid for the fulfillment of their office’s duties and not for working a specific number of hours. For pension payroll reporting purposes you should report “Hours Worked” equal to “Standard Hours” – the same as reporting for a full-time employee. The “Standard Hours” reported should be the same “Standard Hours” reported for your regular employees. Reporting 41

42. State Retirement Agency Common Question I have to report pension payroll data for cafeteria workers, bus drivers, and crossing guards. These employees have a maximum number of hours they can work in their position each week. For example our crossing guards work 3 hours a day so the maximum they can work per week is 15 hours. Are they considered part-time or full-time employees? For SRA purposes they are part-time employees. Their “Hours Worked” would be reported as 15 hours per week and their “Standard Hours”, assuming they are 10 month employees, would be reported as the same as your other 10 month employees. Remember for 10 month employees the minimum “Standard Hours” allowed is 30 hours per week. Reporting 42

43. State Retirement Agency Reporting Important Definitions Percentage of Time(Budgeted Ratio of Time): - % of budgeted time the employee is budgeted to work - For F-T employees, fill the field w/ two zeros (00 = 100%) - For P-T employees, fill the field with the applicable % - % should reflect actual annual compensation ÷ annual earnable compensation

44. State Retirement Agency Important Definitions Contributory Pay Period:Any Pay Period where the employer deducts employee contributions from the employee’s pay. Non-contributory Pay Period: Any Pay Period where the employer does not deduct employee contributions from the employee’s pay. Reporting 44

45. State Retirement Agency Reporting Important Definitions Member Contribution = Actual Annual Compensation X Contribution rate Number of contributory pay periods - Reflect actual contribution for the pay period - Reported in actual dollars and cents. Note: Withhold full contribution amount for each contributory pay period regardless of hours worked.

46. State Retirement Agency Reporting Reporting for Full-time Employees Actual Annual Compensation = Annual Earnable Compensation Actual hours workedincludes: Leave hours (such as sick time, annual leave, and compensatory leave). Actual hours workeddoes not include: Overtime hours and data for employees who did not work during the summer unless the member elects to receive wage payments during the summer. Actual hours worked is not greater than Standard hours. Contributions should not fluctuate. Percentage of Budgeted Time is 100% (reported as 00).

47. State Retirement Agency Reporting Reporting for Full-time Employees Three Examples: Full-time employee working 12 months. Full-time teacher working 10 mos. and being paid over 10 mos. Full-time employee working 10 mos. and being paid over 12 mos.

48. Reporting Reporting Full-time employee working 12 months Hours Worked: 35 per week Standard Hours: 35 per week Actual Salary: $52,000 Earnable Salary: $52,000 Contribution Rate: 4% Pays: 26 Contributory Pays: 26 Biweekly reporting: Pay Actual Period Annual Annual Hours Hours % of Base Earnable PPEDCompensationContributionWorkedStandardTimeSalaryCompensation 10/5/2007 52000 80.00 70.0 70.0 00 2000.00 52000  

49. Reporting Reporting Full-time employee working 12 months Annual Totals: Pay Actual Period Annual Annual Hours Hours % of Base Earnable MonthCompensationContributionWorkedStandardTimeSalaryCompensation Jul $52,000 $160.00 140 .0 140.0 00 $4,000.00 $52,000  Aug $52,000 $160.00 140 .0 140.0 00 $4,000.00 $52,000  Sep $52,000 $160.00 140 .0 140.0 00 $4,000.00 $52,000  Oct $52,000 $160.00 140 .0 140.0 00 $4,000.00 $52,000  Nov $52,000 $240.00 210 .0 210.0 00 $6,000.00 $52,000  Dec $52,000 $160.00 140 .0 140.0 00 $4,000.00 $52,000  Jan $52,000 $160.00 140 .0 140.0 00 $4,000.00 $52,000  Feb $52,000 $160.00 140 .0 140.0 00 $4,000.00 $52,000  Mar $52,000 $160.00 140 .0 140.0 00 $4,000.00 $52,000  Apr $52,000 $160.00 140 .0 140.0 00 $4,000.00 $52,000  May $52,000 $160.00 140 .0 140.0 00 $4,000.00 $52,000  Jun $52,000 $240.00 210 .0 210.0 00 $6,000.00 $52,000  Total: $2,080.00 1,820 1,820

50. Reporting Reporting Full-time teacher working 10 months and being paid over 10 months Hours Worked: 30 per week Standard Hours: 30 per week Actual Salary: $45,000 Earnable Salary: $45,000 Contribution Rate: 4% Pays: 20 Contributory Pays: 20 Semi-monthly reporting (July and August): Actual Pay Period Annual Annual Hours Hours % of Base Earnable PPEDCompensationContributionWorkedStandardTimeSalaryCompensation xx/x/2007 Not reported Semi-monthly reporting (September through June): Actual Pay Period Annual Annual Hours Hours % of Base Earnable PPEDCompensationContributionWorkedStandardTimeSalaryCompensation xx/x/2007 45000 90.00 60.0 60.0 00 2250.00 45000