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Date: April 12, 2017

Bulletin Number: 1564

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Subject New York State Deferred Compensation Plan (NYSDCP) Refunds for Employees on Workers’ Compensation

Purpose To notify agencies of the automatic processing of refunds for deferred compensation contributions in a current calendar year pay check for which an employee was later placed on workers’ compensation leave.

Affected Employees

Active employees in Company “NYS” who, in the current year, contributed earnings to a deferred compensation account and those earnings were later determined to be paid workers’ compensation benefits.

Background

Under IRS regulations, paid workers’ compensation benefits are not taxable and cannot be directed to a tax deferred NYSDCP account. (See Payroll Bulletin 1366 for more information.) If an employee is placed on workers’ compensation leave for a period of time in which they have already contributed to the NYSDCP, those contributions must be refunded to the employee.

Effective Date(s) Institution paychecks dated April 27, 2017
Administration paychecks dated May 3, 2017

Agency Actions When an agency places an employee on Workers’ Compensation Leave, the agency must notify the employee that any contributions made to the NYSDCP for the period the employee is on Workers’ Compensation Leave will be refunded to the employee.

OSC Actions Current Year Refunds for Active Employees
Current year NYSDCP contributions for affected employees with a Job Status of Active, Paid Leave or Leave will be refunded through PayServ.  OSC will automatically calculate deferred compensation contribution refunds in paychecks for active employees who were later placed on workers’ compensation leave in the current calendar year.  Prior to processing the refund, OSC will submit a refund file to Nationwide, the NYSDCP provider, for account balance validation. If the original employee record is inactive, but another record is active, the refund will be processed on the original record.

Prior Year Refunds and Refunds for Inactive Employees
Prior year NYSDCP contributions and current year refunds for affected employees with a Job Status of Retired, Terminated or Deceased and no other active Job record will be refunded by Nationwide, the NYSDCP provider.  Nationwide will also provide this population of employees with a Form 1099-R at the end of the calendar year.

Paycheck Reversals with NYSDCP Refunds
If an agency submits a Request for Paycheck Reversal (AC-230) where the employee was on workers’ compensation leave and had a deferred compensation contribution refund, OSC’s AC-230 Unit will remove the deferred compensation contribution from the AC-230 to prevent double processing.  If the employee was not entitled to the deferred compensation refund, the agency must set up an overpayment for the amount of the deferred compensation refund.

Questions Questions regarding NYSDCP refunds may be directed to the Payroll Retirement mailbox.

Questions regarding processing AC-230s for checks that include a NYSDCP refund may be directed to the Payroll Deduction mailbox.