Reporting AB 1513 wages to the EDD

Recently we were able to get a few answers on how the EDD wants the AB 1513 wages reported.  We will be creating a special DE-9/DE-9C report specifically for these wages.  It will be a separate process from the regular quarterly reporting workflow.  The late notice that the EDD gave employers means that it will take some time before the this reporting software is ready.  The best estimate that we can provide right now is that it will be ready sometime in February.

This special DE-9/DE-9C will find all of the safe harbor checks that you issued during the fourth quarter by selecting checks issued with the special Safe Harbor wage type.  It will then look at the Safe Harbor Detail file to determine which quarters each employee worked and allocate the total Safe Harbor wages earned among those quarters.

Ideally the EDD would have wanted the AB 1513 wages to be reported separately from regular wages.  However, many customers have already filed their quarterly reports and included the Safe Harbor wages in their regular quarterly report for the fourth quarter of 2016 (a number of employers filed their reports even before the EDD sent the notices out).  To keep things simple, we will not be doing any special programming for the quarterly report to exclude the Safe Harbor wages.  This means that you should not delay filing your regular electronic reports and making tax deposits for all wages issued in the fourth quarter.

When you file your AB 1513 quarterly reports, you will need to include a note to the EDD indicating that your electronic report for the fourth quarter of 2016 included the AB 1513 wages that you are reporting.  This way, the EDD will not double count these wages when entering them into their systems.

The EDD cannot accept electronic reports for the AB 1513 wages.  This means you will need to submit reports on paper (!) for up to 14 quarters (July 2012 thru December 2015) for the safe harbor wages that you have issued.  You should have received a notice from the EDD with a special address for submitting these reports.

If you have any additional questions, please leave a reply to this post.

AB 1513 Notices from the EDD

Many customers are receiving notices from the EDD regarding reporting AB 1513 wages.  Unfortunately the notice raises several questions that it doesn’t directly address.  We have a copy of the notice and we do not know anything beyond the information in the notice.

We do have a call into the EDD and hope to get a call back and get some answers to these questions as soon as possible.  In the meantime, if you have questions, we recommend calling the number listed at the bottom of the notice, 916-651-9695.

When we have additional information we will post it on the blog.

 

After the AB 1513 Safe Harbor deadline

Now that the deadline for making AB 1513 Safe Harbor payments has passed, here are a few important thing to keep in mind:

Safe Harbor Report

Now that you have issued your payments, do not run the Safe Harbor Report again for all employees with the box checked to Create Safe Harbor Detail File.  This will overwrite the information that you have used to generate the safe harbor payments, including the links from the employee information to the safe harbor checks that were issued.  If you lose this information the only way to retrieve it may be by restoring a backup.

A future update will include a read-only setting to lock down the Safe Harbor Detail file and prevent and additions or changes to this information.  Keep in mind that the law requires you to retain your payroll records and other information used to calculate the payments until December 2020.

Handling Inquiries

If you have an employee that believe that they should have received a safe harbor payment but didn’t, you can run the Safe Harbor Report for that single employee (again, do not use the option to create the detail file).   If the report does not show any checks for the safe harbor time period, the employee may have worked but did not have any piecework wages.  If there were piecework wages, the employee may have been paid correctly for the break (if using the actual sums due method) or the amounts may have been more than 4% of the employee’s wages (when using the 4% method).  In either case, if the report shows a negative total due, the employee was not due a safe harbor payment.

It is up to you whether or not to provide the employee with a copy of the Safe Harbor Report, and how much detail you want to go into in explaining how Safe Harbor payment amounts were calculated.

If for some reason the report shows a positive amount and the employee is due a payment but one was not issued, you can issue a payment to the employee at that time.  After investigating whether or not the employee has an account in the Safe Harbor Employee file, run the Safe Harbor Report for that employee only with the Create Safe Harbor Detail File box checked and select the Add option when the program asks if you want to add or replace the information in the detail file. You can then create a safe harbor check and print a statement for that employee only.

W-2’s

Employees that receive a safe harbor payment will need to be issued a W-2.  If you have not already ordered additional W-2’s to account for this, go to the Payroll->Year End Tax Reporting->Count Employees With YTD Wages option to get a current count of the number of employees with wages in 2016.

Safe Harbor Payments to the DIR

As far as we know, the DIR will not accept payments for safe harbor payments that you are unable to deliver to employees after the December 15th deadline.  Therefore, checks that are returned after this date should be handled the same as other uncollected payroll checks.  You will need to report these wages on your quarterly report and year end reports and issue W-2’s to employees.  If employees do not return to collect the wages, and you are still unable to locate the employee you will need to forward the funds (after the appropriate dormancy period) to the California State Controller’s unclaimed property fund.

A future blog post will include instructions and recommendations for handling unclaimed payroll checks

How Employees Get Funds From the State

If you have forwarded Safe Harbor funds to the state and employees are asking how they can collect those funds, direct them to the nearest Labor Commissioner’s office.  A list of these offices can be found here.  The Labor Commissioner’s office will verify that they are owed money that has been deposited with the Unpaid Wage Fund and assist them with the required paperwork.

The Labor Commissioner will only be able to disperse the funds to the employee.  If the employee requests it, you may still need to provide the employee with a statement showing how the calculations were made to arrive at the gross wages paid (the Safe Harbor statement), as well as account for the payroll deductions (print a check voucher for the safe harbor check that you issued).

1095-C Reporting

An update to the HR program may be needed so that the 1095-C logic does not include Safe Harbor checks.  Safe Harbor checks are identified with the pay period from 7/1/2012 to 12/31/2015.  Employees that only have safe harbor checks issued in 2016 did not actually work in 2016 and should not have a 1095-C created.

After doing additional testing, we will post information on our blog if an update is necessary.

Using the Safe Harbor Report for 2016 Wages

Some customers that are concerned about whether they have correctly issued payments for breaks in 2016 have asked whether or not the Safe Harbor Report can be run for 2016 payroll.  The answers is  yes and no.  You can run the report for any time period, and using the Actual-AB 1513 Calculation option  for the Safe Harbor Method should identify any employees that were unpaid or underpaid for breaks based on the rules that went into effect January 1, 2016.

However, if you want to issue checks to employees for any shortfalls, do not use the Safe Harbor Report to create the detail file for your 2016 payroll (see first item above).  Contact Datatech customer support so that we can gather more information, determine if additional programming is needed and recommend what procedures to follow.  (If additional programming is needed, it will likely not be possible for this to be done until February.)

 

Safe Harbor update

A new update is available via the Tools->Check for Updates option that includes a change to the Safe Harbor Returned Checks Report.  This update is available for download now for customers using The Farmer’s Office or The Labor Contractor’s Office.  We will post an update for customers using The Shipper’s Office later this afternoon.

Remember, the deadline for submitting the undeliverable safe harbor payments to the DIR is tomorrow!

The report and the Excel spreadsheet that is exported have been modified to match the Form 40 (a template provided as an Excel spreadsheet) that the DIR has requested employers to use.  Note that not all columns are filled in on the Form 40.  We have only filled in the columns that have information that is required under AB 1513.  The other columns will appear in the spreadsheet but they will be blank.

On the printed report, columns that are not required are not printed at all to save space.

After generating the file, you will need to password protect the Excel file before putting it on a CD and sending it to the DIR.  Open the spreadsheet in Excel and add the password.  The procedure for doing this may vary depending on which version of Excel you have.  If you are not sure how to add a password to a spreadsheet, try using Google to find instructions that apply to your version of Excel.

The DIR will contact you after receiving the CD to obtain the password.  Write it down or make sure you don’t forget it!

Lastly, here are the updated instructions for submitting Safe Harbor payments that the DIR provided last week.

Safe Harbor Payments & Look-Back Sick Pay Calculations

If you are using the Look-Back method for sick pay hourly rate calculations and entered a new Wage Code for the Safe Harbor payments, you should double-check the setting for “Include in Regular Rate of Pay Calculations” on the Wage Type setup.

If the box is checked the software will include Safe Harbor wages into the look-back rate calculation, thus increasing the average hourly rate for any employees that request sick pay within 90 days of receiving a Safe Harbor payment.

The “Include in Regular Rate of Pay Calculation” setting should be unchecked:

If you’re not sure what method you are using for sick pay calculations, there’s no harm in changing the setting any way.

 

Handling returned safe harbor checks

Update 12/6/2016: The DIR has released additional details on the following page:  Instructions for Payments to the Unpaid Wage Fund.  We are reviewing the Form 40 that the DIR is requesting employers to use and will publish an update when the program has been modified to generate a file in this layout.  We will post more information when this update is ready to download.

The latest update available via the Check for Updates option includes a new report to use when forwarding Safe Harbor funds to the state for employees that you are unable to locate.  The Returned Check Report will list all of the employees, their addresses, social security number, and net payment amounts (after taxes are deducted) for each employee that you were unable to locate.

When handling safe harbor payments that are returned to you as undeliverable, there are several specific things that you should do and several things you should not do.

Do:

When a check is returned, you should make further attempts to locate the employee, including using “people locator” services as per the law.

If you are unable to locate the employee, check the Check Returned box on the Safe Harbor Employee window.  Do not check this box before you are sure that you cannot locate the employee.  This checkbox determines whether or not the employee and the payment amount will appear on the Returned Check Report.

If you check this box and later the employee does receive the check (for instance, the employee shows up in person to collect the Safe Harbor payment), then you should make sure the Check Returned box is unchecked.

Do not:

Void the check using the Void Payroll Check option.  Safe Harbor payments are wages that must be reported on the quarterly report and W-2, even if the employee has not received them.  If you are unable to locate an employee, they are treated the same as uncollected wages (except there is a specific procedure for forwarding uncollected Safe Harbor wages to the state).

Before issuing the check to the state:

Determine if any safe harbor checks are outstanding (have not cleared on a bank statement) and have not been returned to you.  If you have any checks that have not been returned and have not cleared your bank account, you may need to leave these checks off of the returned checks report and handle them as regular uncollected wages if they end up being returned after the Dec 15th deadline.

(You may want to verify with the state whether or not they will accept undeliverable Safe Harbor payments that are returned to you after the Dec 15th deadline.  Our current understanding is that the state will not accept Safe Harbor payments that you are unable to deliver after Dec 15th.)

How to issue the check to the state:

1. Review the instructions on the DIR’s FAQ for handling Safe Harbor payments.  (See the second to the last question.)
2. Run the Returned Checks Report.  This will list all of the employees that have the Check Returned box checked and provide a total for you to issue a check to the DIR.
3. Use the Returned Checks Report to generate an electronic copy.  The DIR has not specified what electronic formats are acceptable.  The program can generate a PDF, XLS or CSV file.  (The DIR has also not specified what media you should use to submit the electronic copy.)  Enter a filename for the type of electronic copy that you want to generate.
4. Post a journal entry to debit your cash in bank account for the amount of the returned checks.  Offset this with a credit to a liability account or to the suspense account.
5. Issue a direct expense check payable to “INDUSTRIAL RELATIONS UNPAID WAGE FUND” posted to the liability or suspense account for the total amount of checks that were returned/undeliverable.
6. Determine the amount of the administrative fee.  Issue a second direct expense check for this amount.
7. Send all of this (checks, printed and electronic copies of reports) to the DIR according to the directions provided on the FAQ.

Export Safe Harbor data for Simpluris

If you are using Simpluris as your third party administrator to make Safe Harbor payments, you will need to export two Excel files.  The first file will include the employee information (name/address/SSN/payment amount) and the second file will include the pay period data for Simpluris to use for the required statement that must accompany the payment.

Follow the workflow and instructions in our prior blog post here.  When you get to the point where you are exporting the statement data, use the “Standard AB 1513 Statement Export” definition.  When exporting this file, be sure to use a “.xlsx” extension on the filename.  (This is a newer file format that supports more rows than the older “.xls” format.)

When you export the Safe Harbor Employee information, use the “Simpluris Export” definition.  Column P in the employee file will contain the payment amount.  To verify that the correct total payment amount has been exported to the file, open the file in Excel and add a sum formula on Column P and verify that this matches your Create Checks report.  (Be sure not to save the spreadsheet with the sum formula included!)

Both of these export definition files are included with the latest program update.  If you do not see the definition files when you try to import the definitions, download the latest update using the Tools->Check for Updates option.

If Simpluris has not already sent you the instructions for setting up an account on their secure file upload service, request the instructions, create and account, then upload these files after you have verified the payment totals contain in them are correct.

 

Safe Harbor program update available

A couple of last minute corrections were made to the Create Checks option and the option to print statements with the checks.  If you will be printing your own Safe Harbor checks, make sure you are running on at least version 7.77.1650 so that you have these changes.  Use the Check for Updates option on the Tools menu to download the latest version if you are running an older version.

If you are sending payment information to a third party administrator, these changes will not affect you.

Still Lost on the Process of Creating Safe Harbor Checks?

 

Are you still lost when it comes to processing your safe harbor information?  Below is the workflow we published in our Help documentation menu with some added information.  Help can be accessed for the individual windows by pressing the [F1] key.  You can use the Check for Updates tool to download the latest version on the software, which includes updated Help screens.

And now we present:  18 simple steps to get your Safe Harbor checks done!

Exporting AB 1513 payment information

If you are using a third party administrative (TPA) service to issue payments and track down former employees, you will need to export the information from the Safe Harbor payment detail files to provide the needed information to the TPA.

This post will cover two different scenarios.  In the first scenario, you will be providing the employee information, payment amount and PDF copies of the statement to your TPA.  The TPA will issue the payments and include a copy of your statement with the payment.  You will need to provide the TPA with a file that contains the employee information (name, address, S.S. #, payment amount) and copies of the individual statements in PDF format.

In the second scenario, the TPA will generate the statement and issue the payment.  In this scenario, the TPA will need more information that just the employee information and payment amount to create a statement required by AB 1513.  The TPA will require the information for each pay period that needs to be included on the statement.  This will require exporting two separate files.  The first will include employee details (name, address, S.S. #, payment amount, etc.) and the second will include the pay period detail for all employees.

Before continuing make sure that you have updated to version 7.77.1619 or higher.  Starting this with version, the program update included export definition files that you can use to include all of the columns in our standard export formats.

Workflow

Create Checks

In either scenario, the first step is to use the Create Safe Harbor Checks option to calculate the Safe Harbor payment totals.  Since you won’t actually be issuing the checks yourself, select the Final-Update Employees option as shown below:

Create Safe Harbor Checks

The Create Checks option will generate the report showing the total gross wages for each employee as well as the tax deductions.  Only the gross wages amount will be sent to the TPA; it will be their responsibility to calculate and deduct all appropriate payroll taxes.

Make a note and/or print at least the last page of the report that contains the total safe harbor payments that will be made.

If, at this point, you just need to give your TPA a list of employees, but are not ready to issue the payments, then you still need to use the Create Checks option to calculate the preliminary payment amounts.  You can skip the next step however, and go right to the Exporting Employee Data step.  The statements do not need to be generated just to create a list of the employees that will be getting safe harbor payments.

Export or Create Safe Harbor Statements

Next you will use the Print Safe Harbor Statement option to either create PDF copies of the employee statements or export the statement data to an Excel spreadsheet:

If you want to export the statement data to Excel, enter a filename to save the information to, then click on the Customize Export… button to select the columns to include in the spreadsheet. The first time you do this, you will need to import an export definition file. Which file you import will depend on how your payment totals are calculated.  If you are doing an aggregate calculation (as specified in the law) then you will import the “Standard AB 1513 Statement Export” definition.  If you are using a per pay period calculation, then you will import the “Detailed AB 1513 Statement Export” file.

Note:  Both of these files will be installed in your report definitions folder automatically if as long as you are running version 7.77.1619 or higher.  

To import the definition file, right-click on a blank area of the Customize Report Settings window to get the popup menu.  Select the Import Report Settings option from the popup menu:

Select the file that you want to import, and the settings for that definition will be loaded.  Note:  The definition file only needs to be imported one time.  Once it has been imported, if you need to export the statement data again, you can click on the lookup button on the Title to load the settings.

If you will be providing your TPA with the actual statements themselves, then you do not need to export any data using this option.  What you will do instead is check the Generate Individual PDF Statements box to create the PDF copies of the statements that you can compress in a ZIP file and send to the TPA.  By default, the program will create an individual file for each employee using the account number as the filename.  We recommend keeping this naming method because it will make it straightforward for the TPA to identify the correct statement file that needs to go to each employee.

Note that you can export the statement detail data and create the PDF files at the same time if you want.  Normally you should only need to one or the other.

Click on the Preview button to start the export and/or create the PDF files.  The spreadsheet will automatically be opened once you are done.  We recommend that you double check the total payment amounts by adding a SUM function at the bottom of the spreadsheet.  This number should match the gross safe harbor payments from the Create Checks process.  Once you have submitted the file to your TPA, make sure that they confirm the same number.  If the total safe harbor payments at any point do not match, you should investigate the discrepancy before allowing safe harbor payments to go forward.

Note:  During the statement printing process, the program performs a separate calculation on the safe harbor payment amount and compares this to the result of the calculation during the Create Checks process.  If there is a difference, an error message will be displayed.  This could be due to a rounding difference between the two calculations, selecting different options on the Apply Limts option, or a program bug.  If you get an error about the amounts not matching, contact Datatech to investigate further before sending any payment data to your TPA.

Exporting Employee Data

Next you will export the employee name/address/SSN/payment amount information using the Export/Print Mailing Labels option.  For the label type, select Export Only.  Enter the filename that you want to the information to be exported to.  We recommend placing this in the same folder as the statement detail file or the PDF files (depending of course on which files you are sending to your TPA).

Click on the Customize… button.  As with the statement, you will need to import the export definition file the first time that you do the export.  Right click to get the popup menu on the Customize Report Settings window and select the “Standard AB 1513 Employee Export” definition file.

If you are sending your information to Simpluris, we have a different definition file to use that was not included in the update.  Click here to download the Simpluris Export Definition.  Save the file in the Winfarm/Definitions or Winlco/Definitions folder with the other report definitions, or save it on your desktop and navigate to your desktop when you use the Import Report Settings option.

Click on the Export button to start the export process.

Almost Done!

At this point, you will have calculated the Safe Harbor payment totals, exported the statements to either PDF or Excel files, and exported the employee details and total payment information to an Excel file.

Check with your TPA about the preferred method for sending the files to them.  Some may use FTP and others may have a secure file upload service that you can use.  If you are sending PDF statement copies, you may want to compress all of the PDF files into a single ZIP file.  This can be done in Windows by right clicking on the folder that contains the files and selecting the Send To -> Compressed file option:

This ZIP file can then be uploaded to your TPA.

If you are just sending a list of employees right now, you should be able to simply upload the Excel file containing the employee data.