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Thread: A question for my Payroll Peeps Massachusetts

  1. #1
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    Default A question for my Payroll Peeps Massachusetts

    A payroll question:

    Given that an employee needs to pay:

    • Federal taxes
    • State taxes
    • Before-tax benefit deductions
    • After tax benefit deductions
    • A child support garnishment
    • An court order for a child's health insurance (included in the before-tax deductions)
    • (this one is a bit complicated but) Repaying the employer for some after-tax benefit deductions that were not taken at the time due to a retroactive change in eligibility status (it's a REALLY long story but we allowed him to reinstate a non-qualified dependent for several retroactive months and we're spreading out the repayments instead of taking them in one huge chunk)


    And given that the paycheck is not big enough to cover all of the above, what is the order of precedence for the above?

    My boss and I are both questioning that the deductions were taken properly, but before we go to Payroll we agreed that I would check in with you all.
    The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

  2. #2
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    Some brainstorming --part of your question might be answered by what Mass considers "disposable earnings" (what I found for MASS: Disposable earnings are the earnings remaining after you deduct federal, state and local income taxes, Social Security, state unemployment insurance taxes, and any deduction required under a state employment retirement system.) for child support and health insurance coverage (if court ordered). That should help with the basic hierarchy before child support. So CS definitely comes above other deductions beyond that.

    Is the non-qualified dependent coverage also required by a court order? if done correctly at the time, what would the order have been then? I would try to place it in that same order.

    Then I would look at what the specific deductions are -- not just whether they are pre-tax or post-tax. But rather are they requirements or choices (wants or needs) and what happens if they aren't paid and possibly give the employee the choice if you feel the repayment of the non-qual dependent beneficiaries should come above any of those in priority.

    And is there any thought that the employee is overstating what will be owed in taxes to lower the net so there isn't enough (some could be sneaky like that)-- this one is hard to know, but for example I have an employee who makes less than $200 biweekly who has an extra $35 withheld each paycheck in FIT. Don't know why.....but it is above what her MS0 withholding would be.
    Last edited by hr for me; 11-17-2016 at 06:02 AM.

  3. #3
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    According to the Payroll Source

    Taxes first
    Child support second
    Benefit Deductions third( I don't know if pre-tax or post tax matters)
    Voluntary deductions fourth (I believe that is what the repayment would fall under)

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    The non-qualified dependent is not court ordered and has in fact since been dropped at her own request. However, she was dropped several months too soon (I'm actually not even sure how that happened) and he was permitted to reinstate her for the interim. There is still a court order for coverage of a qualified dependent and that is included with his before-tax deductions.
    The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

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    That's a harder one then! Because it was originally a health insurance *level 3 from HRinMA's hierarchy, but now is in between that and *level 4. Generally we would view it as level 3 above and above voluntary and put it above that level even when trying to retrieve past premiums. Does the Section 125 plan document discuss retrieval for mistakes?

    Because otherwise, the person could hike other deductions and never pay it back if pay was low enough. But I'm not in MA so I am not sure I can override what HRinMA suggested, because I could argue it both ways **

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    Quote Originally Posted by HRinMA View Post
    According to the Payroll Source

    Taxes first
    Child support second
    Benefit Deductions third( I don't know if pre-tax or post tax matters)
    Voluntary deductions fourth (I believe that is what the repayment would fall under)
    Agreed. .......
    "Reality is that which, when you stop believing in it, doesn't go away".
    Philip K. **** (1928-1982)

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    I've got no clue what he's claiming in withholdings - we don't actually have access to that. I can see what dollar figure of tax is withheld, but I can't see his W-4.

    He's having health and dental deducted pre-tax (the court-ordered coverage for the child is on the medical); disability insurance is after-tax. He is covering other children besides the court ordered one and we are two tier, so his premiums are not affected by the court order. I just went back and looked at his paycheck again and he has two separate child support orders. He is union, so there are union dues deducted as well.

    Does any of that help?
    The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

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    Unless the state in question has specific rules to the contrary, union dues are legally "voluntary". Lower priority then taxes, medical, and court order child support. I remember going through this in 1996, where I basically reinstalled ADP for a big company and the deduction priority was one of the things that generally gets ignored during installation.
    • Taxes first.
    • Child support orders and bankruptcy next. Vendor wage garnishments are legally complicated as are loans and other low tier CCPA deductions. I recall having Legal having to look at that. I am not sure that vendor garnishments are always higher priority then medical.
    • Medical/dental is pretty high tier because federal law says it is. But something can be pre-tax and not legally important in this context. Child care can be pre-tax but not very high tier.
    • 401(k) deferral is high tier. 401(k) loan repayment is not, even though it is not "voluntary" from the employees stand point, it is not legally a "mandatory" deduction.
    • Any deduction which is not ERISA (pension, 401(k), medical) or bankruptcy/levy/child-support/maybe-vendor-garnishment is almost certainly not legally "mandatory" under federal law.
    • State law is whatever state law is. Not always the same as federal. There are a few states which consider pay-day-loans "mandatory" even though there is no court order.
    "Reality is that which, when you stop believing in it, doesn't go away".
    Philip K. **** (1928-1982)

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    Okay, that helps a lot. He's enrolled in the 401(k) (it's actually a 403(b)) but his participation has already been suspended for unrelated reasons.

    I'll show this to my boss tomorrow.
    The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

  10. #10
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    All Qualified Deferred Compensation plans (401(k), 403, 457) are the same thing for these purposes. Non-qualified DCP are not.
    "Reality is that which, when you stop believing in it, doesn't go away".
    Philip K. **** (1928-1982)

  11. #11
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    Understood. But he recently took a hardship withdrawal which, under the terms of our plan, means his participation is suspended for six months anyway. So it isn't factoring into the rest of the mess at this time.
    The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

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