Dear Scotty, Please Explain These Pay Stub Differences!

Dear Scotty,

After figuring out how to finally log-in and see my pay stub, I’m so confused. Almost everything seems different, and I’m not sure how I can be sure things are correct. Can you help with some of the common questions you’ve been seeing? Why is there an asterisk on part of my life insurance, and why do the amounts under Employer Paid Benefits not match what I signed up for during open enrollment?

I’m not a big fan of change and hope you can break it down for me.

- J. J. Binks

Dear Jar Jar,

I remember first hearing from you in 1999, and I’m happy to say that the new pay stubs are not a phantom menace. Some parts are hard to distinguish when comparing to past pay stubs. Here’s a bit of a primer.

Personal Information

The new system has all the same personal information, but is more clearly presented and further includes mailing address, department, and campus location. The only piece missing is the pay cycle. If you work with Peoplesoft, the pay cycle relates to months of the fiscal year. To convert, use this legend: July = M01, August = M02, September = M03, …, June = M12.

Total Earnings

This continues to be an issue with the new system as it was with the old one. There is no description of activities that are paid hourly, so you will need to track this carefully. Each line item simply reads “Hourly,” which is not very helpful. If you teach overload, then those hours are typically on one line that lacks distinguished pay period dates. If you substitute, proctor, evaluate associates, etc., then those hours appear as a separate line item with beginning and ending dates.

One slight improvement is the addition of beginning/ending dates that include years. The old system would say “Overtime Dec” but wouldn’t say which year. When adjustments/corrections were needed, a timesheet could have corrections from many years all placed under one line.

Pre-Tax Deductions

The new system is far better as it shows all deductions of each type in separate boxes. For those of you contributing to dependent daycare or extra money for the fringe benefits, there has been a change to the way these are done.

Old System: 10 month employees would be double-billed in both April and May. If you worked over the summer, there would be no deductions in June or July; the double-billing would cover you for the full year. Employees paid over 12 month would receive a lower rate per month and be charged that fixed rate in each of the 12 months.
New System: The county system allows for only one payment rate; our district decided to put it in as 10 month since more faculty have 10 month contracts than those with 11 or 12 month. This means that when you sign up for benefits at a certain rate, a different rate will appear as the deduction.
Example 1: The maximum AFLAC cancer rate is $95.55 per month. This assumes 12 payments, so this amount is multiplied by 1.2 to get the payment for each of 10 months: $95.55 × 1.2 = $114.66.
Example 2: AD&D maximum is $40.50, but will be billed at $40.50 × 1.2 = $48.60 in order to have the same premium paid over 10 months.

Gross Pay

The old system had all the Gross Pay information on the left side of the form, but if you had any pre-tax deductions (other than STRS), the computation was incorrect.

Old System: If your base pay was $8,000 with $1,000 to 403(b), then your “Total Gross Pay” was incorrectly reported as $7,000 on the old system. The box for “GROSS” at the top was also incorrect as it was reporting “Gross pay after non-STRS pre-tax deductions.” Try saying that 5 times fast!
New System: Total gross pay is correct as it removes all pre-tax deductions in a convenient and easy to read box. You can now easily check your STRS computation:
2% at 60 members: Multiply monthly earnings by 10.25%.
2% at 62 members: Multiply monthly earnings by 9.205%.

Taxable Income

There is a change here. The old system didn’t allow for taxable benefits, like the taxable life-insurance benefit all employees get*, so MCC wasn’t able to show them to you. You were still taxed on them, but it never showed up on the annual pay stubs and no tax was withheld to cover this additional cost. You might see the impact but only if you looked closely at one specific pay stub.

Old System: December pay stub would charge the Medicare tax for the calendar year worth of taxable life insurance. 1.45% of that amount was added on in a “MEDICARE ADJ” line item. For those paying the lowest amount, $5/month, that was $60/year which meant an added tax of 1.45% × $60 = $0.87.
This $60 was also added into taxable income on your W-2 forms. While no tax was removed up front, you would pay tax on it at the end.
To see the impact, check your December 2016 pay stub and look for the taxable gross box in the top right. That number will not match box 1 on your 2016 W-2 form. The cost of the taxable benefits is in box 12 “C” and was added to your taxable gross after the fact.
Box 12 “DD” on your W-2 form shows the cost of other benefits that are not taxed.
New System: The cost of this taxable benefit is added to the taxable gross after subtracting all pre-tax deductions. Take monthly earnings (top box), subtract “Before-Tax Deductions” and then add the life-insurance cost from the “Employer Paid Benefits” box. In a sense, the district takes some of their money, gives it to you involuntarily and you are taxed on it, then the district takes back your money to pay for the benefit.

After Tax Deductions

Really for all types of deductions, the new form is much better than the old. The old system had all deductions listed on the right hand side including STRS, which is a pre-tax deductions. Any other pre-tax deductions did not appear as actual deductions, but as reductions in gross pay.

*All employees have $100,000 life insurance as a benefit. The district covers a flat rate (currently $9.84) and there is a variable rate based on age. The lowest variable rate seems to be $5 per month, and it can quickly be double that or more. This second rate is taxable but you don’t pay for it, so that’s why it shows up under employer paid benefits with an asterisk. It is important to know that this will increase your taxable gross, but since the money pays for an insurance policy, it will not increase your take-home pay. In reality, it’s one of the cheaper life insurance policies as you only pay the tax on the premium. At the minimum, you’re paying about 20-25% on the $60 premium. So it’s like getting a $50,000 policy for around $15 per year or $1.25/month. Rates increase with age so not all will pay this incredible rate.

There are a few errors that payroll knows about and is working to fix. Sick leave seems to be an issue for many people, which is why we recommend looking at the December 2016 pay stub and matching that with your January 2017 pay stub. Neither the old nor the new forms show all non-contractual sick leave hours; we still need to email payroll@miracosta.edu to get our specific individual information regarding banked hours and non-contractual sick leave sent to us in a spreadsheet.

One other error that seems to have hit many folks is an erroneous charge in After-Tax Deductions. It seems that faculty choosing the AD&D voluntary benefit had it come out of their after-tax dollars, instead of coming entirely from Employer Paid. This error should have been corrected on the March pay stub, so check to see that the total was reversed with a negative. The maximum would have been $97.20 coming back to you.

Lastly, when there are too many items for Employer Paid Benefits, the county is adding multiple items together under the heading of “other.” Payroll is still working to change that because when they are grouped in this way, it is very challenging to see that you were charged correctly and that the district is actually paying for the benefits you signed up for. We all want transparency.

Good luck Jar Jar; I will ignore all the conspiracies about you being the greatest Sith Lord.