Employer Digest

Fall 2021

COMPLETING THE PAYROLL PROCESS CORRECTLY

Identifying common errors to avoid penalties

Under the laws governing OP&F, penalties are assessed if reports of retirement deductions or the accompanying payments are received after the due date. There are also penalties assessed if identified payroll issues are not addressed within the 30 day “cure” period, which is described below. Identifying common errors can help employers avoid penalties. Statutory penalties are structured so that fines assessed will increase over time for failure to meet the deadlines.

OP&F expects that errors are able to be corrected significantly faster than 30 days. This ensures for employers and their employees that pension benefits are correct. Timeliness of correct payroll reports has particular effect on those members entering the Deferred Retirement Option Plan, applying for disability benefits and receiving their first check after retirement.

Both the reports of retirement deductions and the accompanying payments are due on or before the last day of the month following the reporting period. For example, the October 2021 pension report and payment are both due on or before November 30, 2021. If reports and payments are sent by mail, they must be received on or before the due date, not just postmarked on or before that date. For this reason, we encourage our employers to utilize our online pension reporting and payment program.

Once payroll reports are received, they are reviewed by our Employer Services Group (ESG). If the reports are compliant with our requirements and the appropriate payments have been made, the pension data is updated to member accounts. If, on the other hand, one or more reporting issues are identified, a 30 day “cure” period is immediately implemented. Under this protocol, an email notice is provided to the employer, detailing the issue(s) and allowing the employer a 30-day period in which to resolve any and all identified issues. Common examples of possible reporting issues are:

• Fluctuating wages;

• Incorrect earning dates;

• Failure to report accurately scheduled or paid hours;

• Reporting wages under improper pay codes; and

• Missing or incomplete information.

It is important to note that even if there is only one identified issue on a payroll report, the entire report will be held in a pending status until the issue is resolved. Additionally, if in the course of the internal review process it is discovered that additional money is owed, the payment must be made within the 30 day cure period to achieve compliance and avoid a penalty.

OP&F has tools to assist employers in meeting reporting and payment deadlines, including the previously mentioned online reporting and payment application.

There is also the Earnings Period Calendar on the OP&F website, which will calculate the due dates for each reporting period for any given calendar year. The Employer Manual and Employer Digest newsletter are available online and emailed to employers featuring timely and important information, as well as the Employer Self-Serve video.

The Employer Services Group also conducts automated courtesy calls several days before each month’s due date, to inform employers that either the payroll report or payment has not yet been received by OP&F. This affords employers the opportunity to remedy the issue(s) before the due date, thus avoiding penalties.

Despite these tools and services provided by OP&F, it is ultimately the employer’s responsibility to report payrolls and payments timely. This will help avoid penalties and enhance an efficient and smooth updating of OP&F member pension accounts. OP&F sincerely appreciates the efforts of employers concerning payroll accuracy. Please contact Employer Education with any questions at employereducation@op-f.org, or telephone 614-628-8311.

EMPLOYER CERTIFICATION FORM AND MEMBER INFORMATION FORM

In 2020 OP&F replaced the Personal History Record with two separate forms: the Employer Certification of Member Enrollment and the Member Information Form. The purpose of implementing separate forms was to create a more streamlined process relating to new members. With the separation of forms comes a separation of responsibilities – the employer is responsible for verification of a member’s full-time status including the full-time hire date and initial salary, and the member is responsible for providing basic demographic information as well as verification of any prior public employment or military service. This service may be eligible for transfer or purchase at a later date.

The Employer Certification of Member Enrollment and Member Information Form are available on the OP&F website here. OP&F will require the two new forms effective Jan. 1, 2022. After this time the Personal History Record will no longer be accepted by OP&F.

EMPLOYER SERVICES GROUP UPDATE

The OP&F Employer Services Group ensures the accuracy and completeness of employer payroll reports, often working one-on-one with an employer's payroll clerk. Please feel free to contact the employer’s designated payroll representative for any questions or assistance in completing and submitting a payroll report. The Employer Services Group chart can also be found on the OP&F website by clicking here and is updated whenever there is a change.

PRE-EMPLOYMENT PHYSICALS

In addition to the Employer Certification form, Ohio law requires employers have prospective members undergo a Pre-Employment Physical (PEP) in the manner established by OP&F prior to their employment and, with limited exceptions, file the required documentation with OP&F by the established deadlines.

A PEP may not be required for some returning or transferring members; however, the employer should contact OP&F to make this determination. Otherwise, penalties and interest may be imposed against the employer.

The required documentation must be received no later than 60 days after the employee’s first day of earning full-time compensation. The tests must be performed no later than the end of business on the employee’s first day of full-time employment and no earlier than nine months prior to the employee’s first day of full-time employment.

For more information on the Pre-Employment Physical (PEP) please refer to page 10 of the OP&F Employer Manual. The Manual can be viewed online by clicking here. PEP forms are available for viewing and download here.

GASB UPDATES NOW AVAILABLE

The newest GASB 68 data through Dec. 31, 2020, is now available on the OP&F website by clicking here. In June of 2012, the Government Accounting Standards Board (GASB) issued Statement 68 which required governments that provide defined benefit pension plans, to recognize their long-term liability for retirement benefits, as a liability on their financial statements. It is important for employers to keep in mind that this GASB reporting obligation creates an accounting liability, not a legal liability. The legal liability for OP&F employers is that they report and pay the statutory member and employer contributions each month in accordance with Chapter 742 of the Ohio Revised Code.

From the GASB perspective, pensions are seen as part of a total compensation package and employment relationship between employer and employee. To the degree a pension system is not 100% funded, GASB believes that employers have a liability on paper for the unfunded portion of the pension system that is in proportion to their share of the total liability. Each year, OP&F discloses on their website the information employers will need to complete their financial statements in accordance with the GASB 68 requirements. This information includes the total employer contributions for the given calendar year, and the employer allocation as a percentage of this total. The disclosure information is broken down by the five-character division code for each employer.

GASB 75 information is also available on the OP&F website. GASB 75 replaces GASB 45 and accounts for Other Post-Employment Benefits (OPEB). This is primarily liability received by OP&F retirees. Since GASB 68 covers only pension plans, OPEB must be reported separately on an employer’s financial statements.

ACCRUED LIABILITY SECOND-HALF BILLINGS DISTRIBUTED TO OP&F EMPLOYERS

In mid-October, Employers who still have accrued liability balances dating back to the creation of OP&F in the 1960s will have received correspondence from OP&F, including amounts due. Not all employers are subject to accrued liability so only those that are subject should have received the correspondence.

Accrued liability balances can be traced back to the beginnings of OP&F when in 1965, the Ohio General Assembly created the pension fund. This action resulted in the replacement of 454 separate local police and firefighter relief and pension funds around the state, with one consolidated retirement system which began operations on Jan. 1, 1967. On that date, the local funds transferred their assets and liabilities to OP&F. Unfortunately, the transferred assets totaled approximately $75 million, while the total accrued liabilities were approximately $490 billion.

To address this shortfall, the Ohio legislature enacted a statute which enabled the employers who had a shortfall to pay off their share of the unfunded liability over a substantial period of years (1969-2035). Under the law, OP&F bills employers subject to accrued liability two times per year, in April and October. These bills are made up of two components, principal and interest. The interest on an employer’s invoice is accrued at a rate of 4.25 percent of the outstanding balance. Employers that wish to pay off the balance of their accrued liability in a lump sum may do so. Such a payoff can result in significant savings by eliminating the interest portion of the cost.

HOLIDAYS OBSERVED BY THE FEDERAL RESERVE SYSTEM

On holidays observed by the Federal Reserve System, banks are not open for business which could impact payroll reporting. For holidays falling on Saturday, Federal Reserve Banks and Branches will be open the preceding Friday; however, the Board of Governors will be closed. For holidays falling on Sunday, all Federal Reserve offices will be closed the following Monday. The 2021 – 2025 Holidays observed chart is available by clicking here.

IMPORTANT DATES AND DEADLINES

Important dates and deadlines are also posted on OP&F’s website under the Employers menu in the Calendar of Billing Deadlines and Events section.

NOVEMBER 15

2nd Semi-accrued liability bills

NOVEMBER 30

Payroll deductions, member and employer contributions and payroll reports for October 2021.

DECEMBER 31

Payroll deductions, member and employer contributions and payroll reports for November 2021.

JANUARY 31

Payroll deductions, member and employer contributions and payroll reports for December 2021.

OP&F provides the Employer Digest as a general reference material in order to assist employers in properly reporting required contributions to OP&F, as well as submitting the required forms and materials that are necessary to provide benefits for our members. As a general reference material, the Employer Digest may not sufficiently represent all of the details applicable to the subjects discussed. Nothing contained in this newsletter is meant to interpret, extend or change, in any way, OP&F’s governing statutes, administrative rules or policies. If you have any questions or need information on any subjects referenced in the Employer Digest, please contact OP&F.

OP&F provides the Employer Digest as a general reference material in order to assist employers in properly reporting required contributions to OP&F, as well as submitting the required forms and materials that are necessary to provide benefits for our members. As a general reference material, the Employer Digest may not sufficiently represent all of the details applicable to the subjects discussed. Nothing contained in this newsletter is meant to interpret, extend or change, in any way, OP&F’s governing statutes, administrative rules or policies. If you have any questions or need information on any subjects referenced in the Employer Digest, please contact OP&F.

COPYRIGHT © 2021 by Ohio Police & Fire Pension Fund, All Rights Reserved.

Posted 11/5/2021