COMPTROLLER'S SEAL STATE OF CONNECTICUT

STATE OF CONNECTICUT

NANCY WYMAN
COMPTROLLER

OFFICE OF THE STATE COMPTROLLER
55 ELM STREET
HARTFORD, CONNECTICUT 06106-1775

MARK OJAKIAN
DEPUTY COMPTROLLER

MEMORANDUM NO. 2000-34

July 28, 2000

TO THE HEADS OF ALL STATE AGENCIES

Attention: Chief Administrative and Fiscal Officers, Business Managers, and Payroll and Personnel Officers
Subject: Deceased Employees' Wages
  1. PURPOSE: This memorandum supercedes Memorandum No. 2000-19 dated April 27, 2000 and provides new Deduction or Other Earnings (D/OE's) codes for payment of deceased employees' wages, revised Expenditure Object Codes and corrected Internal Revenue Service (IRS) reporting procedures.
  2. AUTHORITY: Section 5-253 of the Connecticut General Statutes authorizes payment for extra hours of work and accumulated vacation allowance upon the death of a state employee and details the terms under which such payment is made.

    In addition, the IRS provides direction for reporting the payment of deceased employees' wages as a special reporting situation in the Instructions for Forms W-2.
  3. DEATH NOTIFICATION PROCEDURES: Agencies must immediately report the death of an employee to the Comptroller's Office on Form CO-638, "Notice of Death of State Employee". If the employee was a member of the State Employees' Retirement System, a request should be made for the name of the beneficiary designated on the employee's Form CO-931, "Designation of Retirement System-Tier-Plan-Beneficiary". If the employee submits an application for retirement benefits from the State Employees' Retirement System and dies before the targeted effective date of retirement, the name of the designated beneficiary must be obtained from the Income Payment Election form submitted to the Retirement & Benefit Services Division with the retirement application.
Refer to the Payroll Policy Manual instructions on the Office of the State Comptroller website for revised procedures for the determination of payee and computation of payment.
  1. PAYROLL PROCEDURES: Payments whether made in the same calendar year the employee died or made after the calendar year of the employee's death must be processed through payroll. All wages due to the employee, including but not limited to regular earnings, vacation pay, longevity, sick pay and overtime, must be combined and paid under the appropriate D/OE listed in Section V of this memorandum. Agency payroll staff must close all active deductions other than retirement prior to, or at the time of the final payment and contact the Retirement & Benefit Services Division's Employee Benefits Unit to process suspension of any Deferred Compensation and/or DCAP reductions. No deductions, other than retirement and FICA/Medicare (see tax and deduction requirements associated with each D/OE in Section V), should be made from this payment. Contact the Comptroller's Payroll Services Division to cancel supplemental benefits that are maintained directly by the companies i.e. Metropolitan, and Bankers Security, etc. Important: Agencies who made payments to deceased employees this calendar year must identify impacted employees and provide the payment information to the Comptroller's Payroll Services Division as soon as possible.
  2. NEW DEDUCTIONS OR OTHER EARNINGS: D/OE 16 has been disabled and can no longer be used for deceased employee payments. The following new D/OE's must be used for all deceased employee payments.

    0Q (Zero, Q), YEAR OF DEATH SALARY - This D/OE is to be used to pay all earnings owed (other than sick pay) when the payment is made in the same year the employee died. It is not subject to Federal or State Withholding Tax. It is subject to FICA, Medicare and Retirement Contributions.

    0R (Zero, R), YEAR OF DEATH SICK - This D/OE is to be used to pay a lump sum sick payment when the payment is made in the same year the employee died. It is not subject to Federal or State Withholding Tax or Retirement Contributions. It is subject to FICA and Medicare.

    0S (Zero, S), YEAR AFTER DEATH SALARY - This D/OE is to be used to make a salary payment (other than sick pay) when the payment is made in the year after the employee died. It is not subject to Federal or State Withholding Tax, FICA, or Medicare. It is subject to Retirement Contributions.

    0T (Zero, T), YEAR AFTER DEATH SICK - This D/OE is to be used to make a lump sum sick payment when the payment is made in the year after the employee died. It is not subject to Federal or State Withholding Tax, FICA, Medicare, or Retirement Contributions.
  3. EXISTING EXPENDITURE OBJECT CODES: Effective immediately, the following existing expenditure object codes have been revised and are to be used for the payment of accrued sick leave and vacation upon the death of a state employee.
01-090 Accrued Sick Leave at Retirement (if fewer than six months of sick leave is charged prior to the date of retirement) or Death (when payment is made in the same calendar year the employee died) - Subject to FICA and Medicare. Not subject to Retirement Contributions.
01-120 Accrued Vacation at Termination, Retirement, or Death (when payment is made in the same calendar year the employee died) - Subject to FICA and Medicare, and Retirement Contributions.
01-220 Accrued Sick Leave at Retirement (if more than six months of sick leave is charged prior to the date of the retirement) or Death (when payment is made after the calendar year of death) - Not subject to FICA, Medicare or Retirement Contributions.
  1. NEW EXPENDITURE OBJECT CODES: Effective immediately, the following new expenditure object codes must be used for the payment of accrued vacation upon the death of a state employee.
01-190 Accrued Vacation at Death (when payment is made after the calendar year of death) - Not subject to FICA or Medicare. Subject to Retirement Contributions.
  1. REPORTING TO THE IRS: When an employee dies, any accrued wages, vacation pay, and other compensation paid after the date of death must be reported to the IRS. The Comptroller's Office will report the payment on the employee's Form W-2 and/or Form 1099-MISC to the beneficiary or estate, as appropriate.
If the payment is made in the same calendar year the employee died, FICA and Medicare taxes on the payment must be withheld and the payment reported on the employee's Form W-2 as Social Security and Medicare wages. This will ensure the deceased employee's survivors receive the benefit of proper Social Security and Medicare credits.
 
The payment must also be reported on Form 1099-MISC, Miscellaneous Income, as a payment to the beneficiary or estate. The name and taxpayer identification number of the beneficiary or estate must be used on Form 1099-MISC.
If the payment is made after the calendar year of death, it is not subject to FICA and Medicare taxes and is not reported on Form W-2.
 
However, the payment must be reported on Form 1099-MISC, Miscellaneous Income, as a payment to the beneficiary or estate. The name and taxpayer identification number of the beneficiary or estate must be used on Form 1099-MISC.
  1. QUESTIONS: Questions concerning this memorandum may be directed to the Office of the State Comptroller as follows:
Beneficiary Questions: Retirement & Benefit Services Division,
Data Base Unit, (860) 702-3517;
 
Group Life Insurance, Deferred Compensation, and DCAP:
Retirement & Benefit Services Division
Employee Benefits Unit, (860) 702-3543;
 
Payroll Procedures: Payroll Services Division, (860) 702-3448;
 
Memorandum Interpretation: Policy Services Division, (860) 702-3440.

NANCY WYMAN
STATE COMPTROLLER

NW:EH:jrs

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