News About the 3% Healthcare Contribution Refund from the State Pension Program 2010-2012

This comes to you from David Cunningham, Director of Financial Services. Questions: dccunningham@hfcc.eduWe have made significant progress toward disbursing the refund, and I can provide the following details (see below for earlier messages and context on this issue):*Expediting. Through our listservs, we have discovered and acquired a means to batch process the stipends into the Colleague system, which will significantly speed up the process. We had our first meeting to implement this solution yesterday afternoon, and will quickly move to test the program and data to ensure correct results.*A Bonus - a third stipend. For most or all of our recipients, there will be a third refund component.  Back in the confusion of the 3% implementation, in 2010, there was an extensive debate as to the FICA application of the State deduction.  Initially the College withheld FICA on the 3%, but prior to the end of December 2010, our auditors recommended we not take out FICA.  We were able to make the appropriate internal adjustments and adjustments with the IRS, and held these amounts in Trust at the College awaiting a decision by the IRS or State.  We will now refund these amounts back to you, and will be treated as a third stipend, which of course is not taxable.  As this was a College decision, ORS was not a party to it, and could not report it to you as they did earlier.  Payroll can inform your amount, however remember, it impacted only if you were an employee during the last quarter of 2010.  FYI.  The FICA applicability continues to be an unanswered question by ORS and IRS even today.*Defer to 403(b) or 457 account option. Also during our discovery process, we determined that most or many school districts and colleges would permit recipients to defer the 3% portion only of the refund (not the interest income or FICA component) to an existing 403(b) and/or 457 investment. I have attached the PDF fillable form for you to defer if you choose.  Deduction Form One important caveat, if you already have a bi-weekly/monthly deduction, you may bump up against the annual limits far quicker, and you will need to monitor and adjust your regular deduction to avoid any end of calendar year issues.  One additional note, you must be an active and current user of the 403(b)/457 program to participate in this one-time deduction.  The deadline to complete and return your form is next Friday, February 23, with no exceptions.*Some Mechanics.  Based on the best practice (confirmed by Ellucian) in Colleague to process your refund you could, in one deposit, receive three stipends:(1) 3% deduction, which is fully taxable,(2) interest income, which will not be taxed (but technically taxable to you as 1099 interest), and(3) FICA refund, which is not taxable.We will use IRS Circular E as the basis for all refunds, which means your 3% portion will be taxed at 22% Federal, and ordinary FICA and State taxes.All said, we have tentative March 9 as the refund date for active employees (direct deposit), and March 21 or 23 for inactive employees (check).