There is some confusion about our upcoming February paychecks, due to two separate things that happen with this pay period. If your Feb 10th paycheck is different than you expected, please look at the itemization for “FSA Stipend” and “Federal Income Tax Withholding”:
- Federal Income Tax Withholding: The February 10th pay period is when the new 2023 W-4 is used for federal tax withholding purposes (and the Oregon W-4 is used for state withholding). If you see a difference in your withholding amount than you were expecting, please contact HR to see whether you need to file a new W-4.
- FSA Stipend: This one is more confusing, so I will try to explain what we are seeing here.
History: Several years ago, when the College still used Pacific Source for our insurance, there was an increase of costs that, in order to keep our premiums down close to what they had been in the past, the new plan would require a large increase to deductibles. At that time, the College decided to make use of Section 125, which allows pre-tax payroll deductions to go into an FSA account on the employee’s behalf to be used for medical or childcare purposes. The benefit of this, in addition to it being tax-free money, is that if the employee or college spreads out a payment over each paycheck throughout the year, the full total of that annual amount is available to use at the first of the year for your medical or childcare expenses. This could be used for that initial deductible, so that employees could access their health care early in the year.
The College agreed that, if an employee makes a minimum contribution of $240 per year–only $10 per paycheck–because that is required in order to use Section 125 at all–the College would make a contribution to the FSA account nearly equal to that higher deductible that we all faced. This amount was based on whether the employee was choosing 1) Employee only, 2) Employee Plus One, or 3) Full Family coverage, as the deductible amount is significantly different for each of these options.
We have continued with this year after year, with the College making this same contribution as long as you sign up for Section 125 each year in November. On January 1, you have had the correct College contribution amount in your FSA account for the full year.
THIS YEAR, the College learned that IRS requirements are that the employer can only MATCH the employee contributions. If the employee makes only the minimum contribution of $240, then the College can only make up to a $500 contribution and no more. Beyond that, for the College to contribute, there are limits based on what the employee contributes.
In recognition of the fact that many employees count on this, but cannot necessarily pay more than the $240 ($10/paycheck) contribution to Section 125, which would mean that many of us would not receive that amount that helps us meet our deductibles at the beginning of the year, LCCEF and LCCEA each bargained a stipend from the College, which “makes you whole” based on the TOTAL amount you would have normally received. So, if you make a small contribution for Section 125, the College will make a small contribution to your Section 125, and a larger stipend on your February 10th paycheck to make up for it. If you make the maximum contribution to your Section 125 FSA, the College has already made their maximum contribution to that as well, so you may see a small stipend on your paycheck or you may see nothing–because the FSA already has the usual contribution that you expect
To see the TOTAL College contribution, look at your FSA account AND your Feb 10th paycheck and add the FSA College contribution to the Feb 10th Stipend for your total. ADD the two together, and it should match what the contract outlined below says.
Many of us are now looking at our February 10th paychecks, expecting a large stipend, but we need to understand the numbers. Please see below for the full agreement that LCCEF signed with the College:
1. Classified Minimum Contribution. In order to participate in a Sec. 125 account, classified members shall continue to contribute a minimum of $240 per year.
2. College Contribution: Employee Only.
a. For classified members contributing $500 or less to Sec. 125, the College shall contribute $500 annually to the classified member’s Sec. 125 account. In addition, the College shall pay a stipend of$170 to such classified members no later than February 10 each calendar year.
b. For classified members contributing between $500.01-$670.00 to Sec. 125, the College shall match the classified member’s contribution dollar for dollar up to $670.00. In addition, the College shall pay a stipend no later than February 10 each calendar year according to the following formula where x is the amount the classified member contributes annually. ($670 – x) = stipend amount. Example: if a classified member contributes $600, the stipend amount will be 70 i.e., ($670 – $600) = $70.
c. For classified members contributing $670 or more to Sec. 125, the College shall match the classified member’s contribution dollar for dollar up to $670. Example: if a classified member contributes $670, the College will contribute $670.
3. College Contribution: Employee plus Spouse/Partner
a. For classified members contributing $500 or less to Sec. 125, the College shall contribute $500 annually to the classified member’s Sec. 125 account. In addition, the College shall pay a stipend of $840 to such classified members no later than February 10 each calendar year.
b. For classified members contributing between $500.01-$1,340.00 to Sec. 125, the College shall match the classified member’s contribution dollar for dollar up to $1,340. In addition, the College shall pay a stipend no later than February 10 each calendar year according to the following formula where x is the amount the classified member contributes annually. ($1,340 – x) = stipend amount. Example: if a classified member contributes $600, the stipend amount will be $740 i.e., ($1,340 – $600) = $740.
c. For classified members contributing $1,340.01 or more to Sec. 125, the College shall match the classified member’s contribution dollar for dollar up to $1340. Example: if a classified member contributes $1,400, the College will contribute $1,340.
4. College Contribution: Employee plus Child(ren)/Full Family.
a. For classified members contributing $500 or less to Sec. 125, the College shall contribute $500 annually to the classified member’s Sec. 125 account. In addition, the College shall pay a stipend of$1,215 to such classified members no later than February 10 each calendar year.
b. For classified members contributing between $500.01-$1,715.00 to Sec. 125, the College shall match the classified member’s contribution dollar for dollar up to $1,715. In addition, the College shall pay a stipend no later than February 10 each calendar year according to the following formula where x is the amount the classified member contributes annually. ($1,715 – x) = stipend amount. Example: if a classified member contributes $600, the stipend amount will be $1,115 i.e., ($1,715 – $600) = $1,115.
c. For classified members contributing $1,715.01 or more to Sec. 125, the College shall match the classified member’s contribution dollar for dollar up to $1,715. Example: if a classified member contributes $1,800, the College will contribute $1,715.
Fiora Starchild-Wolf, MS Ed
LCCEF COPE Officer
Bargaining Team Member