Payroll Deduction

1. Are employers required to administer payroll deduction plans?
2. What types of credit are eligible for purchase via a payroll deduction plan?
3. Are current absence or leave purchases available via a payroll deduction plan?
4. How does a member sign up for payroll deduction?
5. If the member signs up for payroll deduction and there is an associated employer cost with the type of credit being purchased, how is the employer cost handled?
6. What is a tax-deferred payroll deduction plan?
7. Are there restrictions for a member purchasing service credit on a tax-deferred plan?
8. What should an employer do to adopt a tax-deferred plan?
9. Why must I notify STRS Ohio 60 days before implementing a tax-deferred plan?
10. What if a member wants to make an additional payment?
11. How do I know when to discontinue payroll deductions?
12. Do I have to calculate the amount of the last payment due?
13. What if payroll deductions are not stopped in time?
14. Where can I get the required paperwork to set up a tax-deferred payroll deduction plan to purchase service credit?
15. For members to purchase service credit, do I have to offer both after-tax and pre-tax plans?
16. How does a member get more information about purchasing service credit?
17. Can I get a copy of a member cost statement for purchasing service credit?
18. Can I send the payments for payroll deduction with my payroll report for purchased service credit?

1. Are employers required to administer payroll deduction plans?
   Yes. Ohio law requires employers to administer payroll deduction for the purchase of STRS Ohio credit.
2. What types of credit are eligible for purchase via a payroll deduction plan?
   All types of credit purchasable through STRS Ohio can be purchased via a payroll deduction plan. A complete list of all types of purchasable service credit is available in the Purchasing Service Credit section of the STRS Ohio Employers Manual.
3. Are current absence or leave purchases available via a payroll deduction plan?
   No. A member’s purchase of a current absence or leave must be handled as a lump sum purchase through the employer who granted the leave, according to the procedures outlined in the Absences & Leaves section in the STRS Ohio Employers Manual.
4. How does a member sign up for payroll deduction?
   The member should contact STRS Ohio directly regarding the purchase of service credit. If eligible for a service credit purchase, the member is sent a cost statement advising him or her of the current cost to purchase this credit.
   
   Included with a cost statement for eligible credit is information regarding payroll deduction purchases. A member who elects to purchase credit via payroll deduction completes the payroll authorization form and forwards it to the employer. The employer must complete the employer portion of the form, initiate the deduction and forward the completed form to STRS Ohio.
5. If the member signs up for payroll deduction and there is an associated employer cost with the type of credit being purchased, how is the employer cost handled?
   If there is a cost to the employer for the type of credit being purchased, such as past absence or leave, the employer will be billed annually in September for the employer cost associated with the member credit purchased during the prior fiscal year. An employer will be billed at other times of the year if the member’s purchase is complete. If the employer is on the State Foundation Program and the employer payment is not made, the next certification of the State Foundation Program will be adjusted.
6. What is a tax-deferred payroll deduction plan?
   A member purchasing credit via payroll deduction can have deductions made on a tax-deferred basis if his or her employer has adopted a tax-deferred plan. An employer may offer:
   • An after-tax plan,
   • A tax-deferred plan, or
   • Both an after-tax and a tax-deferred plan.
7. Are there restrictions for a member purchasing service credit on a tax-deferred plan?
   Yes. Restrictions apply to a member on a tax-deferred plan that do not apply to a member on an after-tax plan. Under a tax-deferred plan, a member cannot:
   • Stop or change payments until the credit is fully purchased or employment is terminated,
   • Make lump-sum payments for the same service being purchased, or
   • Stop payments to pay off the remaining balance in a lump sum.
8. What should an employer do to adopt a tax-deferred plan?
   Adoption of a tax-deferred plan is optional for the employer. To adopt a tax-deferred plan, an employer must pass a board resolution. Once the board adopts the tax-deferred plan, the employer must notify STRS Ohio at least 60 days before the effective date of the plan. A copy of the resolution authorizing the plan should accompany the Notification of Adoption of a Tax-deferred Payroll Deduction Plan form. View a sample board resolution authorizing a tax-deferred plan.
9. Why must I notify STRS Ohio 60 days before implementing a tax-deferred plan?
   During this time, STRS Ohio identifies your employees who are currently participating in payroll deduction and notifies them of the plan adoption. STRS Ohio also advises them of the restrictions on a tax-deferred plan and their individual options.
10. What if a member wants to make an additional payment?
    For an after-tax payroll deduction plan, the member’s personal check, payable to STRS Ohio, should be attached to the employer’s monthly remittance. Add this amount to the “Total Amount Enclosed” line of the remittance.
    
    For a tax-deferred payroll deduction plan, a member’s deductions may not be accelerated and additional payments will not be accepted.
    
    
11. How do I know when to discontinue payroll deductions?
    STRS Ohio will notify you via the Monthly Transmittal Report approximately three months before the member’s last remittance month.
    
    
12. Do I have to calculate the amount of the last payment due?
    For both after-tax and tax-deferred plans, STRS Ohio will notify you in advance of the amount of the last month’s deduction. You will be responsible for remitting the final payment.
    
    
13. What if payroll deductions are not stopped in time?
    For an after-tax plan, STRS Ohio will refund any overpayments directly to the member. Overpayments made on a tax-deferred plan are returned to the employer.
    
    
14. Where can I get the required paperwork to set up a tax-deferred payroll deduction plan to purchase service credit?
    Your board must first pass a resolution authorizing a tax-deferred plan. A sample resolution is available for reference. You must then complete the Notification of Adoption of a Tax-deferred Payroll Deduction form and forward a copy of the form and the board resolution to STRS Ohio at least 60 days prior to the effective date of the plan. Once we receive your notification and board resolution we will send you a letter confirming the plan you selected and the effective date. Please review the letter and contact us if there are any discrepancies.
    
    
15. For members to purchase service credit, do I have to offer both after-tax and pre-tax plans?
    No. It is your decision whether you want to offer pre-tax only or both pre-tax and after-tax.
    
    
16. How does a member get more information about purchasing service credit?
    A member interested in obtaining information regarding purchasing eligible service credit should contact the STRS Ohio Member Service Center toll-free at 1-888-227-7877. A Member Representative will review all of their options and forward to them a cost statement listing the total cost to purchase the credit.
    
    
17. Can I get a copy of a member cost statement for purchasing service credit?
    The member must provide you with a cost statement. Statements will not be released to employers without the consent of a member.
    
    
18. Can I send the payments for payroll deduction with my payroll report for purchased service credit?
    No. The payroll deduction money should be sent monthly with the payroll deduction remittance either by mail or via the STRS Ohio employer Web site. The Cash Receipt Remittance form should also be completed and submitted.

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