UC Provided Cell Phone Policy Training Session

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UC Provided Cell Phone Policy Training Session

• June 2009

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Agenda

• Welcome
• Review of Business Finance Bulletin G-46
• Tax Implications of New Policy
• How to calculate the cash allowance
• Payroll Processing
• Implementation Steps
• Questions Answers

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Business Finance Bulletin G-46, Guidelines for
the Purchase and Use of Cellular Phones and Other
Portable Electronic Resources

• Revised to fulfill UC tax reporting obligation
  resulting from an IRS audit settlement
• Under new policy
• The value of a University-provided cell phone, a
  personal digital assistant (PDA), or similar
  device purchased after June 1, 2009 and provided
  to an employee will be treated as a taxable
  fringe benefit subject to withholding for payroll
  taxes.
• PDAs which are used only for Data are exempt from
  the policy. In order to be exempt, the PDA must
  be restricted to data only and not enabled for
  making or receiving voice calls.

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Impact on Employees

• Benefits of coverage under the revised cell phone
  policy include
• No disruption to current service
• Incidental personal use will be allowed as long
  as plan minutes are not exceeded
• Not required to comply with burdensome IRS
  substantiation rules
• Negligible impact to employee net pay/taxable
  income via grossed-up allowances

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Components of New Policy

• Approval of Purchases
• Exceptions to Policy
• Criteria for Purchasing
• Department Responsibilities
• Documentation Data Security
• Imputed Income/Cash Allowance Approach
• Incidental Personal Use
• Reimbursement of Non-incidental Personal Use
• Reimbursement of Business Use

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Approval of Purchases

• The dept head (or designee) has the authority to
  approve the purchase of University provided
  cellular phones or cell phone enabled devices.
• Should only authorize the University purchase of
  electronic resources when the primary use of the
  resources will be for University business.

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Criteria for Purchasing

• Only for those employees whose jobs entail the
  following responsibilities
• Travel Employees who frequently travel or are
  out of the office and need to be in contact,
  including contact by e-mail with staff, clients,
  managers, or other University business
  associates.
• Work Location Employees who typically work in
  the field or at job sites where access to
  electronic communications devices is not readily
  available.
• Emergency Response Employees who need to be
  contacted and/or to respond in the event of an
  emergency or are required to be available during
  non-business hours.
• Other Employees who are required by their
  department to be accessible at all times by
  electronic means.

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Data only Exemption

• Data only PDAs are not subject to the policy.
• In order to have this exemption apply
• Departments should contact the cell phone
  provider to restrict the phones capability to
  data only. Other than 911 calls, the phones
  voice capability should be turned off.
• In the event cell phone providers do not have the
  option of turning off voice capability,
  departments must
• Monitor monthly statements to ensure that no cell
  phone calls are made.
• In the rare case of a call being made/received,
  the cell phone user must annotate the cell phone
  bill by listing the person called (or from whom
  the call was received) and the business purpose
  of each call.
• Require reimbursement from the individual for any
  personal calls
• If phone calls are made regularly, then this
  exemption will not apply and the income is be
  imputed.

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Exceptions to Policy

• Approving authority for exceptions is more
  restricted
• Exceptions will be rare
• A typical exception to the policy may be granted
  for certain instances of shared cell phones
• However, employees using these shared cell phones
  must annotate the cell phone bill indicating each
  and every person called and the business purpose
  of each call.  Charges related to any personal
  calls must be timely reimbursed by the employee.
• Requests for exceptions to policy will be
  evaluated on a case-by-case basis
• Requests for exception to policy must document
  the business need or circumstances justifying the
  exception
• If an exception to the imputed income/cash
  allowance requirement is approved, the employee,
  in general, must still comply with existing IRS
  substantiation rules

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Documentation Data Security

• An employee provided with a cell phone or cell
  phone enabled device and/or services must prior
  to receipt of such resources sign The Employee
  Agreement Concerning the Use of Electronic
  Communications Resources in G-46 Appendix.

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Responsibilities of Department

• Charging each employee provided with a cellular
  phone or a cell phone-enabled PDA the appropriate
  amount of imputed income and paying the employee
  a cash allowance
• Monitoring the personal and business-related use
  of such cellular phones and PDAs to ensure that
  its employees are utilizing the most appropriate
  plan and for obtaining reimbursement for any
  personal use that burdens the University with
  noticeable incremental costs.
• unless as exception has been approved in
  accordance with this Bulletin.

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Responsibilities of Department (cont.)

• Complete the Imputed Income/Cash Allowance Form
  for each employee with a University cell phone or
  cell phone-enabled PDA
• Fund cost of phone, phone plan, and cash
  allowance
• Monitor monthly cell phone bills for excess
  minutes
• Monitor changes in cell phone plans and adjust
  Imputed Income/Cash Allowances

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Incidental Personal Use

• Incidental personal use of a University PDA/Cell
  phone is allowed provided that such use does not
  cause the user to exceed the plan minutes

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Reimbursement of Non-incidental Personal Use

• Employees are required to reimburse the
  University for personal calls reported on
  statements billed to the University when the
  employee exceeds the package minutes under their
  cell phone contract.
• The rate of reimbursement for any personal calls
  associated with the excess minutes is at the
  excess-minute rate.
• If the employee does not exceed the package
  minutes, reimbursement is not required for any
  personal calls.

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Reimbursement for Business Use of Personal Phone

• Reimbursement for the business use of a cellular
  phone or PDA purchased with the employees own
  funds is allowable only if an employee exceeds
  the calling plan minutes for the month.
• The reimbursement will be calculated at the
  excess minute rate up to the number of minutes
  exceeding the plan limit for the month.
• An employee must provide a copy of his or her
  cell phone bill identifying the business calls
  and noting the person called and the purpose of
  each call in order to be reimbursed
• Employees may not be reimbursed for the entire
  cost of a personally-owned cell phone or PDA

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Employees Without Pay Status

• Employees without pay status/leave without pay
• Performing testing to see if imputed income
  calculation will work for these individuals
• Return phone, or
• Substantiate business use in accordance with IRS
  Requirements

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Federal Funds

• Cell Phone charged to federal funds allowed if
• Cell phone is needed for the research,
• Such use was articulated in the proposal budget,
  and
• Such use is an allowable charge under the fund
  agreement.
• Charges should be made to the primary fund
  source, but if necessary costs may be split over
  multiple FAUs

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Imputed Income/Cash Allowance Approach

• The cost of an employees cell phone plan and
  device will be added to the employee's taxable
  earnings as imputed income subject to
  withholding.
• A taxable cash allowance will be given to the
  employee to reimburse for the tax on the imputed
  income. Since the allowance itself is taxable,
  it will be increased using the IRS gross-up
  formula to reimburse the employee for the taxes
  associated with the payment.

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What should be included as income?

• Cost of the monthly service plan
• Cost of the Equipment
• Included in monthly plan
• Not included in monthly plan
• Purchased after June 1, 2009 value must be
  imputed as a one time transaction
• Cost of one time purchases
• Accessories (batteries, charger, etc.)
• Expenses for Repairs
• Cost of replacing a lost or stolen device
• Equipment upgrades
• As policy allows

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Sample Cell Phone Bill
This bill has expenses that are Fixed
Variable
xxx-xxxx
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How to Calculate Value of Service Plan

• Total monthly bills for the last year.
• Divide the amount by twelve to calculate the
  imputed income amount for a monthly employee.
• For a biweekly employee, take the average monthly
  amount, multiply by twelve and then divide by 26.

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Example of Calculation
67.19
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Determining the Value

• For Monthly Paid Employees
• Value amount of the monthly plan
• For Biweekly Paid Employees
• Value amount of the monthly plan times 12 and
  divided by 26

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Elements of the New Policy (cont.)

• New Form
• Cell Phone Imputed Income/Cash Allowance Form
• Web-based fill-in form
• Used to automatically calculate the cash
  allowance
• Completed by department
• For commencement of cell phone plan
• For any changes or addition to plan
• For any changes to employee exemptions
• http//www.ucop.edu/ucophome/cao/paycoord/

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Elements of the New Policy

• Two New Description of Service Codes
• CEL
• Records imputed income on employees earnings
  record in order to facilitate tax withholding
• Appears on PPP5302 Distribution of Payroll
  Expense
• Only minor benefits expenses associated with this
  imputed income dollar amount are charged to the
  General Ledger (not the dollar amount itself)
• CE2
• Cash allowance to reimburse employee for the tax
  effect of the imputed income
• Appears on PPP5302 Distribution of Payroll
  Expense
• Expense and associated benefits are charged to
  the GL

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Effect on..

• Employee
• Value of the service plan (CEL) is added to the
  taxable income. It does not increase net pay.
  It increases tax withholding
• The cash allowance (CE2) increases pay and
  offsets the tax withholding
• The addition of income and corresponding taxes
  will be included on their W-2

• Department
• Continue to pay for phone service plan
• Not charged for CEL
• Charged for CE2

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Appt Dist Data

• EDB Preparers should use the ADDL bundle to add
  the new additional appointment and distribution
  data.
• Going into EAPP only is acceptable.
• The EDB Preparer will set up one appointment with
  two associated distributions to the employees
  record.
• The information for the two distributions comes
  directly from the Cell Phone Form.

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Part III Payroll Information
The information in Part III is the Distribution
data!
1
2
Distribution line 1 data.
Distribution line 2 data.
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Appointment Data
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Appointment Data Contd
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Distribution Data - Line 1
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Distribution Data - Line 2
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MONTHLY EXAMPLE
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BIWEEKLY EXAMPLE
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One Time Payments

• One time payments are not set-up in the
  Appointment and Distribution (EAPP) for the
  employee.
• The payments are made in EDAT on the One Time
  Payment (EDFT) screen in PTR.
• The payment should be scheduled to appear on the
  employees next regular payday.

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One Time Payments Contd

• The PTR Preparer must process two EDFT lines
• The TYP code is 3 for both lines.
• The imputed income payment. Use the DOS Code
  CEL and the amount of the payment. This
  information is from the CEL DOS Code (Imputed
  Income) section of the Cell Phone Form.
• The cash allowance reimbursement. Use the DOS
  code CE2 and the amount of the payments. This
  information is from the CE2 DOS Code (Cash
  Allowance) section of the Cell Phone Form.
• The Per End date should be the next Pay Period
  End date for the employees regular pay schedule
  per the PPS Schedule.
• For example, a new phone was purchased on
  06/01/09, for a mohthly employee. The biweekly
  pay period is 06/01/09 06/30/09. Therefore the
  Per End date to reference within EDFT is 063009.

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One Time Payments Contd

• Leave Of Absence with No Pay
• If an employee goes on a LOA without Pay, (Status
  N) and the employee does not return the cell
  phone or substantiate the usage, the employee
  must incur imputed income during this period.
• In order to process the imputed income a one time
  payment (EDFT) transaction must be processed for
  each pay day that the employee is out on LOA
  without pay.
• in accordance with IRS Requirements

Please ensure that any suspended deductions are
resolved prior to processing these transactions
so that the transaction will not fail.
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One Time Payment (EDFT) Example
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Effective Date of Policy

• The new policy became effective with June, 2009
  earnings paid as follows

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Implementation Steps

• Determine which employees have current University
  provided cell phone.
• Determine if the cell phones is still needed to
  perform their job duties
• Review existing service plans to insure correct
  level of expected business-related use.

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Implementation Steps Contd

• Determine the value of the imputed income based
  on information on the monthly cell phone bill
• Complete the Imputed Income/Cash Allowance Form
  to determine amount of cash allowance
• Enter the appropriate appointments and
  corresponding distributions on EDB

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Resources

• Training Presentation
• Available at http//acctg.ucsf.edu/payroll/referen
  ces/index.htm
• Updated Business Finance Bulletin G-46
• Guidelines for the Purchase and Use of Cellular
  Phones and Other Portable Electronic Resources
• Web Form
• http//www.ucop.edu/ucophome/cao/paycoord
• Payroll Services contacts
• Esther Carmona [phone]
• Delia Cavizo [phone]