Original Issuance Date: August 6, 2020

Expiration Date: December 31, 2022

1.     Interim Procedure Purpose

The purpose of this procedure is to establish standards for University of Wisconsin System institutions and University of Wisconsin central administration consisting of UWSA, UWSS and UWEX to use their respective share of funds from the deferred payroll tax liability under the Coronavirus Aid, Relief, and Economic Security (CARES) Act to maximize liquidity.

2.     Related System Administrative Policies

None listed.

3.     Applicable Institution(s)

Each UW System institution, including the central administration consisting of UW System Administration, UW Shared Services, and UW Extended Campus, may use its applicable employment taxes during the payroll deferral period to provide additional institutional liquidity.

4.     Scope

This is a new interim administrative procedure to address how institutions may respond to the CARES Act passed on March 27, 2020. This interim procedure will be administered by the UW System Vice President for Finance.

5.     Definitions

Applicable Employment Taxes: The institution’s employer share of Social Security taxes imposed under section 3111(a) of the Internal Revenue Code of 1986.

Payroll Tax Deferral Period: The period beginning on March 27, 2020 and ending before January 1, 2021, unless determined by UW System or DOA to terminate this program earlier.

6.     Interim Procedure Statement

The Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law on March 27, 2020.  It allows employers to defer the deposit and payment of the employer’s share of Social Security taxes (6.2 percent up to the social security wage base) otherwise due. The payroll tax deferral period began as of the date the Act was signed and continues through December 31, 2020. The delayed portion of the applicable employment taxes will ultimately be paid to the Treasury in two installments as follows: (i) 50% on December 31, 2021, and (ii) 50% on December 31, 2022.

A. Payroll Accrual

  1. Fund 980 – Employer’s Share Fringe Benefit Clearing, department ID 980980 – Employer’s Share Fringe Clearing, and account code 7221 – Social Security Payable-State are used to record payroll accruals related to the employer share of social security taxes (6.2% up to the social security wage base). Payroll accruals are posted to each respective business unit after each payroll and monthly transferred back to the Deferred Payroll Deductions (UWDPD) business unit to clear the balance as payments are made.
  2. Account code 7726 – Employer Payroll Tax Defer LT was set up to account for the amount of the employer share of social security taxes being deferred through the CARES Act Employer Payroll Tax Deferral program using fund 980 – Employer’s Share Fringe Benefit Clearing and department ID 980980 – Employer’s Share Fringe Clearing. As each payroll is processed, amounts deferred though this program will be transferred from account code 7221 – Social Security Payable-State to account code 7726 – Employer Payroll Tax Defer LT. This payroll accrual is posted to each respective business unit and will not be transferred back to UWDPD until the 50% is due December 31, 2021 and 2022.

B. Interest Earnings

In order to maximize the available funds, an Internal Transfer (INT) journal will be completed by UWSA to transfer these funds from Fund 980, department ID 980980, to an interest bearing fund (i.e. Fund 136) using Account code 6270 – Due from Other Funds and 7160 – Due to Other Funds.

 

Example of a properly formatted journal:

BU Fund Program DeptID Account Project/Grant Debit Amount Credit Amount
UWXXX 980 1 980980 6270 none 100,000
UWXXX 980 1 980980 6100 none 100,000
UWXXX 136 1 123456 7160 xxxxxxx 100,000
UWXXX 136 1 123456 6100 xxxxxxx 100,000

C. Limit

The amount of deferred payroll taxes available to each institution for funding is equal to their respective share of the current amount of deferred liability accumulated to date (starting with the 03UNC and 03BW pay periods) plus any accumulated interest.

D. Notification

As institutions identify a need to use funding available through this program, a Notification form must be completed and routed to Financial Administration.

Here is an example of a possible need for which a notification would be completed: The federal government requires reimbursement employers to pay unemployment insurance benefit claims related to the CARES Act that are due to the State Department of Workforce Development before the federal government will reimburse those amounts.

E. Transfer of Funds

An Internal Transfer (INT) journal will be used to transfer funds to the fund identified with a need.

Continuing the example in Section D, here are the journals to account for the transfer of funds, assuming the journal in Section B was completed:

BU Fund Program DeptID Account Project/Grant Debit Amount Credit Amount
UWXXX 136 1 123456 6270 xxxxxxx 75,000
UWXXX 136 1 123456 6100 xxxxxxx 75,000
UWXXX 128 1 xxxxxx 7160 none 75,000
UWXXX 128 1 xxxxxx 6100 none 75,000

F. Replenishment of Funds

Each institution is responsible for returning a sufficient portion of the deferred liability amount borrowed back to fund 980 to meet the installment deadlines for Treasury payments.  Fifty percent of the institution’s deferred liability must be available in fund 980 by December 15, 2021, and the remaining fifty percent must be available in fund 980 by December 15, 2022.

7.    Supplemental Documents

Section 2302 of the CARES Act

Section 3111(a) of the Internal Revenue Code of 1986