Aggregate Model for Supplemental Pay Withholding

The following model is used to calculate tax rates for by-pay-type, multiple-by-pay type, and retroactive supplemental runs.

1. The subject gross of the deduction to be aggregated on the supplemental payment is calculated. The Gross-to-Net process totals the pay events in the supplemental run. After totaling these pay events, any taxable fringe payments are included.

If the total pay events excluding deductions is zero, the rest of the calculation is discontinued; otherwise Gross-to-Net proceeds to step 2. The total of the pay events and taxable fringe payments with deductions excluded are referred to in the calculation model as Variable A.

2. Gross-to-Net finds a deduction detail on the employee’s most recent regular check that has the same deduction type and plan as the deduction to be aggregated on the supplemental check. Replacement checks cannot be included in this calculation, since it is unclear whether or not the replacement is for a regular or a by-pay-type check.

3. The check date of the supplemental wage payment is then compared to the check date for the latest regular paycheck. If they fall within the same year, Gross-To-Net looks for the deduction detail of the deduction for which the aggregate calculation is to be performed.

4. If a deduction detail cannot be found on a regular check falling within the year during which the supplemental payment is to be made, the rest of the aggregate calculation is bypassed. All payments included in the deduction, regardless of the Withholding Subject To setting, are taxed at the flat rate, and the warning message “A2221 - FLAT RATE REPLACED AGG CALC” is issued on the Gross-to-Net Error Report.

5. If a deduction detail matching the deduction to be calculated is found on a regular check falling within the same year that the supplemental payment is to be made, Gross-To-Net adds the subject gross of the deduction (Variable B) to Variable A.

6. The total of Variables B and A are annualized according to the employee’s pay frequency, using the pay class that was valid for the regular check. If the employee changed pay frequencies after the most recent regular check was issued, the frequency that was used to annualize pay on the regular check must be used to do the annualization.

7. Withholding is then determined for the annualized total using the marginal rate calculations. Because withholding rates can change in between payments, rates and tax parameters in effect as of the check date of the supplemental payment are used in the calculation.

8. The annualized withholding determined in Step 5 is divided by the Annualization factor to determine Variable C.

9. The amount of the deduction on the regular check is deducted from Variable C. The result is the withholding to be taken on the supplemental check.

10. Gross-to-Net then continues to calculate deductions for the rest of the check.

The aggregate model, suggested by the Federal government, uses the following to calculate taxes for by-pay-type, multiple-by-pay-type, and retroactive supplemental runs:

• Subject gross of the supplemental check

• Subject gross of the employee’s last regular check that has had Federal tax deducted and has been issued within the same year as the supplemental check.

The aggregate model is not used if there is no regular check issued in the same year as the supplemental check or if there is a regular check, but no Federal taxes were deducted. Gross-to-Net will then use the flat rate specified on the Deduction Plan (DPLN) page.