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Contact Information:

USD Payroll
206 Slagle Hall
414 East Clark St.
Vermillion, SD 57069
phone: 605-677-5671
fax: 605-677-6630
payroll@usd.edu

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Last Modified: 08/15/07

payroll deductions

There are two types of taxes withheld from an employee's paycheck: Federal Income Tax and Social Security (FICA) tax.

Federal Income Tax
Federal Income Tax is based on a graduated scale and the amount withheld is determined by how the W-4 form has been filled out. It is possible to claim exemption from income tax withholding if both of the following statements are true: (1) Last year I had a right to a refund of all Federal income tax withheld because I had no tax liability and (2) this year I expect a refund of all Federal income tax withheld because I expect to have no tax liability. Please refer to the instruction on the W-4 form to claim exemption.

Social Security Tax
The FICA tax is composed of two parts, Old Age Survivors and Disability Insurance (OASDI) and Medicare Part A. The payroll tax rate for OASDI is 6.2% on the first $87,000 taxable wages earned by an employee. The payroll tax rate for Medicare Part A is 1.45% of taxable wages earned by an employee. This results in a total payroll tax of 7.65% on the first $87,000 taxable wages, and 1.45% on taxable wages in excess of $87,000.

Benefit Deductions
There are numerous deductions available to a benefit eligible employee. Some of these deductions include South Dakota Retirement, dependent health insurance, flex products (dental, vision, major injury protection, hospital indemnity plan, short term disability income protection, and flexible spending accounts), supplemental life insurance, dependent life insurance, and cancer/intensive care (AFLAC) coverage.For a summary of the benefits offered and premium information, please refer to the Human Resources web site.

Pro-Rate Deductions for 'less than 12-month' employees:

All benefit eligible employees hired for any appointment less than 12 months a year will be set up as an 8-pay employee for deduction purposes and have pro-rate deductions taken from their September through April paychecks to cover their benefit premiums during the months of May, June, July and August.

The amount of the pro-rate deduction is normally based on the monthly premium x 4 (the number of months the coverage will be sent in on the employee's behalf). This amount is then divided by 8 to determine the monthly pro-rate amount for the months of September through April.

Example: Monthly premium for dependent health $100.00

$100.00 x 4 = $400.00

$400.00 / 8 = $50.00/month pro-rate

In this example, the amount deducted from the employee's check during the months of September through April for dependent health coverage will be $150.00 ($100.00 monthly premium plus $50.00 pro-rate amount).

Tax Sheltered Annuities

The University of South Dakota offers employees the option to purchase tax-sheltered annuities with deductions through payroll.   Such tax-sheltered annuities are commonly referred to as a 403(b) plan after the section of the Internal Revenue Code that outlines their limits.

The IRS sets strict limits on how much money may be contributed to a 403(b) each year.   Contributions in excess of the yearly allowable maximum should be avoided because these contributions will result in significant penalties to the contributing employee.  

Contributions to 403(b) accounts are limited to the lesser of three calculations : (1) $40,000.00   or (2) 100% of compensation or (3) Amounts as noted in following chart:

403(b) General Limit

CalenderYear 2003	CalenderYear 2004	CalenderYear 2005	CalenderYear 2006
$12,000 plus $2000 for participants 50 or over	$13,000 plus $3000 for participants 50 or over	$14,000 plus $4000 for participants 50 or over	$15,000 plus $5000 for participants 50 or over

 

 

403(b) Special Catch-up available to employees with 15 years service with USD

*these amounts are in addition to those in the 1^st row of this chart.  Maximum lifetime cumulative amount using this catch-up is $15,000.

Calendar Year 2003	Calendar Year 2004	Calendar Year 2005	Calendar Year 2006
Smallest of: $3000/yr Or $15,000 less prior catch-up deferrals Or $5,000 x years service less all prior elective deferrals	Smallest of: $3000/yr Or $15,000 less prior catch-up deferrals Or $5,000 x years service less all prior elective deferrals	Smallest of: $3000/yr Or $15,000 less prior catch-up deferrals Or $5,000 x years service less all prior elective deferrals	Smallest of: $3000/yr Or $15,000 less prior catch-up deferrals Or $5,000 x years service less all prior elective deferrals

Due to the complexities of calculating the 403(b), the University recommends employees seek professional tax advice to avoid the possibility of over contributing.  Many of the tax shelter companies have programs in place to assist you free of charge.

Some of the companies that we currently have set up for payroll deductions are listed below.  If you do not see the name of the company you are interested in, please call the payroll office to inquire whether we have them set up or not.

??                     Equitable Life (www.equitable.com)

??                     American Express Financial Advisors (www.americanexpress.com/advisors)

??                     Dean Witter  (www.deanwitterdiscover.com/)

??                     Merrill Lynch  (www.ml.com/)

??                     Mainstay Funds  (www.mainstayfunds.com/)

??                     Putnam  (www.putnaminv.com/)

??                     TIAA-CREF  (www.tiaa-cref.org/)

??                     VALIC  (http://www.valic.com/)

To begin a payroll deduction, you will need to fill out a "Salary Reduction Agreement".  These forms can be obtained by stopping in the payroll office, calling us (677-5615) or by sending an e-mail to us.  This form is also available on the payroll web site (www.usd.edu/payroll).

Involuntary Deductions
The University of South Dakota is required by law to withhold a portion of an employee's earnings to satisfy an outstanding debt when a court order or other legally authorized agency requires such action.

 

Child Support
Payroll deductions are initiated when the Payroll Office receives a "Order/Notice to Withhold Income for Child Support" from the Office of Child Support Enforcement. This order tells the University when to begin withholding, how much to deduct, and where to remit the payments. (SDCL 25-7A-30)

The total amount withheld cannot exceed 50% of an employee's disposable income. (SDCL 25-7A-32).The law requires the University to withhold child support without regard to any prior claims of creditors. This means that the support order has priority over any other state legal process or voluntary deductions made by the employee. If there is more than one support order against the same employee, the University must comply with both to the extent that the total withheld does not exceed the 50% maximum of disposable income. (SDCL 25-7A-37; SDCL 25-7A-35)

Effective January 1, 1998, South Dakota employers are required to honor withholding orders issued by other states for collection of child support. (SDCL 25-9B-502)

The University may not refuse to hire, discipline, discharge, or penalize an employee because of a withholding order. (SDCL 25-7A-46)

 

Creditor Garnishments
Mandatory payroll deductions are initiated when the State of South Dakota Auditor's Office receives an Affidavit for Garnishment issued by the courts to collect a debt from an employee. (SDCL 21-18-8)

The maximum that may be withheld from disposable earnings is the lesser of: (1) 20% of disposable earnings; or (2) the excess over 40 times the federal minimum wage less $25 for each dependent residing with the employee. (SDCL 21-18-51)

The Payroll Office will continue to garnish wages until either the entire amount is satisfied, the due date on the garnishment is reached, or the garnishment is released by the court by written notification to the State of South Dakota Auditor's Office.

 

Federal Tax Levy
The University is required by federal law to withhold wages for an Internal Revenue Service (IRS) tax levy based on the number of exemptions claimed by an employee. The Payroll Office will notify the employee that a Federal Tax Levy has been received and the need for the employee to complete a Statement of Exemptions and Filing Status within three (3) working days.

A tax levy deduction continues until the debt is paid in full or the IRS issues a Release of Levy.

Other Deductions
The University offers numerous other deduction options to employees. Some of these include the purchase of Savings Bonds, contributions to the local United Way, payments to the USD Federal Credit Union, and donations to the USD Foundation. Please inquire with the payroll office for any of these other deductions.

Other Payroll Procedures:     
Direct Deposit
Emergency Checks
Graduate Assistants
Hourly Employees
International Employees
Longevity
Overtime Compensation
Check Distribution              
Payroll Deductions
Payroll Procedures (Terminated, Deceased, Leave without Pay, and Errors)
Salary Authorizations/Status Record (SA/SR)
Supplemental Pay
Work Study Information