Employee requirements for direct deposit by Electronic Funds Transfer (EFT)

• The employee is paid through a payroll system participating in an approved program.
• The employee is paid on a regularly scheduled payroll.
• An employee signed authorization for direct deposit by EFT is on file at the agency. Refer to Administrative and Accounting Resources at http://www.ofm.wa.gov/resources/payroll.asp for a sample EFT authorization form.

• The employee has an account in either a bank or credit union that has the ability to accept transfers of funds via electronic and other technological means.

Agency requirements for direct deposit of employee’s net pay by EFT

Agencies are to establish procedures that incorporate internal controls to safeguard funds against loss.

An agency’s internal controls are to include a positive system of validating the amounts transferred and verifying that the amounts to be transferred to an employee are actually due for work performed or benefits due.

Payroll system requirements for direct deposit of employee’s net pay by EFT

Payroll systems must develop standard procedures that apply to agencies participating in the system.

OFM must approve the use of electronic and other technological means to transfer funds prior to implementation. Refer to Chapter 40.

Standard procedures require that the employee receive a “Notice of Deposit” that contains the following information:

• The employee’s name.
• The amount of the deposit.

Requirements for financial institutions used in direct deposit programs by EFT

The bank or credit union is responsible for adherence to federal and state statutes and regulations related to the transfer of funds via electronic and other technological means.

When an employee dies, promptly record the pay owed to the employee in GL Code 5145 "Due to Deceased Employees' Estate." Refer to accounting procedures provided in Subsection 85.34.30 for accounting procedures related to amounts due to deceased employees.

The term “amount owed to the deceased” means amounts owed for labor or services performed by the deceased and/or expense reimbursements or allowances.

Cases in which the court has appointed a personal representative

If the deceased employee’s estate is in probate (a court action has been filed to distribute the deceased’s estate), and the court has appointed a personal representative, then the entire amount owing to the deceased employee is to be paid to the personal representative (personal representatives may also be referred to as executors or administrators).

The agency is to require a copy of the court order appointing the personal representative before paying the amount due the deceased employee.Generally, orders appointing personal representatives will come from the state superior court. If a tribal court is involved in an inheritance case and an agency is presented with a tribal court order, contact your agency’s OFM Accounting Consultant.

Cases in which no personal representative has been appointed

If no personal representative has been appointed by a court on behalf of the deceased’s estate, then certain relatives can claim the amount due the deceased employee. The agency must require proof of the claimant’s relationship to the deceased employee before distributing any of the amounts owed the deceased to the claimant. This proof is accomplished when the claimant completes the Claim for Indebtedness of the State of Washington to Deceased Employee form. Using the declaration form is easiest for most claimants, particularly those residing out of state, because it does not require the document to be signed in front of a notary public.

The specific relatives who can file a claim for indebtedness are set forth in RCW 49.48.120. They are as follows in the order of priority: the surviving spouse of the deceased (does not apply to same sex marriage partners because Washington does not recognize same sex marriages); if there is no surviving spouse of the deceased, then the deceased’s surviving child or children; if the deceased had no surviving child or children, then the deceased’s parent or parents. Refer to Subsection 25.70.30.d for instructions involving surviving spouses who have a community property agreement. If none of these relatives survives the deceased, then the state can release the amount owed the deceased only to the personal representative of the deceased’s estate unless the provisions of Subsection 25.70.30.e apply.

If the deceased has multiple surviving children, then the agency can pay only the representative portion of the amount owed the deceased to a child, absent an agreement signed by all of the deceased’s children that the child signing the Claim Form may accept the amount owed the deceased on behalf of all the deceased’s surviving children. For example, if the deceased has three surviving children, and only one child filed a claim form, the agency could pay that child only one-third of the total amount the agency owed the deceased, subject to the dollar restrictions in Subsection 25.70.30.c.

Note: “Child” means a biological child of the deceased employee or a child legally adopted by the deceased. The term does not include stepchildren, foster children or children over whom the deceased employee may have guardianship.

A child of the deceased employee who has been declared emancipated under Chapter 13.64 RCW may still file the claim form for the amounts due the deceased. While children who are minors (under 18) must have a guardian or other legal representative file the claim form on their behalf, an emancipated minor is considered an adult for these purposes.

If the deceased is survived by both parents who are divorced – then each must file a claim form and the agency should pay each parent half of the total amount owed to deceased, subject to the dollar restrictions in Subsection 25.70.30.c. If the parents are still married, then either may file the claim form and the agency should pay the entire amount subject to the dollar restrictions in Subsection 25.70.30.c to that parent.

Note: Washington does not permit the creation of common law marriages – couples must obtain a license and the ceremony must be solemnized in order for the marriage to be valid (refer to RCW 26.04.050). However, a common law marriage created in another state will be recognized as valid in Washington if the common law marriage was recognized as a valid marriage in the state where created (refer to RCW 26.04.020(3)). The following jurisdictions recognize common law marriages: Alabama; Colorado; District of Columbia; Georgia (if created before 1/1/97); Idaho (if created before 1/1/96); Iowa; Kansas; Montana; New Hampshire; Ohio (if created before 10/10/91); Oklahoma; Pennsylvania; Rhode Island; South Carolina; Texas; and Utah.

Payments to the relatives in Subsection 25.70.30.b are limited to $11,500 or less

Even if the state owes the deceased more than $11,500, the agency can only pay to the appropriate relative an amount not exceeding $11,500, unless the provisions of Subsections 25.70.30.d or 25.70.30.e apply or a personal representative has been appointed by the court.

Starting July 1, 2005, and every biennium thereafter, the OFM director may adjust the amount of indebtedness that can be paid for a claim to a level not to exceed the percentage increase in the consumer price index for Seattle. Adjusted dollar amounts of indebtedness shall be rounded to the nearest five hundred dollar limit. Refer to RCW 49.48.120.

Cases involving a community property agreement (CPA)

If the deceased and his or her surviving spouse executed a community property agreement (CPA) and the agreement meets the requirements of RCW 26.16.120, then the right to the amount owed the deceased becomes the property of the surviving spouse as follows:

1. The agency that employed the deceased must pay the surviving spouse either the total of the amount the state owes the deceased or that portion governed by the CPA.
2. RCW 49.48.120 requires the surviving spouse to present a copy of the CPA along with a properly completed Claim Form (using either the affidavit or declaration form) when claiming the amount owed to the deceased. This claim form must state that the CPA was executed in good faith between the parties and had not been rescinded prior to the death of the deceased.

Persons of the same sex who have married in a state allowing same sex marriages cannot enter into a CPA in Washington because Washington does not recognize same sex marriages as valid (RCW 26.04.020).

Cases in which the estate consists only of personal property and are handled through the affidavit method pursuant to chapter 11.62 RCW

The agency may also pay the amount owed the deceased if the claimant as a successor to the deceased presents an affidavit as provided for in RCW 11.62.010 and RCW 11.62.020.

The agency must pay the successor/claimant the total amount owed the deceased if the claimant presents a copy of the deceased’s death certificate and an affidavit containing all of the following information:

• The name and address of the successor/claimant and why he or she thinks he or she is a successor to the deceased (generally a successor is a surviving spouse, someone named in the decedent’s will, DSHS, or the state in cases of escheat);
• That deceased was a resident of Washington at the time of his death;
• That the value of deceased’s property (NOT including the surviving spouse’s community property interest) is not more than $100,000 and includes only personal property;
• That 40 days have elapsed since deceased’s death;
• That no application or petition for the appointment of a personal representative is pending or has been granted;
• That all debts of the deceased including funeral and burial expenses have been paid or provided for;
• A description of the personal property claimed (here it would be the amount owed to the deceased) together with a statement that such personal property is subject to probate;
• That claimant/successor has notified all other successors of the deceased of his or her claim to the amount owed the deceased and that 10 days has elapsed since the notice was either personally given or mailed to other successors; and
• That claiming successor is personally entitled to full payment of the amount owed to the deceased or is entitled to full payment on behalf of and with the written authority of all other successors who have an interest in the amount owed to the deceased.

If it has come to the attention of an agency that an employee to whom amounts are owed is missing, and one of the persons listed in RCW 49.48.120 (spouse, children, parent) is attempting to claim the amounts due the employee, the agency cannot pay those amounts until it has a certified copy of a certificate of presumed death. Under RCW 70.58.390, a county coroner, medical examiner or prosecuting attorney may issue a certificate of presumed death under certain circumstances.

1. The agency shall process a warrant or check and release it to the appropriate claimant or successor who signed the claim form and presented the required documentation.
2. The agency shall make the warrant or check payable to the deceased employee. Include the following prescribed endorsement on the warrant or check:
   
   "Pay to the order of (insert name of claimant relative or successor appearing on the supporting documentation) for (name of agency head, title of agency head) by (signature of agency head or authorized designee, and title)."

Claimant must acknowledge payment receipt

In all instances, the supporting documentation is to be retained by the agency as evidence for release of the warrant or check. In addition, agencies are to require claimants to acknowledge receipt of payment in writing. A sample receipt form can be found at: http://www.ofm.wa.gov/resources/payroll.asp.

Federal employment taxes withholding and reporting requirements

The rules for withholding federal income, OASI, and Medicare employment taxes and reporting wages (including accumulated leave) paid after death depend on date of death, the type of compensation, and the payment date. Refer to the current Internal Revenue Service (IRS) Publications 15 and 15-A, as well as other regulations for withholding and Form W-2 reporting requirements regarding deceased employees’ wages.

Also note, there are IRS Form 1099-MISC reporting requirements for payments to claimant estates or beneficiaries. Refer to the current IRS Publication Instructions for Forms 1099 at: http://www.irs.ustreas.gov/pub/irs-pdf/i1099msc.pdf.

Further guidance is available

Refer to Administrative and Accounting Resources at http://www.ofm.wa.gov/resources/payroll.asp for guidelines on procedures on how to file claims of indebtedness of State of Washington to deceased employees. These procedures also provide a sample receipt of payment form to be signed by the claimant.