4.3.2.5.1

Introduction

Effective Date:

July 1, 1995

Payroll deductions or reductions are amounts withheld from an employee’s wages. Reductions affect gross income, deductions do not. Deductions are classified as mandatory or voluntary.

4.3.2.5.2

Mandatory (Standard) Deductions/Reductions

Effective Date:

July 1, 1995

4.3.2.5.2.a	Mandatory Deductions from gross income
	These must be deducted from employees' salaries and wages pursuant to federal or state law. Mandatory deductions include but are not limited to the following list:

	Mandatory Deductions	Description and Requirements
	Federal Income Tax	Determine amount of withholding from employee signed federal W-4 form (Employee’s Withholding Allowance Certificate). Check IRS publication 15 (Circular E) for any additional rules.
	Industrial Insurance (Medical Aid)	State tax for industrial insurance benefits program. Administered by the Department of Labor and Industries (L&I). Premium calculation = (Actual hours worked x L&I rate); OR, (Standard monthly average of 160 hours x L&I rate). Premium for part-time employees is calculated using actual hours. The L&I rate is based on the assigned risk classification(s). Refer to RCW 51.12.035 and L&I regarding mandatory Medical Aid coverage for volunteers of state agencies who have registered and accepted the volunteer services. Refer to L&I publications for coverage, employee/employer rates, and employer reporting requirements.
	Old Age and Survivor’s Insurance (OASI) and Medicare	OASI is a federal employment tax for retirement, survivors, and disability benefits. Matching contributions are required from both employees and employers. The Medicare federal employment employee and employer matching tax supports federal health insurance. Employment Security (ESD) administers our state’s Section 218 agreement with the federal Social Security Administration. Check with ESD for coverage requirements. Refer to IRS Publication 15 (Circular E) for rates, deposit, and reporting regulations.

4.3.2.5.2.b	Mandatory Reductions to gross income
	These reduce gross pay and are not subject to federal income tax. Deduct these amounts from gross income before calculating federal income tax for eligible employees.

	Reductions to Gross Income	Descriptions and Requirements
	State Retirement Systems	This is the employee’s paid share of the total retirement contribution.
	Teachers Insurance and Annuity Association and College Retirement Equities Fund	This is the employee’s paid share of the TIAA/CREF plan. See RCW 28B.10.400 and rules developed by specific institutions for reporting requirements.

	Voluntary Reductions	Descriptions and Requirements
	Deferred Compensation Plans and Tax Deferred Annuities	These are salary reductions allowed under RCWs 28A.400.250, 28B.10.480, 41.04.020, or 41.04.250. Either the agency head or the Committee for Deferred Compensation approves the employee’s request for this type of deduction.
	Dependent Care	This program allows eligible employees to exclude dependent care costs (like child care) from their gross income. Reductions are not subject to OASI and Medicare. Eligibility requirements are in Chapter 41.04 RCW. The Committee for Deferred Compensation administers this program.

	Type of Deduction	Description and Explanation	25/100 rule *	Agency Head Override on 25/100 Rule	Agency head approval required
	Banks, Savings Banks, or Saving and Loan Associations, and Credit Unions	These institutions must be authorized to do business in this state.	X	X	If < 25 in the agency X
	Board, Lodging, Uniform Deductions Tuition, Fees, or Scholarship Contributions	Deductions for board, lodging, or uniforms furnished by the state. Deductions for academic tuition, fees, or scholarship contributions payable to the employing institutions.
	Charitable Contributions	Contributions to the state employee combined fund drive (Chapter 240-10 WAC).
	Dues and Other Fees	Membership and professional dues formed primarily for public employees or college and university professors.	X
	Health Care Authority Premiums	Premiums for contracts authorized by the Washington State Health Care Authority (HCA) (Chapters 41.04 and 41.05 RCW). Deposit the employee and employer portions in the Public Employees' Insurance Account (721).
	Other Health, Accident, Disability, and Life Insurance	These are other employee chosen insurance carriers.	X		X
	Labor or Employee Organization Dues	Per RCW 41.04.230, dues authorized under a collective bargaining agreement if not already provided under the provisions of RCW 41.06.150. Organizations of 500 or more are limited to one payroll deduction for employee benefit programs. All deductions made for a specific organization shall be treated as a single deduction from an employee's pay.	X
	Parking Fees	Payments for parking furnished by the Department of General Administration or an agency.
	US Savings Bonds	Allowed in agencies that participate in an automated payroll bond purchase program. Other agencies can appoint an individual to act as trustee who: --Receives deduction authorizations. --Purchases and deliver bonds. --Keeps records of bonds. If an employee purchases less than one bond a month, account for and purchase bonds through an agency account.
	Other Deductions	Per RCW 41.04.230: Other deductions may be authorized by the director of OFM for purposes clearly related to state employment or goals and objectives of the agency. Plans authorized by the Washington State Health Care Authority.			X