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Pay & Leave Student Loan Repayment

Attachment 4

Sample Student Loan Repayment Plan: Payroll Processing Instructions

Introduction

  1. Purpose

    The following are interim instructions to use in processing manual Student Loan Repayment requests.

  2. General

    Agencies may distribute up to $10,000 per year, per eligible employee with a maximum repayment of $60,000. Other contingencies of the Student Loan Repayment Program are as follows:

    • Repayment authority is limited to loans made under (1) parts B, D and E of Title IV of the Higher Education Act of 1965 and (2) part A, Title VII and part E, Title VIII of the Public Service Health Act;
    • Employees are ineligible for repayment if they occupy positions outside the General Schedule or those excepted from the competitive service because of their confidential nature (e.g., Schedule C appointees);
    • Employees must maintain an acceptable level of performance in order to be eligible to continue in the repayment program;
    • Selection of employees to receive benefits must be in accordance with merit principles.
    • Eligible employees must sign a service agreement that stipulates that they must remain an employee of that service for a period of no less than 3 years for the first disbursement of funds, and a negotiable time owed for any further disbursements. If the employee should separate from the agency within the first 3 years after disbursement, they may have to reimburse the agency for the amount of funds received.

Instructions

The following information must be provided to the Division of Payroll in order to process the reimbursement request: a copy of the signed service agreement and a copy of the statement from the employee's lending institution verifying the indebted amount as well as the account and EFT routing numbers.

The Servicing Personnel Office will manually process NOAC 817/Student Loan Repayment for eligible employees. Each fiscal year, agencies must submit an NOAC 817 for each employee authorized to receive student loan repayment benefits in that fiscal year. The agency must submit an NOAC 817 for an employee upon the initial authorization of student loan repayment benefits and in any subsequent fiscal year in which benefits are authorized to be paid. If student loan repayment benefits are not authoized to be paid in a subsequent fiscal year, the agency does not need to submit an NOAC 817 for that fiscal year, even if the employee has not yet fulfilled the service agreement.

  1. NOAC

    NOAC 817/Student Loan Repayment will be used for those individuals who do not have a personnel master, as well as for those who are currently in the agency.

  2. Legal Authority Code

    An entry in the Legal Authority field is not required.

  3. Award Amount
    Indicate in the Award Amount field:
    • the amount authorized to be paid during that fiscal year, not to exceed $10,000 per calendar year.
  4. Effective Dates

    When enrolling an employee, use the beginning of the current pay period as the effective date.

  5. Withholding and Posting Loan Repayment

    The employment tax withholding due on supplemental wages are calculated under the flat rate method. The correct amount of Federal income tax withholdings is calculated by taking a flat 28 percent of the supplemental wages. State taxes would be calculated based on the employee's current withholdings. Social security tax and Medicare tax withholdings are calculated at the usual rates and are in addition to the 28 percent Federal income tax withholding.

    The loan repayment is reported as Wages in Box 1 of Form W-2, Wage, and Tax Statement, and as Medicare Wages in Box 5 of Form W-2. The repayment is also reported as social security wages in Box 3 of Form W2.

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