State employees on the bi-weekly payroll may have noticed a change in their January 14 paycheck. The pay was for time worked in December, but the changes were implemented in the first January paycheck.
According to the Office of State Finance, the monthly benefit allowance for the year is multiplied by (12 months) and then divided by 26 (paychecks). The new allowance is applied to the first check of the year. In addition, any earnings are also applied to the tax year in which you receive the check, not when it is worked.
The benefit allowance is the average of the high option plans. This year one of the more expensive plans dropped out, lowering the average. If all the current plans bid next year, this should not be a problem and state employees should not see a drop in the benefit allowance at the beginning of January 2012.
On the positive side, Congress enacted tax changes in the last few months of 2010 that will also be applied to the first paychecks of 2011, including a temporary two-percentage-point cut in the employee's share of Social Security taxes.
Posted on
Wed, January 19, 2011
by Trish Frazier