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How do I Setup & Process NLEC in Payroll?

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NLEC is the LEOFF 2 Plan Non-LEOFF Employer Compensation Reporting

Under NLEC, the employer picks up the state contributions on LEOFF Plan 2 non-employer services

The 2019-2021 state operating budget has extended a provision for LEOFF Plan 2 employers. The provision holds employers responsible for funding both the employer and state contributions owed on LEOFF Plan 2 basic salary earned for services rendered by members whose services were provided directly, or indirectly, to a non-LEOFF employer.

For more information on reporting and paying NLEC, please review Chapter 5: Special Conditions in the DRS Employer Handbook. 

Depending on your current payroll setup and entity needs, NLEC setup may vary, but it will make processing your NLEC in payroll easier.

Create Distributions in Payroll Setup

Create one or more Distributions in Payroll Setup if different BARS accounts are used for NLEC.  If not, skip to Create Earning Items in Payroll Setup.

Go to:  Advanced Payroll (v.2) > Payroll Setup > Distributions tab

  1. Click Add New
  2. Enter Description Name
  3. Wages = checked
  4. Add BARS code
  5. Click Save
  6. Repeat steps 1-5 for as many distributions that are needed.
Create Earning Items in Payroll Setup

Depending on current payroll setup and entity needs, two or three earning types will need to be created in the Earnings tab in Payroll Setup

Go to:  Advanced Payroll (v.2) > Payroll Setup > Earnings tab

Add NLEC Offset - used if some or all of employee earnings are based on salary, otherwise skip this.

  1. Click Add New
  2. Item = NLEC Offset
  3. Earning Type = Wage
  4. Inc Hours = Checked
  5. Class = None
  6. If Auto Rate Adj is used then Rate Adj = NA
  7. On Rate = unchecked
  8. Factor = 0
  9. Print = enter a number based on control display/print order (ex:  1 is highest, 3 lower)
  10. L&I = checked
  11. Unemp = checked
  12. Ret = Both
  13. Click Save

Add NLEC Hours

  1. Click Add New
  2. Item = NLEC Hours
  3. Earning Type = Wage
  4. Inc Hours = Checked
  5. Class = None
  6. If Auto Rate Adj is used then Rate Adj = Receive
  7. On Rate = Checked
  8. Factor = 1
  9. Print = enter a number based on control display/print order (ex:  1 is highest, 3 lower)
  10. L&I = checked
  11. Unemp = checked
  12. Ret = Both
  13. Click Save

Add NLEC OT

  1. Click Add New
  2. Item = NLEC OT
  3. Earning Type = Wage
  4. Inc Hours = Checked
  5. Class = None
  6. If Auto Rate Adj is used then Rate Adj = Receive
  7. On Rate = Checked
  8. Factor = 1.5
  9. Print = enter a number based on control display/print order (ex:  1 is highest, 3 lower)
  10. L&I = checked
  11. Unemp = checked
  12. Ret = Both
  13. Click Save
Create Benefit in Payroll Setup

Create one Benefit in Payroll Setup

Go to:  Advanced Payroll (v.2) > Payroll Setup > Benefits & Deductions tab

  1. Click Add New
  2. Plan - enter a number based on control display/print order

Plan numbers can not be used twice!

  1. Description = NLEC Contribution

All other settings will be the same as LEOFF 2 except:

  1. Basis = Wages
  2. FWT = checked
  3. DRS Plan ={blank}
  4. Custom Basis = NLEC Hours & NLEC OT (Do not include NLEC Offset)

In the Settings tab (in the middle of the screen)

  1. Click Add New
  2. Description = All
  3. Employer Decimal (on screen as City Dec, Town Dec, or Dist Dec) = .0344
  4. Click Save
  5. Click Save

The screen below is for the Custom Basis.  If the Pay Items are blank, click Write and all the Pay Items will write to the table.

Add Earning items & Benefit to Position defaults in Payroll Setup

Add the Earning items & Benefit to the Position defaults if the position may be involved in NLEC

Go to:  Advanced Payroll (v.2) > Payroll Setup > Positions tab

  1. Select the Group the position is in
  2. Click Default Pay Items & Accruals tab
  3. Select the Position from the dropdown menu
  4. Click Edit
    • If employee earnings are based on salary, then check NLEC Offset, NLEC Hours & NLEC OT in Default Pay Items
    • If employee earnings are based on hours, then check NLEC Hours & NLEC OT in Default Pay Items
  1. Click Default Deductions tab
  2. Select the Position from the dropdown menu
    • Check NLEC Contribution
  3. Click Save
Add Earning items & Benefit to existing Employees in Payroll Control Center

Add Earning items & Benefit to existing Employees in the Payroll Control Center if the employee may be involved with NLEC

Go to:  Advanced Payroll (v.2) > Payroll Control Center > Employees tab

  1. Highlight employee that may be involved with NLEC
  2. Click View
  1. Click Pay Items tab
  2. Click Add New
    • If employee earnings are based on salary, then add NLEC Offset, NLEC Hours, & NLEC OT
      • Distribution for NLEC Offset = same as regular pay
      • Distribution for NLEC Hours = same as regular pay or applicable NLEC distribution
      • Distribution for NLEC OT = same as regular pay or applicable NLEC distribution
      • L&I Class for NLEC Offset & NLEC Hours = same as regular pay
      • L&I Class for NLEC OT - same as regular overtime
    • If employee earnings are based on hours, then add NLEC Hours & NLEC OT
      • Distribution for NLEC Hours = same as regular pay or applicable NLEC distribution
      • Distribution for NLEC OT = same as regular pay or applicable NLEC distribution
      • L&I Class for NLEC Hours = same as regular pay
      • L&I Class for NLEC OT - same as regular overtime
  3. Click Save

L&I Class does not need to be assigned if fixed L&I hours are used.

  1. Click Deductions & Benefits tab
  2. Click Add New
  3. Select NLEC Contribution from Plan Name dropdown
  4. Select All from Plan Category dropdown
  5. Click Save
NLEC Processing for Payroll
  1. Add NLEC pay to applicable Employee Paychecks in Payroll Control Center
    • Enter NLEC regular hours into NLEC Hours
    • If employee earnings are based on salary then enter negative hours & wages from NLEC Hours into NLEC Offset (reduce salary hours & wages by NLEC Hours)
    • Enter NLEC overtime hours into NLEC OT
  2. When payroll is completed, process your NLEC with your other Benefits

Example of using NLEC Offset and NLEC hours for a salary employee:

L&I Class will be "blank" for non-salary items if fixed L&I hours are used.

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