1. SETTLEMENTS BACK PAY ACT
INDIANAPOLIS PAYROLL OFFICE
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2. Integrity - Service - Innovation
AGENDA
Settlement History
Required Documentation
Submission Requirements
Additional Information
Common Errors
Resources
Questions
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3. Integrity - Service - Innovation
SETTLEMENTS – HISTORY
The Back Pay Act of 1966 permitted federal employees to be reimbursed for wrongful deprivation of pay under certain circumstances as listed in 5 USC 5596
The Back Pay Act was amended in 1978 to include that the “administrative determination” supporting a monetary award may include “decisions relating to an unfair labor practice or grievance” per 5 USC 5596(b)(1)
The amendment also provides for the payment of interest on awards of back pay and attorney fees
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THE BASICS
What is back pay?
According to the IRS, back pay is pay received in a tax year(s) for actual or deemed employment in an earlier tax year(s)
Back pay makes an employee financially whole after the employee is found by an appropriate authority to have been affected by an unjustified or unwarranted personnel action that resulted in the withdrawal, reduction, or denial of pay, allowances, and differentials otherwise due the employee
How does an employee get back pay?
Filing a Claim
Employee/Former Employee asserts a claim by filing a written request, a grievance, or by filing a complaint in connection to an employment-related dispute and a court or agency reviewing authority determines the employee is owed back pay
Agency Initiative
An agency, on its own initiative, determines the employee’s pay was incorrect and makes a correction resulting in back pay
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5. BACK PAY DETERMINATIONS
Back pay must be issued under the authority of one the following
Court Order
A Federal Court may issue an order for back pay
Agency Order
A hearing official or reviewing authority like the MSPB, EEOC and OPM may issue an order for back pay
Settlement Agreement
Parties in a case may agree to an award of back pay using a written settlement agreement
Grievance Response/Decision or Arbitrator Award
Issued to a union employee after the filing of a grievance
Appropriate Authority’s Determination
An appropriate agency authority may determine under the Back Pay Act at 5 U.S.C. § 5596 that an employee was affected by an unjustified or unwarranted personnel action resulting in the withdrawal, reduction or denial of pay, allowances and differentials. The authority must issue a written determination. This is usually submitted as a signed statement on agency letterhead
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SETTLEMENTS
Information required by DFAS to process back pay agreed upon in settlements or as ordered by the Merit Systems Protection Board or the EEOC – Provided from the Office of the General Counsel
Requests for action will be submitted through the Remedy system. The Customer Expectation for response is 15 business days from the time all required information and paper work is submitted for both titles of Settlement Inquiry- New submission or Settlement Inquiry-Follow-up
To find all information and forms required by DFAS and VA for single employee settlement refer to the Single Employee Settlement Guidance located on the FSC website.
Submit Remedy ticket far enough in advance to assure settlement is in compliance with the judgment
Allow ample time for PRO to perform proper calculations per the 5 CFR, as the settlement could include several years of back pay, which may require manual offline calculations
Submit all documentation required through Remedy and/or Imaging
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7. REQUIRED DOCUMENTATION TO BE ATTACHED
Supporting documentation should be included with all back pay requests (refer to the “Settlement Checklist” on APAN for additional details):
An un-redacted copy of the settlement agreement or order (i.e. MSPB decision, EEOC determination, or union grievance consent order or arbitration award, or agency determination on letterhead) (time frame should be included)
Completed “Employee Statement Relative to Back Pay”
New, corrected or canceled SF 50s
Election forms for FEGLI, health benefits, and/or TSP, with an effective date of the cancellation of the separation or new access date, if applicable
Statement from HR indicating that employee was counseled regarding benefits. Must clarify whether the employee waived benefits during the back pay period
Certified timecards
Outside Earnings Documentation (W-2 or 1099 statements, payroll records, worker’s compensation statements, retirement payment records, severance pay records)
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8. APAN - REFERENCE TOOL PRIOR TO SUBMISSION
VA users should also refer to the VA Single Employee Settlement Guidance on the FSC website for VA detailed requirements.
Select this option
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9. APAN - REFERENCE TOOL PRIOR TO SUBMISSION
Checklist and employee statement available here
Training videos are available for additional guidance
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10. SETTLEMENT SUBMISSIONS
A drop down box has been included to the title Settlement Inquiry
Settlement Inquiry Submission
This is to be used for all new, complete Settlement submission packets
If submitting a request to reactivate an employee, use this option
Do NOT enter time other than current time until advised to do so by the PRO
***Template has been added to assist the customer in identifying all required documentation up front
Settlement Inquiry Follow-Up
Supply additional documentation that did not fit on the initial submission ticket
If asked by the PRO for additional documentation
Ask follow-up questions after a settlement has been processed
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11. SETTLEMENTS INQUIRY-SUBMISSION
Select Submission from the drop down
This message will pop up when the title is selected from the drop down. Select OK to proceed
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12. SETTLEMENTS INQUIRY – SUBMISSION NEW
Attach Copy of settlement agreement under legal documents field. This field is mandated to proceed with a new inquiry.
NOTE: Each question must be answered. For all “Yes” answers, required documentation MUST be attached. If the correct documentation is not attached, the ticket will be returned with no action taken.
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13. SETTLEMENTS INQUIRY-FOLLOW UP
Select FOLLOW-UP
These messages will pop-up, review and select OK
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14. EMPLOYEE’S STATEMENT RELATIVE TO BACK PAY
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15. EMPLOYEE’S STATEMENT RELATIVE TO BACK PAY
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16. EMPLOYEE’S STATEMENT RELATIVE TO BACK PAY (Con’t)
Employee signature required
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17. ADDITIONAL INFORMATION - FEGLI DEDUCTIONS
FEGLI is deducted from back pay only under the following circumstances:
FEGLI During Erroneous Retirement: If FEGLI coverage was continued during a period of erroneous retirement, deduct the FEGLI premiums
Example: The employee retired upon separation and continued FEGLI coverage as a retiree. FEGLI premiums would be deducted for the back pay period
Employee was Suspended or Separated and Died or was Dismembered During Back Pay Period: If the employee was erroneously suspended or separated and employee died or had an accidental dismemberment during the back pay period, then premiums will be withheld from the back pay award
Employee dies after being fired. It was later determined they were erroneously fired and back pay was ordered. FEGLI premiums should be deducted from the back pay award
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18. ADDITIONAL INFORMATION - FEGLI DEDUCTIONS CONT
FEGLI is deducted from back pay only under the following circumstances:
Employee was Suspended or Separated, had Option C, and Family Member Died: If the employee had Option C coverage and was erroneously suspended or separated, and a family member dies during the back pay period, premiums should be withheld from the back pay award
No Erroneous Separation or Suspension, but Employee gets Retroactive Promotion:
Example: Employee was not erroneously separated or suspended without pay. Employee won a retroactive promotion case. Both employee and employer FEGLI premiums are owed. The employee must pay the premiums at the higher rate – the difference in premium amount should be offset from the back pay award
References: 5 C.F.R (e); see also DoDFMR Vol. 8, ch. 11 at para and ch. 6 at
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19. ADDITIONAL INFORMATION – INTERIM EARNINGS
Required documents for interim earnings
Official letter from OPM if retirement annuities has been paid and will be collected
Unemployment statement or a 1099-G
W2, 1099, and/or Schedule C for all outside employee earnings
If the employee received annuity payments during the back pay period, a statement from OPM is required to reflect the amount to collect for the erroneous annuity payment
Payroll is required to submit repayment of the annuity directly to OPM via payroll offset. If monies are insufficient, the agency will be charged and employee will be indebted to repay the agency
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20. ADDITIONAL INFORMATION – OPM LETTER
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21. ADDITIONAL INFORMATION – OPM LETTER CONT.
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22. ADDITIONAL INFORMATION – UNEMPLOYMENT STATEMENT
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23. ADDITIONAL INFORMATION – OPM ANNUITY/TIMECARDS
Certified timecards or certified corrected time and attendance records. If applicable, include overtime, night differential, shift differential, Sunday premium, etc.
Include number of hours and dates for each premium or entitlement
NOTE: Payroll is required to obtain all certified timecards prior to performing the pay audit to assure accuracy of back pay and leave
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24. ADDITIONAL INFORMATION – LUMP SUM LEAVE
Lump sum payments for annual leave are issued to separated employees under the authority of 5 U.S.C. 5551
There is no authority under 5 U.S.C for a reinstated employee to keep a lump sum leave payment he or she received when the separation is later reversed
NOTE: When a separation is cancelled and the employee is restored to duty, the lump-sum payment for annual leave is considered to be an erroneous payment and must be offset against the employee's back pay award and the annual leave must be reaccredited to the employee. ‘Eaton v. Department of Air Force, 55 M.S.P.R. 12 (1992)
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25. ADDITIONAL INFORMATION – RESTORATION OF LEAVE
The General Rule
No employee may be granted more pay allowances and differentials (including leave) than he or she would have been entitled to receive if the unjustified or unwarranted personnel action had not occurred. See 5 C.F.R (b)
DFAS cannot restore more leave to an employee than the employee would have earned during the back pay period
Why corrected time cards must be submitted
Ensures no more leave than what would have been earned will be awarded
Ensures annual leave Use or Lose is calculated correctly
Ensures account is audit ready
Ensures agency will be able to refute any allegations by employee of a settlement breach
Ensures employee receives proper retirement credit for any leave used
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26. ADDITIONAL INFORMATION- PRO VS VENDOR PAY
Civilian Pay Processing
Any award of back pay which consists of wages require SF50 interfaces online and offline and will need to be coordinated with DFAS Civilian Pay, including any lump sum payments for wages
Generally, the employee will receive a W-2
Vendor Pay Processing
Any lump sum payment outside of payroll, i.e. non-wage lump sum payments such as; punitive damages, compensatory damages, and/or attorney fees are handled through DFAS Vendor Pay
Generally, the employee will receive a 1099 at the end of the tax year
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27. ADDITIONAL INFORMATION - PRECAUTIONS
Please submit only one Remedy Submission ticket per settlement agreement, unless directed otherwise by the PRO, in an effort to avoid duplicate payments. Always use Remedy title Settlements Inquiry-New submission for all new requests and Settlement Inquiry-Follow-up for all questions or submission of missing documentation. Any new settlements submitted via the Follow-Up title will be returned with no action taken. Use of multiple titles will increase the risk of duplicate processing
Please ONLY submit interim earnings documents for items that were agreed upon to be deducted from back pay, to avoid erroneous deductions. If you are unsure, please contact your HR officer or EEO office for clarification prior to submitting the ticket
Not required for Moonlighting
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28. ADDITIONAL INFORMATION - PRECAUTIONS
Please review settlement in full prior to submission. If request pertains to damages such as punitive or compensatory damages paid in lump sum or attorney fees, this is NOT processed by the PRO and needs submitted to vendor pay
Be aware that requests for leave restoration in a lump sum amount must have certified timecard corrections that reflect use of hours. PRO is not authorized to restore leave that would NOT have been earned/used during the impacted period identified in the judgment
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29. Integrity - Service - Innovation
RESOURCES
The Back Pay Act of 1996: 5 U.S.C. § 5596:
The Back Pay Act Regulations: 5 C.F.R. Part 550, subpart H:
DoD Financial Management Regulation (DoDFMR), Volume 8, Chapter 6 section:
EEOC – Title VII of the Civil Rights Act of 1964:
IRS Publication 15-A Page 13, Back Pay:
IRS Publication 957, Reporting Back Pay to the Social Security Administration:
IRS Memorandum: “Income and Employment Tax Consequences and Proper Reporting of Employment-Related Judgments and Settlements” (Oct. 22, 2008)
OPM Settlement Guidelines:
APAN Website:
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30. Integrity - Service - Innovation
QUESTIONS
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