State of California

  M E M O R A N D U M

  REFERENCE CODE:
  2003-054

  DATE:
  December 18, 2003

  TO:
  Accounting Officers
  Budget Officers
  Personnel Officers
  Personnel Transactions Supervisors

  FROM:
  Department of Personnel Administration
  Policy and Operations Division

  SUBJECT:
  Work and Family - Dependent Care Benefit:  Nontaxable 
  Subsidy Reporting Process

  CONTACT:
  Rosanne McHenry, Work and Family Coordinator
  (916) 324-9351
  FAX: (916) 324-0524
  Email: RosanneMcHenry@dpa.ca.gov


  This memorandum is to advise you of the process to be used 
  for nontaxable reporting for the Work and Family Dependent 
  Care Benefit, a subsidy program which is administered 
  through the FlexElect Program Dependent Care Reimbursement 
  Account (DCRA).  This subsidy first became available in 
  2003 and will continue until the program sunsets on 
  June 30, 2005.  The 2003 payment will issue during 
  December 2003.  For 2004 and 2005, payments are expected to 
  issue during the first quarter of each year.  Although this 
  subsidy is not subject to taxation, it must be reported to 
  the Internal Revenue Service (IRS).
  
  The State Controller's Office (SCO) will process TC 38 
  accounting transactions and issue zero balance credit issue 
  warrants for the Dependent Care Benefit to eligible State 
  employees each FlexElect Program year, in an effort to meet 
  IRS reportability requirements.  The payment to the 
  employee will be distributed to the employee's current 
  department as of the Friday prior to the payment issue 
  date.  If the employee has left State service, it will be 
  distributed to the employee's department at the time of 
  separation.  It is the department's responsibility to 
  forward the warrant to the separated employee.
  
  If the employee changes departments after the warrant is 
  issued, it is the department's responsibility to forward 
  the warrant to the new department.  PLEASE CONTACT DPA 
  PRIOR TO REDEPOSITING THESE DEPENDENT CARE BENEFIT 
  WARRANTS.
  
  The warrants will be paid from each employee's respective 
  department appropriation.  During the first week of the 
  month following the payment, SCO Accounting will process a 
  TC 38 transaction to transfer funds back to the 
  department's appropriation for the corresponding year's 
  payment.  The TC 38 transaction will identify the year of 
  the transfer and post the amount.
  
  For additional information regarding the payroll 
  reportability process, please refer to SCO's Payroll 
  Letter #03-026 dated December 17, 2003.
  
  For questions regarding the Dependent Care Benefit or the 
  Work and Family Program, please have your designated 
  personnel office staff person contact Rosanne McHenry.  
  Payroll questions on this process may be directed to Sandra 
  Young with SCO at (916) 324-1293 or syoung@sco.ca.gov.
  
  
  
  
  Bob Painter, Chief
  Policy and Operations Division