Leave Loaded System (LLS) Transactional Policy
Date: May 5, 2017
Introduction
The Office of Management and Budget (OMB) implemented Uniform Guidance 200.431 Accounting Methodologies and Treatment of Leave when an employee retires or terminates employment as of December 26, 2014. As a result of this new OMB Uniform Guidance 200.431, The University of Alabama in Huntsville (UAH) can no longer pay unused leave for sponsored research employees (normally charged to 5-accounts) upon termination of employment from sponsored research accounts.
The current UAH payroll accounting system does not separately budget and charge employees’ paid leave. The Leave Loaded System (LLS) is designed to separately accrue sponsored research employees’ paid leave from their salaries and separately charge the paid leave when leave is taken. Unused annual leave paid to sponsored research employees upon termination from the University falls into the LLS guidelines.
Operational Summary
Historically, the average paid leave as a percent of the gross salary for a sponsored research employee is approximately 20%. The primary operating principle of the LLS is establishing a new payroll accounting system to accrue and charge the paid leave for sponsored research employees separately from their salaries. Effective with biweekly payroll # 22 in 2016, the LLS accrued 20% of sponsored research employees’ salaries and recorded this paid leave centrally in the Budget Office. The paid leave taken by the sponsored research employees, including unused paid leave upon termination of employment at UAH, is also charged and recorded against this LLS pool. The current fringe benefit pool for sponsored research is projected at 36%, so the LLS accrues another 7.2% (36% x 20%) for fringe benefits in addition to the 20% of gross salary.
Biweekly Operational Transaction
The LLS payroll accounting system is programmed similar to the Business Interrupted Insurance (BII) system. Each biweekly pay period, 20% of salary is accrued in 302304-6200. The actual paid leave amount is also charged to 302304-6200. The 20% for fringe benefits is accrued in 302304-6300. The actual fringe benefits charges are recorded in separate fringe benefit account codes in 302304.
It is normal during a typical biweekly payroll period that a research employee may charge his or her labor distribution to both state and contract accounts. The charges for paid leave are distributed based on the labor distribution of the current payroll period. For example, if an employee is 50% state and 50% contract when the employee takes leave, then the leave is charged 50% to the state account and 50% to the leave pool account in 302304. Any payroll retroactive adjustment (retro) that is completed for a pay period must follow the same policy of splitting the leave based on the distribution for the pay period.
Payment for Terminated Leave
Termination leave for an employee will be paid according to the last labor distribution submitted on the employee’s last biweekly pay period. Most research employees are charged 100% to contracts, and therefore, most annual leave paid upon termination is charged 100% to the LLS pool. However, occasionally a sponsored research employee may run out of contract funding and charge his or her final payroll to a state account. In this example, the earned leave is accrued in the LLS pool and the termination leave is paid from a state account. In order to solve this problem, the research center will request from the Effort Reporting Office the terminated employee labor distribution history, and use this historical information to submit a retro to correct the terminated leave charges. This action will credit the research center’s state account and debit the LLS pool account. For example, if the 12-month history of the labor distribution information from the Effort Reporting Office shows that the sponsored research employee is 30% state and 70% contract, the final termination leave should also reflect the same 30%-70% split between the state and the LLS pool accounts.
Biweekly Accounting and Reconciliation
The Payroll Office submits to the Budget Office each biweekly pay period a detailed transaction report on salary and fringe benefits accrual and charges for each budgetary unit charging to external contracts. Both current and cumulated transaction information is maintained by the Budget Office. It is normal during the course of the year that there will be pay periods when the accrual is lower than the charges, or vice versa. Due to the uneven accrual and charges during each biweekly payroll cycle, the LLS pool may have a negative fund balance. The Budget Office will utilize the detailed transaction information submitted by the Payroll Office to increase or decrease the accrual percentage on the first pay period of the following fiscal year.
Please refer to the "Retro Policy" for additional information on retros containing an account or accounts against the LLS pool.
This transactional policy may be revised periodically as the University moves along in this new LLS system.
