H.R. 6081, The Heroes Earnings Assistance and Relief Tax (HEART) Act of 2008, was passed by Congress in May 2008. The HEART Act provides tax benefits and incentives to military personnel. Beginning in January 2009, differential wage payments for retirement plan purposes are now reportable.
A differential wage payment or differential military pay is any employer payment to an individual serving on active duty in the uniformed services for more than 30 days that represents wages the individual would have received if the individual were performing services for the employer.
Differential military pay is reportable for all systems and plans. If you pay differential military pay then beginning in January 2009, you now must report it to the Department of Retirement Systems through your retirement transmittal process.
Joe Jones works for the City and his normal salary is $4,000.00 per month. Joe has been called to active military service. The military pays Joe $3,000.00 per month. The City continues to pay Joe $1,000.00 per month for the difference between his military pay and his salary he would have earned from the City. The City will report $1,000.00 in compensation, the member and employer contributions, and the associated hours using the A code. To determine the associated hours take the total compensation and divide by the total hours to determine the hourly rate. Then take the differential military payment amount and divide by the hourly rate. $4,000.00/160.0 hours in the month = $25.00 $1,000.00/$25.00 = 40 Hours
If you have any questions regarding this DRS Notice, please contact Employer Support Services at (360) 664-7200, option 2, or 1-800-547-6657, option 6, option 2; or email us.
Assistant Director of Administrative Services