Chapter 5: Special Conditions - LEOFF Plan 2 Non-LEOFF Employer Compensation (NLEC) Reporting

SUMMARY

Effective July 1, 2017, if a LEOFF employer charges a fee or recovers costs for services rendered by a LEOFF Plan 2 member to a non-LEOFF employer, the LEOFF employer must cover both the employer and state contributions on the LEOFF Plan 2 basic salary earned for those services. [RCW 41.26.450(3)]

Determining NLEC Eligibility for Reporting

 

Are there general guidelines we can follow to determine if this change applies to any basic salary we report to DRS for our LEOFF Plan 2 employees?

 

Yes. Basically, if you can answer “yes” to all three of the following questions, you are responsible for funding the state contributions owed on the LEOFF Plan 2 basic salary earned for the associated services rendered:

  1. Were the services rendered to a non-LEOFF Plan 2 Employer?
  2. Is the salary reportable to DRS as LEOFF Plan 2 Basic Salary under RCW 41.26.030(4)(b)?
  3. Is your organization being monetarily compensated by the non-LEOFF employer receiving the services?

 

What is a non-LEOFF employer?

A non-LEOFF employer is any employer that is NOT one of the following:

  • Washington municipalities (cities and towns)
  • Washington counties (county seats)
  • Washington port authorities
  • Washington universities
  • Washington State Patrol
  • Washington State Department of Fish and Wildlife

 

When is NLEC reporting required?

Here are some scenarios in which the LEOFF employer would be required to report NLEC to DRS:

  • Example #1: A fire district contracts with the State Department of Natural Resources (DNR) to fight forest fires. DNR reimburses the fire district for those LEOFF services. Since DNR is a non-LEOFF employer, the fire district is required to report the basic salary associated with those LEOFF services as NLEC.

    Example #2: A city police department contracts with a local school district to provide security during school hours and sporting events. The school district compensates the police department for those services. Since school districts are non-LEOFF employers, the police department is required to report the basic salary associated with those LEOFF services as NLEC.

    Example #3: A county sheriff’s department contracts with the county fairgrounds to provide security for vendors at the fairground’s events. The fairgrounds charge the vendors a fee for security services and passes that compensation on to the sheriff’s department. Since the vendors are non-LEOFF employers, the sheriff’s department is required to report the basic salary associated with those LEOFF services as NLEC.


Do we use NLEC reporting if we don’t contract out our LEOFF Plan 2 employees for these types of services?

No. NLEC reporting doesn’t currently apply to you; however, we recommend you remain aware of NLEC requirements in case you begin contracting for these types of services in the future.

NLEC Reporting

 

Report type NLEC Non-LEOFF Employer Compensation is intended to be used by LEOFF employers to report total compensation for an earning period associated with LEOFF services provided to non-LEOFF employers. NLEC does NOT replace any otherwise required transmittal reporting by the LEOFF employer, but rather it allows the employer to tell DRS the portion of the total reported basic salary for its LEOFF Plan 2 members that was associated with NLEC services.

Is the NLEC Compensation I report supposed to be based on the basic salary earned for NLEC services, or equal to the amount of the fee received from the non-LEOFF employer?

The NLEC Compensation you are responsible for reporting is the portion of the total LEOFF Plan 2 basic salary associated with NLEC services. The amount of the fee has nothing to do with the amount you report.

The fees we receive from the non-LEOFF employer are not directly allocated to our LEOFF Plan 2 members’ salaries. Do we still have the pay the state rate?

Yes. If you receive a fee for services rendered by your LEOFF Plan 2 member(s) to a non-LEOFF employer, you are responsible for reporting the portion of the total LEOFF Plan 2 basic salary associated with NLEC services, and for paying the state contributions owed on that portion.

For which periods are we required to report NLEC?

You are responsible for reporting NLEC earned from July 1, 2017, forward.

Should the compensation be reported as earned?

Yes. All gross NLEC should be reported as earned by payroll period. If you have payroll periods that span more than one month, and there was NLEC earned in both months, you would create separate earning periods for each month.

How often should I report NLEC?

You should report NLEC after your regular transmittal has processed for the earning period containing NLEC. This timing will ensure the receivables associated with both the transmittal and the NLEC reports will post to the same reporting period for the employer.

  • Example: The LEOFF employer submits a transmittal for the December 2017 earning period on Jan. 10, 2018. The transmittal report will process on Jan. 11, 2018. The employer then submits the NLEC report on Jan. 11, 2018. The employer’s receivables for both the transmittal report and the NLEC report will post to the December 2017 reporting period.


What if we don’t have NLEC for a period, or don’t have it at all?

You are not required to submit an NLEC report unless you have NLEC services associated with an earning period.

I submitted an incorrect amount on a previous report. Can I correct it?

Yes. You can adjust any prior earning period by adding a line to your report. You can reverse previously reported NLEC, but only up to the amount you originally reported.

Paying the State Contributions Owed on NLEC

 

How will my NLEC receivable be posted?

When your NLEC report is processed, the receivable amount will be posted directly to your receivable account (Current Account Activity) the same way your transmittal amounts are posted. The transaction will be listed on your current account activity in Eservices as Non-LEOFF Employer Compensation, and will post to the reporting period listed on your NLEC report. You can review your NLEC reports history in Eservices.

Can I use ePay to submit a payment?

Yes. You can also pay by check. To use ePay, you add the payment amount to the LEOFF Plan 2 contribution box.

Can I add the additional LEOFF Plan 2 contribution to my existing payment advice for my regular transmittal?

Yes. You can add the amount to the LEOFF Plan 2 contribution amount from the regular report.

Note: Make sure the reporting periods match. You can view the processed NLEC report to ensure you’re paying the dollars into the correct reporting period.

Other NLEC Impacts

 

Are there any other impacts of this change?

Yes. If you report NLEC, the state contributions you pay on the NLEC will be included in the GASB 68 reconciliation and must be taken into consideration when you’re reporting for this purpose.

Will this affect my LEOFF Plan 2 employees’ contributions or accounts in any way?

No. The LEOFF Plan 2 members’ accounts will not be affected by this change.

Chapters

Contact Us

Other Links

Close