Update 12/6/2016: The DIR has released additional details on the following page: Instructions for Payments to the Unpaid Wage Fund. We are reviewing the Form 40 that the DIR is requesting employers to use and will publish an update when the program has been modified to generate a file in this layout. We will post more information when this update is ready to download.
The latest update available via the Check for Updates option includes a new report to use when forwarding Safe Harbor funds to the state for employees that you are unable to locate. The Returned Check Report will list all of the employees, their addresses, social security number, and net payment amounts (after taxes are deducted) for each employee that you were unable to locate.
When handling safe harbor payments that are returned to you as undeliverable, there are several specific things that you should do and several things you should not do.
When a check is returned, you should make further attempts to locate the employee, including using “people locator” services as per the law.
If you are unable to locate the employee, check the Check Returned box on the Safe Harbor Employee window. Do not check this box before you are sure that you cannot locate the employee. This checkbox determines whether or not the employee and the payment amount will appear on the Returned Check Report.
If you check this box and later the employee does receive the check (for instance, the employee shows up in person to collect the Safe Harbor payment), then you should make sure the Check Returned box is unchecked.
Void the check using the Void Payroll Check option. Safe Harbor payments are wages that must be reported on the quarterly report and W-2, even if the employee has not received them. If you are unable to locate an employee, they are treated the same as uncollected wages (except there is a specific procedure for forwarding uncollected Safe Harbor wages to the state).
Before issuing the check to the state:
Determine if any safe harbor checks are outstanding (have not cleared on a bank statement) and have not been returned to you. If you have any checks that have not been returned and have not cleared your bank account, you may need to leave these checks off of the returned checks report and handle them as regular uncollected wages if they end up being returned after the Dec 15th deadline.
(You may want to verify with the state whether or not they will accept undeliverable Safe Harbor payments that are returned to you after the Dec 15th deadline. Our current understanding is that the state will not accept Safe Harbor payments that you are unable to deliver after Dec 15th.)
How to issue the check to the state:
- Review the instructions on the DIR’s FAQ for handling Safe Harbor payments. (See the second to the last question.)
- Run the Returned Checks Report. This will list all of the employees that have the Check Returned box checked and provide a total for you to issue a check to the DIR.
- Use the Returned Checks Report to generate an electronic copy. The DIR has not specified what electronic formats are acceptable. The program can generate a PDF, XLS or CSV file. (The DIR has also not specified what media you should use to submit the electronic copy.) Enter a filename for the type of electronic copy that you want to generate.
- Post a journal entry to debit your cash in bank account for the amount of the returned checks. Offset this with a credit to a liability account or to the suspense account.
- Issue a direct expense check payable to “INDUSTRIAL RELATIONS UNPAID WAGE FUND” posted to the liability or suspense account for the total amount of checks that were returned/undeliverable.
- Determine the amount of the administrative fee. Issue a second direct expense check for this amount.
- Send all of this (checks, printed and electronic copies of reports) to the DIR according to the directions provided on the FAQ.