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  • Open Comment Period: July 29 - August 9, 2019

    Jul 29, 2019 8:30 am by OBFS POLICY ADMINISTRATOR

    Relocation Assistance Payments

    Overview

    Welcome to the Office of Business and Financial Services Open Comment Blog!

    The Office of Business and Financial Services is hosting an open comment period, beginning July 29 and closing August 9 at 5 p.m. CT. In this open comment period we present updates to the existing relocation assistance policies. The proposed updates are being presented as, 8.11 Relocation Payments.

    Highlights from the proposed updates to the University of Illinois System policy include:

    • Switch assistance from a reimbursement-based process to a one-time moving stipend processed through University Payroll and Benefits (UPB). The total amount being offered must be documented in a signed offer letter, paid in full, is taxable, and may not be grossed up
    • Raise the relocation assistance cap above the current limit of $7,500 to allow for payments up to $15,000. Exception requests to provide reimbursement assistance above the $15,000 limit must be approved by the chancellor or equivalent, or delegate
    • Eliminate the list of ‘preapproved’ expense types, as the assistance will be paid in the form of a stipend and not a reimbursement
    • End the ability to make direct payments to moving companies or other vendors
    • Allow universities to create additional policies to further restrict relocation assistance payments
    • Clarify that civil service employees may be eligible to receive relocation assistance

    The new policy will be found in Section 8 Payments and Reimbursements of Business and Financial Policies and Procedures Manual.

    Please review the policy and provide feedback.

    Relocation Policy Proposal FAQs

    Q. How and when will the stipend be processed?
    A. The one-time relocation stipend will be processed by University Payroll and Benefits (UPB) via PARIS. A new or transferred employee must be active in Banner with an active job to process the relocation adjustment before the stipend payment can be processed. This means that an employee will receive the stipend after their start date. The offer letter, which must disclose the amount of the relocation stipend, and any additional documented approvals from the Chancellor or equivalent if the stipend amount exceeds $15,000 must be scanned into the employee’s BDMS record by HR and/or the unit for UPB to process the payment. The unit must then initiate the stipend request as a Prior Underpayment Adjustment (PUA) in Payroll Adjustment Request Interface System (PARIS).

    Q. What documentation is required to process a stipend?
    A. The offer letter and any additional documented approvals from the Chancellor or equivalent if the stipend amount exceeds $15,000 must be scanned into the employee’s BDMS record by HR and/or the unit for UPB to process the payment.

    Q. Are relocation stipends taxable?
    A. All payments related to personal moving expenses are considered taxable income to the employee and will be reported on Form W-2, Wage and Tax Statement and subject to income tax and Medicare withholdings. The stipend payment may not be grossed-up.

    Q. Are relocation stipend payments subject to withholding for the State University Retirement System (SURS)?
    A. Relocation stipend payments are not subject to SURS withholding.

    Q. Are there special considerations when processing a relocation stipend for a foreign national?
    A. Hiring departments should encourage their Foreign National employee to meet with University Payroll & Benefits prior to receiving a relocation stipend payment from the University of Illinois.   It is the employee’s responsibility to schedule and attend a Foreign National Tax Status Review Appointment. Attending this appointment will assist the employee in confirming any tax treaties that may exist which may reduce federal taxes.  Keep in mind tax treaties are only in effect after the employee signs the appropriate documentation with University Payroll & Benefits and before the stipend is processed/paid.

    Q. Is it required that $15,000 be paid, or are there other amounts that may be provided?
    A. The relocation stipend may not exceed $15,000, without prior approval from the chancellor or equivalent, or delegate. At the discretion of the universities, colleges, or departments additional approvals, or restrictions may be applied. Units can offer a relocation assistance stipend for any amount that falls within established guidelines.

    Q. How was the $15,000 limit identified?
    A. The new limit was identified by surveying the amount of financial assistance offered for relocations at comparable peer institutions.

    Q. Why choose a stipend-only model?
    A. A stipend-only model for moving payments represents the most administratively streamlined approach to providing relocation assistance. The System Offices will no longer require units to track the expenses incurred by new or transferred employees and file reimbursement requests. Units will be able to process the relocation assistance stipend . The only substantiation required to process this request will be an offer letter and any additional documented approvals from the Chancellor or equivalent if the stipend amount exceeds $15,000. The stipend will be paid in-full and directly to the employee.

    Q. Can we still make direct payments to relocation vendors?
    A. Under the proposed policy units will no longer be able to make direct payments to relocation vendors. The administrative difficulty of tracking both a payroll-processed stipend payment and a direct vendor payment for proper tax reporting and withholding make this option impractical. There are additional concerns regarding the possibility of providing relocation assistance beyond the commitment identified in an offer letter, if the direct vendor payment exceeds initial estimates and the total cost along with a stipend is greater than the amount offered to that employee.

    Q. Why eliminate the pre-approved expense list?
    A. Due to Tax Cuts and Jobs Act (TCJA) of 2017, effective January 1, 2018, payments related to personal moving expenses are considered taxable income to the employee and will be reported on Form W-2, Wage and Tax Statement and subject to income tax and Medicare withholdings. The list of pre-approved expenses was based on a list of previously ‘qualified’ or non-taxable expense types. Now that all relocation payments and expense types are considered taxable income there is no longer a basis in tax law to maintain this list.

    Q. Is this relocation assistance for personal items, professional equipment, or both?
    A. The relocation assistance stipend permitted under this proposed policy is for personal moving expenses. Units will still be permitted to assist with moving professional equipment under established processes.

    8.11 Relocation Payments

    Policy Statement
    The University of Illinois System may provide a one-time moving stipend to eligible employees for the purpose of supporting the relocation process. The stipend may not exceed $15,000, without prior approval from the chancellor or equivalent, or delegate. The amount of the stipend must be documented in a signed employment offer letter. The stipend will be paid in full, is considered taxable income, and may not be grossed-up. At the discretion of the universities, additional university-level approvals, or restrictions may be applied.

    Reason for the Policy
    The University of Illinois System allows one-time moving stipend payments to assist with the recruitment of new or transferred employees.

    Applicability of the Policy
    Units may, when funds are available, provide a one-time moving stipend to new or transferred permanent, full-time members of the faculty, administrative, academic professional staff, and when appropriate, civil service staff. Contact the appropriate university or system human resources office for relocation stipend options for civil service staff.

    Procedure
    The amount of a one-time moving stipend must be documented in a signed offer letter. Stipend payments must be submitted to University Payroll and Benefits for processing.  Units are responsible for initiating the one-time moving stipend payment request and for following additional university-specific requirements. Units should process the stipend via PARIS using earn code REL under the payment type agreement/settlement. The offer letter and any additional documented approvals from the Chancellor or equivalent if the stipend amount exceeds $15,000 must be scanned into the employee’s BDMS record by HR and/or the unit in order for UPB to process the payment. Refer to University Payroll and Benefits guidance at (URL) for additional information regarding how to process these stipend payments.

    Related Policies and Procedures
    18.5 Fringe Benefits

    Additional Resources
    PARIS Resource Page

    To leave feedback, please use the "Add Comment" link below. On the next screen, choose the "Sign in with my NetID" option and log in with your University credentials. Comment moderation is enabled. Your comment will not appear until approved.

    You may also submit a comment without posting to the feedback board by contacting obfspolicies@uillinois.edu.

     

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    Comments

    rairden@illinois.edu Aug 8, 2019 2:22 pm

    Impact on HR Operations:

    • Will the REL transaction in PARIS be tied to the primary position or will an LP job have to be established? (Our hope is that this is tied to the primary job for less processing work.) 
    • How will lump sum payments be handled for part-time employees who are ineligible for a lump sum payment per PPACA standards? This may be relevant more so for AP and CS employees rather than faculty and administrators.   
    • There could be even further delays in the payment if the job is not processed prior to calc, esp. during peak processing timeframes, which places further financial burden on the employee.
    • Employees will need to be informed of the up-front costs not being accounted for until their first paycheck (pre-move house hunting expenses, etc.)
    • Relocation $ amounts
      • Different dollar amount levels for the employment categories (i.e. Faculty vs. AP vs. CS)
      • Who will be enforcing these amounts? 
      • Will distance be a factor when determining eligibility?
      • What is the likelihood of being able to increase the stipend further? 
      • We would like established guidelines to help with implementation.
    • What is the impact to foreign nationals?
      • The prevailing wage is requested with the annual salary, not an additional amount for a relocation allowance that appears to be salary. Has Legal Counsel been consulted? 
    • Is there an option to spread the payment over multiple pay periods (at least 2 for example)?  We anticipate there will be questions from employees and are thinking of tax implications. Has Legal Counsel been consulted? 
    rairden@illinois.edu Aug 8, 2019 2:12 pm
    1. We agree with raising the relocation assistance cap from $7,500 to $15,000.
    2. What research has been completed based on current usage (i.e. through Allied)?
    3. The proposed changes CANNOT negatively impact our ability to successfully recruit and retain top talent. We must remain competitive with our peers.  What research has been done in this regard and can it be shared with the colleges and departments?  How does the new proposed method compare with other institutions?  We have feedback from one department head who said other institutions may very well operate in a similar capacity.  It would be great to have the background info on how we arrived at the proposed policy.
    4. We want to maintain a high level of service to our new employees, and especially new faculty members. On one hand, the proposed policy presents a much simpler process for relocation payments overall, which may be a welcomed option for many new employees.  On the other hand, many faculty are relieved to have some of the relocation costs handled by the dept. in terms of ease and to not have money out-of-pocket. The new policy seems to eliminate the option for departments to provide direct payment support if/when it is needed or preferred.  FAQ confirmed that we can no longer may direct payments to vendor and we are concerned with the loss of this option when it is necessary.
    5. We believe that PARIS transactions cannot be processed until the job record is in Banner. We are concerned about telling new employees (esp. faculty) that they will have to wait until they are fully on-boarded before receiving a stipend to pay for their moving allowance.  Many faculty use the direct billing for the use of Federal Warehouse so that they are not out of pocket for moving expenses.  This is especially important when they are trying to buy a home at the same time and may feel tight on cash. In addition, if a faculty member makes a house hunting trip prior to a move that is well in advance of the start date, we need to reimburse them sooner rather than later. Could this processed as a reimbursement prior to official employment?  Would a 0% suffice (then see questions below in the HR section)?
    6. The switch from a reimbursement-based process to a one-time moving stipend is problematic.
      1. Are employees utilizing all of the relocation allowance now?  Are there metrics to support this policy change or is it simply to solve the tax implication issue? We have data from at least one large unit that suggests several thousand dollars may go unspent when there are minimal moving costs. Paying a one-time stipend at X amount sets the potential for unintended profit at the university’s expense. 
      2. On the other hand, what happens when an employee spends more than the $ amount designated in their offer letter? Is another stipend going to be allowed?  Who manages that process and what approvals are required? 
    7. We do not support ending the ability to make direct payments to moving companies or other vendors. We need to retain the option to pay vendors directly.  Currently, Federal Warehouse Company offers moving services at a price up to 68% discounted from other vendors.  If the university stops using Federal, then we imagine that discount will no longer be available.  Therefore, each move will cost more than what it currently does – is this an unintended consequence for the proposed plan?  Just like travel, if we can prevent an employee from having to bear the cost at any point, why would we not take that burden from them? 
    8. Business managers are being asked to sign off on a policy that says Universities may add new policies to further restrict assistance.  How can you approve this policy without knowing what is yet to come?

     

    wthomas9@uic.edu Aug 1, 2019 3:01 pm

    This new policy would improve efficiency with paperwork and be a more attractive benefit to the new hire. Since the payment is taxable now, it is more like a stipend than a reimbursement anyway.

     

    klabarre@illinois.edu Jul 31, 2019 12:20 pm

    There are good initiatives buried here which expand moving expense support to civil service employees, and increasing the max expense amount, but the change in policy moving from reimbursement to a stipend format is unduly burdensome. Not everyone has the funds to wait until after the start date to pay for moving expenses! It moves this into a taxable benefit category, which means people may not be fully reimbursed for these expenses. Ending direct payment to moving companies makes this unduly onerous for individuals who do not have the savings or access to credit cards to 'prepay' these expenses. 

    I support these initatives within the policy.

    • Raising the relocation assistance cap above the current limit ($7,500) to allow for payments up to $15,000. Exception requests to provide reimbursement assistance above the $15,000 limit must be approved by the chancellor or equivalent, or delegate
    • Clarifying that civil service employees may be eligible to receive relocation assistance
    goby@illinois.edu Jul 31, 2019 8:35 am

    The proposed change to the relocation assistance policy is an issue for federal awards. 

    For relocation costs charged to Federal funds, reimbursement cannot exceed the employee’s actual (or reasonably estimated) expenses.  A flat stipend amount for relocation costs cannot be charged to federal funding unless the stipend is less than the employee’s actual (or reasonably estimated) expense. 

    The federal regulations also limit the types of relocation costs that are allowable, and cites certain cost categories that are unallowable.   Documentation to support the type of relocation costs claimed for reimbursement would be required for charging the costs to a federal award.

    See Code of Federal Regulations 2 CFR 200 "UNIFORM ADMINISTRATIVE REQUIREMENTS, COST PRINCIPLES, AND AUDIT REQUIREMENTS FOR FEDERAL AWARDS" §200.464 “Relocation costs of employees” for the full text of the federal requirements.

    mozeran@illinois.edu Jul 30, 2019 6:38 pm

    As others have pointed out, this will tremendously damage the university's ability to recruit candidates. Requiring new employees to front moving costs of several thousand dollars is a terrible way to begin the employment relationship, and it means tons of qualified candidates simply won't come work here, because they can't afford to.

    mthacker@illinois.edu Jul 30, 2019 3:20 pm

    Not being able to direct pay vendors combined with not being able to disburse stipends until after the start date is going to be a hindrance with recruitment and will be especially be burdensome for early career folks who may not have the savings to be able to afford a move. Illinois being able to direct pay my moving company was really valuable and important to me. In fact, it is something I cite about what impressed me about Illinois compared to other places I have worked and something I have told prospective candidates about as a positive when I am on search committess. I would strongly discourage this new policy being put into effect. 

    adillman@illinois.edu Jul 30, 2019 8:49 am

    In consulting with departmental purchasing, finance and HR, this new policy would eliminate the burden of paperwork and clarify the simple benefit to the new hire.  The department is upportive of this new proposed policy.

    mdevocel@illinois.edu Jul 29, 2019 4:08 pm

    Are recruting expenses (pre-employment) for house hunting, recruting visits, etc. to be separate from this policy and still reimbursable, and if so, are these expenses taxable (reportable) or not?  Recruits don't always end up becoming employees in the end, and this policy seems to be directed at confirmed employees.

    mmadsen@illinois.edu Jul 29, 2019 3:45 pm

    This policy is punitive and unnecessarily so towards those who cannot afford to front the moving costs prior to getting a new job. This will discourage candidates from accepting offers, relative to institutions who are more mindful of candidates' cash flow. The benefits (less paperwork, higher stipends) also advantage those who earn more money already. Academic employees typically have to work a month before being paid, and that is a very long time to wait after going through the moving process. Thank you.

    chmorris@illinois.edu Jul 29, 2019 3:12 pm

    If employees must cover the full cost of relocation, and units cannot directly pay relocation contractors, then this model appears to eliminate the ability to move for many employees who cannot afford to wait for a reimbursement. Will there be policies in place to accommodate employees who are not able to afford the cost of their relocation from their own pockets? 

    mkrof2@uis.edu Jul 29, 2019 2:28 pm

    I found the FAQs very useful in responding to questions I had after reading about the changes.

    rmarquez@uic.edu Jul 29, 2019 2:28 pm

    Can the stipend be used for temporay housing either on or off campus?