Payroll Standard Operating Procedure 3.0: Payroll Procedures for Payments after Death
Subject: Payroll Procedures for Payments after Death
Source: Financial Management Services
Original Date of Issue: October 1990
Date of Last Revision: March 2020
Rationale: To outline the procedures for departments to follow concerning the death of an employee.
Upon learning of an employee’s death, the department (or campus) that formerly employed the decedent must immediately notify University Payroll of the employee’s death, and the following procedures should be used to process their final payment. No further payments should be processed in HRMS payable to the deceased employee. Final payments are processed by FMS using a Check Request in BUY.IU, made payable to the estate, following the appropriate approval process.
- The department (or campus) should remove all current pay period wages from the payroll voucher to avoid payment.
- The department (or campus) will prepare and submit the normal termination documents (eDoc and paper adjustment voucher (pdf)) to University Human Resources for final payout, including all terminal pay earn codes.
- To obtain the final payment, the family of the decedent should review How to Claim a Final Paycheck (pdf) our procedures for making the final payment. The family must then complete and submit the following documents to University Payroll:
- Paycheck Claim (pdf)
- Affidavit of No Administration (pdf)
- W-9 Request for Taxpayer Identification Number and Certification (pdf)
- University Payroll receives the adjustment voucher for the final payment from the department (or campus), as well as the Paycheck Claim, Affidavit of No Administration, and W-9 tax form from the decedent’s family.
- If the decedent’s estate has not been opened, University Payroll will issue the payment following the completion of a 45-day waiting period. The 45-day waiting period will be calculated from the date of death. In accordance with Indiana law, if an estate is opened, and University Payroll receives the letters of administration or letters testamentary and the W-9 tax form, the 45-day waiting period will not apply.
- The termination payout will be approved by University Human Resources following normal procedures. The University Payroll Termination Coordinator will monitor and maintain all paperwork in University Payroll.
- The Retirement Coordinator in University Payroll will process the final payment on a Check Request including all wages, refunds, etc. due. Retirement contributions will be calculated and wages will be adjusted as needed. If an estate was opened, the check will be issued “to the estate of” the deceased. If an estate is not opened, the check will be issued to the claimant signing the Paycheck Claim (pdf) form.
- Social Security and Medicare taxes will be withheld if the final payment is made in the same tax year in which the death occurred and will appear in boxes 3 and 5 of the employee’s Form W-2. If the final payment is made in the year following the date of death, social security and Medicare taxes will not be withheld and will not be reported in boxes 3 and 5 of the employee’s Form W-2. University Tax will update the decedent’s wages (DCD) accordingly in HRMS.
- The check will be disbursed according to instructions indicated on the Paycheck Claim (pdf) form. At tax year-end, the university will issue a Form 1099 to the estate or person claiming the final paycheck.
Responsible Organization: Financial Management Services