Issue/Symptom/Question

The Families First Coronavirus Response Act mandates employer paid sick leave and family leave for some employers. How do I set up PENTA so that I can stay in compliance with this act?

Applies To

Penta for Windows

Payroll

Covid-19, Coronavirus, Families First Coronavirus Response Act, FFCRA

Last Update:

12/31/20 - FFCRA has been extended through 3/31/21. If you would like the expiration date extended in PENTA for FICA exempt code 'X' please submit a support ticket with subject line "FFCRA Extension."

12/4/20 - Added details regarding W2 printing and end of year requirements.

Overview

Employers are reimbursed through a credit on their quarterly payroll tax return (Form 941) so it's best to be able to track the hours and cost associated with pay through this program. There are three components to the FFCRA: Paid Leave, Sick Leave and Child Care Leave. Each has their own rules with regards to rate of pay, payment limit and number of weeks/hours. For the details please view the additional resources links at the bottom.

Recommended Best Practice for Setup:

1. Optional: Set up new PTO codes to track hours used against a balance
   
   • Go to the Paid Time Off Categories window (Payroll > Setup > PTO, Hours Classification Codes and Overtime Rules > Paid Time Off Categories)
   • Insert a new record, assign a PTO code and description. You can use any description you want but we recommend 'FFCRA: Paid Leave', 'FFCRA: Sick Leave' and 'FFCRA: Child Care Leave'
   • For 'Bal <0 Causes' we recommend setting to Error, but this is up to you. You can also determine if you would like this to appear on the check stub via the 'Check Stub Info' popup box.
   • If you decide to use PTO codes you will need to load in balances for all employees that will be utilizing FFCRA. This can be done in the Employee Paid Time Off Adjustment Entry window (Payroll > Employees > Employee Paid Time Off Adjustment Entry)
2. Set up three new hours classifications, one for Paid Leave, one for Sick Leave and one for Child Care Leave:
   • Go to the Hours Classification Codes screen (Payroll > Setup > PTO, Hours Classification Codes and Overtime Rules > Hours Classification Codes).
   • Insert a new record and assign an Hours Class Number. Add a description for the Paid Leave portion of FFCRA. You can use any description you want but we recommend 'FFCRA: Paid Leave', 'FFCRA: Sick Leave' and 'FFCRA: Child Care Leave'
   • Enter the distribution type as 'OU and Account' or 'Other'. Complete the rest of the columns as needed. 
   • If you created PTO codes in optional step 1 be sure to assign them to an Hours Class Number now.
   • If wages are not subject to Union Fringe Benefits make sure to uncheck the box for 'Fringe Basis Hours.' This will cause fringes to NOT calculate when the hours class number is used.

Employee Setup:

It has been stated in the IRS FAQ's that all wages paid under FFCRA are not subject to Employer FICA. All other payroll taxes still apply. In order to process payroll correctly in PENTA a flag will need to be set up for each employee eligible for FFCRA. The setup for the employee is date dependent and you need to make sure the flag is set appropriately when processing payroll.

IMPORTANT: An update is needed from PENTA before you can complete the employee setup. If the description for X is "Exempt From Employer SS (2010)" then you do not have the update and this will not work until the update is installed.

1. For any employee who is receiving FFCRA payments
   
   • Go to the Federal W/H tab of the Employee Payroll Information screen. Update the "Exempt From FICA" code to 'X'
   • When this flag is set to 'X' then ALL payroll processed will be exempt from Employer FICA.
   • This setting is date sensitive and will only apply to payroll between 4/1/20 and 12/31/20. 
     
   • On 1/1/21 'X' will have the same functionality of 'N' in case it is not reverted back on accident.
     • Recent legislation as of 12/28/20 has extended FFCRA until 3/31/21. If you would like the expiration date extended in your environment please submit a support ticket with the subject line of "FFCRA Extension"
2. As soon as an employee is no longer eligible to receive FFCRA payments this flag needs to be set back to the previous value (likely 'N').
   • It is important to change the flag back because if you do not then FICA will continue to not be calculated for Employer
3. If an employee has both regular wages and FFCRA wages within the same payroll period then 2 checks will need to be created.
   • Process the regular wages first and create the paycheck. No special setup or processing is needed.
   • Update the Exempt From FICA code to 'X' for the employee, then process the FFCRA wages.
   • There is not a way to process both FFCRA and regular wages for the same pay period on the same payroll check.
4. What if payroll has already been processed and the flag was not set correctly?
   • For FFCRA wages paid before we made the update to your system we are still determining the best process to correct this. For now do not make any adjustments.
   • If, after the update, you incorrectly processed payroll then void the check, update the flag, and then re-process payroll.

Recommended Best Practice for Processing:

1. Verify the "Exempt From FICA" flag is set correctly for all employees.
2. Create timecards in the Time/Equipment/Production Units Entry screen
3. Override the Hour Class for each record. You can also set a default Hour Class via the 'Default Information' popup to speed up entry.
4. Distribute, run Gross to Net and Create Checks as you normally would.
5. If, after this pay cycle, an employee is no longer eligible for FFCRA wages make sure to change the "Exempt From FICA" flag to not be 'X' in Employee Payroll Information. 
6. One report to check for withheld taxes during the pay period is the PR Register Major Summary report (PRCHKSMY)

This will pay all the employees on normal paychecks and hours/cost will be tracked via the new Hours Classifications that were created. 

Reviewing FFCRA Hours

The reporting aspect is not 100% certain at this time but you can use a few different methods to review the hours associated with an Hours Class Number:

1. Use the workbench Labor & Overhead Distribution report and filter to the Hours Class Codes. Hours Class Codes are available on workbench version 21.3.42 and up only.
2. PENTA Reports Hours by Hours Class (HRBYHRCLS). Open up Additional Criteria and you can restrict to specific Hours Classifications using the HR_CLASS_NUM

How to apply the credit against an AP entry:

1. When ready to apply the credit against the withheld payroll taxes, use the AP Invoice and Credit Memo screen.
2. Enter a batch number, a total (which will be a negative number) and the posting date on the Batch Total tab.
3. On the document tab enter the OU ID and vendor ID. Enter an invoice number (generally 'CM' or 'CR' is entered before the number) then an amount.
4. Go to the Account Distribution tab. Enter the Account # for the payroll tax expense account. Enter the description and amount then update the AP Account #, if needed.
5. Exit when everything is complete and the batch is in balance.
6. If accruing payroll tax invoices as part of payroll processing, then when selecting invoices for payment, include both the credit and accrual from the payroll period to take the credit in the cash disbursement recording.

Getting FFCRA amounts to print on the W2 in box 14

FFCRA wage amounts will be printed in box 14 on employee W2's based on the setup above and the responses in the End of Year tax kit reservation form. The hours classifications above need to be directly correlated to one of the three FFCRA reporting types in order to print correctly. The correlation between the hours classification and the FFCRA wage type is created during the end of year tax update by the installer and cannot be changed by users or through any PfW screens. If an update is needed please submit a support ticket.  

In box 14 of the W2 we will print descriptions and wage amounts if an employee received FFCRA wages via one of the associated hours classifications.

Questions?

If you have specific questions about PENTA and processing for FFCRA please create a support ticket.

Additional Resources

• Other PENTA Covid-19 articles: 2020 Employer FICA tax deferral & Some Ways PENTA Can Help Deal With COVID-19 - FAQ
• IRS updates: https://www.irs.gov/coronavirus
• Department of Labor: https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave
  • FAQ: https://www.dol.gov/agencies/whd/pandemic/ffcra-questions
• MCAA Questions and Answers: https://www.mcaa.org/wp-content/uploads/2020/03/FFCRA-Questions-and-Answers-1.pdf