Termination Benefits Guide 

The information provided in this guide applies to termination payments made to employees in all personnel programs, including Academic, Senior Management Group, Management and Senior Professional, and Professional and Support Staff programs.

Governmental Accounting Standards Board (GASB) Statement #47 requires two classification types of termination benefits (voluntary and involuntary).  Voluntary termination benefits include inducements to hasten separation from employment or as a result of voluntary termination.  Involuntary termination benefits include benefits provided as a direct result of an involuntary termination.  When an employee receives termination benefits, the Distribution of Payroll Expense and General Ledger must record the cash-out payments separately from other salaries and wages and their associated fringe benefits.  Fringe benefits should include Retirement, OASDI, Medicare, health insurance (medical, vision, dental, life, and disability), Workers Compensation, and Unemployment Insurance.

  1. Termination benefits
  2. Voluntary termination benefits
  3. Involuntary termination benefits
  4. Description of service (DOS) Code
  5. Payments outside of PPS
  6. ITP: Pay in lieu of notice
  7. Example
  8. Resources
  9. Where to get help

Appendix
Resources
Voluntary and Involuntary Termination Benefits_GASB47.ppsVoluntary and Involuntary Termination Benefits_GASB47
What to KnowFilter
Termination benefits

In general, termination benefits may be provided to an employee as a result of voluntary or involuntary early termination of services.  Termination benefits are those that are over and above standard benefits (ie, vacation pay, health care coverage, etc) provided upon termination that are not provided by UCRP or the annuitant health plan.  The following are examples of termination benefits:

  • Health care coverage continuation
  • Expanded health care coverage
  • Expanded health care coverage not provided by UCRP annuitants
  • COBRA benefits paid by UCSC
  • Severance pay
  • Cash pay outs at, or following, termination, including annuity payments
  • Career counseling or job placement
  • Other payments such as moving expenses, attorneys' fees, damages and interest on back pay.

Some of the benefits listed above exceed those provided under University policy and need to be approved as an exception or included in a settlement agreement approved by the Office of General Counsel.

Voluntary termination benefits

Voluntary Termination Benefits represent payments made to employees as:

  • an inducement to hasten the termination of services or
  • as a result of a voluntary early termination plan.

The University's obligation to provide benefits for voluntary terminations or separations typically arises as a result of a bilateral agreement in which the University agrees to provide benefits in exchange for which the employee agrees to leave service earlier than he or she otherwise would.

The following DOS codes for Voluntary Termination Benefits paid through PPS must be used instead of the base code SEV:

DOS Code Description Usage
VTL Voluntary Termination Lump Sum By-Agreement Settlement Payments, job placements, etc
VTS Voluntary Termination Severance By-Agreement Severance
VTR Voluntary Termination Regular Pay Regular Pay in monthly increments

See DOS Section for further Details

Involuntary termination benefits

Involuntary Termination Benefits represents payments made to employees as a consequence of the involuntary termination of services.  In contrast to voluntary terminations or separations, involuntary terminations result from a unilateral decision by the University, such as layoff.  The conditions for involuntary terminations are outlined in personnel policy, which provides the basis for conveying these types of benefits to employees.

For Involuntary Termination Benefits all of the following criteria must be met:

  • A plan of termination has been approved by those with the authority to commit the University to the plan
  • The plan has been communicated to the employee
  • Benefits can be estimated

For Involuntary Termination Benefits paid through PPS, the following DOS codes must be used instead of SEV:

DOS Code Description Usage
ITL Involuntary Termination Lump Sum By-Agreement Settlement Payments, job placements, etc.
ITS Involuntary Termination Severance By-Agreement Severance
ITR Involuntary Termination Regular Pay Regular pay in monthly increments
ITP Involuntary Termination Pay-in-Lieu Regular pay in monthly increments in-lieu of notice

See DOS section for further details

Description of service (DOS) Code

The following DOS codes are used for payment input (Paytran) only.  The codes cannot be used as a distribution line in a PPS employee EDB record setup.

By Agreement DOS Codes

DOS Code Description Usage
VTL Voluntary Termination Lump Sum Settlement Payment
VTS Voluntary Termination Severance By-Agreement Payment
ITL Involuntary Termination Lump Sum By-Agreement Settlement Payment
ITS Involuntary Termination Severance By-Agreement Payment

Rated DOS Codes

DOS Code Description Usage
VTR Voluntary Termination Regular Pay Pay in monthly increments
ITR Involuntary Termination Regular Pay Pay in monthly increments
ITP Involuntary Termination Pay-in-Lieu
  • Regular Pay in Lieu of notice
  • Employee does not have the option of Preferential Rehire rights
    or receiving Severance Pay.
  • Involuntary lay-off
  • At the HR Control Unit's discretion

Additionally, the base DOS Code BYA can no longer be used to make either Voluntary or Involuntary Termination Benefits payments.

Payments outside of PPS

For non-salary termination payments made throughout the year outside of the PPS system (ie, through the FAST office), the following object codes should be used to record the payments:

  • Termination Benefits -- Voluntary: Object Code 8770
  • Termination Benefits -- Involuntary: Object Code 8875
ITP: Pay in lieu of notice

Pay-in-lieu of notice is considered to be wages.  A claimant is not eligible to receive unemployment compensation for the particular period following termination of employment for which payment was intended.  A pay-in-lieu of notice (ITP) payment is subject to the same conditions as regular pay.  Benefits will be based on the ITP pay period end date, not the pay period end date representing when the employee actually left.  Likewise, vacation and sick leave accrue based on the projected separation date.

When to use ITP

  • Employee does not have the option of Preferential Rehire rights or Severance pay.  Layoff is involuntary.
  • A Payment in-lieu of notice is used at the HR Service Team's discretion.  It is not a mandated type of payment.

How to use ITP

  • Separation date must be a projected date based on the agreement made with the HR Control Unit.
  • Appointment/Distribution end dates and last day on pay status must be the last day the employee actually works.
  • An AB2410 must be generated and distributed to the employee for the total owed (including projected wages) on employee's last working day.
Example

HR Control Unit offers a one month Pay-in-lieu of notice with the employee's last working day being July 15. The employee's record in PPS is updated as follows:

  • Separation date: August 15
  • Last day on pay status date: July 15
  • Appointment end date: July 15

In this example, benefit coverage extends through September 30. The Separation Payment_AB2410: (Excel | PDF)  is completed in the following way:

  • Line 1:  Employee is paid as REG (regular time) for the percentage of actual time worked
  • Line 2: Remaining July hours are paid as projected ITP Pay-in-lieu for the percentage of work time left in July
  • Line 3: August projected ITP Pay-in-lieu is paid at the percentage of the month through August 15
  • Line 3: Terminal vacation paid must have an August 31 pay period end date.  Vacation and sick leave are calculated based on the projected separation date.

Separation

The AB2410 check for all pay due is given to the employee on July 15.
Resources

This policy applies to the following campus business processes:

Where to get help

Assistance is available for your termination benefits related questions from the Payroll Office.