Cell Phone Policy Changes

1
Cell Phone Policy Changes

• Effective June 1, 2009
• Presentation to DHRM, May 28, 2009

2
Current Cell Phone Policy

• Business Finance Bulletin G-46,
• Guidelines for the Purchase and Use of Cellular
  Phones and Other Portable Electronic Resources
• Primary use of the resource is for official
  University business
• Personal use of the resource should be incidental
  in nature
• Incremental costs (excess minutes) for personal
  use of the resource must be reimbursed by the
  employee

3
Why change the policy? Why Now?

• The Internal Revenue Service (IRS) considers
  personal cell phone use of an employer provided
  device a taxable fringe benefit.
• IRS substantiation rules must be followed to
  document business and personal use of devices.
• As part of a settlement of recent audits at UCSD
  and UCLA, the University was required by the IRS
  to comply with these special substantiation rules
  for University-provided cell phones and PDAs.

4
IRS Substantiation Rules

• To exclude the use of an employer-owned cell
  phone from an employees taxable income, the
  employer must have a policy requiring employees
  to keep records that distinguish business from
  personal phone charges. In absence of such
  record keeping, the value of the use of the phone
  will be treated as income to the employee.
• The written record for each business call should
  contain the following
• The amount of the expense
• The date and time of call
• The name of the person called
• The business purpose of the call
• Charges relating to personal calls must be
• reimbursed by the employee.

Since compliance with substantiation rules not
practical - NEW POLICY!
5
Revised Cell Phone Policy

• The value of a University-provided cell phone, a
  cell phone-enabled personal digital assistant
  (PDA), or similar device provided to an employee
  will be treated as a taxable fringe benefit
  subject to payroll taxes.

6
Implementing the Revised Policy

• Imputed Income/Cash Allowance Procedure
• The cost of an employees cell phone plan and
  device will be added to the employee's taxable
  earnings as imputed income subject to
  withholding.
• A taxable cash allowance will be given to the
  employee to reimburse for the tax on the imputed
  income. Since the allowance itself is taxable,
  it will be increased using the IRS gross-up
  formula to reimburse the employee for the taxes
  associated with the payment.

7
Implementing the Revised Policy

• New Form
• Imputed Income/Cash Allowance Form
• Web-based fill-in form
• Used to calculate the cash allowance
• New Description of Service (DOS) Codes
• CEL records imputed income on employees
  earning record
• CE2 pays a cash allowance to cover tax
  implications

8
Impact on Employees

• No disruption to current service levels
• Incidental personal use will be allowed as long
  as plan minutes are not exceeded
• Not required to comply with IRS substantiation
  rules
• Impacts taxable income
• May impact net pay
• Does not impact retirement or other benefits such
  as medical contribution levels.

9
When does it take effective?

• The new policy is effective with June earnings
  paid as follows
• June 23, 2009 Semi-monthly paid employees
• July 1, 2009 Monthly paid employees
• July 8, 2009 Monthly arrears paid employees

10
Action Steps for Departments

• Determine if employees who currently have devices
  still need the device to perform their job
  duties.
• Evaluate whether current plan meets the
  employees business need. Review existing plans
  for excess minutes. Adjust plans as necessary
  for business use.
• Determine imputed income amount (monthly plan
  cost) using new form.
• Determine cell phone cash allowance using the new
  form.
• Enter amounts determined for each employee.
• Monitor ongoing use of the cell phone and make
  adjustments as required.

11
Exceptions to Imputed Income

• UCB exception process currently being defined.
• What we do know
• Exceptions will be considered on a
  device-by-device basis.
• If an exception is granted, the employee must
  comply with IRS substantiation rules.

12
Resources

• Optional training sessions for departments at 150
  University Hall
• May 29, 2009 - 900am to 1030am
• June 8, 2009 - 200pm to 330pm
• June 17, 2009 - 900am to 1030am
• June 25, 2009 - 200pm to 330pm
• Please register using the UCB Learning Center,
  available through Blu. The course code is
  BECTR812.

13
Resources

• Business Finance Bulletin G-46,
• Guidelines for the Purchase and Use of Cellular
  Phones and Other Portable Electronic Resources
  at
• http//www.ucop.edu/ucophome/policies/bfb/g46.p
  df/
• Web Form and instructions at
• Payroll.berkeley.edu
• Payroll Help payhelp_at_berkeley.edu
• HCM Help hrmshelp_at_berkeley.edu
• Controllers Office Cell Phone Policy
  Information http//controller.berkeley.edu/polici
  es/cellphone.htm
• QUESTIONS?