Deceased Employee CHOP Check

State Controller Process

Effective Date: 12/07/2022

Approved by: Robert Jaros, CPA, MBA, JD, Colorado State Controller

When a current employee dies, the agency and Central Payroll shall follow this Payroll Process to pay the beneficiary.

Agency Responsibilities

If a current employee dies, an agency shall complete the following tasks:

• Determine the beneficiary - who should be paid the employee's final pay. The process for a deceased employee's final pay is included in §8-4-109 C.R.S. termination of employment - payments required - civil penalties - payments to surviving spouse or heir. Agencies must follow these steps:
  • Is there a personal representative of the estate of the deceased employee?
    • If yes, the personal representative must complete the Affidavit for Payment of Final Compensation of Deceased Employee Pursuant to §8-4-109(f), C.R.S ("Affidavit") and attach a copy of either the personal representative's letters testamentary or letters of administration. The Affidavit is located on the Central Payroll Services webpage under Payroll Procedures and Codes.
    • Agencies must require the personal representative to provide evidence of the personal representative's appointment.
    • If there is no personal representative, then continue to next step below.
  • If there is a surviving spouse, then the surviving spouse must complete the Affidavit. If no surviving spouse, then continue to next step below.
  • If there is a next legal heir, then the next legal heir must complete the Affidavit. If there is more than one legal heir, then continue to next step below.
  • One of the deceased employee's next legal heirs would complete the Affidavit and distribute the funds according to the schedule in the Affidavit.
    • C.R.S. § 8-4-109(4) does not require the employer to determine the distribution of the funds. Any examination of the terms and conditions of a will by an employer would be inappropriate.
    • An agency can rely on the Affidavit.
    • If there are no legal heirs, then continue to next step below.
  • If no one claims the employee's wages within one year after the pay date of the employee's last pay, the wages are presumed abandoned under the Colorado Uniform Unclaimed Property Act (§ 38-13-201(k), C.R.S.).
• File a Report with Treasury's Unclaimed Property Division
  • Upon conclusion of the one-year period, the employer must submit a report and transmit payment to Treasury's Unclaimed Property Division.
    • An agency must complete the report online on the Find Your Unclaimed Property webpage:
      • If the deceased employee has a surviving spouse or legal heir:
        • Before filing the report, the employer, as the holder of property presumed abandoned, must send the apparent owner of the property (spouse or legal heir) notice that the property will be turned over to the State Treasurer. (§ 38-13-502, C.R.S.) Apparent owner is defined to be the person whose name appears on the records of the employer as the person entitled to the property held by the employer. (§ 38-13-102(2), C.R.S.)
        • An agency must send notice to the apparent owner not more than 180 days nor less than 60 days before filing the report with the Unclaimed Property Division. Notice must be sent to the address the employer has in its records for the apparent owner, provided the employer's records do not disclose the address to be invalid and the address is sufficient to direct the delivery of first-class United States mail to the apparent owner. (§ 38-13-501, C.R.S.)
        • The Treasurer's website does not include a form of notice to the apparent owner. Under C.R.S. § 38-13-502, the notice must contain a heading that reads substantially as follows: "Notice. The State of Colorado requires us to notify you that your property may be transferred to the custody of the state treasurer if you do not contact us before [insert date that is thirty days after the date of this notice]." The notice must identify the nature and the value of the property that is the subject of the notice. In addition, the notice must state that the property will be turned over to the State Treasurer; that after the property is turned over to the State Treasurer an apparent owner that seeks return of the property must file a claim; and that property that is not legal tender of the United States may be sold by the State Treasurer. The notice must provide the apparent owner with instructions on how to prevent the holder from reporting and paying or delivering the property to the State Treasurer.
        • An employer who fails to deliver property within the time prescribed by the statute, or who willfully fails to submit a report is subject to interest and penalties. (§ 38-13- 1204, C.R.S.)
      • If the deceased employee does not have a spouse or legal heir:
        • After one year, an agency must submit a report and transmit payment to Treasury's Unclaimed Property Division.
        • An agency should use the name and tax identification number of the deceased employee when filing the report with Treasury's Unclaimed Property Division.
• Determine the amount to be paid
  • Pay:
    • Pay employee for all time worked since last pay period (regular, shift, overtime, etc.), all unused annual leave up to maximum of accrual rate, and ¼ of unused sick leave up to maximum accrual of 360 hours. (See Personnel Rule 5-7)
  • Deductions:
    • Current month health, dental, and life insurances (current payment is for current month's coverage)
    • PERA
    • Medicare
    • Local Occupational Privilege Tax (if applicable)
    • Optional Deductions: 401k and 457. The money will go the beneficiary listed on the plan.
  • Do NOT Deduct:
    • PERA Life Insurance: GTN 059 (current payment is for next month's coverage)
    • Federal Taxes: per the IRS, final payments to deceased employees are not subject to income tax, only Medicare tax.
    • State Taxes: per the Department of Revenue, any income that is not taxable under Federal regulations is not taxable for Colorado.
    • Write the date of death and the beneficiary's name and address on the CHOP Request.
      • The agency shall follow the steps for determining the beneficiary for the final paycheck included in paragraph 1 of this procedure.
    • Email the CHOP request to Central Payroll Email (Subject: Deceased CHOP)
• Complete CPPS Changes in Personnel Update Screens (Screen 01)
  • Personnel Action Data Screen (Screen 3): Change the status to 'T' for terminated using the date of death. The separation reason should be 80 (without survivors) or 81 (with survivors).
  • Job Screen (Screen 4): Stop date the job as of the last day of the prior pay period. (Example: if a monthly employee dies on February 17th, the stop date should be January 31st.). If a biweekly employee dies on during the biweekly pay cycle, the stop date should be the last day of the pay cycle.
  • Personal Data Screen (Screen 5): Change name to LAST DEC'D,FIRST (no space between the comma and the employee's first name). Change the address to the beneficiary's address.
• Payroll Timing Issues:
  • If a payroll is processing and the employee is in a batch, please delete the lines from the batch and adjust the batch header. If this happens on the day that payroll is processing, please contact the Garnishment Desk in Central Payroll (303-866-5804) to make the deletion and the correction to the batch header.
  • If the employee has died after payroll has run but before payday, please contact the Direct Deposit Desk in Central Payroll (303-866-6227) to cancel the advice.

Central Payroll Responsibilities

If a current employee dies, Central Payroll shall complete the following tasks:

• Mail the beneficiary a form W9 and the Affidavit
• Enter the beneficiary in CORE after the beneficiary returns the form W-9, Affidavit, death certificate, and any other documentation,
• Issue a check to the beneficiary.
• Key the CHOP in CPPS for accounting purposes after all documents have been completed.
• Enter the final pay in CPPS
• Complete a balance adjustment to remove the final pay taxable grosses from the year-to- date balances, as the pay is not taxable to the employee.
• Issue the beneficiary a form 1099 at year end. The check is taxable income to the beneficiary.

Questions

If agencies have any questions regarding final pay process for deceased employees, contact Central Payroll at 303 866-5418.