006.09.1 R1-21-5-1202. Military Differential Pay
AR ADC 006.09.1 R1-21-5-1202Arkansas Administrative Code
Ark. Admin. Code 006.09.1 R1-21-5-1202
006.09.1 R1-21-5-1202. Military Differential Pay
Military differential pay is paid from an agency's individual fund and is not reportable as salaries or wages. State agencies shall determine which employees are due military differential pay and contact each employee or their beneficiary. Eligible employees are as follows: 1) an active State employee, 2) a former State employee that was terminated as a result of a disability incurred while on active duty or 3) the beneficiary of a deceased former State employee who died while on active duty. The payment should be calculated for the time period dating from the date called to active duty after September 11, 2001, to the date discharged or the present, whichever is later. The payment shall be made as a one-time -lump-sum payment.
Employees or beneficiaries must provide 1) Leave and Earnings Statements or other supporting documentation showing the employee's military pay from each year for which payment shall be calculated and 2) Form DD-214 Report of Separation, if applicable.
Agencies that use AASIS to process checks and warrants must request a vendor number for each employee receiving military differential pay. A vendor number is obtained by submitting a Vendor Maintenance Request Form. The Form can be found on the DFA-Office of State Procurement (DFA-OSP) website: http://www.arkansas.gov/dfa/procurement/pro_index.html. The Second Name Line of the Form must be “Military Differential Pay.” A W-4 form must be attached to the Vendor Maintenance Request form, as well as a letter from the agency on agency letterhead signed by the agency's authorized payroll official stating the employee's eligibility for military differential pay and employee's personnel number. The Vendor Maintenance Request Form, W-4 form and letter must be submitted to DFA-OSP. Electronic submission will not be accepted.
State agencies shall submit a Military Pay Differential Calculation Worksheet, P1-21-5-1202, the Leave and Earnings Statement(s) or other supporting documentation showing military pay and DD-214 Report of Separation, if applicable, to DFA-Office of Personnel Management (DFA-OPM). Following review, DFA-OPM will return the approved request to the agency for processing as an Accounts Payable Vendor Payment. Military differential pay is not considered by the Internal Revenue Service to be W-2 reportable wages. Budget transfers may be necessary in order to accommodate this extraordinary disbursement for commitment item 501:00:00. A pay plan adjustment request should be communicated to the agency's DFA-Office of State Budget analyst to be submitted to the Legislative Council.
If the employee continues to be on active duty after the lump-sum payment is made, on-going payments shall be processed monthly. The agency shall submit a Military Pay Differential Calculation Worksheet to DFA-OPM for each monthly payment. Following review, DFA-OPM will return the approved request to the agency for processing. Leave and Earnings Statements for those currently on active duty, after the initial submission to payroll, need only be submitted thereafter when a pay change occurs.
The Internal Revenue Section requires military differential pay to be reported on Form 1099 Miscellaneous. The payment is reported in Box 3 - Prizes and Awards, and no withholding is allowed. The $600 minimum reporting threshold applies.
Payments authorized by A.C.A § 21-5-1202 will not be retirement eligible earnings at the time of payment and will not be reported to APERS; thus, there will be no contribution paid to APERS. When the employee returns to State service as an active State employee, the retirement service will be purchased for them by the agency, and the retirement contribution will be paid at that time. If the employee is a member of the APERS contributory plan, he/she will pay their contributions to APERS by personal payment. These contributions will not be tax deferred.
Supporting documentation for military differential pay must be maintained for audit purposes by the agency.
Current with amendments received through February 15, 2024. Some sections may be more current, see credit for details.
Ark. Admin. Code 006.09.1 R1-21-5-1202, AR ADC 006.09.1 R1-21-5-1202
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