Cell Phone and Voice / Data Service Policies and Procedures Effective Date: October 1, 2008, retroactive to January 1, A.

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1 Cell Phone and Voice / Data Service Policies and Procedures Effective Date: October 1, 2008, retroactive to January 1, 2008 A. Background Beginning October 2008 Colby will implement new cell phone procedures in order to achieve compliance with prevailing tax laws. Moreover, in an effort to maximize available minutes and savings, the College will transition from several smaller plans to one of three administered centrally through Media Resources. Cell phone users will see a simplified internal plan structure that assigns accounts into three minute-based levels determined by business need. Options such as texting and data/smart phones remain available as an add-on (see Section C below). One key change that cell phone users need to be aware of is that in order to meet IRS standards Colby must compute the tax liability for each person relative to the value of the plan received. This will be reflected at year-end in each employee s W-2 form. B. Tax Implications In 1989 the Internal Revenue Service (IRS) adopted a regulation concerning cell phones and similar devices. Under the Internal Revenue Code, cell phones are deemed listed property because employees may use them for business as well as personal use. The IRS, in recent investigations, has closely scrutinized the treatment of personal use of employer-provided equipment and services, such as cell phones. Bills have been introduced in Congress to update the tax treatment of employerprovided cell phones and similar devices; however, until that happens we must comply with the laws and regulations as they currently stand. What is Listed Property? Listed property includes items obtained for use in a business but designated by the Internal Revenue Code as those devices lending themselves easily to personal use. This includes cell phones. With listed property the IRS requires either (a) detailed record keeping of each call (similar to a travel log); or (b) the value of the service and equipment received be used to calculate additional withholding from the employee s paycheck to recognize this excess benefit. Page 1

2 Why Should You Care? For most employees, detailed record keeping is both time consuming and impractical. As an alternative, calculating the appropriate tax amount based on an internal plan represents the most effective way for Colby to comply with the IRS and to provide equitable service to employees. In brief, if the cell phone use is not documented properly, or if the value of the personal use is not added to an employee's W-2, then the penalties for non-compliance can be severe. C. New Policy: Cell phones will continue to be managed centrally through Media Resources and departments will continue to be charged monthly for individual accounts. However, in order to simplify the financial administration and to provide the best benefits for departments, the following internal fee allocation schedule has been developed: Categories Monthly Charge Monthly Minutes Comparable Minutes for the Same Rate: (as of 9/4/08): Standard $ High End $ Super User $ Texting: add $10.00 per month Data/Smart Phone: add $40.00 per month All Colby Plans come with the following features: local Waterville telephone numbers, no long distance or roaming charges within the continental U.S., voice mail, unlimited night (after 9pm) and weekend minutes, unlimited incoming call minutes, unlimited incoming text messages, and no activation fee. Under this plan, each eligible employee will receive a plan designation and equipment commensurate with their business needs. D. Monthly Charges and Payroll Taxes Each month the value of the cell phone service will be charged to the employee s department. In addition, in order to ensure compliance with IRS guidelines, a like amount must be used to compute applicable payroll taxes for each employee. This figure will appear in their W-2. There are two caveats to the payroll tax stipulation: Page 2

3 (1) During the Transition Period only, the employee will see an adjustment to their paycheck recognizing the value of the service received; however, Colby will compensate each employee for the increased tax liability so the net effect will be zero (for the January through December 2008 period). Beginning January 1, 2009, Colby will discontinue grossing up pay for employees and each person must be responsible for any additional tax liability (see Transition Period, below). (2) If Congress should act to remove cell phones from listed property then Colby will respond accordingly. Until such time we must conform to the law. Determination of Plan Assignment for Employees Employees who currently have cell phones retain de facto approval and will be placed into plans comparable to their existing service. Department managers may consult with the employee on the assignment but the final determination should be based on actual business need. Requests for additional services (e.g. smart phones), higher plan minute levels or services for new employees are not automatic and must be approved by the supervising Vice President / Dean and the Vice President for Administration. New services, plans or equipment must receive the appropriate approvals in order prior to any changes taking effect. Changes must be made using the designated approval form. or verbal notification is no longer sufficient. Support for Cell Phone or Device Media Resources will continue to provide support for all plans and approved equipment. For those employees with a data plan, the Palm Treo remains the exclusive device that interfaces with the Oracle Calendar program used by Colby. All other data devices (Blackberry, iphone, etc.) are not supported by Media Resources. Contact Ken Gagnon at x4239 if you have questions. Payroll Processing The Payroll office must receive a signed, completed approval form in order to add the allowance to that individual s payroll check. Reminder: following the Transition Period, appropriate payroll taxes on the allowance amount will be withheld from the paycheck, and the amount of the allowance will be included on the individual s year-end W-2. Overages Media Resources will monitor cell phone usage on a monthly basis. Due to the combined plans, Media Resources will maintain buffer or reserve minutes for the whole College. Cell phone usage by an employee above the prescribed plan minutes, if the situation occurs, will be handled in one of several ways. In general, if an overage appears to be a one-time or infrequent event, then in all likelihood no action will be taken. However, if an individual routinely exceeds his or her plan minutes then the College reserves the right to pursue remedies (e.g. moving the employee to a higher plan or reviewing the situation with the supervisor). Secondary or Add On Accounts for Family Members Secondary or add on accounts for personal or family member use can no longer be permitted under this plan due to the taxability issues and restrictions on business use. If you have such a plan now, you will need to consult with Media Resources on termination of service. Page 3

4 Loaner Phones In some circumstances a department may make a phone available for multiple individuals to use. If a phone is not assigned to a specific individual ( non-assigned phones or loaner phones) and no personal calls are made on these phones, the phones can be used by individuals without using the taxable allowance approach described above. Personal calls should not be made on these nonassigned phones. Supervisors must ensure that these policies are being followed by adopting check in/check-out procedures and by routinely checking call records. Reimbursements For those employees not assigned a cell phone through this program, calls for business-related purposes on a personal cell phone or other equipment may still be reimbursed through the standard expense reimbursement process. The effective rate until further notice is $0.10 per minute. To qualify, the employee must provide the date, time, duration, person contacted and specific business purpose of each call. Transition Period The Transition Period shall last from the effective date of this policy until December 31, Media Resources and the Office of Financial Services will coordinate the necessary administrative arrangements for implementation and inform departments and employees about the policy. During the Transition Period employees will see a change in their pay stubs to reflect the value of the cell phone service; however, there will be NO change in the actual amount received due to the tax liability because Colby will make appropriate adjustments to salaries or wages for calendar year At the end of the Transition Period and with the start of the new calendar year on January 1, 2009, these adjustments by Colby will be discontinued. Questions / Contacts A complete description of the new program can be found at: For additional information, please contact: Scott Jones Assistant VP for Finance x5522 sjones@colby.edu Ruben Rivera Controller, Office of Financial Services x4127 rlrivera@colby.edu Mark Crosby Director of Human Resources x5500 mcrosby@colby.edu Ray Phillips Director of IT Services x4209 rbphilli@colby.edu Page 4

5 Cell Phone Request Form Date: Employee Name: Department / Area: Accounting Code (Fund /Center / Object / Project): Monthly Charges: Base Monthly Amount: Add: Text Service: Add: Data Service: = Total Monthly Charge: Starting Pay Date for Allowance: I certify that I have read, understood, and intend to comply with Colby's Cell Phone Policy. I understand that appropriate payroll taxes on the allowance amount will be withheld from my paycheck, and the amount of the allowance will be included on the year-end W-2. The allowance does not constitute an increase to my base pay, and will not be included in the calculation of percentage increases to base pay due to annual raises, job upgrades, special adjustments, or benefits based on a percentage of salary. The cell phone allowance will start at the next scheduled monthly pay date. Employee Signature and Date: I certify that the requested cell phone allowance is needed for this employee and I have read, understood, and intend to comply with Colby's Cell Phone Policy. I understand that all cell phone allowance payments are departmental responsibility and have been considered carefully in light of overall budget priorities. Page 5

6 Supervisor Signature and Date: Vice President for Administration Signature and Date: Page 6