University of California New Cell Phone Policy UCOP Implementation

1. University of CaliforniaNew Cell Phone PolicyUCOP Implementation June 2009

2. 2 Overview Review of New Policy Exceptions to Policy Implications for Employees and Departments Completion of New Cell Phone Form Implementation Steps Background Internal Revenue Code � requires substantiation of business use in order to be exempt from income. Meant for big ticket items Recent IRS audit � 2 campus (us) and 1 lab UC not compliant with regulations Paid fine & promised to be in compliance by June 1, 2009 Hoped legislation would be passed removing cell phone Since it didn�t happen, UCOP decided on 1 approach Background Internal Revenue Code � requires substantiation of business use in order to be exempt from income. Meant for big ticket items Recent IRS audit � 2 campus (us) and 1 lab UC not compliant with regulations Paid fine & promised to be in compliance by June 1, 2009 Hoped legislation would be passed removing cell phone Since it didn�t happen, UCOP decided on 1 approach

3. 3 Business & Finance Bulletin G-46, Guidelines for the Purchase and Use of Cellular Phones and Other Portable Electronic Resources Revised in response to IRS audit settlement. Under new policy, the value of a University-provided cell phone or a cell phone-enabled personal digital assistant (PDA) will be treated as a taxable fringe benefit subject to withholding for payroll taxes.

4. 4 Imputed Income/Cash Allowance The cost of an employee�s cell phone plan and device will be added to his/her taxable earnings as �imputed� income subject to withholding. The employee will receive a taxable cash allowance�to reimburse him/her for the tax on the imputed income. Since the allowance is taxable, it will be increased using the IRS gross-up formula to reimburse the employee for the taxes on the payment.

5. 5 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 Minimal impact on net pay

6. 6 Exception to Policy Exceptions will be approved for shared phones and phones used for research. If an exception is approved, the employee must comply with IRS substantiation rules. Must annotate phone bill or keep log of calls. Exception requests should be sent to EVP Katie Lapp.

7. 7 Excluded Equipment and Services Data-only PDAs (voice restricted) Push-to-talk devices Pagers Laptops Internet service Home computers

8. 8 Reimbursement of Personal Use--UC-Provided Phone Employees are required to reimburse personal calls when they exceed their plan minutes. Personal calls must be reimbursed at the excess-minute rate. If the employee does not exceed the plan minutes, reimbursement is not required for any personal calls.

9. 9 Reimbursement of Business Use-- Personal Phone Reimbursement of business calls is allowable only if an employee exceeds his/her plan minutes. Reimbursement will be calculated at the excess minute rate up to the number of minutes exceeding the plan limit for the month. An employee must provide a copy of his/her cell phone bill identifying the business calls and noting the person called and the purpose of each call.

10. 10 Reimbursement of Business Use-- Personal Phone Employees may be reimbursed for some services where it is cost-effective: Data Text Messaging The cost of the voice plan and handset, or a percentage of those costs, is not reimbursable

11. 11 Cell Phone Imputed Income/Cash Allowance Form New web-based fill-in form Used to automatically calculate the cash allowance Completed by department for: New cell phone plan Any changes or additions to plan Any changes to employee exemptions http://www.ucop.edu/ucophome/cao/paycoord/

12. 12 What should be included as income? Average cost of the monthly service plan, including taxes, and equipment Cost of the equipment not included in plan: Purchased after June 1, 2009 � value should be imputed as a one-time transaction Cost of one time purchases Accessories (batteries, charger, etc.) Expenses for repairs Cost of replacing a lost or stolen device Equipment upgrades

13. 13 Part I: Employee Information

14. 14 Part II: Calculation of Cash Allowance

15. 15

16. 16 Implementation Steps Determine which employees have UC- provided cell phones Determine if the cell phones is still needed to perform job duties Review service plans to insure correct level of business use and cost Calculate imputed income based on monthly cell phone bills

17. 17 Implementation Steps Complete the Imputed Income/Cash Allowance Form by June 5, 2009 Fund cost of phone, phone plan, and cash allowance Monitor monthly cell phone bills for excess minutes Monitor changes in cell phone plans and adjust imputed income/cash allowance Require employees to sign usage agreement in G-46

18. 18 Resources Cell Phone Imputed Income/Cash Allowance Form, Instructions, and FAQs http://www.ucop.edu/ucophome/cao/paycoord Policy contact: Mike O�Neill, (510) 987-0905 Michael.oneill@ucop.edu Payroll contact: Ana Trejo, (510) 987-9057 Ana.trejo@ucop.edu