Administrative Policies and Procedures Manual - Policy 2650: Payment When Terminating Employment

Date Originally Issued: 11-01-1991
Revised: 01-01-2008, 06-08-2023

Process Owner: University Controller

1. General

Upon terminating employment, an employee is paid the earnings for the final pay period either on or soon after the last day of employment. In addition, the employee may be eligible to receive cash payments for the leave hours in their annual and sick leave banks. An employee who has paid retirement contributions may also request a refund of these contributions from the Educational Retirement Board as explained in Section 5. herein.

For those employees who have arranged to work remotely outside the state of New Mexico, the specific employment laws of the state where the employee works may affect application of this policy.

2. Earnings for Final Pay Period

2.1. Schedule of Payment

If the employee is being discharged, the employee may request payment of final earnings be made within five (5) business days of the separation date. If the employee is retiring, payment is normally made on the separation effective date. Otherwise, final earnings are normally paid on the next regularly scheduled pay date.

2.2. Deductions

Certain deductions are not taken from the final paycheck of biweekly or monthly paid employees, depending upon the separation date and type of deduction. Taxes, retirement, and mandated deductions such as garnishments and child support must be taken, regardless of the separation date.

2.3. Distribution Options

The employee's final paycheck will be distributed in the same manner as regular paychecks.

3. Annual and Sick Leave Payout

Upon termination of employment, employees receive cash payments for the annual and/or sick leave hours in their leave banks. The criteria for paying off annual and/or sick leave depends on the reason the employee is terminating employment with the University. The maximum number of hours that an employee may be paid for and the percentage of the employee's base pay that will be paid per hour are defined in UAP 3400 ("Annual Leave") and UAP 3410 ("Sick Leave").

4. Withholding Taxes

Leave payouts are subject to Social Security, FICA Medicare, Federal, and State tax withholdings. The supplemental rate is applied for Federal and State tax withholdings.

5. Refund of Retirement Contributions

When an employee separates from the University, they may withdraw contributions from the New Mexico Educational Retirement Board retirement fund. To do so, the employee completes and submits a Request for Refund form at the Payroll Office. The refund request is forwarded to the Educational Retirement Board and a portion of the refund is sent directly to the employee. This process may take up to 90 days from initial request. The employee may only withdraw the employee contributions plus accumulated interest on the employee's contribution, not the University's contributions. Furthermore, the Internal Revenue Service (IRS) may require the employee pay a ten percent (10%) penalty for "early" withdrawal of a tax deferred contribution.

6. References

UAP 3245 ("Remote Work")

UAP 3400 ("Annual Leave")

UAP 3410 ("Sick Leave")