The Board of Examiners approved the settlement with Internal Revenue Service over its failure to make Medicare payments for judges and members of boards and commissions.
Deputy Director of Administration Stephanie Day told the board Tuesday that the settlement will cost nearly $1.7 million, but the cost could have been much higher had the IRS not agreed to waive all penalties and interest.
The standard penalty is 20 percent, and the interest would have been the federal rate plus 3 percent.
Day told the panel headed by Gov. Brian Sandoval that the IRS agreed to waive penalties because the state voluntarily reported the problem after payroll discovered that no Medicare deductions had been taken for those state employees for 27 years.
Fortunately for both the state and the employees involved, the IRS can only go back three years.
The state is fronting the employee share of the bill, a total of $847,648, but Day said the employees will have to pay it back. Under federal law, the employer and employee split the 2.9 percent of payroll that covers the cost of Medicare.
“This is a wonderful deal for both the state and the impacted employees,” she said.
It’s also a pretty good deal for IRS because, given that the state will pay both shares, federal agents won’t have to go looking for employees and former state workers to try to collect the money. The state will take on that task, and most of the money can be collected through payroll deductions. For workers no longer in state service, the state will have to try collect what they owe.
If the state can’t get people to pay, Day said, the debts will eventually be turned over to the controller for collection.
There are 527 employees on the list, but officials say 389 of them — board and commission members who only get a small per diem — owe less than $200 each.
Some of the judges, however, owe much larger amounts — up to $10,000 each.
Day said those owing $10 or less will be written off because it costs more than that to collect the money. Those owing $1,000 or less will have a year to pay up; those who owe between that amount and $2,500 will have two years; and those owing more than $2,500 will have up to three years.
Officials from the Attorney General’s Office and Administrative Office of the Courts said the employees have been advised of the situation and that no real complaints have been lodged.
The money will come from several different pots including the Stale Claims Fund and Payroll Trust as well as current year funding. One piece of the puzzle, $92,174 from the Legislative Contingency Fund, requires Interim Finance Committee approval.
In addition, the board approved the first major step in building a northern counterpart to the Southern Nevada Veterans’ Home. Director of Veterans Services Kat Miller said the $1.84 million will provide advanced planning for the project. She said the plan is to build a 90-bed home on land at the Dini-Townsend hospital campus in Sparks.
The next major step in he process will happen in three months, when Veterans Services gets a look at the initial design by architects, Miller said. That design, she said, is being done by the same firm that designed the new veterans’ homes in Utah.
The board also approved hiring three contract psychiatrists for the Southern Nevada mental hospital. State Medical Officer Tracey Green said they will provide direct services in emergency rooms to move patients either to inpatient status at the mental health facility or release them. Right now, those patients must wait for a psychological evaluation in the mental health facility before they can be released and, too often, sit unnecessarily in the emergency room until that happens.