Overtaxed Employees Pleased with University Response to Payroll Error

Harvard employees said they are pleased with the way the University has dealt with the payroll error that overtaxed employees on more than $20 million of income between 2009 and 2013.

“I was delighted Harvard has righted the ship and steered in the direction of veritas,” said Law School professor Alan A. Stone, one of the 11,000 employees affected by the error that was first announced earlier this month.

The payroll error occurred after Harvard altered the structure of its supplemental life insurance plan, a move which made certain benefits untaxable. Despite this change, the University did not modify the way it reported taxable income, meaning that employees were taxed on income they did not receive.

Nearly three weeks later, many employees said they are happy with the University’s response to its mistake. The corrected W-2 documents for fiscal year 2013, which were expected in late March, have already started returning to employees. Several employees said they have already received all three years of corrected documents, some of which were not expected to arrive until July. The early arrival of the forms is helping people refile for their corrected income tax.

“They’re five months ahead of their announced schedule so they’re really taking it seriously,” Harvard Law School professor Daniel Halperin said.

Employees across the Unviersity, including tenured professors and custodians, were overtaxed. While most were improperly taxed on less than $200, a handful of employees were taxed on more than $10,000 in excess income, according to a letter from Vice President for Human Resources Marilyn Hausammann, sent Feb. 7.

“Our analysis shows that, for a typical [Harvard Union of Clerical and Technical Workers] member, the overpaid tax impact of the University’s mistaken reporting would be in the range of $5 to $20 per year,” said Bill Jaeger, director of the Harvard Union of Clerical and Technical Workers.

Many employees said they were frustrated by Hausammann’s initial email explaining the situation and asking workers to correct the tax issue.

“I was amazed and disappointed that Harvard was going to deal with it in such a callous way, Stone said. “I thought it was not Harvard’s sense of community, and I was appalled by it.”

In response, Halperin and fellow law professor Alvin C. Warren sent an email to Law School faculty and administrators expressing their discontent with the University’s plan to deal with the tax error.

“The letter fails to accept Harvard's responsibility to make its employees whole for its monumental error,” they wrote earlier in Februdary.

The University reacted quickly and corrected its strategy for dealing with the error.

“We got the follow-up letter and every concern I had was answered,” Stone said. “Everybody thinks the University goofed and then did their best to repair it.”

Many employees now await the return of the rest of the forms they need before they can be reimbursed for the excess taxes.

“As unimpressive as the University’s handling of this was, the response and actions taken by the University after Law School faculty complained about it have been equally impressive,” Jaeger said.

—Staff writer Mariel A. Klein can be reached at marielklein@college.harvard.edu. Follow her on Twitter @mariel_klein.