Beginning January 1, 2026, employers are required to track and report qualified overtime compensation paid to non-exempt employees. Employees can then deduct this qualified overtime (up to $12,500 for those with a filing status of single or up to $25,000 for those filing their return jointly) when filing their federal income tax return. This information will print on the employee’s W2 in Box 12 with the code of TT. Further details regarding the specifics of this bill can be found here.

The Position record now has a new field called Overtime Classification. If the Position is exempt from overtime reporting, the value should be set to Exempt. If the Position is not exempt from overtime reporting, the value should be set to Non Exempt. If the Position>Overtime Classification value is blank, the system defaults to including the Position - meaning non-exempt. To assure the proper overtime amounts are included on the employee’s W2, it is strongly recommended this value be set accordingly as soon as possible. If this value is not set properly or prior to the first pay in January 2026, please assure the FLSA Overtime value on the Payroll Payments - Future/Current record is set correctly.

When the payment is created (in Payroll Payment - Future and Payroll Payment - Current) and the Pay Type of Blended Overtime and/or Overtime is selected, a new field called FLSA Overtime is available. For those non-exempt employees it is important the appropriate FLSA option, either Included or Excluded, is selected on the payment side.

The system will first look at the Position>Overtime Classification field. If the Position>Overtime Classification field is set to Exempt, then the system ignores the FLSA field on the payment. If the Position>Overtime Classification field is set to a blank value or Non-Exempt, then the system will look at the FLSA value to determine if the payment amount is reported on the employee’s W2. Therefore, for those non-exempt employees it is important the appropriate FLSA option, either Included or Excluded, is selected on the payment side.

The table below is a cross walk of different Position>Overtime Classification value and the Payroll Payments - Future/Current>FLSA Overtime value scenarios and the effects of reporting the overtime amounts on the employee’s W2.

1. Can the FLSA Overtime column be added to the Payroll Payments - Future/Current grid?

• Yes, the FLSA Overtime column can be added to the Payroll Payments - Future grid by selecting the More option and marking the FLSA Overtime checkbox. This option is currently not available on the Payroll Payments - Current grid.

  • Payroll Payments - Future Example:

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2. Can the Overtime Classification column be added to the Position grid?

• Yes, click on the More option and mark the ‘Overtime Classification’ checkbox.

3. Can Mass Change be used to update the Position>Overtime Classification field?

• Yes, Mass Change can be used to load the Overtime Classification value. The following scripts can be downloaded and imported into Mass Change.

4. Can Mass Load be used to update the Position>Overtime Classification field?

• Yes, Mass Load can be used to load the Overtime Classification value. Below are the required column headings and corresponding field values:

  • employee.number

  • number (Position Number)

  • retirementCode - (only when adding a new position)

    • SERS

    • STRS

    • NONE

  • overtimeClassification

    • EXEMPT (Case sensitive)

    • NON_EXEMPT (Case sensitive)

5. Is there a default Overtime Classification value on the Position record?  What does a blank value mean - Exempt or Non Exempt? 

• No, there is no default overtime classification value on the Position Record. Each Position should have the value set accordingly. The overtime classification can be set by going to Position>Overtime Classification. A blank value is treated as Non Exempt.

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• Position templates can be used to create Overtime Classification. For example, one template can be created with the Overtime Classification set to Exempt and another can be created with the Overtime Calculation set to Non-Exempt. Then when creating a Future Payment, it will default the ‘FLSA Overtime’ field to what is set in Position ‘Overtime Classification’ field.

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6. Does the Position Overtime Classification value need to be set to Exempt or Non Exempt prior to their first payroll in January?

• No, the Position>Overtime Classification value does not have to be updated before the first pay in January. However, please be sure the Payroll Payments - Future/Current>FLSA Overtime value is set properly beginning with the first pay in January. The Position>Overtime Classification does need to be set properly prior to W2 2026 processing. The system will then use the Position>Overtime Classification flag along with the Payroll Payments - Future/Current>FLSA Overtime value to arrive at the total printed on the W2.

7. What happens in situations where the Position Overtime Classification is set properly, but the Payroll Payments - Future/Current FLSA Overtime field is left blank?

• If the Payroll Payments - Future/Current>FLSA Overtime value is blank, the system will default based on the Overtime Classification selected on the Position screen. This flag will control if the pay amount is included in the W2 overtime calculations for 2026.

8. What happens in situations where the Position Overtime Classification is not set properly, but the Payroll Payments - Future/Current entry has the FLSA Overtime value set properly?

• The Overtime Classification field on the Position record determines if the system examines the pay history as shown below:

  • If the Position>Overtime Classification field is set to Non-Exempt, then the system looks at the payment history.

    • FLSA value set to Included: Historical pay amounts will be used in the amount reported on the employee’s W2.

    • FLSA value set to Excluded: Historical pay amounts will not be used in the amount reported on the employee’s W2.

    • If the Position>Overtime Classification field is set to Exempt, then the payment history is not looked at.

  • If Position is set to Exempt and information should be included on the employee’s W2, then Core>Adjustments using the W2 Overtime will need to be created.

9. What is the recommended way to process blended rate overtime?

• A Miscellaneous Pay Type can be used for the ‘1' part of the 1.5 overtime payment and the BOT Pay Type for the 0.5 part. The whole .5 amount (as long as it is “included”) will go in Box 12 on the employee’s W2. For an example and further details, please refer to the information provided in the November 2025 Friday’s FWF Release Recap. When the BOT Pay Type is used, and the Position is set to Non Exempt and the payment is set to Included, the BOT amount paid is included on the employee’s W2 in the Qualified Overtime line.

10. How does the Pay Amount Summary Report list overtime?

• Currently, the Blended Overtime Pay Type and Overtime Pay Type are combined and listed under the OT Units and OT Pay column totals. We have an issue (USPSRFB-1995) to separate these Pay Types in the future.

11. If the OT Pay Type is used, how does how does the system report the information on the W2? Does the system know to report only the half-time portion? NOTE: W2 Qualified Overtime is using the Retire Hours in the calculation, not the Units entered.

• Yes, the system will properly calculate and report the 0.5 amount on the employee’s W2 in the Qualified Overtime line.

• https://mcoecn.atlassian.net/browse/USPSR-7343

12. Can the FLSA Overtime field be included and loaded using the Attendance/Absence Import option?

• This is not a required field. Column Z in the load file represents the FLSA OT value and is only valid for OT and BOT Pay Types (Column Q). In the load, if the Pay Type (Column Q) is set to OT or BOT and the FLSA value (Column Z) is left blank, when the file is loaded the value will be set to the default of Included.

  • Valid field values are:

    • INCLUDED

    • EXCLUDED

  • Entries in the load file with Pay Types (Column Q) that are not equal to OT or BOT will ignore this column and the value will always be set to false.

13. Will the FLSA Overtime field be available when using the Core>Attendance>Post to Future and Post to Current option?

• Currently this is not available. This will be a future enhancement. (USPSR-7397 scheduled to be included on the 2026.1.0 Release)

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14. Will the FLSA Overtime field be available when using the Core>Attendance>Mass Add?

• Yes, JIRA issue USPSR-7382 (scheduled to be included on the 2026.1.0 Release) is in place to add the ability to set the FLSA Overtime value when creating OT and BOT pay amounts using Core>Attendance>Mass Add in the future.

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15. Is there a recommended report to run to obtain Overtime Pay Types along with other Payments?

• To assist in calculating overtime amounts, we’ve created a customized version (located in the Public Shared Reports Library) that can be used. The report includes information such as the amount, pay type, FLSA Overtime selection. A separate report, Account History v2, will need to be run if searching by account object codes typically used for overtime charges. To begin using the reports, simply download the report definitions and then import the report definition using the Report Manager.

• USPSR-7404 (scheduled to be included on the 2026.6.0 Release) is in place to add to add this report.

16. Can I run W2 Report and Submission now to verify how overtime is going to look on the employee’s W2 in 2026?

• No, the software updates for 2026 reporting have not been implemented yet. USPSR-7343 (scheduled to be included on the 2026.2.0 Release) is in place to add this information.

17. Does it matter which ‘position’ the BOT is applied to in Future/Current?

• No, this is determined by the district’s preference regarding which position they choose to pay the BOT under. It also depends on how the district tracks the positions worked and whether they use separate payroll accounts for those positions.

18. How should double time be paid to properly report the information on the employee’s W2?

• A payment in Payroll Payment - Future/Current can be created using the Pay Type of Overtime and manually updating the Rate to the proper value.

19. How will double time be reported?

• Per One, Big, Beautiful Bill Act, the 0.5 is considered exempt. So, the system will report the 0.5 part of the double time payment (as long as the Position is set to Non Exempt and the payment is set to Included) on the employee’s W2 in the Qualified Overtime line.

20. How will the system handle the OT calculation on compensations with daily rates?

The system automatically breaks down the daily rate into hourly by dividing the Unit Amount by the Hours in Day. NOTE: W2 Qualified Overtime is using the Retire Hours in the calculation, not the Units entered.

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Pay Unit = Daily
Unit Amount = 258.448
Hours in Day = 7

Rate=258.448 ÷ 7 = 36.921142857

Regular OT (Included)
0.5 (FLSA percentage) × 36.921142857 (system-converted hourly rate) × 4 (OT Retire hours) = 73.8422857

The 73.84 will be included on the employee’s W2 Qualified Overtime.

• SSDT PowerPoint - Overtime, Blended Overtime, and Double Time