ES PROCEDURES FOR OVERPAYMENT RECOVERY

Transcription

1 ES PROCEDURES FOR OVERPAYMENT RECOVERY Effective: 7/1/2012 Respnsible Office: Emplyee Services (ES) Apprved: ES Directr Applicatin: All Emplyees f the University f Clrad Plicy The University f Clrad will fllw the guidelines prvided by the Internal Revenue Service, Scial Security Administratin, and State f Clrad in the recvery and reprting f verpayments. The prcedures identified within this plicy describe hw verpayments are t be recvered, based n the applicable gverning regulatins. Scpe Overpayment ccurs when cmpensatin that is nt wed t the emplyee is paid in errr. Overpayments include (but are nt limited t) excess wage and salary payments, errneus refunds, and under-withheld vluntary r invluntary deductins fr retirement prgrams, insurance prgrams, including billed receivables, and miscellaneus deductins. This plicy applies t all emplyees paid by the university. S as nt t put the university at risk f nn-cmpliance, attempts will be made t recver all verpaid funds. Gverning Regulatins The university s plicy will be in accrd with: 1. Internal Revenue Service requirements -- per IRS Publicatin 15 Emplyer s Tax Guide, Wage Repayments sectin: If an emplyee repays yu fr wages received in errr, d nt ffset the repayments against current-year wages unless the repayments are fr amunts received in errr in the current year. 2. State f Clrad Fiscal Rule 9-4 Overpayments t State Emplyees (Authrity: C.R.S): Thrugh errr, a state emplyee may be paid mre than is due. When the errr is detected, prvisins shall be made fr the repayment f the verpayment. If the verpayment is nminal, it shall be deducted frm the emplyee s next paycheck. Hwever, in sme cases the verpayment may be significant and require a repayment schedule extending ver a perid f time. The chief executive fficer, r a delegate, f the state agency r institutin f higher educatin shall establish a repayment schedule based n the particular facts Emplyee Services

2 invlved in each case. The State Cntrller shall apprve any repayment schedule extending fr mre than six mnths. An emplyee s maximum liability fr repayment, shuld an errr g undetected fr ver a tw year perid, shall be limited t the ttal amunt f the verpayment fr the first tw years in which the emplyee was verpaid. 3. State Persnnel Directr s Payrll Deductin Plicy C.R.S. sec (8)(c) POLICY: State agencies and institutins f higher educatin shall nt permit r prcess payrll deductins except as expressly authrized in this Plicy. Payrll deductins are permitted nly when: (4) The deductin is fr the purpse f facilitating the reimbursement f mnies wed t the state frm an emplyee; (e.g. higher educatin tuitin, unifrms, salary verpayments). Respnsibilities Emplyees are respnsible fr: (1) Reviewing their paychecks and pay advices fr accuracy. (2) Prmptly reprting any discrepancies t their supervisr and/r appinting authrity. (3) Prmptly repaying all verpayments made by the University t the emplyee, regardless f wh made the errr. Delay in repaying and/r prcessing f verpayments can result in additinal amunts t be recvered frm the emplyee (see the Amunts t be Recvered sectin belw). (4) Assuring that address and cntact infrmatin in the HRMS system is current and accurate. ES verpayment crrespndence is sent t the mailing address shwn in the HRMS system. Current emplyees shuld reprt changes f address t the hiring department s that crrectins t the HRMS system can be made. Frmer emplyees shuld cntact ES fr assistance. The emplyee s hiring department is respnsible fr: (1) Preventing wage verpayments. (2) Prmptly reviewing payrll registers in rder t identify errrs in time t crrect them befre they becme verpayments. (3) Timely crrectin f the emplyee s cmpensatin recrds (if applicable) when an verpayment ccurs. (4) Ntifying the emplyee affected that an verpayment has ccurred. (5) Written ntificatin t Emplyee Services (ES) using the required Ntice f Overpayment Adjustment Frm. (6) Making changes t the HRMS address and cntact infrmatin, as requested by the emplyee. (7) Reviewing any bjectins frm the emplyee regarding salary amunts verpaid and reslving any discrepancies with the emplyee. (8) Ntifying ES in writing f any changes t the verpaid amunt. The emplyee s hiring department must nt: (1) Cllect the verpayment frm the emplyee. (2) Arrange recvery schedule with the emplyee. Emplyee Services (ES) is respnsible fr: (1) Recrding receipt f the Ntice f Overpayment Adjustment Frm int the verpayment database. (2) Cnfirming the grss salary verpayment and/r incrrect deductin r refund reprted. (3) Calculating the emplyee s net verpayment due, regardless f the surce f errr. (4) Determining what repayment ptins are cnsistent with University plicy. (5) Managing the recvery prcess, including: crrespndence, repayment arrangements, receipt f funds in cmpliance with accepted fiscal practices, crediting the department after verpayment is recvered, and initiatin f cllectin prcesses when necessary. (6) Cmpleting and mailing a W-2C, if applicable. (7) Recnciling the verpayment accunt. Emplyee Services

3 Amunts t be Recvered The amunt t be recvered frm the emplyee includes the net amunt verpaid, with whatever additins r limits are apprpriate as listed belw: If recvery is nt cmpleted within the same tax year in which the verpayment ccurred, amunts withheld fr federal and state incme tax that cannt be recvered frm the Internal Revenue Service and/r State f Clrad must be repaid by the emplyee (see the Repayments Crssing Tax Years sectin belw). If the recvery time allwed by the Scial Security Administratin is exceeded, amunts withheld fr scial security (OASDI) and Medicare that cannt be recvered frm the Scial Security Administratin must be repaid by the emplyee r emplying department (see the Repayments Crssing Tax Years sectin belw). If the emplyee has clsed a retirement accunt (PERA, 401(a), 403(b), 457, etc.) befre amunts ver-depsited have been reclaimed by ES, these amunts (including any emplyer cntributins verpaid) must be repaid by the emplyee. If amunts deducted fr benefit r ther purpses have already been paid and cannt be recvered frm the payee/carrier because f the emplyee s actin r inactin, they must be repaid by the emplyee. If they cannt be recvered frm the payee/carrier because f actin r inactin by a university department, that department will be respnsible fr repaying these amunts. Overpayments nt repaid in a timely manner may be referred t State Cllectins. When this ccurs, the emplyee becmes liable fr the grss amunt verpaid plus any fees and penalties assessed by State Cllectins. Limits n amunts t be recvered: Per State Fiscal Rule 9-4, An emplyee s maximum liability fr repayment, shuld an errr g undetected fr ver a tw year perid, shall be limited t the ttal amunt f the verpayment fr the first tw years in which the emplyee was verpaid. Repayment Optins Frms f repayment: Emplyee repayments must be made either by persnal check (made ut t the University f Clrad) r by payrll deductin. ES cannt prcess wire transfers r credit card transactins. Cash payments are discuraged fr the emplyee s prtectin. Overpayment recveries which crss tax years may cause additins t the amunt the emplyee has t repay (see Amunts t be Recvered abve) if the emplyee is n lnger emplyed by the university r has n taxable wages when verpayment recvery is initiated. It is usually t the emplyee s advantage t request that payrll deductin and repayment plans be shrtened t finish in the same tax year in which the verpayment ccurred. If the emplyee is still active when verpayment recvery is initiated, amunts crssing tax years will nt be added unless the emplyee becmes inactive r has n taxable wages. Active emplyees with current salaries: ES will by default set up payrll deductins accrding t repayment schedule guidelines as belw. Emplyees may pt t pay by persnal check(s) r t shrten the length f their repayment schedule by cntacting ES. Terminated emplyees and thse with insufficient salary fr payrll deductin must pay by persnal check. At the discretin f ES a payment plan may be set up. Emplyee Services

4 Repayment Schedules Payrll deductin plans will be set up fr active emplyees based n cmparisn f the grss amunt f the verpayment t the emplyee s grss mnthly salary r biweekly wage payment, as indicated in the chart belw. If the emplyee s pay is nt sufficient fr full deductins, the emplyee must pay the balance due by persnal check at the end f the payrll deductin perid. Emplyees may elect payment by persnal check r a shrter deductin perid by cntacting ES (a shrter deductin perid may be advisable t prevent additinal mney being wed due t crssing f tax years). Any changes t the riginal verpayment amunt may require an adjustment t the repayment schedule, based upn the new values. If grss verpayment is f emplyee s grss mnthly salary r bi-weekly wage payment Overpayment will be deducted equally frm the next: 20% r less 1 available wage payment 20.1% t 40% 2 available wage payments 40.1% t 60% 3 available wage payments 60.1% t 80% 4 available wage payments 80.1% t 100%` 5 available wage payments 100.1% and abve 6 available wage payments Payments by persnal check are required within 30 days f the ES verpayment ntice being sent t the emplyee. Payment plans may, at the discretin f ES, be negtiated with emplyees wh wish t make multiple payments by persnal check. Payment and payrll deductin plans exceeding a six-mnth pay perid must be apprved by the state cntrller per State Fiscal Rule 9-4. Requests fr such plans must be made thrugh ES and require a business case which must be apprved and submitted t the state cntrller via the university Treasurer s Office. All requests will be reviewed by the payrll administratin manager prir t submissin t the Treasurer s Office. Uncllected Overpayments Payrll deductin plans will be discntinued and payment f remaining balance by persnal check required if the emplyee receives n pay fr tw cnsecutive pay perids. Ntice will be sent t the emplyee that payment by persnal check is required. Payment plans will be discntinued and the remaining balance will becme immediately due and payable if payments are nt made in the amunt and frequency agreed. Ntice will be sent t the emplyee that full payment by persnal check is required. Payments by persnal check fr unpaid balances are required within 30 days f the ES ntice being sent t the emplyee, r within 30 days f the end f the payrll deductin plan r payment plan. If such payment is nt received, ntice will be sent with a warning that the file may be referred t State Cllectins if payment is nt received in 14 days. If payment is nt received within this time perid the uncllected verpayment will be reprted t State Cllectins in writing. Emplyee Services

5 Uncllected verpayment recveries $50 r fewer will be reviewed with the department fr instructins n pursuing cllectin. If an emplyee leaves emplyment and subsequently returns, any uncllected verpayment will be scheduled t be deducted by payrll deductin plan. Crrespndence will be sent t emplyee's mailing address n recrd stating the timing and amunt f payrll deductins. Repayments Crssing Tax Years IRS Publicatin 15 (Circular E), Emplyer s Tax Guide, Wage Repayments, states: If an emplyee repays yu fr wages received in errr, d nt ffset the repayments against current-year wages unless the repayments are fr amunts received in errr in the current year. The wages paid in errr in the prir year remain taxable t the emplyee fr that year. This is because the emplyee received and had use f thse funds during that year. The emplyee is nt entitled t file an amended return (Frm 1040X) t recver the incme tax n these wages. Instead, the emplyee is entitled t a deductin (r credit in sme cases) fr the repaid wages n his r her incme tax return fr the year f repayment. Effect n withhlding taxes: In accrdance with IRS requirements as stated abve, ES may adjust taxable incme and tax withhlding balances nly fr the amunt f repayment received in the same tax year in which the verpayment ccurred. Therefre, when recvery f an verpayment crsses int a subsequent tax year, the amunt due frm the emplyee is increased by withhlding taxes (bth federal and state) assciated with any unpaid balances at the end f the tax year. ES will send a Letter f Credit fr Incme Tax Purpses t each emplyee in this situatin in the January fllwing the tax year in which the repayment ccurred, shwing the amunt repaid in that year. Effect n scial security (OASDI) and Medicare taxes: The Scial Security Administratin allws crrectin and recvery f these tax balances fr the current year and the three previus tax years. ES will file these crrectins by generating and filing a W2-C. If the allwable recvery time frame is exceeded, the verpayment amunt due is increased by these tax amunts. If the time frame was exceeded because f the emplyee s actin r inactin, these taxes must be repaid by the emplyee. If the taxes cannt be recvered frm the Scial Security Administratin because f actin r inactin by a university department, that department will be respnsible fr these amunts. Resurces fr emplyees: T determine hw t accunt fr these repayments when filing their taxes, emplyees may review I.R.S. Publicatin 525 Repayments Sectin, Frm 1040 and Schedule A Instructins, r cntact their persnal tax advisr r the Internal Revenue Service fr assistance. Crediting the Department Recvered funds are credited back t the department when the verpayment is cmpletely recvered. Partially recvered funds are credited back t the department whenever an verpayment recvery crsses int a new fiscal r calendar year. Credits cannt be made prir t repayment by the emplyee, s departments must make apprpriate accmmdatins fr funding surce issues. If amunts deducted fr benefit r ther purpses have already been paid and cannt be recvered frm the payee/carrier because f actin r inactin by a university department, that department will nt receive credit fr them. Emplyee Services