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Collection of Employee Overpayments. Part 1: Payroll Process Part 2: Accounts Receivable Process. Presenters. Katherine Bremser Oregon Statewide Payroll Services (OSPS) Training Coordinator Gerold Floyd Statewide Account Receivable Management (SWARM) Coordinator. Part 1: Payroll Process.

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collection of employee overpayments

Collection of Employee Overpayments

Part 1: Payroll Process

Part 2: Accounts Receivable Process

  • Katherine BremserOregon Statewide Payroll Services (OSPS) Training Coordinator
  • Gerold FloydStatewide Account Receivable Management (SWARM) Coordinator
class goal
Class Goal
  • To encourage agency staff members to think about the options for entering overpayments & repayments in OSPA
  • To provide non-payroll staff members background on how OSPA handles overpayments
class objectives
Class Objectives
  • By the end of class, attendees will be able to:
    • Identify two reasons why agencies are interested in ensuring employees return overpayments
    • List three situations where an overpayment may occur
    • List two tools that a payroll person may use to research an overpayment
    • List three options for handling the repayment in OSPA
class outline
Class Outline
  • Why do we care if an employee is overpaid?
  • Why do overpayments occur?
  • What steps may be required to process repayment?
  • How can we prevent overpayments?
why do we care1
Why Do We Care?
  • If an overpayment occurs, your agency:
    • Has less cash for the agency’s programs
    • Is not in compliance with ORS, OAR & OAM
    • Runs the risk of audit comments
  • The employee:
    • Deductions based upon % of income will be greater than they should be
    • May experience a hardship with repayment
why do we care cont d
Why Do We Care Cont’d
  • State / agency administration:
    • Payroll expenses are inaccurate in the Comprehensive Annual Financial Report (CAFR)
    • Annual delinquent A/R report to the Legislature (Part 2)
ospa s characteristics
OSPA’s Characteristics
  • Two payroll runs
    • Run 1 payday generally the 1st of the month
    • Run 2 payday generally the 15th of the month
  • For salaried employees:
    • Run 1 is an “anticipatory” run based upon a forecast
    • Run 2 is a “clean-up” run to adjust the forecast to actual hours worked
  • Hourly employees are paid for actual hours worked & entered
ospa interfaces data to sfma
OSPA Interfaces Data to SFMA
  • Summary payroll expenditures interface to SFMA after each payroll run
  • Pay codes entered on the time capture screens & the P050 Gross Pay Adjustments determine the COBJ / AOBJ in SFMA
  • After each run, SFMA automatically generates transactions to reimburse the Joint Payroll Account (JPA), a revolving account
causes of overpayments
Causes of Overpayments
  • Employee’s circumstances change:
    • LWOP / SAIF claim
    • Changes in work schedule
    • Changes in job status -- separation / part-time vs. full-time / salaried vs. hourly
causes of overpayments cont d
Causes of Overpayments Cont’d
  • Delays / errors in PPDB or PEBB:
    • Changes in job status
    • WOC / differentials / pay range or step
    • Benefits entered late
  • Data entry timing or errors:
    • Deductions entered after run 1
    • Incorrect time capture / P070 / P050 entries
potential process steps
Potential Process Steps
  • Research & determine what happened
  • Notify employee in writing (Part 2)
  • Agree upon repayment plan
  • Determine OSPA entries
  • Potentially set-up an A/R (Part 2)
finding overpayments relies on
Finding Overpayments Relies On:
  • Honest employees who review their pay stubs
  • Diligent managers
  • Careful Personnel staff members
  • Alert Payroll staff members
research tools
Research Tools:
  • E122-042A Payroll Exception Report
  • B055RG Time Exception Report
  • XREF43 and XREF44 OSPS Payroll Register Alpha Report
  • B075 Gross Pay Adjustments Report
research tools cont d
Research Tools Cont’d
  • Net Pay Negative Report
  • Gross Pay Over 2.0 x Ajd Base Exception Report
  • P370 Calculation of Current Pay-off Screen
  • P190 Payroll Register Data Screen
notify employee in writing
Notify Employee in Writing
  • OAM 45.50.00 PR requires written notice at least 10 days prior to final date for entering deductions
  • Bargaining agreements may require written notice, e.g. SEIU Master Agreement requires written notice that includes amount to be repaid
  • “Part 2” will cover what to include in notice
best method for overpayments
“Best” Method for Overpayments
  • Early detection & prompt, accurate correction simplifies life for everyone!
  • The best of all worlds:
    • A staff member detects the overpayment before pay day AND
    • Makes correcting entries before final run OR
    • Pulls check / stops ACH before distributed & requests manual check
repayment options
Repayment Options
  • Payment methods (OAM 45.20.00 PO):
    • Payroll deduction(s)
    • Money order(s)
    • Certified check(s)
  • Payment options:
    • Lump sum payment
    • Agreed upon repayment plan
    • Default plan defined in contract or OAM 45.50.00 PO (if applicable)
ors 292 063 1
ORS 292.063(1)
  • “When a state employee receives payment of salary or wages in an amount greater than the employee’s entitlement, the amount of overpayment may be deducted from salary or wages earned by the employee”
oam 45 50 00 po
OAM 45.50.00 PO
  • Applies, unless under a bargaining agreement
  • “By signing a time and attendance report (timesheet) either physically or electronically, an employee is attesting to the accuracy and truthfulness of the report…
  • Unless caused by administrative action and/or administrative error, the overpayment will be recovered in one lump sum”
oam 45 50 00 po cont d
OAM 45.50.00 PO Cont’d
  • An employee may make arrangements for monthly payments if:
    • Overpayment >10% of employee’s monthly adjusted base pay AND
    • Employee submitted accurate time & attendance information AND
    • Employee demonstrates lump sum would create economic hardship OR
    • Overpayment occurred over 2 pay periods & not employee’s fault
bargaining agreements e g seiu
Bargaining Agreements, e.g. SEIU
  • If caused by discrepancy between actual & forecasted hours, may be adjusted in following month
  • If overpayment <5% of regular base salary, recovered through lump sum deduction
  • If overpayment >5% of regular base salary, monthly payments may not exceed 5% of regular base salary, unless employee agrees
  • OAM 45.50.00 PO -- “If an employee leaves agency service prior to full recovery of the overpayment, the balance owing shall be deducted from the employee’s final check.”
  • SEIU – “If an employee leaves agency service before the agency fully recovers the overpayment, the remaining amount may be deducted from the employee’s final check(s)”
separations ors 292 170
Separations – ORS 292.170
  • “If a state employee leaves state employment after receiving payment of salary or wages in an amount greater than the employee’s entitlement, the amount of overpayment shall be considered a delinquent account and shall be subject to collection by the Collections Unit in the Department of Revenue under ORS 293.250.”
  • More in Part 2
it depends
“It Depends….”
  • Not always a “black & white” answer
  • Determined on a case-by-case basis
  • As a general rule:
    • Not all overpayments will create a net pay negative when corrected
    • OSPA will automatically offset corrections unless employee invokes repayment plan or repayment crosses tax years
  • Here are some things to consider:
options for ospa entries
Options for OSPA Entries
  • Allow OSPA to automatically offset until overpayment repaid
  • Enter changes & set corrective
  • Enter negative P050 gross pay adjustment(s)
  • Reimburse JPA & enter PANN deduction
ospa automatically deducts
OSPA Automatically Deducts
  • OSPA will make automatic adjustments when employee has net pay negative, e.g.:
    • LWOP entered after run 1 final
    • Salaried full-time  part-time
    •  hours for salaried part-time
    • Retro-active P050 or P070 entries
ospa automatically deducts cont d
OSPA Automatically Deducts Cont’d
  • Agency & JPA are made whole
  • Employee’s taxable income is correct
  • Where correction is made for run 2, expenditure will be in correct accounting month
set corrective
Set Corrective
  • Can be set for prior 3 months in same tax year
  • OSPA recalculates the employee’s pay for the designated month(s)
  • Examples include:
    • To correct time
    • Late entry of benefits
    • Retro-active changes in PPDB
set corrective cont d
Set Corrective Cont’d
  • OSPA will adjust taxes & deductions based upon % of adjusted base pay
  • JPA & agency whole
  • Uses original pay types (AOBJ & COBJ)
  • Posts to SFMA in current month (not retro-active)
negative p050 adjustment
Negative P050 Adjustment
  • May be for prior, current, or future pay periods within the same tax year
  • Use same pay codes as original transaction
  • OSPA will adjust taxes & deductions based upon a % of pay
  • Automatically makes JPA & agency whole
  • May impact overtime calculation, use “Z” codes
pann p070 deduction
PANN P070 Deduction
  • If the employee has a net pay negative& OSPA will not automatically offset it within 2 monthsor it will cross tax years:
    • Reimburse the Joint Payroll Account with an SFMA “BT” transaction (JPA whole)
    • Notify OSPS -- Return of Overpayment form:
    • Enter PANN deduction(s) for employee (agency whole)
income taxes prior tax year
Income Taxes, Prior Tax Year
  • IRS Publication 15 (Circular E): “The wages paid in error in the prior year remain taxable to the employee for that year. This is because the employee received and had use of those funds during that year.The employee is not entitled to file an amended return to recover the income tax on these wages. Instead, the employee is entitled to a deduction for the repaid wages on his/her income tax return for the year of repayment.”
p070 pann amount cont d
P070 PANN Amount Cont’d
  • Use gross pay for calculation of overpayment
  • OSPS will report & recoup overpayment for Medicare & FICA on next Form 941
  • Agency should recoup overpayment to PERS & SEIU
  • Reimburse employee for FICA, Medicare, & SEIU dues
how can we prevent overpays1
How Can We Prevent Overpays?
  • Encourage Personnel to make timely entries
  • Enter all employee time prior to run 1
  • Review “tricky” entries on the P370
  • Carefully review Exception Reports for preliminary & final
how can we prevent cont d
How Can We Prevent Cont’d
  • Review payroll reports prior to releasing paychecks & stubs
    • OAM 45.35.00 PO, requires that a non-payroll manager review B075 Gross Pay Adjustments Report before the release of pay checks
  • Cancel direct deposits when LWOP results in more than one overpayment (Letter of Recommended Payroll Practice 02-0101)
example 1 8 hrs lwop
Example #1 – 8 hrs LWOP
  • Employee is salaried
  • LWOP entered after run 1 final
example 2 woc
Example #2 – WOC
  • Employee’s 5% WOC should have stopped 2 months prior
  • Personnel stopped the WOC in PPDB retro-actively
example 3 incorrect time
Example #3 – Incorrect Time
  • Employee had 10 hrs. of shift differential that was not entitled to
  • Identified after run 2 final
example 4 dpt not entered
Example #4 – DPT Not Entered
  • During open enrollment, employee signed up for health insurance for domestic partner
  • No P050 DPT entry
example 5 separation
Example #5 -- Separation
  • FMLA LWOP status not entered in PPDB
  • LWOP for salaried employee for 2 months
  • Employee separates at end of 2nd month
example 6 repayment plan
Example #6 – Repayment Plan
  • Employee had incorrect base pay in PPDB for 12 months (July to following June)
  • 18-month repayment plan
payroll contact information
Payroll Contact Information
  • OSPS Help Desk:
    • E-mail:
    • Telephone: 503 378 6777
    • FAX: 503 378 3518
class goals
Class Goals
  • To raise awareness of how overpayments become an A/R and the requirements surrounding the collection of accounts that become liquidated and delinquent
  • To understand the process of assigning an account to collection
  • To understand the reporting requirements for employee overpayments
class objectives1
Class Objectives
  • By the end of class, attendees will be able to:
    • Implement the requirements for notification so that the account can proceed through the collection process
    • Understand the process of assigning an account to collection
    • Follow the requirements for reporting Employee Delinquent Balances to the Legislative Fiscal Office with all other A/R activity
set up account receivable if
Set-up Account Receivable If:
  • The State Agency is required to reimburse OSPS for the overpayment, the “out of pocket” expense should be recorded as a receivable.
  • If notification to debtor has not been made in the same pay period.
information that should be included in notification to the employee
Information that should be included in notification to the Employee:
  • Notification should always be documented in writing!
  • Notification should include:
    • Supporting documentation
    • Amount owed
    • Opportunity to respond within # of days
    • If applicable, opportunity for repayment plan
    • Employee’s signature authorizing deduction(s)
    • Informed Consent regarding SSN
    • Notice that if payment is not received, the account will be assigned to collection
informed consent
“Informed Consent”
  • Section 7, Privacy Act of 1974, 5 USC 552a the debtor must be informed:
    • Whether disclosure is voluntary or mandatory
    • By what statutory or other authority SSN is solicited
    • What uses will be made of SSN
employee separations
Employee Separations
  • The debtor should always be given an opportunity to pay the balance due, if they do not respond to the request for payment then the account is delinquent and subject to collection:
    • ORS 292.170 Procedure when employee leaves employment after overpayment “If a state employee leaves state employment after receiving payment of salary or wages in an amount greater than the employee’s entitlement, the amount of overpayment shall be considered a delinquent account and shall be subject to collection by the Collections Unit in the Department of Revenue under ORS 293.250.”
limitations of ors 293 250
Limitations of ORS 293.250
  • ORS 293.250 states that “The Department of Revenue may render assistance in the collection of any delinquent account owing to any state officer, board, commission, corporation, institution, department or other state organization…

In providing assistance, the Department of Revenue shall utilize all means available to collect the delinquent accounts including the setoff of any refunds or sums due to the debtor from the Department of Revenue or any other state agency.

No setoff will be made by the Department of Revenue unless the debt is in a liquidated amount.”

definition of liquidated
Definition of Liquidated:

Definition of Liquidated (OAM 35.30.10)

a. An agency has determined an exact past due amount owing; and

b. An agency has made a reasonable attempt to notify the debtor in writing of the amount owing and nature of the debt, and has requested payment; and

c. The debt meets one of the following conditions: ...

6. The debt is an account stated under a preexisting written agreement between the agency and the debtor. A statement of account has been mailed or delivered to the debtor, and the debtor has not objected within a reasonable time, which should be specified by the agency.

7. The debtor has, in writing, unconditionally acknowledged the debt, both as to liability and amount, or an agreement has been reached in writing between the agency and the debtor regarding the debt, both as to liability and amount. …

when to assign to collection
When to assign to collection:
  • Once an account has become liquidated ( as defined by OAM 35.30.10) the account is required to be turned over to either the Department of Revenue or to a private collection firm. ORS 293.231 requires that this occur not later than:
    • (a) Ninety days from the date the account was liquidated if no payment has been received on the account within the 90-day period; or
    • (b) Ninety days from the date of receipt of the most recent payment on the account.
how do you assign an account to dor
How do you assign an account to DOR?

Check with your Collection

staff for Program Code

See to download form and instructions.

how do you assign an account to private collection firm
How do you assign an account to Private Collection Firm?
  • This will be determined by the Collection firm that your agency uses.
  • Check with your agency collection staff for details regarding the account assignment process for your agency. At minimum you will need:
    • Debtor Name
    • Address
    • Amount of the debt
timeline for the collection process
Timeline for the collection process
  • ORS 293.231 states that the Department of Revenue shall have six months from the date of assignment to collect a payment. If the department does not collect a payment, the state agency shall then immediately offer for assignment the debt to a private collection agency.
  • If, after a reasonable time, the private collection agency is unable to collect the account, the private collection agency shall notify the state agency that assigned the account that it has been unable to collect the account and shall relinquish the account to the state agency.
servicemembers civil relief act scra
Servicemembers Civil Relief Act (SCRA)
  • The Servicemembers Civil Relief Act (SCRA) provides military personnel who are on active duty with certain protections for more information about the provisions of the Act, visit:
  • The most common provision is a limit of 6% interest on debts incurred prior to active duty.
  • For any account where the debtor files Bankruptcy, the following steps should be followed:
    • IMMEDIATELY stop all collection and contact efforts!!!!
    • If a Proof of Claim is received, complete and file with the Bankruptcy court.
    • If the debtor receives a discharge from the court, the debt no longer exists, remove the debt from you’re A/R but it is not classified as a write-off.
    • If the case is dismissed by the court, you may resume all collection efforts.
deceased debtors
Deceased Debtors
  • If you are notified that a debtor is deceased the following steps should be followed:
    • Attempt to locate any information regarding the estate.
    • If there is an estate, forward collection letters to the executor of the estate.
    • Consult with legal counsel if executor does not respond to the collection letters.
    • If there are no assets of the estate, follow the Secretary of State guidelines (OAM 35.20.80.PO) for requesting approval for write-off.
a r reporting required annually
A/R Reporting required annually
  • ORS 293.229 states that “Not later than October 1 of each fiscal year, each state agency shall submit a report to the Legislative Fiscal Office (LFO) that describes the status of that agency’s liquidated and delinquent accounts and efforts made by that agency to collect liquidated and delinquent accounts during the previous fiscal year.”

DAS receives several questions each year from the legislature regarding balances on the LFO report

what information is required
What information is required?
  • Beginning balance and total number of all liquidated and delinquent accounts
  • New liquidated and delinquent accounts added during the last preceding fiscal year
  • Total collections of liquidated and delinquent accounts
  • Total amount and total number of liquidated and delinquent accounts that have been written off
  • Total number and ending balance of all liquidated and delinquent accounts
  • Total amount of liquidated and delinquent accounts turned over to Department of Revenue Other Agency Accounts and total amount collected by the same
  • Total amount of liquidated and delinquent accounts turned over to private collection agencies and total amount collected by those agencies
how is the reporting done
How is the reporting done?
  • A/R reporting is done via a secure website maintained by the LFO
  • Information about the reporting process, including a reporting manual can be found at:
  • Check with you A/R Collection staff, they will already be reporting for your agency, sharing of information for overpayments will make sure that the reporting is done correctly
  • Overpayments become an A/R once the agency has an “out of pocket” expense or if notification is not made to the debtor before the beginning of the next pay period
  • A/R balances require notification to debtor to become liquidated
review cont
Review (cont.)
  • Once an account becomes liquidated, it must be assigned to collection within 90 days, or 90 days after the most recent payment
  • State agencies are required to report to the LFO the status of all liquidated and delinquent accounts during the previous fiscal year
swarm contact information
SWARM Contact Information

Gerold Floyd

SWARM Coordinator

DAS State Controller’s Division

155 Cottage St. NE, U50

Salem, OR 97301-3969

503-378-3156 ext. 231