Overpayments

Step 1: Attempt to Prevent the Overpayment

Overpayments can be prevented if you identify the error before payment is distributed to the employee.

A Current Pay Adjustment (CPA) in PARIS or a Pay Stop in ANA can avoid the need to recover funds from an employee. Please be aware that a Pay Stop will prevent the employee from receiving payment for all jobs on that pay period. A Prior Underpayment Adjustment (PUA) will be required if any pay is due to the employee.

See Payroll Adjustment Processing for more information.

*These transactions prevent overpayments, so the unit will not be assessed the overpayment service fee. See below.

Step 2: Notify the Employee

Employing units should act as a liaison between UPB and the employee throughout the recovery process, ensuring that the employee understands the procedures for recovering the overpayment.

When one of your employees is overpaid, notify them as soon as possible since they must make repayment to the University of Illinois System. You may provide them with Repaying Payroll Overpayments - Guide for Employees so they will know what to expect.

Step 3: Make Corrections

Job Records

If a job record error is the cause of the overpayment, the department representative must submit a HR Front End (HRFE) transaction as required before the next job change cutoff date as published in the Payroll Schedule. This is crucial to prevent additional overpayments from occurring in the future.

C-FOAPALS on Overpayments Involving Sponsored Programs (Grants)

If an overpayment involves a grant from a restricted sponsored program, Federal agriculture, special state appropriations or any other fund that may change or close before recapture, the unit should follow this process:

1. Transfer the overpaid amount from the restricted funding source to an unrestricted FOAPAL by Performing a Labor Redistribution.
2. Wait until the next business day for the labor redistribution to post in Banner.
3. Notify UPB of the overpayment in ANA (see Step 4 below).
4. Complete GC-91 if sponsored project (grant) funds remain on the pay period overpaid. Submit to PI within 10 days.

Contact your local Sponsored Programs office if additional assistance is needed.

Step 4: Submit an Overpayment Adjustment transaction in ANA

Submit an Overpayment Adjustment transaction in ANA to initiate the recovery process, following the instructions in the Overpayment Job Aids.

Submit overpayment transactions as soon as you notify the employee, job records have been corrected, and after necessary labor redistributions are performed so recovery efforts can be successful.

If the unit is holding the paper check, indicate in the ANA comments, "Holding original payroll check and returning to UPB." Return the original check to UPB immediately with the completed Return Payroll Checks/Overpayment Remittance Form.

See the Overpayment Recovery Process below.

Step 5: Pay the Overpayment Service Fee

Units are responsible for a 6% payroll service fee for all overpayment amounts recovered. These fees will be assessed monthly on the previous month's collection activity. The fee will be posted to the C-FOAPAL overpaid, or as indicated in the ANA transaction. The fee will be posted by an automated Journal Voucher (JV) process towards the beginning of each month. CPAs in PARIS and Pay Stop transactions in ANA will not be assessed the service fee since these transactions prevent overpayments.

Other posting considerations:

• Description on the JV transaction will be "Payroll Service Fee," and will identify the employee's University Identification Number (UIN) and Pay Period of the recovery.
• To transfer charges to a different FOAPAL, a JV will need to be initiated by the unit.
• Corrections to JV entries related to the payroll service fee will be limited to the current fiscal year only.
• The Overpayment Detail (HROVRPYMTD) report is available for viewing in Mobius View by the seventh of each month.

Service Fee Appeals:

Units may appeal service fee charges. The appeal must occur within the same fiscal year as the fee.

1. Contact UPB Customer Service. The customer service representatives will determine if the fee refund is allowable.
2. An option is available to meet with UPB management if an agreement cannot be reached with the customer service representative. The meeting will occur within 30 days of the request (except near the fiscal year end).
3. A decision regarding the refund will be rendered within 5 business days.
4. If approved, the fee will be refunded/reversed at the end of each month.

Communication

For an active status employee, UPB sends an electronic notification to the employee’s email address listed in Banner. For an employee in an inactive or terminated status, a notification will be sent to the mailing address (MA) or permanent address (PR) in Banner, plus a copy via email. The contact person for the employing unit identified in the ANA transaction will receive an electronic copy in email.

• If the gross amount of overpayment is 20% or less of the regular gross pay, UPB will send an Overpayment Notification to the employee and the unit indicating the overpayment amount.
• If the overpayment amount is more than 20% of the regular gross pay, UPB will send an Overpayment Notification to the employee and the unit indicating the overpayment amount. The notification specifies a two-week deadline by which the employee must contact UPB in order to make repayment arrangements or to request a review.

Once UPB sends the Overpayment Notification the unit should be prepared to communicate with the employee and UPB Customer Service.

If an employee enters into a repayment arrangement to spread out payments, UPB will notify the unit contact of the terms.

If the employee requests a review of the overpayment, a meeting will be set up within 30 days with the individual, unit representative and the Director of UPB (or designee) to seek resolution. Please contact UPB Customer Service to request a review.

Upon full collection of an overpayment, the employing unit and the employee will receive an Overpayment Closed Notification.

The Overpayment Summary (HROVRPYMTS) report is available in Mobius View by the seventh of each month providing details on the prior month's overpayment activity.

Processing

It is the responsibility of UPB to process overpayment adjustment transactions following the recovery process guidelines (see below). Each transaction will be processed promptly to ensure recovery whenever possible.

All overpayment recaptures are credited to the department.

Status of the pay event

Whenever possible the unit should attempt to prevent the overpayment amount from reaching the hands of the employee. A CPA in PARIS during the Current Pay Adjustment Window or a Pay Stop in ANA avoids the need to recover an overpayment directly from the employee. If a paper check is being held by the unit, do not distribute it to the employee. In this situation the employing unit must initiate the overpayment process in ANA and return the original check to UPB within two business days accompanied by the completed Return Payroll Checks/Overpayment Remittance Form.

If the unit does not take the steps required to prevent the overpayment, an overpayment transaction in ANA is the only option to resolve the payroll overpayment. UPB will initiate the recovery process upon receipt of the Overpayment Adjustment transaction in ANA.

Status of the employee

For employees who are active with the university and are receiving regular payments, UPB will attempt to recapture the overpayment amount on upcoming pay events until fully recovered. See Gross Amount Overpaid below.

If the overpaid individual is not currently being paid by the university, they must submit a personal check or money order to UPB Customer Service, payable to the University of Illinois System. They should include their UIN on the check along with a copy of the notice.

Gross Amount Overpaid

• If the gross overpayment amount is 20% or less of the regular gross pay, UPB will collect the overpayment amount from the next available pay event or adjustment. When UPB recaptures the overpayment in full, the unit and employee will receive an Overpayment Closed notification.
• If the gross overpayment amount is more than 20% of the regular gross pay, UPB will collect the overpayment amount from the next available pay event or adjustment after the deadline on the Overpayment Notification. When UPB recaptures the overpayment in full, the unit and employee will receive an Overpayment Closed notification.

If the employee requests to repay the overpayment directly to UPB, the employee must request the net amount owed by contacting UPB Customer Service. The employee must send payment directly to UPB along with a copy of the overpayment notification showing the net amount owed. They should include their UIN on the check.

Tax Year of the Overpayment

The employee was overpaid in the current calendar year:

• If an active employee’s entire overpayment can be recaptured in the current calendar year, UPB will reduce the gross wages on upcoming pay events until full payment has been collected.
• If the overpayment cannot be recaptured in the current calendar year, UPB will credit the departmental expense account for recoverable deductions withheld. The employee's W-2 record will be appropriately adjusted as defined by IRS Code. UPB will set up a payroll recapture deduction (MPP) to recapture the net amount owed. Inactive employees will need to submit a personal check or money order to UPB Customer Service, payable to the University of Illinois System. They should include their UIN on the check along with a copy of the notice.

The employee was overpaid in a previous calendar year:

• The Internal Revenue Service (IRS) has defined the calendar year (January 1 through December 31) as the reporting period for which salary and wage payments are reported on Form W-2. The IRS has defined the method of constructive receipt to determine which calendar year a payment is reported in. If salary and wage payments are available to employees any time during the calendar year, the payments are considered paid in that year and reportable on Form W-2 for that calendar year. If a repaid amount is received in a subsequent year, UPB cannot adjust the wages on Form W-2 for the year in which the payment was received. because Wages paid in error in a prior year remain taxable to the employee for the year in which they were received. See IRS Publication 15 for more information on wage repayments.
• UPB will credit the departmental expense account for recoverable deductions withheld.
• When FICA (Medicare and Social Security) taxes are recovered from a prior calendar year, UPB will issue Form W-2C, Corrected Wage and Tax Statement.
• UPB will issue a statement of receipt of funds indicating the amount repaid from an overpayment in a previous tax year. Consult a tax professional for information about how to file with an overpayment repayment adjustment. See IRS Publication 15.

Repayment Inactivity

• UPB identifies overpayments with no repayment activity within the past 90 days. These are entered as a General Accounts Receivable in Banner at the beginning of each month for processing by the University Bursar.
• University Bursar will attempt to contact the individual by sending two letters and making phone calls in an effort to recover the overpayment owed.
• If no response is received from the employee after 90 days of attempted contact by the Bursar, the debt is sent to the Illinois State Comptroller for collection.

Tax Deferred Supplemental Retirement Plan Contributions

When UPB credits deductions from the overpayment, the Tax Deferred Annuity (403B) deductions may not be fully recaptured. Shortages may occur due to market fluctuations that result in a reduced market value for the contribution originally invested. When this happens, the department will be responsible for any shortages that transpire.

State Funds Crossing Fiscal Years

If an overpayment occurs in one fiscal year and the repaid funds are received from the employee in a new fiscal year, the funds will be credited to the department's account for the current fiscal year. Funds on state accounts lapse and will not be credited if received from the employee in a new fiscal year, unless they are received prior to the end of the lapse accounting processing period. The funds will revert to the state if received after the lapse processing period. It is recommended that the unit redistribute the payment to another fund prior to submitting the overpayment adjustment in ANA to ensure proper credit when the amount is repaid.

Over/Underpayment

In certain situations the employee may be overpaid on one position, but is underpaid the same amount or more on a new position. UPB will apply underpaid funds to the overpayment by adjusting transactions in Banner. Since the employee effectively does not receive more money than they were due, these transactions will not incur an overpayment service fee.

An over/underpayment can be performed with the following conditions:

1. Both the overpayment and the underpayment occur on the same pay period.
2. The underpayment is greater than or equal to the overpayment.
3. An overpayment transaction in ANA is submitted at the same time as a PUA in PARIS, referencing each other as over/underpayment transactions.

Workers’ Compensation

Workers’ compensation claims often result in an overpayment. When the employee cannot work resulting in a workers’ compensation claim, the first three lost workdays after injury are not eligible to receive total temporary disability (TTD) payments. If the employee misses 14 or more calendar days due to the injury, then the first three workdays are eligible to receive TTD payment. Employees often choose to use accrued sick and/or vacation leave benefits for the first three scheduled workdays following a workers’ compensation claim. When an employee receives TTD payments for the same days they are paid vacation or sick leave, those vacation or sick days are overpaid and must be returned to the university.

For more information about Workers’ Compensation, see:

• Checklist for Handling a Retroactive Workers' Comp Award
• Workers' Compensation - TREASURY