Overpayment Process

Definition

1 CCR 101-1, State of Colorado Fiscal Rules, Chapter 9, Rule 9-5 defines, “An overpayment is any payment that results from overstating the rate of pay, overstating the hours worked, understating the employee deductions, or any other payments to which the employee is not entitled.”

Overview

If at all possible, overpayment of an employee should be corrected by entering retroactive adjustments to reduce the employee’s current pay. These adjustments can be spread out over multiple payrolls if necessary.

If entering adjustments is not possible, money should be collected from the employee and submitted to Central Payroll along with an overpay form and documentation. 

Overview: An overpay acts like a cancellation in the Central Payroll Processing System (CPPS), pulling back amounts from each earnings code and gross-to-net (GTN) as specified on the form. The amounts on the overpay form should be the differences between what the employee was paid and what the employee should have been paid. The amount the employee owes equals the net pay amount on the overpay form.

Active Employee 

If an active employee is overpaid, the overpayment should be corrected by entering retroactive adjustments to reduce the employee’s current pay. This method is preferred over collecting a check directly from employees as the payroll system will adjust for deductions as necessary and additional CPPS/CORE (Colorado Operations Resource Engine) transactions are not necessary.

The retroactive adjustment should include any hours and dollars that were overpaid and can be broken down by pay period as needed. 

Note: if the employee does not have enough funds or the adjustment would cause a hardship to the employee, these adjustments can be spread out over multiple payrolls. If the repayment is expected to exceed six months, please contact Central Payroll as approval from the State Controller is required.

The retroactive adjustment form can be found on Central Payroll’s website under Payroll Forms: Central Payroll Services | OSC.

Terminated/Extended Leave 

If entering adjustments to earnings is not possible due to separation or extended leave situations like STD (short-term disability), FAMLI (Colorado Family and Medical Leave Insurance Program), and Workers Compensation, the overpayment form and documentation should be completed and sent to Central Payroll for review. Once reviewed and approved, money should be collected from the employee and Central Payroll should be notified. Overpayments will only be processed once the employee has paid back funds, not before. This is due to potential tax consequences that could lead to W-2 C’s.

Note: if an overpayment happens while on extended leave, communicate this information to the employee that states that an overpayment occurred and it will be processed upon return to work or separation from employment from the state.

An overpay acts like a cancellation in CPPS, pulling back amounts from each earnings code and GTN as specified on the form. The amounts on the overpay form should be the differences between what the employee was paid and what the employee should have been paid. The amount the employee owes equals the net pay amount on the overpayment form.

You will need CPPS, Overpayment Calculation Form, and Overpayment Form. 

Agency Process

Resources Required: CPPS, Overpayment Calculation Form, and Overpayment Form

1. Look up what the employee was paid: 
2. In CPPS, go to Payroll History (55), Gross-to-Net Detail (005). Print the screen(s) for the payroll the employee was overpaid. Then go to Earnings Detail (004) and print the screen for the same payroll. 
3. Open the Overpayment Form. Enter the info from the Earnings Detail and Gross-to-Net Detail screens in the “Actually Paid” column. 
4. Calculate what the employee should have been paid: 
5. In CPPS, go to Payroll Calculations (54), Check-it-Out Gross-to-Net (12). Enter the earnings that the employee should have been paid.
6. If the employee had any of the following deductions, these same deductions must be entered in the Check-it-Out screen (use the same amounts from the overpaid payroll). These deductions are monies that cannot be pulled back from the vendors, and therefore cannot be included on the overpay form.
   1. PERA Life (GTN 059) 
   2. Additional Direct Deposits (GTNs 181-185) 
   3. Wage Attachments (GTNs 186-190)
7. If the employee paid insurances on the overpaid payroll:
   1. If the employee is eligible for benefits in Benefit Solver, and has not subsequently covered payroll's insurances on a CHOP or through additional payroll deductions, the insurance amounts must be included on the Check-it-Out screen. Confirm the amounts are equal to the amounts paid on the original payroll. 
   2. If the employee is not eligible for benefits, or has since paid for that payroll’s insurance in another manner, the insurance amounts should be deleted from the Check-it-Out screen. 
8. If the employee paid local tax on the overpaid payroll:
   1. If the employee is still being paid the minimum amount of salary for his/her locality, the local tax amount must be included on the Check-it-Out screen.
      1. i. Denver – 0156 – $500/month 
      2. ii. Aurora – 1503 – $250/month 
      3. iii. Glendale – 2151 – $750/month 
      4. iv. Greenwood Village – 0157 - $250/month 
   2. If the overpay is large enough that the employee will not be paid the minimum amount of salary, the local tax amount should be deleted from the Check-it-Out screen.
   3. Once the Check-it-Out screen is completed, print the screen. 
   4. In the Overpayment Form, enter the info from the Earnings Detail and Gross-to-Net Detail screens in the “Should Have Been Paid” column.

Filling Out the Overpay Form 

1. Complete the ORG ID, Employee ID, and Employee Name fields. 
2. Enter the amounts from the “Difference” column on the spreadsheet. If an amount is negative in the “Difference” column, enter it as a negative on the Overpay Form. Required Fields: 

a. Gross Pay 

b. Net Pay 

c. Transaction Date: payroll date of overpaid payroll 

d. GTNs: GTN and amount. If GTN is zero in the difference column, it does not need to be listed

e. Account Distributions: account, job class, earnings type, and pay end date of overpaid payroll. Gross amount from calculation form, time should be the difference of time on overpaid payroll and correct time worked. 

i. If the prior accounting template is no longer active, a new one should be used.

3. Have the form reviewed, signed, and dated by an authorized person. 
4. Do not collect funds from the employee until review by Central Payroll is complete. This will ensure we are not having to ask the employee for more money or sending them money back. Send documents to Central Payroll for review:
   1. Overpay form
   2. Print-out of Overpay Calculation
   3. Print-out of Check-it-Out screen
   4. Print-outs of GTN Detail and Earnings Detail for overpaid payroll(s)

Central Payroll will notify the agency of an approved Net amount that can be collected from the employee.

5. Once funds are collected from the employee, please notify Central Payroll and include all documentation again including:
   1. Employee Collected Amount – check, CR, and ITI in the amount of “Net Pay” from the Form

For terminated employees, this process needs to be completed in its entirety by three months after the termination date.

6. If this process cannot be completed by the three month mark, agencies should book a receivable for bad debt in CORE and the overpayment form will not be processed in the payroll system.

Other Considerations

If the employee was overpaid on multiple payrolls

The overpayment amounts may be combined on the Overpayment Calculation Form and Overpayment Form. Break out each payroll under the Account Distributions, showing each Pay End Date. Use the most recent Pay End Date as the transaction date. 

If the employee was overpaid in a prior year

Federal, state, and local taxes must be included on the Check-it-Out screen. The tax amounts must match the amounts paid on the original overpaid payroll. (We cannot pull back prior year taxes.) 

If you need more lines on the Overpayment Form

Continue onto a second form. Put the Gross and Net Pay amounts on the first page only. Label each form (ex: “1 of 2”, “2 of 2”)