Overpayment Recovery Process
An overpayment represents a debt owed to the University, which the University has a financial obligation to attempt to recover.
Departments that discover an overpayment of wages must submit an Overpayment Recovery Form via ServiceNow so assistance can be given in determining the accurate amount the employee was overpaid and initiating a recovery.
Understanding Overpayment Recovery
The University, in accordance with New York Labor Law Section 193, sets forth the procedures for recovery of overpayments when an employee receives funds that are not due to the employee. An overpayment represents a debt owed to the University, which the University has a financial obligation to attempt to recover. The recovery process identifies employee and department responsibilities regarding overpayments of wages.
Overpayments are a shared responsibility between the employee, Department, Human Resources, and Payroll to identify and correct the source of the error and subsequently recover the overpayment in as timely a manner as possible.
Employees are expected to promptly report any discrepancies they note in their pay to their department.
Departmental Administrators are responsible for managing financial resources, including monitoring salary expenditures for their respective departments. To that end, Department Administrators are expected to routinely and frequently review available financial reports to assist in monitoring, reconciling, and verifying salary payments. Department Administrators must promptly submit an Overpayment Recovery request via the ServiceNow Portal to recover departmental funds when a salary overpayment occurs.
Payroll Operations is responsible for reviewing all submitted overpayment matters, and managing the recovery process. These responsibilities include calculating the overpayment amounts (including related tax and benefits withholdings), canceling checks, reversing direct deposits, determining repayment options, determining the amount to be repaid by the employee, correcting employee records, and amending an employee W-2 or W2c when applicable.
Who Should Know This Process
This applies to all employees of Columbia University (hereinafter, "the University").
Overpayment Recovery Process
Payroll overpayments typically are related to one of the following circumstances:
- Employee receives pay for a period at the start of unpaid leave due to the timing of the leave notification, confirmation, or submission or related to the processing of a resignation/termination
- Time entry error:
- employee is paid for too many hours
- employee is paid for paid time off that was not available
In the event an employee receives amounts not due to the employee, the University will work to recover these funds. Employees should immediately notify their department when they note an error. Departments are charged with proper management of employment records and routine monitoring of expenditures to ensure overpayments don't occur or are promptly identified. Departments that discover an overpayment of wages must submit an Overpayment Recovery Form via ServiceNow so assistance can be given in determining the accurate amount the employee was overpaid and initiating a recovery.
In accordance with New York Labor Law Section 193, 1(c) ("Section 193"), New York State Department of Labor Regulations, Subpart 195-5.1 (the "Regulations"), and the terms and conditions of this Policy, the University may recover overpayments of wages through wage deductions, where such overpayment is due to a mathematical or other clerical error (hereinafter, "overpayment").
Before recovering an overpayment, Payroll will provide the employee with a notice of intent, indicating that a wage deduction will commence to recover such overpayment (the "Notice").
Pursuant to the Regulations, the University may recover overpayments by wage reduction that were made in the eight (8) weeks prior to the issuance of such Notice, and can make deductions to recover such overpayments for up to six (6) years from the date of overpayment.
The Notice to the employee will contain the following information:
- The amount overpaid in total and per pay period;
- The total amount to be deducted, detailed by date and amount for each deduction; and
- A statement that the employee may contest the overpayment, the date by which the employee may contest the overpayment, and the procedure by which the employee may contest the overpayment and/or terms of recovery, or provide a reference to where such procedure can be located.
As per the Regulations, where the entire amount of the overpayment is less than or equal to the net wages earned (after other permissible deductions) in the next wage payment, the University may recover the entire amount of such overpayment in that next wage payment. In this circumstance, Payroll will provide the Notice to the employee at least three (3) days prior to the deduction, i.e., at least three days prior to the payday in which the deduction shall commence ("Three-Days' Notice").
As per the Regulations, where the entire amount of the overpayment is more than the net wages earned (after other permissible deductions) in the next wage payment, the University may recover up to 12.5% of the gross wages earned in each subsequent wage payment. In addition, such deduction will be made only once per wage payment and cannot reduce the effective hourly wage below the New York State Minimum Wage. In this circumstance, Payroll will provide the Notice to the employee at least three (3) weeks prior to the first deduction, i.e., at least three weeks prior to the payday in which the deductions will commence ("Three-Weeks' Notice"). If the employee follows the procedure to contest the overpayment or deduction (see below under "Procedure to Contest Overpayment or Deductions"), the University will not commence the taking of any deduction to recover an overpayment until at least three (3) weeks after issuing the final determination.
Department must submit an Overpayment Recovery Form via ServiceNow to begin the recovery process.
In certain rare situations, an overpayment may be identified outside the 8 weeks. In those situations, the University works with the employee to determine the best method to recover those overpayments, which may include a deduction from current payroll by agreement with the employee.
Department must submit an Overpayment Recovery Form via ServiceNow to begin the recovery process.
The University follows the NYS Department of Labor (NYSDOL) procedures for employees to dispute or contest the overpayment and/or terms of recovery:
When communications are unsuccessful or an employee does not return the overpaid amounts, the University reserves the right to take additional steps to recover overpayments, including through the use of external collection services or legal proceedings.
The amount the employee must repay to Columbia University will vary based on when the overpayment is discovered and when the employee makes repay. This is largely due to Federal and State tax rules limiting the university’s ability to adjust tax withholding after a calendar year.
In general, the amount will either be the "net amount" or an "adjusted gross amount."
Net Amount Repaid: Current Calendar Year
If repayment is completed in the same calendar year as the overpayment, the employee will repay the net pay amount of the overpayment. Typically, the net pay amount is the amount actually received by the employee through payroll which reflected the application of tax and other withholdings or deductions to the gross overpayment amount. The Payroll Department will reduce the employee's taxable wages and associated taxes for that calendar year as of the year-end so that the adjusted wages and taxes are shown on the W-2 Form.
Gross Amount Repaid: Subsequent Calendar Year(s)
If repayment is completed after the calendar year in which the overpayment was made, the employee will be required to repay the adjusted gross amount if the employee provides a Letter of Consent. If the employee does not provide a Letter of Consent, the gross amount of the overpayment must be repaid.
The adjusted gross amount includes the net amount of overpayment plus the federal and state income taxes withheld and, if applicable, the supplemental Medicare withheld from the gross amount through payroll at the time the overpayment was made. The employee is also required to provide a Letter of Consent to allow Columbia University to claim a refund of the FICA taxes in connection with the overpayment.
In accordance with Internal Revenue Service rules, wages paid in error in a prior year remain taxable to the employee for that prior year because the employee received and had use of those funds during that calendar year. Thus, the university will not revise the Form W-2 amount of income or income tax withholding for such prior year. IRS Publication 525 (Taxable and Nontaxable Income) instructs for "Repayments" that the employee should not file an amended tax return for that year. Instead, the employee is entitled to a deduction (or credit, depending upon the amount repaid) for the wages repaid on their personal income tax return in the year of repayment. Please contact your tax preparer and review IRS Publication 525 on how to claim this deduction or credit on your income tax return.