Overpayment Process Overview for Departments

Overpayment Overview

Overpayments occur for a variety of reasons. Currently, the overpayment process is a manual process and requires several steps from beginning to end for both departments and Central Payroll Services. 

When a university employee is overpaid, the department is responsible for communicating with the employee and completing the Overpayment Notification form. 

Central Payroll Services is responsible for collecting the overpayment via payroll deduction or checks received, correcting the employee’s payroll data, and providing the required tax documents. 

The employee has two options for repaying the overpayments:

  • Deduction from future payroll checks - This is the preferred method for active employees unless the amount of the repayment is too large to recover within the same tax year. 
  • Repayment by check - This is the only option for Inactive or terminated employees. Employees can pay by personal check, money orders, cashier’s checks, or bill pay.  

Overview of the entire collection process: 

  • The department where the overpayment occurred initiates the overpayment.
  • Central Payroll Services processes the overpayments.
  • All uncollected overpayments that are supposed to be repaid by check by the end of the calendar year are sent the UMN Collections department. 
  • UMN Collections department tries to collect the overpayment for a year.
  • At the end of the year, UMN Collections department sends the overpayment to the state of Minnesota.
  • The state of Minnesota adds a 20% fee to the overpayment and tries collecting the overpayment for five years. 
  • After five years, any uncollected overpayments are written off to a chart string identified by the department where the overpayment occurred.

Learn more about the HRMS Business Process behind overpayment collection.

Expand all

The Department's Responsibilities

  • To identify any overpayment
  • Determine the chart string where the overpayment was made. The full chart string should include the account number.
    • If on a sponsored account, this amount must be moved to a non-sponsored account and retro ID number added to the form. 
  • Determine if the employee is active or terminated.
  • Explains the repayment process options and process to the employee.
  • The department should answer all the questions regarding the overpayment from the employee. 

For Active Employees 

  • Notify the employee and follow up by sending the employee an email notice. 
    • Important: The initial email must be attached to the overpayment form. 
  • Collecting through payroll deduction is the preferred method for active employees.  
  • Work with the employee on a repayment plan. 
    • If hours are associated with overpayment—like Regular pay—then Central Payroll must use hours to deduct from future pay. Determine the number of hours per pay period to be deducted. 
    • If the overpayment is associated with amount only earnings such as ART, then determine the amount to be deducted from each pay period. 
  • Collect the Consent to Collection of Overpayment form to deduct from future pay.
    • The repayment plan should be indicated in this consent form as well as the Reason for Overpayment section in the Overpayment Notification form.
    • NOTE: The consent form is a state-required document authorizing UMN to deduct the employee’s pay. 
    • The Consent to Collection of Overpayment file contains two forms to collect: 
      • Collecting the overpayment in a single pay period 
      • Collecting the overpayment in multiple pay periods
  • Complete the Overpayment Notification form. 
    • Instructions are in a separate tab on indicate how to complete the form. 
  • Combine the following files into one document and submit to payforms@umn.edu:
    • Initial employee email if they will be paying by check.
    • Overpayment Notification form
    • Consent to Collection form. 

For Inactive Employees 

  • Notify the employee and follow up by sending the employee an email notice. 
    • Important: The initial email must be attached to the overpayment form. 
  • Answer all employees’ questions regarding the overpayment.
  • Determine the chart string where the overpayment occurred. The full chart string is required and should include the account number.
    • If on a sponsored account, this amount must be moved to a non-sponsored account. A retro account number should be included in the form. 
  • Determine if there is a vacation payout due to the employee by sending an email request to payforms@umn.edu. 
    • If yes, then have the employee complete a Consent to Collection form to have the overpayment deducted from their vacation payout.  
    • A consent to collect form is required for this option as Central Payroll is deducting the employee’s paycheck.
  • Complete the Overpayment Notification form. 
    • Instructions on a separate tab indicate how to complete the form. 
    • Important: Add ALL employees’ email addresses to the form. 
  • Submit the following files to payforms@umn.edu: 
    • Initial employee email 
    • Overpayment Notification form 
    • Note: Payroll Services will determine the amount to be repaid and will send the employee a letter with the amount owed and where to mail the check. 
  • Departments should not receive any checks for overpayment. If a check is received in error, please forward the check to Payroll Services.
    • Important: Do not cash the check.

Payroll Services' Responsibilities

  • Review the payforms@umn.edu email and gather all the new Overpayment Notification forms. 
  • Review all the Overpayment Notification forms and return any incomplete submissions to the department.
  • Collect the overpayments as indicated on the Overpayment Notification form.
  • Correct the employee’s payroll records.
  • Credit the chart string as indicated on the Overpayment Notification form. 
  • Send any unpaid overpayments to UMN Collections department at the end of the calendar year.  

If the employee repays by payroll deduction

  • Ensure there is a consent form for each overpayment you are processing.
  • Add the employee to the Overpayment Repayment spreadsheet to track the overpayment to ensure the overpayments are paid in full. 
  • Enter the hours or amount to be deducted on the payline during the On-cycle payroll processing. Payroll records are corrected through the system as the overpayment is deducted. 
  • Ensure the employee pays the overpayment in full. 

If the employee pays by check 

  • Calculate the amount owed by the employee.
    • Current Calendar Year 
      • Central Payroll Services determines the net payment amount due.
      • Add the employee to the Overpayment Employee by Check spreadsheet to track the overpayment to ensure the overpayments are paid in full. 
      • A letter is sent to the employee and department stating the amount owed and where to mail the check. 
      • If needed, Central Payroll Services will work with the employee on a repayment plan along with the department approval. Must be repaid by the end of the year. 
      • Once the overpayment is paid in full, Payroll Services will process a pay reversal transaction. This will "reverse" the original payment to reduce the employee’s year-to-date taxable gross and tax amounts as though the payment had never been made.  This correction also credits the department for the Gross Salary amount under the employee’s current chart string.
    • Previous Calendar Year 
      • If overpayment is under $3000 in gross amount: 
        • The employee will repay the net amount. 
          • Due to tax law changes with the Tax Cuts and Jobs Act of 2018, an employee who was overpaid is no longer able to recoup the additional taxes that were withheld as a part of their overpayment. 
          • The department will receive back the net amount and will be financially responsible for the difference between the gross and net pay. 
          • A copy of the overpayment letter sent to the employee and sent to the department. 
          • The difference between the Gross and Net figures in this letter is the amount the department is responsible for. 
        • Central Payroll Services will work directly with the employee on any possible FICA and Medicare tax refunds from the federal government that may be requested. 
      • If overpayment is over $3000 or more in gross amount: 
        • The employee must repay the gross amount. When the repayment is complete, the University will provide an IRS letter that the employee can use when filing their taxes for the year in which the repayment occurred. This will allow them to recoup the extra taxes withheld when they were overpaid. 
        • Payroll Services will work directly with the employee on any possible FICA and Medicare tax refunds from the federal government that may be requested.
  • Send reminder letters to the employee in April, July, October, and December. Departments are copied on all correspondence sent to employees.
  • All unpaid overpayments at the end of the year where the employee has not responded or has not repaid the overpayment are sent to UMN Collections department. 
  • At the end of the year, all unpaid overpayments—whether the employee hasn’t responded or not paid the overpayment—are sent to the University of Minnesota’s internal collections department. 
    • The departments will receive the credit on the chart string indicated in the overpayment notification form. 
    • UMN Collections department will continue to try and collect the overpayment for one year.
      • UMN Collections department can process credits cards and checks to process the overpayment.  
    • If the overpayment cannot be collected by UMN Collections department, the overpayment is turned over to the State of Minnesota for collection.
    • The state adds a 20% fee to perform the collection. This amount is added to the overpaid amount as the employee is responsible for this fee and the overpayment. 
    • The State of Minnesota tries to collect the overpayment for five years.
    • If the State of Minnesota cannot collect, the information is sent back to the University.  Accounts payable will contact the department for the appropriate chart string to write off the overpayment amount.

Collecting the Overpayment Accounting

  • Payroll salary reduction: If the overpayment is collected by payroll salary reduction, then Central Payroll Services will credit back the amount collected to the non-sponsored chart string provided in the Overpayment Notification form. 
    • Fringe is automatically calculated. 
    • Central Payroll Services deducts from the gross that results in a lower taxable wage for the employee, so less taxes are taken. 
  • Vacation payout: If the employee terminates prior to full recovery, then Payroll Services will try to collect the balance from vacation payout. 
    • Fringe is automatically calculated. 
    • The amount collected will be credited back to the non-sponsored chart string in the Overpayment Notification form. 
  • Collecting a check from the employee: If the full overpayment cannot be recovered prior to termination, then Central Payroll Services will collect a check from the employee. 
    • Current year: If the employee pays back the balance amount by the end of the current calendar year, then the net amount of the check is collected. 
      • In this case, Central Payroll Services will process a reversal entry and either: 
      • Option one: credit back the amount to the original chart string that was used to overpay the employee; or 
      • Option two: credit back the amount to the chart string
    • Prior Year: Checks received for previous years' overpayments will be credited to the non-sponsored chart string provided in the Overpayment Notification form. No corrections are made in the system. 
  • Uncollected Funds from the State of Minnesota: The overpayment will be charged to the account string provided by the department for this write-off. 
  • Fringe: Once the repayment has been paid in full, a list of employees is sent to Finance, where the fringe is calculated and credited back to the departments.