9.2 Prior Year Overpayments
Purpose: Use this document to understand the general rules for prior year overpayments.
Audience: Local HR/Payroll Teams
NOTE: Most of these instructions are for actions taken outside ctcLink.
For activities to be done in ctcLink, links are provided to the appropriate QRG.
- Payments cannot reduce current year taxable wages, so deductions have to be after-tax.
- Federal taxable gross and federal tax withheld, Box 1 & 2 on the W-2 are not reduced by the repaid amount.
- Total repayment should be gross wages minus FICA, Medicare & retirement if the below conditions are satisfied.
- A signed statement is received from the employee that they have not and/or will not claim a refund from SSA.
- Currently employed for retirement reduction. If the employee is separated do not reduce retirement as they may have withdrawn their funds.
- Once the employee has repaid the overpayment, calculated in step 3, they are entitled to a refund for any deduction that the employer can recover from the vendor.
- This will be specific to each employee but may include L&I, PFML & union dues.
- Garnishments, medical premiums, FSA, HSA, or VEBA may or may not be recoverable.
Personal Check Repayments
- Adjust the prior year balances for FICA & Medicare taxable gross wages, both employee & employer portion.
- The employee should not receive a refund for FICA & Medicare taxes. The employer is entitled to any refunds from SSA, both the employee & employer amounts.
- Complete and file a W-2C with SSA and send a copy to the employee. Record the W2-C in ctcLink.
Refer to QRG: 9.2 Enter W-2C in ctcLink
- Complete and submit a 941X to request a refund of FICA and Medicare taxes.
- Enter a one-time deduction refund for any recoverable deductions.
- DRS Members
- Adjust earnings and hours in ERA for the overpayment period.
- Using the employer non-taxable retirement deduction code, enter a one-time refund for the total amount of the employee & employer portion of retirement.
- Once the refund is processed in HCM, submit a DRS credit redistribution form to move the refund to the correct month(s)/year.
- TIAA members
- Adjust the prior year balances for the TIAA deduction, both employee & employer.
- Submit a mistake of fact to TIAA to request a refund of employee & employer contributions.
Payroll Deduction Repayment
- Set up the employee with general deduction 000025 - Prior Year Overpayment Payback.
Refer to QRG: 9.2 Creating and Ending General Deductions
- Include a goal amount. This will be the calculated overpayment amount from step 3 above minus any payments already made.
- Once the goal amount is reached, use the process outlined above under personal check repayments to complete the overpayment.