Payroll

Policy Statement 7: Overpayment Collection

1. Purpose
   
   On occasion, erroneous payments are made to employees who have separated from employment with ECU either at their own will or otherwise. An overpayment may occur when an employee separates during the middle of a pay period, when separation documents are not forwarded to the Payroll Department in a timely manner, or when an employee is paid based on unearned leave. On occasion active employees are overpaid due to advancement of leave or paperwork not submitted in a timely manner. The purpose of this policy is to outline the process for notifying an active employee or former employee of an overpayment and to define the process for collecting said funds owed to the university.
   
   
   
2. Procedure
   1. FORMER EMPLOYEE
      
      When the Payroll Department determines an overpayment has occurred, the assistant director will notify the former employee of the overpayment in writing.
      
      • The first collection letter (reference FIRST NOTICE letter) will identify how the overpayment occurred, the amount of the overpayment and due date to pay back said amount. The debtor has 30 days from when the first letter is dated to communicate with the Payroll office on their intentions. The collection letters will be modified as needed to accommodate the unique circumstances associated with each overpayment situation. If payment is received per the letter’s instructions, no further follow up is required.
        
      • If Payroll has not received a response within 30 days from the due date stated in the initial letter, then Payroll sends a second letter (reference SECOND NOTICE letter) which will include an amount owed reflective of interest and late fees. Also, in compliance with the Setoff Debt Collection Assistance (SODCA) legislation, the University notifies the NC Department of Revenue of the outstanding debt, and a notice of this action is included in the correspondence to the employee. Under SODCA, the Department of Revenue will withhold the debt from any State income tax refund for which the individual may be eligible. The Department of Revenue then forwards the funds to the University to apply against the debt. If payment is received in response to the second written request, Payroll is responsible for notifying the NC Department of Revenue of the settlement.
        
      • If no response is received after 60 days, then Payroll sends a third demand letter (reference FINAL NOTICE letter) by certified mail, that the debt will be turned over for collection to the State of North Carolina Attorney General's (AG) Office, unless payment is received or a payment plan is agreed on within 30 days of the notice.
        
      • If no response is received after 90 days, then the debt is sent to the AG's office, and the AG's office sends a communication to the employee. (Complete submission guidelines for the school to follow can be found on the AG’s website: http://www.ncdoj.com/DocumentStreamerClient?directory=Publications&file=Guidelines_Submitting_Accounts.pdf)
        
      • If no response is received to the AG's letter within 45 days, then East Carolina University may request that the AG's office either file suit or turn the debt over to a state-approved collection agency. The AG’s office suggests debts under $25 be treated as a write off.
        
      • As a payment or payments are received they are deposited into Payroll's clearing account, then the overpayment is credited to the appropriate budget via the actual payroll processing. This reconciliation returns the funds to the department and updates the employee's gross pay, taxes, deductions, and benefit records. If needed, an amended W-2 is issued.
        
        
   2. ACTIVE EMPLOYEE
      When the Payroll Department determines an overpayment has occurred, the assistant director will notify the active employee of the overpayment in writing.
      
      • The total overpayment will be withheld from the next available payroll check unless this creates a hardship for the employee. In that case, a repayment agreement may be established according to attached format.
        
        
3. Files Maintained
   The Payroll Department will maintain a separate file on each overpayment by employee name. The file will include documentation that supports and substantiates the overpayment and the calculation of the amount due in addition but not limited to any discrepancies that may occur. Copies of all correspondence between all applicable parties, including letters and emails will be maintained in the file. Documentation of phone calls and critical points of the conversation will be maintained in the file as well.
   
   
   
4. Downloadable Files
   • Sample Collection Letters
   • Overpayment Repayment Agreement Form