Federal Employment: Payroll errors in withholdings and contributions
Payroll offices must adjust errors in withholdings and contributions on a subsequent payroll and must include the adjustments in a subsequent withholdings and contributions report.
Your employing office must ensure that your individual payroll record shows not only the regular (current) deductions for health benefits withholdings, but also the adjustments.
Where annual appropriations are involved and the fiscal year changes between the processing of the erroneous withholdings and/or contributions and the processing of the adjustment, the proper appropriation must be adjusted.
When you participate in premium conversion, IRS rules require that no adjustments to taxable income be made as a result of an error correction (even when the employing office is at fault). When your employing office processes a correction, the actual amount of FEHB premiums deducted from your pay will receive pre-tax treatment.
Example
Wendy has $100 per pay period deducted from her pay for FEHB. Her employing office mistakenly deducted $150 during the last pay period before the effective date of her election to participate in premium conversion. To correct the error, the agency deducts $50 for FEHB from Wendy’s pay in the following pay period, during which she becomes a premium conversion participant. Although if not for the error, $100 would have been deducted from her pay, only $50 is treated on a pre-tax basis.
Errors Involving Current Employees Overdeductions
When too much money has been withheld from your pay, or when withholdings have been made when you are not enrolled, your payroll office must adjust the withholdings on a subsequent payroll on which your name appears. This adjustment automatically corrects any excess agency contribution.
Errors Involving Current Employees Underdeductions
When too little or no money has been withheld from your pay for health benefits withholdings, your employing office must send the correct payment to OPM no later than 60 calendar days after it determines the amount of the underdeduction. This payment must be made to OPM regardless of whether or when the underdeduction is recovered by your employing office.
The underdeduction represents an overpayment of your pay. Your employing office must determine whether to waive collection of the overpayment (up to $1,500), in accordance with 5 U.S.C. 5584. The law provides that an employing office can waive recovery of the overpayment if, in its judgment, you are without fault and recovery would be against equity and good conscience. (If the employing office involved is excluded from the provisions of 5 U.S.C. 5584, it can use any applicable authority to waive the collection.)
If the employing office waives the collection of the unpaid health benefits withholdings, it must remit the payment, along with any applicable Government contributions, out of its own funds.
Waiver is not available for unpaid withholdings when you are in a leave without pay status or when your pay is insufficient to make the withholding.
Errors Involving Separated Employees
When an adjustment in withholdings is necessary after you have separated from service, your payroll office must make the adjustment in your final pay (or payment to your beneficiary or estate).