Section 5.40 - Overpayments and Underpayments of Compensation(a) Definitions. In this section: (1) "Community college" has the meaning assigned to "public junior college."(2) "Comptroller" means the comptroller of public accounts for the State of Texas.(3) "Institution of higher education" has the meaning assigned by Education Code, § 61.003, except that the term does not include a public junior college or a community college.(4) "Public junior college" has the meaning assigned by Education Code, § 61.003.(b) Recovering overpayments of compensation. (1) Special definitions. In this subsection: (A) "Compensation" has the meaning assigned by Government Code, § 666.001(1). The term: (i) includes any type of bonus or performance reward; and(ii) does not include a workers' compensation payment.(B) "Comptroller object code" means the four-digit code that indicates in USAS the type of expenditure made.(C) "Deduction" means a deduction of the amount of a state employee's indebtedness from any amount of compensation that a state agency owes the employee or the employee's successor.(D) "Fiscal year" means the accounting period beginning on September 1st and ending the following August 31st.(E) "HRIS" means the human resource information system.(F) "Indebtedness" means money that a state employee owes a state agency because the employee received an overpayment of compensation from the agency.(G) "Overpayment of compensation" means compensation paid to a state employee that exceeds the amount the employee was eligible to receive under law because at the time the compensation was paid: (i) the employee was ineligible to receive all or a portion of the amount paid; or(ii) the employee's eligibility to receive all or a portion of the amount paid was conditioned on the occurrence of an event that did not occur or the employee's fulfillment of a promise that the employee did not fulfill.(H) "Reduction" means a reduction in the gross amount of base salary or wages that a state agency owes a state employee or the employee's successor for services provided by the employee during any pay period after the pay period in which the indebtedness was incurred.(I) "SPRS" means the standardized payroll/personnel reporting system.(J) "State agency" has the meaning assigned by Government Code, § 666.001(3).(K) "State employee" has the meaning assigned by Government Code, § 666.001(4).(L) "Successor" has the meaning assigned by Government Code, § 666.001(5).(M) "USAS" means the uniform statewide accounting system.(N) "USPS" means the uniform statewide payroll system.(2) Exclusive authority to recover indebtedness. (A) The comptroller has exclusive authority to recover an indebtedness if the comptroller is responsible under Government Code, §§ 404.046, 404.069, or 2103.003 for paying compensation to the employee or successor on behalf of a state agency. For example, if a payment of compensation is processed through USAS, then the comptroller has exclusive authority to recover the indebtedness.(B) If the comptroller is not responsible under Government Code, §§ 404.046, 404.069, or 2103.003 for paying compensation to the employee or successor on behalf of a state agency, then only the agency that pays compensation to the employee or successor may recover the indebtedness. For example, a state agency that issues a check to pay the compensation of a state employee has exclusive authority to recover the indebtedness.(3) General preconditions for the comptroller recovering an indebtedness. (A) This paragraph applies only to the recovery of an indebtedness by deduction or reduction.(B) A state agency's request for the comptroller to recover an indebtedness is invalid unless the request complies with any applicable requirements of HRIS, SPRS, USAS, and USPS.(C) A state agency's request to the comptroller to recover an indebtedness constitutes the agency's certification to the comptroller that the agency already has: (i) provided proper notice to the employee or successor according to paragraph (4) of this subsection; and(ii) complied with Government Code, § 666.005(a).(D) A state agency may avoid making the certifications listed in subparagraph (C) of this paragraph only if the agency does not request the comptroller to recover the indebtedness.(4) Notice requirements. A state agency's notice to a state employee or the employee's successor is "proper" for purposes of recovering an indebtedness only if the notice: (A) complies with Government Code, § 666.003(b)(1)-(3); and(B) reasonably describes the method by which the indebtedness may be recovered if the indebtedness is not paid on or before the date specified.(5) Calculating the hourly rate for the recovery of an indebtedness. This paragraph applies only if an indebtedness resulted from a state agency believing that a state employee worked more hours than the employee actually worked. When the agency calculates the amount of a deduction or a reduction, the agency shall use the hourly rate of pay that was in effect during the payroll period the hours were worked.(6) Effect of the recovery of an indebtedness on payroll deductions. If a deduction (other than the deduction described in this subsection) was made from an overpayment of compensation at the time the overpayment occurred, then a refund of that deduction must be made in conjunction with the recovery of that overpayment. For example, the amount deducted to make a retirement contribution or to comply with the Federal Insurance Contributions Act must be refunded when the overpayment is recovered.(7) Timing of a deduction. A deduction may be made from any payment of compensation and may be made more often than once monthly.(8) Sufficiency of compensation to support a deduction. (A) If the amount of a state employee's compensation is insufficient to support a deduction after all other deductions with a higher priority have been made, then a portion of the deduction must be made. The amount of the deduction that could not be made must be deducted in succeeding payroll periods until the full amount is deducted.(B) This subparagraph applies to a state employee who has agreed to pay an indebtedness through deduction but under an installment plan. The amount that could not be deducted in a payroll period because of insufficient compensation must be added to the amount of the regularly scheduled installment in the next payroll period.(9) Sufficiency of base salary or wages to support a reduction. (A) If the amount of a state employee's base salary or wages is insufficient to support a reduction, then a portion of the reduction must be made. The amount of the reduction that could not be made must be subtracted from gross salary or wages in succeeding payroll periods until the full amount of the reduction is realized.(B) This subparagraph applies to a state employee who has agreed to pay an indebtedness through a reduction but under an installment plan. The amount of the reduction that could not occur in a payroll period because of insufficient base salary or wages must be added to the amount of the regularly scheduled installment in the next payroll period.(10) Reimbursement of accounts and funds in the state treasury. (A) This paragraph applies only to a state agency that: (i) directly used money in the state treasury to make an overpayment of compensation; or(ii) initially used local money controlled by the agency to make an overpayment of compensation and then was reimbursed for that overpayment with money in the state treasury.(B) A state agency that recovers an indebtedness must reimburse the appropriate account or fund in the state treasury. The agency must credit that reimbursement to the comptroller object code that corresponds to the type of compensation recovered, e.g., salary, benefit replacement pay, longevity pay. The reimbursement must be credited to the same fiscal year that was charged for the overpayment. If the fiscal year already has closed, then the agency must first deposit the reimbursement in a suspense account and then manually adjust the appropriate accounts.(C) For purposes of this paragraph, "state treasury" means money that may be spent only on a warrant issued or electronic funds transfer initiated by the comptroller.(11) Adjustments to payroll accumulators. A state agency that recovers an indebtedness shall adjust all relevant payroll accumulators, including agency paid taxes, employee paid taxes, and limits on benefit replacement pay and deferred compensation. The agency shall maintain sufficient records about these adjustments to prove compliance with state and federal laws and to support an audit.(12) Terminations or interagency transfers of state employees. A deduction or a reduction that started while a state employee was employed by a state agency may not continue after the employee transfers to a different state agency. The amount of overpaid compensation that remains outstanding after the transfer may not be recovered through deduction or reduction.(c) Correcting underpayments of compensation. (1) Special definitions. In this subsection: (A) "Casual or task employee" means an individual who is employed by an institution of higher education for a short period or a particular task.(B) "State agency" means a department, board, commission, committee, council, agency, office, or other entity in the executive, legislative, or judicial branch of Texas state government, the jurisdiction of which is not limited to a geographical portion of this state. The term includes the State Bar of Texas, the Board of Law Examiners, and an institution of higher education.(C) "State employee" includes a state officer, a casual or task employee, and an individual whose employment with a state agency is conditional on the individual being a student.(2) Quality control measures. Each state agency must ensure that its internal operating procedures include quality control measures that will detect any underpayment of compensation to a state employee.(3) Deadline for correcting underpayments. (A) Except as provided in subparagraph (B) or (C) of this paragraph, a state agency shall correct an underpayment of compensation for a particular pay period not later than the following pay period.(B) A state agency shall promptly process a supplemental payroll to correct an underpayment of compensation to a state employee if delaying the correction would cause employee hardship.(C) This subparagraph applies when a state agency does not detect an underpayment of compensation in time to correct it during the pay period following the pay period for which the underpayment occurred. The agency shall promptly correct the underpayment through a supplemental payroll.(4) Choosing the hourly rate for the correction. This paragraph applies only if an underpayment of compensation resulted from a state agency believing that a state employee worked fewer hours than the employee actually worked. The agency shall calculate the amount of the correction by using the hourly rate of pay that was in effect during the payroll period the hours were worked.(5) Adjustments to payroll accumulators. A state agency that corrects an underpayment of compensation shall adjust all relevant payroll accumulators, including agency paid taxes, employee paid taxes, and limits on benefit replacement pay and deferred compensation. The agency shall maintain sufficient records about these adjustments to prove compliance with state and federal laws and to support an audit.34 Tex. Admin. Code § 5.40
The provisions of this §5.40 adopted to be effective September 28, 2004, 29 TexReg 9203