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Policy and Procedure Name:

Adjustment of Overpaid Compensation

Policy #:

CP-01-08

Code/Rule Reference:

R.C. 4123.511(K), 4123.512

Other Reference:  Industrial Commission of Ohio (IC)/Ohio Bureau of Workers’ Compensation (BWC) Joint Resolution R89-3-27; Adjudications Before the Ohio Industrial Commission Memo K4, S2

Effective Date:

03/16/21

Approved:

Ann M. Shannon, Chief of Claims Policy and Support

Origin:

Claims Policy

Supersedes:

Policy # CP-01-08, effective 11/13/15

History:

Previous versions of this policy are available upon request


 

Adjustment of Overpaid Compensation Table of Contents

 

I. POLICY PURPOSE

II. APPLICABILITY

III. DEFINITIONS

Claimant

Good Faith

IV. POLICY

A.         Adjusting Compensation

B.         Overpayments

C.         Collecting Overpayments

D.         Travel Expenses

E.         Overpayment Reduction

V. PROCEDURE

A.         General Claim Note and Documentation Requirements

B.         Adjustment of Compensation Previously Paid

C.         Non-Collection of Previously Paid Compensation

D.         Absorption Rates for Overpayments

E.         Appeals to Court

F.         Issuing a BWC Overpayment Reduction Notice

G.        Recouping an Overpayment from Living Maintenance (LM) and Living Maintenance Wage Loss (LMWL)

H.         Collecting Overpayments

I.           Manual Adjustments to Overpaid Compensation in the Claims Management System

 

 


 

I. POLICY PURPOSE

 

The purpose of this policy is to ensure that compensation is entered and adjusted correctly in the claims management system when compensation is overpaid, and overpayments are collected according to Ohio law and applicable case law.

 

II. APPLICABILITY

 

This policy applies to BWC Claims Services staff.

 

III. DEFINITIONS

 

Claimant: The individual seeking workers’ compensation benefits, typically the injured worker (IW) or a dependent of a deceased IW.

 

Good Faith: For purposes of this policy, when the claimant, including IW, employer, and BWC take action on a compensation decision in the claim based on the belief that all relevant and necessary information was available at the time the decision was made, and all parties were acting reasonably and with an honest belief that compensation was lawfully due.

 

IV. POLICY

 

A.     Adjusting Compensation

1.     BWC shall adjust compensation when a claimant’s full weekly wage (FWW) and/or average weekly wage (AWW) are reset; and

2.     BWC shall adjust compensation when a claimant receives compensation that he/she is no longer entitled to receive.  

 

B.     Overpayments

1.     It is BWC’s policy to adjust payment of compensation and, if applicable, collect an overpayment from any past, present, or future workers’ compensation claims according to Ohio law, unless:

a.     The claim meets the criteria for non-collection, as outlined in this policy; 

b.     The overpayment is waived in a lump sum settlement agreement; or

c.      The IC has directed otherwise.

2.     BWC may choose not to collect an overpayment when claims services staff, in consultation with a BWC attorney, determines that the claimant, employer and BWC all believed, in good faith, at the time the payments were made, that compensation was lawfully due. (See “V.C.1-7 for examples.)

 

C.    Collecting Overpayments

1.     It is BWC policy to apply the recoupment schedule outlined in R.C. 4123.511(K) to an overpayment even when that overpayment was created by circumstances other than a reversal of an order to pay compensation.   For example, BWC would apply the recoupment schedule outlined in R.C. 4123.511 (K) when a duplicate payment is made in error. 

2.     It is BWC’s policy to collect:

a.     An overpayment from any amount of compensation the claimant may receive in any past, present, or future claim in accordance with Ohio law, even if the claimant has arranged to make payments to BWC’s Collection Department to reduce the overpayment; and

b.     Overpayments according to the percentages are listed in the chart on www.bwc.ohio.gov titled “Absorption Rates for Overpayments.” 

i.       Internal and external customers may refer to BWC Library/About BWC/Tools for Authorized Reps/Resources to locate the chart on www.bwc.ohio.gov.  

ii.      Internal customers will find the chart on Claims Online Resources (COR)/Adjustment of Overpaid Compensation/Tips and Tools.  

3.     BWC will not absorb an overpayment from the first 12 weeks of payment of temporary total compensation (TT), except when the overpayment is due to a finding of fraud, but will absorb the overpayment following payment of the first 12 weeks of TT.

4.     Refer to the Overpayment of Compensation policy and procedure on www.bwc.ohio.gov for more information regarding overpayments.

 

D.    Travel Expenses

1.     Reimbursement of travel expenses is a reimbursement of previously paid expenses, not a form of compensation; therefore, BWC will not collect compensation overpayments from travel expense reimbursement.

2.     Refer to the Travel Reimbursement policy and procedure for more information regarding reimbursement of travel expenses. 

 

E.     Overpayment Reduction

1.     The claimant may contact BWC’s Collections Department to set up a schedule of payments to reduce the overpayment.

a.     The claimant may send payments for non-fraud collections to:

Ohio Bureau of Workers’ Compensation

P. O. Box 89492

Cleveland, OH  44101-6492.

b.     Fraud collections are to be sent to:

Ohio Bureau of Workers’ Compensation

Attn:  Fraud Collections

P.O. Box 15187

Columbus, OH  43215.

2.     A check(s) or money order(s) must be payable to Ohio Bureau of Workers’ Compensation or BWC. 

 

V. PROCEDURE

 

A.     General Claim Note and Documentation Requirements

1.     BWC staff shall refer to the Standard Claim File Documentation and Altered Documents policy and procedure for claim note and documentation requirements; and

2.     Shall follow any other specific instructions for claim notes and documentation included in this procedure.

 

B.     Adjustment of Compensation Previously Paid

1.     Claims services staff shall adjust compensation when:

a.     A claimant received compensation he or she was not entitled to receive;

b.     There is a declared overpayment;

c.      A claimant’s FWW and/or AWW are reset (refer to the Wages policy and procedure for more information regarding adjusting previously paid compensation); and

d.     There is a change in the IW’s eligibility to receive compensation, including, but not limited to, the following:

i.       Return to work;

ii.      Maximum medical improvement; 

iii.     Death of the IW;

iv.    The allowance of the claim is overturned; and

v.      A claimant is receiving Social Security Retirement while receiving TT.

2.     Prior to making any adjustment to previously paid compensation, claims services staff shall:

a.     Review the claim; and

b.     Note the amount of any existing overpayment to ensure:

i.       Any existing overpayment(s) has been appropriately declared by BWC/Industrial Commission of Ohio (IC) Order;

ii.      The result of the adjustment has the intended impact on any overpayment that already exists in the claim; and

iii.     Claims services staff issues a “BWC Adjustment Order” for only the newly overpaid amount when an overpayment already exists in the claim. 

3.     When the IW is overpaid, claims services staff shall: 

a.     Complete an Overpaid Compensation Worksheet;

b.     Complete an Overpayment Checklist;

c.      Issue:

i.       A “BWC Adjustment Order”, only when BWC is declaring the overpayment; or

ii.      An “Initial Notification of IC Declared Overpayment” letter when the IC issued an order with a specific finding of overpayment and the IC decision is final;  

d.     Set the absorption rate on the overpayment currently being declared at 0% until the issue is fully adjudicated; and

e.     Refer to the Wages policy and procedure for details regarding adjusting previously paid compensation when the IW is overpaid due to a change in wages.

4.     When the BWC Adjustment Order is appealed, claims services staff shall obtain:

a.     Copies of cashed warrants; and

i.       Claims services staff shall obtain copies of cashed warrants by sending an e-mail to the BWC EFT e-mail box.  The e-mail shall include:

a)     The warrant number;

b)     The warrant amount; and

c)     The date the warrant was issued.   

ii.      Claims services staff shall image copies of the cashed warrants into the claim. 

iii.     Claims services staff shall request copies of cashed warrants sent to a third party by following the steps listed above when an overpayment was created by a payment and a third party was reimbursed for that same payment.  Examples of third-party payees include:

a)     Ohio Department of Job and Family Services;

b)     Lump sum advancement to third parties; and

c)     Employers for wage agreements.  

b.     A Warrant History Report from data warehouse.  The report: 

i.       Includes payments made by paper warrants as well as electronic benefits transfer/electronic funds transfer (EBT/EFT);

ii.      Is used by claims services staff, Special Investigations Unit (SIU), and an IC Hearing Officer as a checklist against the actual copies of the cashed warrants to verify issuance and receipt of warrants; and

iii.     Is used to identify and verify EFT/EBT payments, except for reclaimed or reversed EFT/EBT payments because, in the data warehouse, the warrant status for electronic payments will always display as “cashed,” even if the funds were reclaimed or the transaction reversed. To determine if a reclaim or reversal has been made, claims services staff shall review:

a)     The information found on the Warrant History Report; and

b)     The Compensation Payment History window found on www.ohio.bwc.gov

 

C.    Non-Collection of Previously Paid Compensation

1.     Claims services staff may choose not to collect previously paid compensation to which the claimant was not entitled when payment was made in good faith and was lawfully due.

2.     When claims services staff believes a good faith exception may have occurred, staff shall review the claim with a BWC field attorney to review the decision regarding non-collection of previously paid compensation.  Examples of good faith/good faith exceptions may include:

a.     Example #1 - The decedent had been married twice, but never legally divorced his first wife.  Upon his death, BWC paid death benefits to his second wife, who was not his legal wife.  These facts were unknown to the woman who was paid death benefits, BWC, and the employer at the time payment was made; therefore, the previously paid compensation that was made in good faith should not be collected.

b.     Example #2 - The IW, employer and BWC believed all available information was presented at the time the decision was made to pay Disabled Workers’ Relief Fund (DWRF) benefits to the IW.  However, it was later discovered that receipt of Social Security disability benefits affected DWRF eligibility.  The Court determined the IW, employer, and BWC believed, in good faith, that entitlement was established at the time the DWRF payments were made.  Therefore, the previously paid compensation that was made in good faith should not be collected.

3.     Following the staffing, claims services staff shall make the appropriate adjustments in the claims management system to correct the previous compensation payments that will not be collected and to ensure correct future payment.  Prior to making any adjustments to previously paid compensation that will not be collected, claims services staff shall document the amount of any existing overpayment to ensure the appropriate amount remains on the claimant’s overpaid balance in the claims management system.

4.     Claims services staff shall complete the Overpaid Compensation Worksheet to support the amount of the previously paid compensation that will not be collected.

5.     Claims services staff shall send a Subsequent Decisions Order to the claimant, employer, and the authorized representative(s) to address the matter causing inappropriate payment to the claimant and issue a decision regarding previously paid compensation that will not be collected.

6.     Claims services staff shall use the following language in the order to notify the claimant, employer, and their authorized representative(s) that BWC will not seek reimbursement of compensation previously paid in error:  As outlined in this order, BWC will not seek reimbursement of any compensation previously paid in error to the claimant.

7.     Once a final decision has determined that previously paid compensation will not be collected, claims services staff shall seek approval from the supervisor for manual adjustment of the claimant’s overpaid balance. 

a.     Once supervisor approval has been received, claims services staff shall send an email to the BWC Service Desk who will forward to the Business Transformation Team to remove the amount of the previously paid compensation that will not be collected from the claimant’s overpaid balance on the claims management system.  The claimant may have an existing overpaid balance; therefore, it is especially important to remove only the amount of the previously paid compensation that will not be collected, not the entire overpaid balance.  

b.     The email shall contain the same information as the claim note entered to support non-collection of the previously paid compensation, as well as other information in this procedure and related policy pertaining to manual adjustment of an overpaid balance.

 

D.    Absorption Rates for Overpayments

1.     Claims services staff shall collect overpayments according to the percentages listed in the chart on Claims Online Resources (COR) titled “Absorption Rates for Overpayments” (See Adjustment of Overpaid Compensation/Tips and Tools).

2.     Claims services staff shall collect an overpayment from future compensation, in accordance with Ohio law, even if the claimant has arranged to make payments to BWC’s Collections Department to reduce the overpayment.

3.     Temporary Total (TT) Compensation – For information regarding adjustment of compensation during and after the first 12 weeks of payment of TT, claims services staff shall refer to COR/Adjustment of Overpaid Compensation/PowerSuite Job Aids.

4.     When the Court of Common Pleas issues a decision that reverses a previous BWC or IC claim allowance or compensation payment decision, claims services staff:

a.     Shall set the IW up overpaid; and

b.     May refer to the Orders, Waivers, Hearings and Appeals policy and procedure for information pertaining to issuing a BWC Order and the Overpayment of Compensation policy and procedure for information regarding setting up an overpayment.

 

E.     Appeals to Court

1.     Court of Common Pleas:  when an appeal is filed and the Court of Common Pleas reverses the allowance of the claim or payment of compensation, claims services staff shall seek recovery of any compensation paid (set the IW up overpaid.) Claims services staff shall:

a.     Ensure that the overpayment resulting from the reversal of the allowance decision is charged to the Surplus Fund by placing the state-fund claim in disallowed status; or

b.     Collect the overpayment from the IW (an Overpaid Compensation Worksheet shall be completed), if specified to do so by the court; and

2.     Court of Appeals or the Supreme Court:  when an appeal is filed and the Court of Appeals or the Supreme Court reverses the appealed decision, claims services staff will not seek recovery of any compensation paid (IW is not set up overpaid), except for claims assigned to a public employer-state (PES). Claims services staff shall:  

a.     Determine if the employer’s risk needs adjusted

i.       The employer’s risk will be adjusted if compensation has been paid; and

ii.      Any overpayment that occurs due to the reversal of the claim allowance or compensation payment will be charged to the Surplus Fund.

b.     For claims assigned to a PES employer:

i.       The employer’s risk will not be adjusted; and

ii.      Any overpayment that occurs due to the reversal of the claim allowance or compensation payment will not be charged to the Surplus Fund.

3.     Refer to the “When to Contact Employer Risk Adj” under Tips and Tools on the Adjustment of Overpaid Compensation page on COR for more information regarding adjusting overpaid compensation.  

4.     Refer to the Orders, Waivers, Appeals and Hearings policy and procedure on www.bwc.ohio.gov for more information regarding appeals to court. 

 

F.     Issuing a BWC Overpayment Reduction Notice   

1.     The reduction notice is generated by the claims management system:

a.     Annually, when the IW/surviving dependent is receiving ongoing compensation (e.g., Permanent Total Disability, Death Benefits); and

b.     At the end of the year, when the overpayment has been completely collected.

2.     Claims services staff shall:

a.     Send a BWC Overpayment Reduction Notice when any subsequent reductions are made to a declared overpaid balance due to one of the following:

i.       Receipt of a personal check;

ii.      Receipt of a returned warrant; or

iii.     Issuance of an award for a new period of compensation.

b.     Generate an Ad Hoc letter to send to the parties to the claim when a situation arises that the Overpayment Reduction Notice does not sufficiently address.

c.      Include the following in the reduction notice:

i.       Overpaid balance;

ii.      Amount of reduction; and

iii.     New balance of the overpayment.

3.     Claims services staff may send the Overpayment Reduction Notice when the overpayment has been completely collected. 

 

G.    Recouping an Overpayment from Living Maintenance (LM) and Living Maintenance Wage Loss (LMWL)

1.     Claims services staff shall recoup overpayments of compensation from LM and LMWL as follows:

a.     No overpayment deductions will be taken from LM, except for fraud;

b.     Non-fraud overpayment deductions will be taken from LMWL at 40%; and

c.      Overpayments caused by the fraudulent receipt of any compensation will be collected from LM and LMWL at 100%.

2.     When TT payments change to LM, claims services staff shall absorb the LM at 100% only for the duplicate periods paid in TT.  This is considered an even adjustment.

a.     Claims services staff shall not issue a BWC Order when this situation arises.

b.     For additional information, refer to the TT/LM Even Adjustment job aid on COR/Adjustment of Overpaid Compensation/PowerSuite Job Aids.

H.    Collecting Overpayments

F.

 

1.     When the IW contacts BWC’s Collections Department to set up a schedule of payments to reduce the overpayment, the Collections Department may negotiate repayment of the overpayment based upon the amount of the overpayment and the length of time future awards of compensation will be paid.

2.     When a check or money order is received in a service office, excluding a department or service office in the William Green Building, as payment for any overpayment that is recorded in the claims management system and transmitted to Accounts Receivable, claims services staff shall:

a.     Track the receipt of payment through the Payment Transaction Tracker (see payment transaction tracker designee in the service office to enter payment in the tracker); and 

b.     Complete an Accounting General Deposit Slip (A-31b) online or through RightFax as follows:

i.       Write the IW’s Social Security Number with no dashes (123456789) on the line next to “BWC Customer Number”;

ii.      Write the name of the individual writing the check on the line beside “Name” (if the IW’s name is different than the name of the individual writing the check, write the IW’s name on the line beside “Address”);

iii.     Write the claim number on the second “Address” line;

iv.    In the “Payment Type (BWC Use Only)” section, place an X in the “Overpaid Compensation” box and mark the appropriate sub-box; 

v.      Write the check or money order amount in the “Amount Paid to BWC $” line; and

vi.    Place the check or money order and the A-31b in an envelope and send them to the following address:  Ohio Bureau of Workers’ Compensation; P. O. Box 89492; Cleveland, OH  44101-6492.  Pre-printed envelopes may be ordered from Office Services.

c.      If the check or money order is received by a department or service office located in the William Green Building, claims services staff shall complete the A-31b as noted above and shall send the check or money order to Cash Control on Level 24 of the William Green Building.

d.     When the check or money order received (in the local customer service office or the William Green Building) is for a fraud overpayment, claims services staff shall:

i.       Enter the payment into the Payment Transaction Tracker; and

ii.      Complete the A-31b by:

a)     Checking the Fraud box in the “Payment Type (BWC Use Only)” section; and

b)     Writing “Fraud” and the IW’s Social Security Number with no dashes on the BWC customer number line.

iii.     Forward the check or money order to the Fraud Analyst in the Special Investigations Unit within the customer service office; and

iv.    Image a copy of the A-31b and a copy of the check or money order (with account numbers blacked out) in the claim file. 

v.      BWC’s Cash Control Unit will update the IW’s account on the Accounts Receivable system, and the claims management system will systematically update overnight, and an Accounts Receivable update will post to claims services staff’s work list.

e.     When a benefit recipient returns a warrant, claims services staff shall:

i.       Write VOID on the warrant;

ii.      Attach the warrant to a completed Warrant Status Change (C-170); and

iii.     Return the warrant and the C-170 to Benefits Payable.

a)     For immediate action, claims services staff shall fax the C-170 with a copy of the voided warrant to Benefits Payable at 614-621-1140.

b)     The original warrant must be returned to Benefits Payable at Benefits Payable Department; 30 W. Spring St. L-24; Columbus, OH  43215-2256.

iv.    For more information regarding warrant status, refer to the Adjustment of Overpaid Compensation page on COR.

a)     See Tips and Tools/Warrant Status Information; or

b)     See Tips and Tools/Returned Warrant Information from Benefits Payable (see Quick Reference Card).

v.      Additional information pertaining to warrants may be found on the Fiscal and Planning Division page on BWCWEB.  See Benefits Payable/Services/FAQ’s for BWC Issued Warrants.

I.       Manual Adjustments to Overpaid Compensation in the Claims Management System

1.     In most situations, overpaid balances in the claims management system are automatically recalculated when claim services staff adjusts the claimant’s benefit plan.  However, the following situations are examples of when claims services staff shall manually increase or decrease the overpaid balance for a claimant:

a.     Payment was made to a claimant’s attorney on Miscellaneous Payment;

b.     Payment was made to the Ohio Department of Job and Family Services (ODJFS) after TT has been paid;

c.      An IW has been granted a bankruptcy discharge or is in a bankruptcy proceeding and the Law Department notifies claims services staff that the overpayment has been discharged or ordered collected at a different rate;

d.     A check is issued for a few cents due to a rounding error; and

e.     A dependent is overpaid death benefits. 

2.     Claims services staff shall not complete a manual adjustment to an overpaid balance in the claims management system in the following situations (not all-inclusive):

a.     A claim has been vacated and rebuilt, and an overpayment remains because the overnight batch process has not run;

b.     A District Hearing Officer (DHO) reverses a decision on maximum medical improvement (MMI) and states the IW is not overpaid. 

i.       In this situation, claims services staff shall rebuild the compensation because it has been determined the IW was due compensation for a previously vacated period that was actually paid to the IW.

ii.      Claims services staff shall execute this as an even adjustment. 

c.      A check has been received from the claimant and forwarded to BWC’s bank.

i.       Claims services staff shall not submit a request to have the overpaid balance reduced.

ii.      Once the check clears the bank, the Cash Control Unit will apply the check to the IW’s overpaid account and the overpayment in the claims management system will be reduced through a nightly interface.

iii.     Claims services staff shall set a work item for 10-14 days.

iv.    If the payment is not reduced, claims services staff shall contact Cash Control by email.

v.      When the adjustment occurs, claims services staff shall be notified by a security work item.

d.     A warrant is returned and will reduce a claimant’s overpaid balance.  The returned warrant must be placed in a “Void Credit” status by Benefits Payable in order to reduce the IW’s overpayment. 

3.     When manually adjusting an overpaid balance, claims services staff shall verify the overpayment is not from another claim for the IW by checking the IW’s overpayment balance in the claims management system at Participant - IW/Claims.  Overpayments appear at the IW level, not just at the claim level.  

a.     To help determine if an overpayment needs to be adjusted, claims services staff may review what compensation the IW was entitled to and what was paid.

b.     Claims services staff shall enter a claim note explaining why the overpayment is being changed.  Specific dollar amounts are to be included in the note. Example:  The IW’s current overpaid balance is $500.00; however, the IW has been granted bankruptcy and the overpayment is to be forgiven; requesting to adjust the overpaid balance to $0.00.

c.      The BWC Service Desk must be contacted to request a manual adjustment to an overpaid balance.

i.       Before sending an email to the team to request an adjustment, claims services staff shall send an email to the supervisor to request review and approval of the adjustment to the overpayment.  The email shall include the following information:

a)     Claim number(s) (more than one claim number may be listed);

b)     Injured worker’s name;

c)     Current overpaid amount on the claims management system;

d)     Amount to adjust the overpayment and if it should be increased or decreased (e.g., Overpayment should be decreased by $700.);

e)     Overpaid balance that should display on the claims management system after adjustment (e.g., Overpaid balance should be $300.);

f)       Confirmation that a claim note was entered and the date it was entered (e.g., Claim note entered on 11/12/13.)

ii.      Review and approval of the adjustment is not necessary for a “penny rounding error.”

iii.     After reviewing the information pertaining to the adjustment, the supervisor shall respond to claims services staff stating whether the adjustment is approved or denied.

a)     If the request is denied, the supervisor shall contact claims services staff to discuss the appropriate course of action staff must execute to obtain approval of the adjustment.

b)     If the request is approved, claims services staff shall send the request for manual adjustment to the IW’s overpaid balance to the BWC Service Desk.

i)       The subject of the email to the BWC Service Desk shall be the claim number(s) and “overpayment adjustment.”

a.     If the overpayment needs to be increased/decreased before a payment can be released, claims services staff shall include “overpayment increase/decrease” in the subject line of the email; and

b.     Claims services staff shall set a high priority flag.

ii)      Claims services staff shall send the BWC Service Desk the same information that was included in the email to the supervisor. The email does not go to Accounting or Benefits Payable.

iii)    Claims services staff may choose to request a return receipt on Outlook so that the issue may be tracked.

iv)    Claims services staff shall request an immediate adjustment only if it is necessary (compensation cannot be paid until the adjustment is done) and shall not wait until the end of the day to request a critical adjustment.

c)     The BWC Service Desk will forward the matter to the Business Transformation Team, who will review the request and notify the requester/claims services staff if the team does not agree with the request for the manual adjustment or if the request is missing required information.

d)     The Business Transformation Team may ask staff to provide information about the following:

i)       What periods and types of compensation the IW was entitled to;

ii)      What has been paid; and

iii)    Why the overpayment should be something other than the difference between the two amounts.

e)     Claims services staff will receive a work item once the Business Transformation Team enters a claim note indicating the adjustment has been completed.

i)       The work item serves as notice to claims services staff that the adjustment is complete, and the IW’s adjusted overpaid balance is viewable on the claims management system.

ii)      Accounts Receivable receives the adjustment to the overpayment in the overnight interface.