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  The Processing Center (PC) must manually impose penalties for late reports that are processed manually (e.g., direct input exclusions). Establish the PENALTY data field and withhold the penalty manually via a Manual Adjustment, Credit, and Award Process (MADCAP) action.

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  Systems limitations require that we combine some penalties with overpayment data even though they are not overpayments (e.g., when entitlement terminates and we have collected a partial penalty).

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  Do not record the penalty amount on the Recovery of Overpayments, Accounting and Reporting (ROAR) system or on the MBR as a legally defined overpayment (LDO) or special payment amount (SPA).

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  If the beneficiary requests a partial adjustment of the overpayment, assume the request also applies to the penalty. Record the combined overpayment and penalty amounts on ROAR to continue partial withholding until we collect the full combined amount. For more information on partial recovery with a penalty involved, see SM 00610.716.

If we withhold a penalty from benefits and later discover the penalty is not due, we still need to collect the penalty deduction. However, because of summarization rules, the MBR benefit history will reflect we paid the benefits and collected the penalty. Consequently, later automated action will process in ignorance of the penalty withholding. Although we still need to collect the penalty, do not rework the automated action to reestablish the penalty unless the beneficiary questions the action. If so:

1. a. 

   Correct the Beneficiary Overpayment or Underpayment Data (BOUD) or Special Payment (SPA) amount to reflect the correct payment amount due.

2. b. 

   Control the collection of the penalty amount manually.

NOTE: Do not revise the penalty field for that year on the MBR.

A late annual report penalty applies and we recovered the penalty amount from current benefits.

The above remark will generate when the incoming transaction identifier is PAC (penalty amount collected).