TN 19 (08-11)

GN 02604.180 Processing Instructions for Annual Earnings Test and the Penalties for Late Filing

A. Description of the automated job stream-3 (AJS-3) penalty process

For automated enforcement actions and late annual reports directly entered into the Master Beneficiary Record (MBR), the AJS-3 will:

  1. calculate the penalty;

  2. prepare a notice advising of the overpayment, penalty, proposed adjustment, and the opportunity to establish good cause;

  3. control the penalty for collection; and

  4. withhold the penalty from benefits due (unless we revoke the penalty or the beneficiary requests a partial withholding).

B. Procedure for processing penalties for late filing

1. Manual input of penalties

  • 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.

  • 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).

2. Full benefit withheld

  • 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).

  • 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.

3. Penalty withheld from benefits later found to be “not due”

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

  2. Control the collection of the penalty amount manually.

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

C. Procedure for AJS-3 exceptions

If the AJS-3 is unable to process an action, it will produce an exception error. Fix the error using a manual action. If a late annual report (AR) entered through AJS-3 results in an exception error that does not contain the penalty remark below, then the AJS-3 program determined that a penalty does not apply.

Penalty diary MM/YY collect penalty $$$$.¢¢

  • Reason for exception

    A late annual report penalty applies, the penalty diary is now mature, and the penalty recovery should begin; however, AJS-3 is unable to process the action.

  • Action to take

    Begin withholding the amount of penalty and delete the diary.

D. Description of AJS-3 remarks

The informational remarks below will appear on AJS-3 output:

1. Recovery of penalty amount $$$$.¢¢ started

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

2. Penalty amount collected (PAC)

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

E. Reference

SM 00610.001, Overview of the Recovery of Overpayments, Accounting and Reporting (ROAR) System


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