An over allocation is the payment of an amount of money that is greater than the amount that was billed. If the Over Allocation setting is indicated for a liability product, amounts of money that are greater than the amounts billed to a participant can be allocated towards an outstanding liability. For example, if an employer is billed $100 and a payment is received from that employer for $120, the full $120 is allocated toward the $100, creating a $20 over allocation.
If the over allocation setting is not indicated, then the allocation cannot exceed the liability amount. Over allocations are used for products where the liabilities are usually only an estimate of what should be billed. For example, employer contribution liabilities are usually an estimate, as the employer will tend to have more information than the agency regarding the number of its employees.
The Over Allocation setting is also used to determine how payments that are cancelled will be regenerated if the original payment included a deduction. If the setting is not enabled, when a payment is regenerated and the deduction made along with the original payment is more than the outstanding liability amount, an exact replica of the original payment will not be regenerated. The system will deduct only the outstanding liability amount. If the setting is enabled, when a payment is regenerated and the deduction made along with the original payment is more than the outstanding liability amount, the system will regenerate an exact replica of the original payment.