All or part of the unallocated amount of a payment received can be refunded to the person or employer from whom the payment was received. The amount will be refunded through the preferred method of payment that is defined for the client. For example, a payment of $100 was received from a client and $80 is subsequently allocated towards an outstanding liability. However, if there are no further outstanding liabilities for the client, the remaining unallocated amount of $20 can be issued back to the client. If the preferred payment method for the client is check, the system will generate a check payment of $20 for the client.
When the unallocated amount has been refunded, the unallocated amount for the payment received instruction will be updated and a refund instruction line item will be created to issue the payment to the client. An allocation line item is also created to link the refund payment to the original payment received instruction.
A liability sent out by the organization may only be an estimate of what a participant should be billed. A participant may therefore send the organization more money than the billed amount. A liability product can be set up to allow for the amount sent in to be read as the correct amount to be allocated toward liabilities. This is called liability over allocation.
For example, an employer is issued a bill for employer contributions in the amount of $100. That same employer sends in a payment for $120. If over allocation functionality is set up for the liability, then the full $120 can be allocated toward the liability line item. A new over allocation instruction line item is created in the amount of $20. This $20 remains as a credit reserved to the liability case. By reserving the amount, the original amount billed can be reconciled with the amount that should have been billed to determine whether the extra amount should be applied to additional liabilities on the case.
To allow this reserved amount to be applied toward additional liabilities on the case, the Reconcile Case Account batch process must be run. This batch process starts by unreserving the credit amount. It then looks for outstanding liabilities on the case and, if found, allocates the credit amount toward them. Any remaining credit amounts are made available for allocation to other liability cases the participant may have with the organization.
If over allocation functionality is not set up for a liability, the total allocations toward the liability cannot exceed the total amount for the liability. Taking the example above, only $100 of the payment received can be allocated toward the liability instruction line item. Note that if more than one allocations are made toward a liability line item, the total of all these allocations cannot exceed the total amount for the liability ($100 in the example above).
Over allocation processing is set up for a liability product as part of financial administration.