(a) This section applies to insurance carrier overpayment of income benefits. It does not apply to:
  (1) insurance carrier overpayment of death, burial, or medical benefits;
  (2) redesignation of income benefits; or
  (3) repayments pursuant to Labor Code §415.008.
(b) If an insurance carrier determines that it has overpaid income benefits to an injured employee, the insurance carrier may recoup the overpayment from future income benefit payments as follows:
  (1) The insurance carrier must notify the injured employee in writing that it will begin withholding benefits to recoup an overpayment. The notice must be in plain language and in English or Spanish, as appropriate. The notice must also include the reason for the overpayment; the amount of the overpayment to be recouped from future income benefit payments; the date recoupment will begin; and relevant documentation that supports the insurance carrier's determination of an overpayment, such as a wage statement or a supplemental report of injury. The notice must also advise the injured employee that if the injured employee disagrees that there has been an overpayment, the injured employee may request dispute resolution through the dispute resolution processes outlined in Chapters 140 - 144 and 147 of this title (relating to Dispute Resolution), including expedited dispute resolution. The insurance carrier may not begin recoupment of the overpayment earlier than the second income benefit payment made after the written notice has been sent to the injured employee.
  (2) If the injured employee's income benefits are not concurrently being reduced to pay approved attorney's fees or to recoup a division approved advance, the insurance carrier may recoup the overpayment under this subsection in an amount not to exceed 25% of the income benefit payment to which the injured employee is entitled, except as provided by subsection (c) of this section.
  (3) If the injured employee's income benefits are concurrently being reduced to pay approved attorney's fees or to recoup a division approved advance, the insurance carrier may recoup the overpayment under this subsection in an amount not to exceed 10% of the income benefit payment to which the injured employee is entitled, except as provided by subsection (c) of this section.
(c) If the insurance carrier wishes to recoup the overpayment in an amount greater than that permitted by subsection (b) of this section, the insurance carrier must attempt to enter into a written agreement with the injured employee and, if unable to do so, request dispute resolution through the dispute resolution processes outlined in Chapters 140 - 144 and 147 of this title. If the injured employee wishes to provide for recoupment of the overpayment in an amount less than the percentage chosen by the insurance carrier, the injured employee must attempt to enter into a written agreement with the insurance carrier and, if unable to do so, request dispute resolution through the dispute resolution processes outlined in Chapters 140 - 144 and 147 of this title.
(d) In determining whether to approve an increase or decrease in the recoupment rate, the division must consider the cause of the overpayment and minimize the financial hardship that may reasonably be created for the injured employee.
(e) The insurance carrier must provide notice to the injured employee and the division of any change in the payment of an injured employee's income benefits in accordance with the requirements of §124.2 of this title (relating to Carrier Reporting and Notification Requirements). The insurance carrier's notice to the injured employee must identify the amount that was overpaid.
(f) This section does not create an entitlement for an insurance carrier to seek reimbursement from the Subsequent Injury Fund except as provided by Labor Code §§403.006, 408.0041, 410.209, and applicable division rules.
(g) If an injured employee does not agree that the injured employee has received an overpayment of income benefits, the injured employee may request dispute resolution through the dispute resolution processes outlined in Chapters 140 - 144 and 147 of this title, including expedited dispute resolution.
(h) This section does not affect the division's authority to identify and take action on overpayments on its own motion.

Source Note: The provisions of this §126.16 adopted to be effective January 1, 2012, 36 TexReg 8854