Employee penalty deductions.

If the employee earns over the monthly allowable earnings amount in a month and does not report it within the time limit shown in § 220.162(b), a penalty deduction may be imposed. The penalty deduction for the first failure to report equals the annuity amount for the first month in which the employee earned over the monthly allowable earnings amount. The deduction for a second or later failure to report equals the annuity amount for each month in which the employee earned over the monthly allowable earnings amount and failed to report it on time.