Debt Collection by Administrative Offset

PENSION BENEFIT GUARANTY CORPORATION

29 CFR Part 2609

RIN 1212-AA64

Debt Collection by Administrative Offset

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Proposed rule.

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SUMMARY: The Pension Benefit Guaranty Corporation (``PBGC'') is

proposing to provide for debt collection by administrative offset. The

PBGC believes that adoption of this proposed rule would enhance its

debt collection ability. The procedures in this proposed rule implement

administrative offset, as authorized by the Federal Claims Collection

Act of 1966, as amended by the Debt Collection Act of 1982, and in

accordance with standards prescribed by the Comptroller General of the

United States and the Attorney General of the United States.

DATES: Comments must be received on or before July 19, 1994.

ADDRESSES: Comments may be mailed to the Office of the General Counsel

(Suite 340), Pension Benefit Guaranty Corporation, 1200 K Street NW.,

Washington, DC 20005-4026, or hand-delivered to the above address

between 9 a.m. and 5 p.m., Monday through Friday. Comments will be

available for public inspection at the PBGC's Communications and Public

Affairs Department, suite 240, at the above address between 9 a.m. and

4 p.m., Monday through Friday.

FOR FURTHER INFORMATION CONTACT:

Catherine B. Klion, Attorney, Office of the General Counsel (Suite

340), Pension Benefit Guaranty Corporation, 1200 K Street NW.,

Washington, DC 20005-4026, 202-316-4125 (202-326-4179 for TTY and TDD).

(These are not toll-free numbers.)

SUPPLEMENTARY INFORMATION: The Pension Benefit Guaranty Corporation

(``PBGC'') administers the pension plan termination insurance program

under title IV of the Employee Retirement Income Security Act of 1974,

as amended (``ERISA'') (29 FHWA 1301 et seq.). In conjunction with the

pension plan termination insurance program, persons (including

organizations and entities) incur various types of debts to the PBGC,

and the PBGC incurs various types of liabilities (including contractual

obligations).

The PBGC uses various methods to collect its debts; however, it

currently does not use administrative offset. The PBGC anticipates that

the ability to use administrative offset, particularly against payments

to be made by other agencies in connection with government contracts,

would enhance its debt collection ability. Therefore, the PBGC is

proposing to add part 2609, Debt Collection--Administrative Offset, to

its regulations (29 CFR part 2609). (Other debt collection tools

currently available to the PBGC include the use of collection agencies

and salary offset. Tax refund offset potentially is available to the

PBGC.)

The Debt Collection Act of 1982, which amended the Federal Claims

Collection Act of 1966 (31 U.S.C. 3701 et seq.), authorizes the

collection of debts owed to the United States by administrative offset

(31 U.S.C. 3716). Administrative offset is defined as ``withholding

money payable by the United States Government to, or held by the

Government for, a person to satisfy a debt the person owes the

Government'' (31 U.S.C. 3701(a)(1)).

Before collecting a claim by administrative offset under the

Federal Claims Collection Act, the head of an agency must prescribe

regulations on administrative offset based on the best interests of the

United States Government, the likelihood of collecting a claim by

administrative offset, and, for collecting a claim by administrative

offset after the six-year period for bringing a civil action on a claim

under 28 U.S.C. 2415 has expired, the cost-effectiveness of leaving a

claim unresolved for more than six years (31 U.S.C. 3716(b)).

The Comptroller General of the United States and the Attorney

General of the United States jointly issued amendments to the Federal

Claims Collections Standards (``FCCS'') (4 CFR parts 101 through 105)

to implement the Debt Collection Act of 1982. Part 102 of those

regulations prescribes standards for the administrative collection of

claims, including, in Sec. 102.3, collection by administrative offset.

The FCCS do not cover offset of debts against salaries of federal

employees (48 FR 23249, May 24, 1983). (See PBGC Notice No. 89-28 (Nov.

13, 1989) for the agency's salary offset procedures.) (See Sec. 101.3

for other limitations on the applicability of the FCCS.)

The FCCS use the terms ``claim'' and ``debt'' synonymously and

interchangeably to ``refer to an amount of money or property which has

been determined by an appropriate agency official to be owed to the

United States from any person, organization, or entity, except another

federal agency'' (Sec. 101.2(a)). They provided that collection by

administrative offset is to be undertaken, in accordance with an

agency's implementing regulations, on claims that are liquidated or

certain in amount when such collection is determined to be feasible and

not otherwise prohibited (Sec. 102.3(a)). The creditor agency is to

determine whether collection by administrative offset is feasible on a

case-by-case basis, in the exercise of sound discretion, based on

various factors; agencies are not required to use offset in every

instance in which there is an available source of funds

(Sec. 102.3(a)(2)).

Except as otherwise required by law, the procedures to be

established by agency regulations must provide the debtor with written

notice of the nature and amount of the debt and the agency's intention

to collect by offset, opportunity to inspect and copy agency records

pertaining to the debt, opportunity to obtain review within the agency

of the agency's determination of indebtedness, and opportunity to enter

into a written agreement with the agency to repay the debt (``repayment

agreement''). An agency's regulations also must establish procedures

for making requests for offset to other agencies holding funds payable

to the debtor and procedures for processing requests for offset that

are received from other agencies (Sec. 102.3(b)).

The FCCS provide that agencies may not initiate administrative

offset to collect a debt under 31 U.S.C. 3716 more than 10 years after

the government's right to collect the debt first accrued unless facts

material to its right to collect the debt were not known and could not

reasonably have been known by the official(s) charged with the

responsibility to discover and collect such debts (Sec. 102.3(b)(3)).

Nor may agencies use administrative offset under 31 U.S.C. 3716 with

respect to debts owed by state or local governments or arising under

the Social Security Act, the Internal Revenue Code, or United States

tariff laws or in cases in which collection of the type of debt

involved is ``explicitly provided for or prohibited by another

statute'' (Sec. 102.3(b)(4)). (Administrative offset is not

``explicitly provided for or prohibited'' by Title IV of ERISA.)

However, unless otherwise provided by contract or law, such debts may

be collected by administrative offset under the common law or other

applicable statutory authority. Collection by offset against a judgment

obtained by a debtor against the United States must be accomplished in

accordance with 28 U.S.C. 3728 (which provides that the Comptroller

General shall withhold paying that part of a judgment against the

United States that is equal to a debt the plaintiff owes the United

States) (Sec. 102.3(e)).

The PBGC's Financial Operations Department (``FOD'') would have

primary responsibility for the new debt collection procedures in this

proposed rule, including applying amounts recovered by administrative

offset to multiple debts (Sec. 2609.3(c)), requesting offset by other

agencies (Sec. 2609.5), and processing requests for offset from other

agencies (Sec. 2609.6). However, ascertaining the indebtedness and

providing notice to the debtor and administrative review would continue

to be handled by the organizational unit with functional responsibility

for the type of claim involved, including, where applicable, review by

the Appeals Board (see Sec. 2606.1(b) (5) through (9)). For example,

the Premium Operations Division of FOD would continue to have

responsibility for premiums, interest, and late payment penalties,

including issuing initial determinations and reconsideration in

accordance with part 2606 (see Sec. 2606.1(b)(4)). (Applicable

assignments of responsibilities are set forth in the mission and

functions statements issued by the Executive Director and included

(along with organization charts) in the PBGC Directives Manual as

section 30-1 of Part GA (General Administration).)

Proposed Sec. 2609.1 sets out the purpose and scope of part 2609.

The PBGC will apply these procedures only when it determines that

collection by administrative offset of a claim that is liquidated or

certain in amount is feasible and not otherwise prohibited. As stated

in proposed Sec. 2609.3(a), the PBGC will determine whether collection

by administrative offset is feasible on a case-by-case basis, in the

exercise of sound discretion, as provided in the FCCS

(Sec. 102.3(a)(2)). (The PBGC generally will not offset against plan

benefits.)

Proposed Sec. 2609.3 also reiterates FCCS provisions regarding the

acceptance of a repayment agreement in lieu of offset and how to apply

amounts collected by administrative offset on multiple debts

(Sec. 102.3(b)(2) (i) and (g)). Proposed Sec. 2609.2 defines various

terms (e.g., ``repayment agreement'') used in this part of the

regulations.

Proposed Sec. 2609.4 addresses the procedures that the PBGC

generally must complete before effecting administrative offset against

a payment owed to a debtor. The FCCS do not require, however, that an

agency duplicate procedures provided in connection with the same debt

under other statutory or regulatory authority. (Sec. 102.3(b)(2)(ii)).

Accordingly, the PBGC would not do so (proposed Sec. 2609.4(a)). Thus,

for example, if the PBGC were to use administrative offset to collect a

debt for premiums, interest, and late payment penalties, it would not

duplicate any procedural protection previously provided under part

2606.

The FCCS provide that whenever an agency is required to afford a

debtor with a hearing or review within the agency, the agency must

provide a reasonable opportunity for an oral hearing when: (1) An

applicable statute authorizes or requires the agency to consider waiver

of the indebtedness involved, the debtor requests such waiver, and the

waiver determination turns on an issue of credibility or veracity, or

(2) the debtor requests reconsideration of the debt and the agency

determines that the question of the indebtedness cannot be resolved by

a review of the documentary evidence (Sec. 102.3(c)(1)). However, an

agency need not provide oral hearings with respect to debt collection

systems in which determinations of indebtedness or waiver rarely

involve issues of credibility or veracity and the agency has determined

that review of the written record ordinarily is an adequate means to

correct prior mistakes. In administering such a system, the agency is

not required to sift through all requests received in order to accord

oral hearings in those few cases which may involve issues of

credibility or veracity. (Section 102.3(c)(2).)

Based on its experience, the PBGC has determined that with respect

to its debt collection system, review of the written record ordinarily

is adequate, and, therefore, part 2609 does not provide for oral

hearings. (When reviewing determinations described in Sec. 2606.1(b)

(5) through (9), the Appeals Board may, at its discretion, permit an

opportunity to appear or to present witnesses (Sec. 2606.56).)

If the debtor does not submit a timely request for administrative

review (see proposed Sec. 2609.4(c)(1)), or if upon review the PBGC has

notified the debtor of its decision that a debt is owed (see proposed

Sec. 2609.(c)(3)), then the PBGC may pursue administrative offset

without further notice to the debtor (see also proposed

Sec. 2609.4(e)).

Proposed Sec. 2609.4(d) provides that the PBGC will not consider

entering a repayment agreement in lieu of offset unless a debtor

submits information regarding the debtor's financial condition,

including specified financial statement information (paragraph (d)(1)).

The PBGC may require appropriate security as a condition of accepting a

repayment agreement in lieu of offset (paragraph (d)(2)).

Proposed Sec. 2609.4(e), as authorized by the FCCS

(Sec. 102.3(b)(5)), provides that the PBGC may effect administrative

offset prior to completion of the procedures specified in paragraphs

(b) and (c) under certain circumstances (in particular, to avoid

prejudicing the Government's ability to collect the debt). Under the

special rule in Sec. 2622.9(c) of this chapter, the PBGC need not

follow certain procedures when it believes that its ability to assert

or obtain payment of liability incurred upon termination of a single-

employer plan is in jeopardy. The PBGC views any case in which it

applies Sec. 2622.9(c) as one that would meet the criteria in proposed

Sec. 2609.4(e)(1) and therefore a case in which it could effect

administrative offset prior to the completion of the specified

procedures. Proposed Sec. 2609.4(e)(2) reflects this view.

Proposed Secs. 2609.5 and 2609.6 prescribe procedures for making

requests for offset to other agencies and for processing requests for

offset from other agencies, respectively. Any PBGC requests for

administrative offset against amounts due and payable from the Civil

Service Retirement and Disability Fund would be made in accordance with

applicable Office of Personnel Management (``OPM'') regulations (Agency

Requests to OPM for Recovery of a Debt from the Civil Service

Retirement and Disability Fund, 5 CFR part 831, subpart R), as well as

applicable provisions of the FCCS. As provided in the FCCS,

(Sec. 102.3(d)), the PBGC generally will comply with requests from

other agencies to initiate administrative offset unless the requesting

agency has not complied with the applicable provisions of the FCCS or

the offset would be otherwise contrary to law (proposed

Sec. 2609.6(a)).

E.O. 12866 and the Regulatory Flexibility Act

The PBGC has determined that this action is not a ``significant

regulatory action'' under the criteria set forth in Executive Order

12866 because the rule would not have an annual effect on the economy

of $100 or more or adversely affect in a material way the economy, a

sector of the economy, productivity, competition, jobs, the

environment, public health or safety, or State, local, or tribal

governments or communities, create a serious inconsistency or otherwise

interfere with an action taken or planned by another agency; materially

alter the budgetary impact of entitlements, grants, user fees, or loan

programs or the rights and obligations of recipients thereof; or raise

novel legal or policy issues arising out of legal mandates, the

President's priorities, or the principles set forth in Executive Order

12866. The purpose of the rule is to enhance the PBGC's debt collection

ability. The procedures will be triggered only by a failure to pay a

debt already owed.

For the same reason, the PBGC certifies that, if adopted, this

proposed rule will not have a significant economic effect on a

substantial number of small entities. Accordingly, as provided in

section 605 of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.),

sections 603 and 604 do not apply.

List of Subjects in 29 CFR Part 2609

Administrative, Practice and procedure, Claims.

For the reasons set forth above, the PBGC proposes to amend

subchapter A, chapter XXVI of 29 CFR by adding a new part 2609 to read

as follows:

PART 2609--DEBT COLLECTION--ADMINISTRATIVE OFFSET

Sec.

2609.1 Purpose and scope.

2609.2 Definitions.

2609.3 Application of Federal Claims Collection Standards.

2609.4 Administrative offset procedures.

2609.5 PBGC requests for offset to other agencies.

2609.6 Requests for offset from other agencies.

Authority: 29 U.S.C. 1302(b); 31 U.S.C. 3701, 3716; 4 CFR part

102.

Sec. 2609.1 Purpose and scope.

(a) Purpose. This part prescribes procedures for debt collection by

administrative offset, as authorized by the Federal Claims Collection

Act (31 U.S.C. 3716), and consistent with applicable provisions of the

Federal Claims Collection Standards.

(b) Scope. The procedures in this part apply when the PBGC

determines that collection by administrative offset of a claim that is

liquidated or certain in amount is feasible and not otherwise

prohibited or when another agency seeks administrative offset against a

payment to be made by the PBGC.

Sec. 2609.2 Definitions.

For purposes of this part:

Administrative offset has the meaning set forth in 31 U.S.C.

3701(a)(1).

Agency means an executive or legislative agency (within the meaning

of 31 U.S.C. 3701(a)(4)).

Claim and debt, as defined in the Federal Claims Collection

Standards (4 CFR 101.2(a)), are used synonymously and interchangeably

to refer to an amount of money or property which has been determined by

an appropriate agency official to be owed to the United States from any

person, organization, or entity, except another Federal agency.

Federal Claims Collection Act means the Federal Claims Collection

Act of 1966, as amended (31 U.S.C. 3701 et. seq.).

Federal Claims Collection Standards means 4 CFR parts 101 through

105, which are regulations issued jointly by the Comptroller General of

the United States and the Attorney General of the United States that

implement the Federal Claims Collection Act.

PBGC means the Pension Benefit Guaranty Corporation.

Repayment agreement means a written agreement by a debtor to repay

a debt to the PBGC.

Sec. 2609.3 Application of Federal Claims Collection Standards.

The PBGC will determine the feasibility of collection by

administrative offset, whether to accept a repayment agreement in lieu

of offset, and how to apply amounts collected by administrative offset

on multiple debts as provided in the Federal Claims Collection

Standards (4 CFR 102.3).

(a) Feasibility. The PBGC will determine whether collection by

administrative offset is feasible on a case-by-case basis in the

exercise of sound discretion. In making such determinations, the PBGC

will consider:

(1) Whether administrative offset can be accomplished, both

practically and legally;

(2) Whether administrative offset is best suited to further and

protect all governmental interests;

(3) In appropriate circumstances, the debtor's financial condition;

and

(4) Whether offset would tend to interfere substantially with or

defeat the purposes of the program authorizing the payments against

which offset is contemplated.

(b) Repayment agreements. The PBGC will exercise its discretion in

determining whether to accept a repayment agreement in lieu of offset,

balancing the Government's interest in collecting the debt against

fairness to the debtor. If the debt is delinquent (within the meaning

of 4 CFR 101.2(b)) and the debtor has not disputed its existence or

amount, the PBGC will accept a repayment agreement in lieu of offset

only if the debtor is able to establish that offset would result in

undue financial hardship or would be against equity and good

conscience.

(c) Multiple debts. When the PBGC collects multiple debts by

administrative offset, it will apply the recovered amounts to those

debts in accordance with the best interests of the United States, as

determined by the facts and circumstances of the particular case,

paying special attention to applicable statutes of limitations.

Sec. 2609.4 Administrative offset procedures.

(a) General. Except as otherwise required by law or as provided in

paragraph (e) of this section, the PBGC will not effect administrative

offset against a payment to be made to a debtor prior to the completion

of the procedures specified in paragraphs (b) and (c) of this section.

However, the PBGC will not duplicate any notice or other procedural

protection it previously provided in connection with the same debt

under some other statutory or regulatory authority, such as part 2606

of this subchapter.

(b) Notice. The PBGC will provide written notice informing the

debtor of the following:

(1) The nature and amount of the debt, and the PBGC's intention to

collect by offset;

(2) That the debtor may inspect and copy PBGC records pertaining to

the debt in accordance with part 2603 or part 2607 of this subchapter,

as applicable (access under the Freedom of Information Act (5 U.S.C.

552) or the Privacy Act (5 U.S.C. 552a), respectively);

(3) How and from whom the debtor may obtain administrative review

of a determination of indebtedness;

(4) The facts and circumstances that the PBGC will consider in

determining whether to accept a repayment agreement in lieu of offset;

and

(5) If the PBGC has not previously demanded payment of the debt,

the date by which payment must be made to avoid further collection

action.

(c) Administrative review. (1) A debtor may obtain review within

the PBGC of a determination of indebtedness by submitting a written

request for review, designated as such, to the PBGC official specified

in the notice of indebtedness. Unless another regulation in this

chapter specifies a different period of time, such a request must be

submitted within 30 days after the date of a PBGC notice under

paragraph (b) of this section.

(2) A request for review must:

(i) State the ground(s) on which the debtor disputes the debt; and

(ii) Reference all pertinent information already in the possession

of the PBGC and include any additional information believed to be

relevant.

(3) The PBGC will review a determination of indebtedness, when

requested to do so in a timely manner. The PBGC will issue a written

decision, based on the written record, and will notify the debtor of

its decision.

(i) The review will be conducted by an official of at least the

same level of authority as the person who made the determination of

indebtedness; and

(ii) The notice of the PBGC's decision on review will include a

brief statement of the reason(s) why the determination of indebtedness

has or has not been changed.

(4) Upon receipt of a request for administrative review, the PBGC

may, in its discretion, temporarily suspend transactions in any of the

debtor's accounts maintained by the PBGC. If the PBGC resolves the

dispute in the debtor's favor, it will lift the suspension immediately.

(d) Repayment agreement in lieu of offset. (1) The PBGC will not

consider entering a repayment agreement in lieu of offset unless a

debtor submits a copy of the debtor's most recent audited (or if not

available, unaudited) financial statement (with balance sheets, income

statements, and statements of changes in financial position), to the

extent such documents have been prepared, and other information

regarding the debtor's financial condition (e.g., the types of

information on assets, liabilities, earnings, and other factors

specified in in paragraphs (b)(3) through (b)(7) of Sec. 2622.6 of this

chapter).

(2) The PBGC may require appropriate security as a condition of

accepting a repayment agreement in lieu of offset.

(e) Exception. (1) The PBGC may effect administrative offset

against a payment to be made to the debtor prior to completing the

procedures specified in paragraphs (b) and (c) of this section if:

(i) Failure to take the offset would substantially prejudice the

government's ability to collect the debt; and

(ii) The time before the payment is to be made does not reasonably

permit the completion of those procedures.

(2) The PBGC has determined that a case in which it applies the

special rule in Sec. 2622.9(c) of this chapter meets the criteria in

paragraph (e)(1) of this section.

(3) If the PBGC effects administrative offset against a payment to

be made to debtor prior to completing the procedures specified in

paragraphs (b) and (c) of this section, the PBGC--

(i) Will promptly complete those procedures; and

(ii) Will promptly refund any amounts recovered by offset but later

found not to be owed to the Government.

Sec. 2609.5 PBGC Requests for offset by other agencies.

(a) General. The PBGC may request that funds payable to its debtor

by another agency be administratively offset to collect a debt owed to

the PBGC by the debtor. A PBGC request for administrative offset

against amounts due and payable from the Civil Service Retirement and

Disability Fund will be made in accordance with 5 CFR part 831, supbart

R (Agency Requests to OPM for Recovery of a Debt from the Civil Service

Retirement and Disability Fund).

(b) Certification. In requesting administrative offset, the

Director of the Financial Operations Department (or a department

official designated by the Director) will certify in writing to the

agency holding funds of the debtor--

(1) That the debtor owes the debt (including the amount) and that

the PBGC has fully complied with the provisions of 4 CFR 102.3; and

(2) In a request for administrative offset against amounts due and

payable from the Civil Service Retirement and Disability Fund, that the

PBGC has complied with applicable statutes and the regulations and

procedures of the Office of Personnel Management.

Sec. 2609.6 Requests for offset from other agencies.

(a) General. As provided in the Federal Claims Collections

Standards (4 CFR 102.3(d)), the PBGC generally will comply with

requests from other agencies to initiate administrative offset to

collect debts owed the United States unless the requesting agency has

not complied with the applicable provisions of the Federal Claims

Collection Standards or the offset would be otherwise contrary to law.

(b) Submission of requests. (1) Any agency may request that funds

payable to its debtor by the PBGC be administratively offset to collect

a debt owed to such agency by the debtor by submitting the

certification described in paragraph (c) of this section.

(2) All such requests should be directed to the Director, Financial

Operations Department, Pension Benefit Guaranty Corporation, 1200 K

Street, NW., Washington, DC 20005-4026.

(c) Certification required. The PBGC will not initiate

administrative offset in response to a request from another agency

until it receives written certification from the requesting agency,

signed by an appropriate agency official, that the debtor owes the debt

(including the amount) and that the requesting agency has fully

complied with the provisions of 4 CFR 102.3 (with a citation to the

agency's own administrative offset regulations).

Issued in Washington, D.C. this 17th day of May, 1994.

Martin Slate,

Executive Director Pension Benefit Guaranty Corporation.

[FR Doc. 94-12426 Filed 5-19-94; 8:45 am]

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