Claims Collection Standards; Debt Collection Act of 1982: Administrative Offset

SUMMARY: The Office of Personnel Management (OPM) is issuing final

regulations to govern the collection of debts owed to the United States

which arose from transactions involving OPM's administrative accounts.

These regulations implement the debt collection procedures provided

under the Debt Collection Act of 1982 (Act). The Act authorizes the

Federal Government to collect debts by means of administrative offset

from other payments due the debtor from the United States, without the

debtor's consent, provided that the debtor is properly notified and

given the opportunity to exercise certain administrative rights. OPM's

collection of debts due the Retirement and Insurance Group for payment

to the Civil Service Retirement and Disability Fund, Employees' Life

Insurance Fund, the Retired Federal Employees Health Benefits Fund, or

the Employees' Health Benefits Fund is governed by other regulatory

provisions.

DATES: These regulations are effective July 11, 1994.

FOR FURTHER INFORMATION CONTACT:

Anna Wilson, Chief, Financial Policy Division, Office of the Chief

Financial Officer, (CFO) (202) 606-5075.

SUPPLEMENTARY INFORMATION: Section 10 of the Debt Collection Act of

1982 (Act) (Pub. L. 97-365) codified at 31 U.S.C. 3701 et seq., makes

several changes in the way Executive and Legislative agencies collect

debts owed the Government. The purpose of the Act is to improve the

ability of the Government to collect monies owed it.

Under the Act, administrative offset may be initiated when the head

of an agency determines that an individual or entity is indebted to the

United States, or is notified by the head of another agency that a

person or entity is indebted to the United States and that the debtor

is owed monies by the United States as a result of transactions with a

Federal agency. After the debtor has received certain due process

rights, the debt may be collected by administratively offsetting the

debt against the amount due.

Under the Act, before the Government may collect a debt by

administrative offset, a debtor must be provided with notice that a

debt is owed, the opportunity to inspect and copy Government records

relating to the debt, the option to enter into a written repayment

agreement, and an opportunity for review of the agency's determination

concerning the existence of the amount of the debt, or the repayment

terms. The debtor must notify the agency of his or her intent to

exercise these rights within time periods prescribed in these

regulations.

The Act permits the agency to initiate an administrative offset

prior to the completion of the due process requirements if failure to

do so would substantially jeopardize the agency's ability to collect

the debt and if the time remaining before payment is to be made does

not reasonably permit completion of the due process procedures. Such

prior offset must be followed by completion of the due process

procedures.

The Act requires agencies to issue regulations for administrative

offset. This final rule establishes the procedures the Office of

Personnel Management (OPM) will follow in making an administrative

offset from funds paid to a debtor from OPM's administrative accounts.

These regulations apply to the collection of debts owed to the United

States arising from transactions with OPM other than those involving

payments made from the Civil Service Retirement and Disability Fund

(the Fund) or where a request for an offset from OPM's administrative

accounts--other than the Fund--is received by OPM from another Federal

Agency. Regulations for other agencies to request OPM's Retirement and

Insurance Group to recover a debt from the Fund are provided at subpart

R of part 831 and subpart D of part 845 of title 5, Code of Federal

Regulations. These regulations are consistent with the Federal Claims

Collection Standards on administrative offset issued jointly by the

Department of Justice and the General Accounting Office as set forth in

4 CFR 102.3.

OPM has determined that this document is interpretative because it

implements a definitive statutory scheme and the requirements contained

in regulations promulgated by the Department of Justice and the General

Accounting Office. Accordingly, no Notice of Proposed Rulemaking is

required pursuant to 5 U.S.C. 553(b)(A). In addition, because this rule

relates to agency management and personnel, no Notice of Proposed

Rulemaking is required pursuant to 5 U.S.C. 553(a)(2). For these

reasons, a delayed effective date is not required pursuant to 5 U.S.C.

553(d)(2).

Analysis and Comments

The Interim Rule was published in the Federal Register on November

19, 1993 (58 FR 60991). The comment period closed on January 18, 1994.

Two labor organizations responded with comments. OPM has fully

considered all of their comments.

Section 179.303 General

One commenter cited 28 U.S.C. 2415 to question the validity of the

time allowed for commencing actions brought by the United States (6

years rather than 10 years). Section (i) of 28 U.S.C. 2415 states:

``The provisions of this section shall not prevent the United States or

an officer or agency thereof from collecting any claim of the United

States by means of administrative offset, in accordance with section

3716 of title 31.'' That provision precludes agencies from initiating

offset to collect a debt more than 10 years after the Government's

right to collect the debt first accrued, with certain exceptions

explained in that section.

Section 179.305 Agency Review

A commenter expressed concern that the discretion allowed to

suspend transactions in an alleged debtor's account pending resolution

of an appeal (179.305(c)) would have a ``chilling effect on such

appeals by depriving appellants of funds that would otherwise be

available to them.'' The intent of the regulations is to suspend

transactions in the account(s) to the extent of the debt owed unless

there is evidence of fraud. The language has been modified to clarify

that intent.

Another commenter requested that we add to the same section: ``Upon

lifting the suspension * * * any payments, removals, or transfers, as

well as lost interest or discounts due to the debtor that had been

precluded due to temporary suspension of transactions in any of the

debtor's accounts shall be applied retroactively to cover the period of

suspension.'' This authority is not stated in the Debt Collection Act,

and without specific authority, OPM is not authorized to take this

action.

Section 179.306 Written Agreement for Repayment

A commenter requested an increase in the amount of time allowed for

submission of a financial statement from 10 business days to 30

business days (i.e., from 2 weeks to 6 weeks) ``to allow the debtor

sufficient time to accurately prepare the financial statement.'' OPM

feels that 10 business days is adequate for the average debtor to

present a statement of his or her finances. An audited financial

statement is not required. Exceptions will have to be considered on a

case-by-case basis.

Section 179.308 Accelerated Procedure

A commenter wished to add ``with interest'' at the end of the

paragraph. The Debt Collection Act of 1982 requires the assessment of

interest, penalty fees, and administrative costs on delinquent debts as

a means of strengthening enforcement of collections; however, it makes

no provision to pay interest to the debtor for erroneous collections.

OPM is not authorized to make such payments in the absence of a

specific statute or authority permitting such payments.

Regulatory Flexibility Act

No notice of proposed rulemaking is required for these regulations,

and the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et

seq.) do not apply.

List of Subjects in 5 CFR Part 179

Claims.

Office of Personnel Management.

James B. King,

Director.

Accordingly, OPM is amending part 179 of title 5 of the Code of

Federal Regulations as follows:

PART 179--CLAIMS COLLECTION STANDARDS

1. The authority citation in part 179 is revised to read as

follows:

Authority: 31 U.S.C. 952; 5 U.S.C. 1103; Reorganization Plan No.

2 of 1978; 5 U.S.C. 5514; 5 CFR part 550 subpart K; 31 U.S.C. 3701;

31 U.S.C. 3711; 31 U.S.C. 3716; 31 U.S.C. 3720A.

2. Subpart C, consisting of Secs. 179.301 through 179.309, is

revised to read as follows:

Subpart C--Administrative Offset

Sec.

179.301 Scope of regulations.

179.302 Definitions.

179.303 General.

179.304 Notification procedures.

179.305 Agency review.

179.306 Written agreement for repayment.

179.307 Administrative offset.

179.308 Accelerated procedures.

179.309 Additional administrative procedures.

Subpart C--Administrative Offset

Sec. 179.301 Scope of regulations.

These regulations apply to the collection of debts owed to the

United States arising from transactions with OPM other than those

involving payments made from the Civil Service Retirement and

Disability Fund (the Fund), or where a request for an offset from OPM's

administrative accounts--other than the Fund--is received by OPM from

another Federal agency. Regulations for other agencies to request OPM's

Retirement and Insurance Group to recover a debt from the Fund are

provided at subpart R of part 831 and subpart D of part 845 of title 5,

Code of Federal Regulations. These regulations are consistent with the

Federal Claims Collection Standards on Administrative Offset issued

jointly by the Department of Justice and the General Accounting Office

as set forth in 4 CFR 102.3.

Sec. 179.302 Definitions.

Administrative offset, as defined in 31 U.S.C. 3701(a)(1), means

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.

Person, includes a natural person or persons, profit or non-profit

corporation, partnership, association, trust, estate, consortium, or

other entity which is capable of owing a debt to the United States

Government except that agencies of the United States, or of any State

or local government, shall be excluded.

Sec. 179.303 General.

(a) The Director or his or her designee, after attempting to

collect a debt from a person under section 3(a) of the Federal Claims

Collection Act of 1966, as amended (31 U.S.C. 3711(a)), may collect the

debt by administrative offset subject to the following:

(1) The debt is certain in amount; and

(2) It is in the best interest of the United States to collect the

debt by administrative offset because it is less costly and speeds

payment of the debt;

(b) The Director, or his or her designee, may initiate

administrative offset with regard to debts owed by a person to another

agency of the United States Government, upon receipt of a request from

the head of another agency, or his or her designee, and a certification

that the debt exists and that the person has been afforded the

necessary due process rights.

(c) The Director, or his or her designee, may request another

agency that holds funds payable to an OPM debtor to offset the debt

against the funds held and will provide certification that:

(1) The debt exists; and

(2) The person has been afforded the necessary due process rights.

(d) If the 6-year period for bringing action on a debt provided in

28 U.S.C. 2415 has expired, then administrative offset may be used to

collect the debt only if the costs of bringing such action are likely

to be less than the amount of the debt.

(e) No collection by administrative offset shall be made on any

debt that has been outstanding for more than 10 years unless facts

material to the Government's right to collect the debt were not known,

and reasonably could not have been known, by the official or officials

responsible for discovering and collecting such debt.

(f) These regulations do not apply to:

(1) A case in which administrative offset of the type of debt

involved is explicitly provided for or prohibited by another statute.

(2) Debts owed to OPM by other agencies of the United States or by

any State or local government.

Sec. 179.304 Notification procedures.

Before collecting any debt through administrative offset, a notice

of intent to offset shall be sent to the debtor by certified mail,

return receipt requested, at the most current address that is available

to OPM. The notice shall provide:

(a) A description of the nature and amount of the debt and the

intention of OPM to collect the debt through administrative offset;

(b) An opportunity to inspect and copy the records of OPM with

respect to the debt;

(c) An opportunity for review within OPM concerning OPM's

determinations with respect to the debt; and

(d) An opportunity to enter into a written agreement for the

repayment of the amount of the debt.

Sec. 179.305 Agency review.

(a) A debtor may dispute the existence of the debt, the amount of

the debt, or the terms of repayment. The request to review a disputed

debt must be received by the OPM official identified in the

notification within 30 calendar days of the debtor's receipt of the

written notice described in Sec. 179.304.

(b) If the debtor requests an opportunity to inspect or copy OPM's

records concerning the disputed claim, 10 business days will be granted

for the review. The time period will be measured from the time the

request for inspection is granted or from the time the copy of the

records is received by the debtor.

(c) Pending the resolution of a dispute initiated by the debtor,

transactions in any of the debtor's account(s) maintained in OPM may be

temporarily suspended to the extent of the debt that is owed. Depending

on the type of transaction, the suspension could preclude payment,

removal, or transfer, as well as prevent the payment of interest or

discount due thereon. Should the dispute be resolved in the debtor's

favor, the suspension will be lifted immediately.

(d) During the review period, interest, penalties, and

administrative costs authorized under the Federal Claims Collection Act

of 1966, as amended, will continue to accrue.

Sec. 179.306 Written agreement for repayment.

A debtor who admits liability but elects not to have the debt

collected by administrative offset will be afforded an opportunity to

negotiate a written agreement for the repayment of the debt. If the

financial condition of the debtor does not support the ability to pay

in one lump-sum, reasonable installments may be considered. No

installment arrangement will be considered unless the debtor submits a

financial statement, executed under penalty of perjury, reflecting the

debtor's assets, liabilities, income, and expenses. The financial

statement must be submitted within 10 business days of OPM's request

for the statement. At OPM's option, a confess-judgment note or bond of

indemnity with surety may be required for the installment agreement.

Notwithstanding the provisions of this section, any reduction or

compromise of a claim will be governed by 4 CFR part 103 and 31 U.S.C.

3711.

Sec. 179.307 Administrative offset.

(a) If the debtor does not exercise the right to request a review

within the time specified in Sec. 179.305 or, if as a result of the

review, it is determined that the debt is due and no written agreement

is executed, then administrative offset shall be ordered in accordance

with these regulations without further notice.

(b) Request for offset to a Federal agency: The Director or his or

her designee may request that funds due and payable to a debtor by a

Federal agency be administratively offset in order to collect a debt

owned to OPM by that debtor. In requesting administrative offset OPM,

as creditor, will certify in writing to the Federal agency holding

funds of the debtor:

(1) That the debtor owes the debt;

(2) The amount and basis of the debt; and

(3) That OPM has complied with the requirements of 31 U.S.C. 3716,

its own administrative offset regulations, and the applicable

provisions of 4 CFR part 102 with respect to providing the debtor with

due process.

(c) Request for offset from a Federal agency: When administrative

offset is authorized, any Federal creditor agency may request OPM to

make an administrative offset from any OPM funds that are due and

payable to a creditor agency's debtor. OPM shall initiate the requested

administrative offset only upon:

(1) Receipt of written certification from the creditor agency:

(i) That the debtor owes the debt;

(ii) The amount and basis of the debt;

(iii) That the agency has prescribed regulations for the exercise

of administrative offset; and

(iv) That the agency has complied with its own administrative

offset regulations and with the applicable provisions of 4 CFR part

102, including providing any required hearing or review.

(2) A determination by OPM that collection by offset against funds

payable by OPM would not otherwise be contrary to law.

Sec. 179.308 Accelerated procedures.

OPM may make an administrative offset against a payment to be made

to the debtor prior to the completion of the procedures required by

Sec. 179.304 and Sec. 179.305 if failure to take the offset would

substantially jeopardize OPM's ability to collect the debt, and the

time before the payment is to be made does not reasonably permit the

completion of those procedures. Such prior offset shall be promptly

followed by the completion of those procedures. Amounts recovered by

offset but later found not to be owed to OPM shall be promptly

refunded.

Sec. 179.309 Additional administrative procedures.

Nothing contained in this chapter is intended to preclude the use

of any other administrative remedy which may be available.

[FR Doc. 94-16632 Filed 7-8-94; 8:45 am]

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