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: Final rule.

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

amending its regulations to provide for debt collection by

administrative offset. The procedures in this 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. The PBGC

believes that adoption of this rule will enhance its debt collection

ability.

EFFECTIVE DATE: December 30, 1994.

FOR FURTHER INFORMATION CONTACT:

Catherine B. Klion, Attorney, Office of the General Counsel, Pension

Benefit Guaranty Corporation, 1200 K Street NW., Washington, DC 20005-

4026, 202-326-4024 (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 U.S.C. 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 anticipates that administrative offset will

enhance its debt collection ability because persons owing debts to the

PBGC sometimes receive payments from federal government agencies (e.g.,

in connection with government contracts). (As was stated in the

preamble to the proposed administrative offset rule, the PBGC generally

will not offset against plan benefits.)

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)). 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). Before collecting a claim by administrative offset,

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 have amended 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 prescribe

standards for debt collection by administrative offset. The procedures

prescribed in this rule are consistent with applicable provisions of

those regulations.

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

primary responsibility for the new debt collection procedures in this

rule, including applying amounts recovered by administrative offset to

multiple debts, requesting offset by other agencies, and processing

requests for offset from other agencies. However, ascertaining the

indebtedness and providing notice to the debtor and administrative

review will 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)). (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).)

On May 20, 1994 (59 FR 26467), the PBGC proposed to add part 2609,

Debt Collection--Administrative Offset, to its regulations (29 CFR part

2609). The PBGC received no comments on proposed part 2609.

The provisions of this final rule are identical to those proposed.

However, in the near future the PBGC expects to issue an interim final

rule on tax refund offset (as anticipated in the agency's semiannual

regulatory agenda (59 FR 58424, 58429, November 14, 1994)). Because the

PBGC plans to add its tax refund offset procedures to part 2609 (as

subpart C), it is designating all but the definitions section of the

proposed administrative offset regulations as subpart B (and

substituting ``subpart'' for ``part''). (The terms in Sec. 2609.2 are

included in a general subpart A.)

Finally, in response to a letter from the Small Business

Administration, the PBGC is reiterating its certification that sections

603 and 604 of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) do

not apply to this action, with an expanded explanation of the reasons

for such certification.

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 will not have an annual effect on the economy of

$100 million 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.

The PBGC certifies that this rule will not have a significant

economic impact 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. As indicated above,

this rule is limited to procedures required by the Federal Claims

Collections Standards for use of administrative offset to collect

certain debts owed to the United States. Thus, a small entity can avoid

the application of this rule by paying such debts when due. Further,

insofar as provisions of this rule do apply, their primary effect will

be to provide procedural protection to persons whose debts are

otherwise subject to collection by administrative offset.

List of Subjects in 29 CFR Part 2609

Administrative practice and procedure, Claims.

For the reasons set forth above, the PBGC is amending subchapter A,

chapter XXVI of 29 CFR by adding a new part 2609 to read as follows:

PART 2609--DEBT COLLECTION

Subpart A--General

Sec.

2609.1 [Reserved]

2609.2 Definitions.

Subpart B--Administrative Offset

2609.21 Purpose and scope.

2609.22 Application of Federal Claims Collection Standards.

2609.23 Administrative offset procedures.

2609.24 PBGC requests for offset by other agencies.

2609.25 Requests for offset from other agencies.

Subpart C--Tax Refund Offset [Reserved]

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

102.

Subpart A--General

Sec. 2609.1 [Reserved]

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.

Subpart B--Administrative Offset

Sec. 2609.21 Purpose and scope.

(a) Purpose. This subpart 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 subpart 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. 2609.22 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. 2609.23 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.

(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 Sec. 2622.6 (b)(3) through (b)(7) 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 a 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. 2609.24 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, subpart

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. 2609.25 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 to 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).

Subpart C--Tax Refund Offset [Reserved]

Issued in Washington, DC this 21st day of November, 1994.

Martin Slate,

Executive Director, Pension Benefit Guaranty Corporation.

[FR Doc. 94-29432 Filed 11-29-94; 8:45 am]

BILLING CODE 7708-01-M