Debt Collection ProceduresTax Refund Offset

PENSION BENEFIT GUARANTY CORPORATION

29 CFR Parts 2606 and 2609

RIN 1212-AA72

Debt Collection Procedures--Tax Refund Offset

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Interim final rule.

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

an interim final rule that will enable it to refer past-due, legally

enforceable debts to the Internal Revenue Service to be offset against

federal tax refunds. The PBGC believes that adoption of this rule will

enhance its debt collection ability. The procedures in this rule assure

that PBGC regulations meet the requirements for participation in the

federal tax refund offset program.

DATES: This rule is effective January 5, 1995. Comments must be

received on or before February 6, 1995.

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

Pension Benefit Guaranty Corporation, 1200 K Street, NW., Washington,

DC 20005-4026, or hand-delivered to Suite 340 at the above address

between 9:00 a.m. and 5:00 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 9:00

a.m. and 4:00 p.m., Monday through Friday.

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.

The PBGC uses various methods to collect its debts. As part of an

effort to enhance its debt collection ability, on November 30, 1994,

the PBGC published a final rule adding to its regulations a new ``Debt

Collection'' part (29 CFR part 2609) that included administrative

offset procedures in subpart B and reserved subpart C for tax refund

offset procedures (59 FR 61272; effective December 30, 1994). The PBGC

has not previously participated in the tax refund offset program of the

Internal Revenue Service (``IRS''). Because the PBGC believes that such

participation will enhance its debt collection ability, the PBGC now is

amending part 2609 to include the anticipated subpart C procedures and

adding, in subpart A, a general section (Sec. 2609.1) and several

definitions (Sec. 2609.2). The PBGC also is amending two provisions of

part 2606 of its regulations (29 CFR part 2606, Rules of Administrative

Review of Agency Decisions), and it is reserving subpart D of part 2609

for salary offset procedures.

The Federal Tax Refund Offset Program

The federal tax refund offset program is authorized by section

3720A of subchapter II (Claims of the United States), chapter 37 of

title 31 of the United States Code (31 U.S.C. 3720A). Section 3720A

directs any federal agency that is owed a past-due, legally enforceable

debt to notify the Secretary of the Treasury at least once a year of

the amount of any such debt. Before doing so, an agency must meet

requirements specified in subsection (b) of section 3720A or prescribed

by the Secretary of the Treasury to ensure that the debt is past-due

and legally enforceable and that the agency has made reasonable efforts

(pursuant to regulations) to obtain payment. It also must comply with

the notice, minimum debt, and fee requirements in Treasury regulations

issued pursuant to subsection (d) of section 3720A. Upon receiving

notice that a named person owes an agency a past-due, legally

enforceable debt, the Secretary of the Treasury is to determine whether

any amounts are payable to that person as a refund and, if so, to

reduce the refund by the amount of the debt and pay the amount of the

reduction to the agency (subsection (c) of section 3720A).

Section 301.6402-6 of the IRS's Procedure and Administration

Regulations (26 CFR 301.6402-6) provides that to be eligible to

participate in the tax refund offset program an agency must have

promulgated temporary or final administrative offset and federal tax

refund offset regulations (under 31 U.S.C. 3716 and 3720A,

respectively). In addition, unless the agency has certified (relying on

the most current information reasonably available) that it will not

refer the names of present or former federal employees or other persons

whose debts are subject to offset under section 5514(a)(1) of title 5

of the United States Code (5 U.S.C. 5514(a)(1)), it must have

promulgated temporary or final salary offset regulations

(Sec. 301.6402-6(b)).

To be referred to the IRS for offset, IRS's regulations require,

among other things, that a debt be at least $25 and, except in the case

of a judgment debt or any debts specifically exempt from this

requirement, be referred within 10 years after the agency's right of

action accrues (Sec. 301.6402-6(c) (1) and (7)). In addition, an agency

may not refer a debt unless (1) the debt is ineligible for

administrative offset (by reason of the exclusion in 31 U.S.C.

3716(c)(2) for claims explicitly provided for in other statutes) or the

agency cannot currently collect it by administrative offset against

amounts payable to the taxpayer by that agency, and (2) the agency

cannot currently collect the debt by salary offset (Sec. 301.6402-6(c)

(2) and (3)).

Before referring a debt, an agency must notify, or make a

reasonable attempt to notify, the taxpayer that the debt is past-due

and, unless repaid within 60 days, will be referred to the IRS for

offset against a tax overpayment; give the taxpayer at least 60 days to

present evidence that all or part of the debt is not past-due or not

legally enforceable; consider evidence presented; and determine that

the debt is past-due and legally enforceable (Sec. 301.6402-6(c) (4)

and (5)). Under IRS regulations, an agency has made a reasonable

attempt to notify the taxpayer if it uses the most recent address

obtained from the IRS pursuant to section 6103(m) (2), (4), or (5) of

the Internal Revenue Code (26 U.S.C. 6103(m) (2), (4), or (5)), except

where agency notices are sent to a different address received in a

clear and concise notification from a taxpayer (Sec. 301.6402-6(d)(1)).

Finally, if a consumer debt exceeds $100, an agency also must

disclose it to a consumer reporting agency, as authorized by section

3(d) of the Federal Claims Collection Act (31 U.S.C. 3711(f)), unless

the consumer reporting agency would be prohibited from reporting

information concerning the debt because it is obsolete (see 15 U.S.C.

1681(c)) (Sec. 301.6402-6(c)(6)).

Agency referrals of debts must contain the name and identifying

number of the taxpayer who is responsible for the debt, the amount of

the debt, the date on which the debt became past-due, and the agency's

designation (Sec. 301.6402-6(e)). The agency must promptly notify the

IRS if, after a referral, the agency determines that an error has been

made with respect to the information transmitted to the IRS, or if the

agency receives a payment from the debtor (Sec. 301.6402-6(f)).

Interim Final Rule

As indicated in Sec. 2609.31 (Purpose and scope), the procedures in

subpart C of part 2609 apply to determinations that a debt of at least

$25 is past-due and legally enforceable, and to PBGC debt referrals to

the IRS. Section 2609.32 reiterates when, under IRS regulations, a debt

is eligible for tax refund offset. Among other things, a debt is not to

be referred unless the PBGC cannot currently collect it by salary

offset (Sec. 2609.32(b)). The PBGC intends to promulgate salary offset

regulations under section 5514(a) of Title 5 of the United States Code

(5 U.S.C. 5514(a)). Until it does so, it will not refer to the IRS the

names of any persons whose debts are subject to salary offset.

Section 2609.33 specifies the procedures that the PBGC must

complete before referring a debt to the IRS. The PBGC may satisfy these

requirements in conjunction with any other procedures that apply to the

same debt, such as administrative offset procedures or procedures

prescribed in part 2606 (Sec. 2609.33(a)).

The PBGC anticipates, however, that particularly in the first year

of its participation in the tax refund offset program, the debts it

refers to the IRS will include debts as to which procedures previously

provided do not satisfy the requirements of new Sec. 2609.33. For

example, the PBGC anticipates referring debts relating to premium

payments due under section 4007 of ERISA (29 U.S.C. 1307) and part 2610

of the PBGC's regulations. Determinations with respect to premiums,

interest, and late payment penalties are covered by part 2606 of the

PBGC's regulations (29 CFR part 2606), Rules for Administrative Review

of Agency Decisions. Part 2606 currently provides that (subject to

limited exceptions) an aggrieved person must request reconsideration of

an initial PBGC determination as to premiums, interest, and/or late

payment penalties within 30 days of the date of the determination and

that the request must reference all pertinent information in the PBGC's

possession and include any additional information believed to be

relevant (Secs. 2606.33 and 2606.35). Thus, the PBGC has not been

providing such debtors with at least 60 days to present evidence that

all or part of a debt is not past-due or not legally enforceable, as is

required for tax refund offset (Sec. 2609.33(b)(2)). Nor has the PBGC

notified such debtors of its intention to refer a debt for tax refund

offset (Sec. 2609.33(b)(1)). Before referring these debts to IRS, the

PBGC will provide debtors any additional procedures required by new

Sec. 2609.33.

In order that the PBGC in the future may provide, in a single

review, procedures that comply both with this subpart and with part

2606 (where applicable), the PBGC is amending Secs. 2606.33 and

2606.53. The amendment adds language that will require the PBGC, in a

case where administrative review includes a procedure in Sec. 2609.33,

to provide for a 60-day (or longer) period for requesting review (and,

hence for presenting evidence that all or part of a debt is not past-

due or not legally enforceable).

The PBGC currently has no plans to use agents, or persons other

than PBGC employees acting on its behalf, to consider evidence under

Sec. 2609.33. Should it decide to do so in the future, a debtor would

be accorded 30 days, or more, from the date of that person's

determination within which to request review by the Director of the

Financial Operations Department or his or her designee

(Sec. 2609.33(b)(3)), as required by IRS regulations (Sec. 301.6402-

6(d)(2)).

Section 2609.33(c) provides for consumer reporting agency

disclosure. Agency reporting of delinquent debts to a consumer

reporting agency will comply with the Federal Claims Collections

Standards (see 4 CFR 102.5) and with the Privacy Act of 1974, as

amended (5 U.S.C. 552a). However, the vast majority of debts to the

PBGC are not consumer debts subject to this requirement.

The PBGC's Financial Operations Department will have primary

responsibility for PBGC participation in the IRS's tax refund offset

program (see Sec. 2609.1(b)(1)). As indicated in Secs. 2609.33(c) and

2609.34, this includes responsibility for consumer reporting agency

disclosure and for referral of debt for tax refund offset (including

assuring that referrals contain information, and are corrected, as

required by IRS regulations (Sec. 301.6402-6 (e) and (f)).

Ascertaining indebtedness and other aspects of agency collection

activities will continue to be handled by the PBGC organizational unit

with functional responsibility for the type of claim involved (see

Sec. 2609.1(b)(2)). (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.)

This rule prescribes rules of agency organization and procedure, in

accordance with congressional standards implemented by the IRS after

notice and comment rulemaking. Because the Administrative Procedure Act

does not require publication of a general notice of proposed rulemaking

before the issuance of rules of agency organization and procedure, and

because, in view of prior IRS rulemaking, the PBGC has for good cause

found further notice and public procedure unnecessary (5 U.S.C. 553(b)

(A) and (B)), the PBGC is issuing this rule as an interim final rule.

However, the PBGC is soliciting public comment on its provisions. If

the comments received during this period warrant modifying provisions

of the rule, the PBGC will do so.

E.O. 12866

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 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 this rule is to enhance the PBGC's debt

collection ability. The procedures will be triggered only by a failure

to pay a past-due, legally enforceable debt.

List of Subjects

29 CFR Part 2606

Administrative practice and procedure, Organization and functions

(Government agencies), Pension insurance, Pensions.

29 CFR Part 2609

Administrative practice and procedure, Claims.

For the reasons set forth above, the PBGC is amending 29 CFR parts

2606 and 2609 as follows:

PART 2606--RULES FOR ADMINISTRATIVE REVIEW OF AGENCY DECISIONS

1. The authority citation for part 2606 continues to read as

follows:

Authority: 29 U.S.C. 1302(b)(3).

Secs. 2606.33 and 2606.53 [AMENDED]

2. Sections 2606.33 and 2606.53 are amended by adding ``or, when

administrative review includes a procedure in Sec. 2609.33 of this

subchapter, by a date 60 days (or more) thereafter that is specified in

the PBGC's notice of the right to request review'' at the end before

the period.

PART 2609--DEBT COLLECTION

3. The authority citation for part 2609 is revised to read as

follows:

Authority: 29 U.S.C. 1302(b); 31 U.S.C. 3701, 3711(f), 3720A; 4

CFR part 102; 26 CFR 301.6402-6.

4. Subpart A of part 2609 is amended by adding a new Sec. 2609.1 to

read as follows:

Sec. 2609.1 General.

(a) Certain PBGC efforts to obtain payment of debts arising out of

activities under the Employee Retirement Income Security Act of 1974,

as amended, are authorized by and subject to requirements prescribed

under other federal statutes. When, and to the extent, such

requirements apply to collection of a debt by the PBGC, PBGC activities

will be consistent with such requirements, as well as with any other

applicable requirements (see, e.g., parts 2606, 2610, and 2622 of this

chapter).

(b)(1) The Executive Director of the PBGC has delegated to the

Director of the Financial Operations Department primary responsibility

for PBGC debt collection activities. This delegation includes

responsibility for procedures implementing requirements prescribed

under federal statutes other than the Employee Retirement Income

Security Act of 1974, as amended, and for coordinating the activities

of other PBGC departments with functional responsibilities for

different types of claims.

(2) PBGC departments are responsible for ascertaining indebtedness

and other aspects of agency collection activities within their areas of

functional responsibility.

5. Section 2609.2 is amended by adding, in alphabetical order,

definitions of consumer reporting agency, IRS, and tax refund offset to

read as follows:

Sec. 2609.1 Definitions.

* * * * *

Consumer reporting agency has the meaning set forth in 31 U.S.C.

3701(a)(3).

* * * * *

IRS means the Internal Revenue Service.

* * * * *

Tax refund offset means the reduction by the IRS of a tax

overpayment payable to a taxpayer by the amount of past-due, legally

enforceable debt owed by that taxpayer to a federal agency that has

entered into an agreement with the IRS with regard to its participation

in the tax refund offset program, pursuant to IRS regulations (26 CFR

301.6402-6).

6. Part 2609 is further amended by adding a new subpart C and

adding and reserving a new subpart D heading to read as follows:

Subpart C--Tax Refund Offset

Sec.

2609.31 Purpose and scope.

2609.32 Eligibility of debt for tax refund offset.

2609.33 Tax refund offset procedures.

2609.34 Referral of debt for tax refund offset.

Subpart C--Tax Refund Offset

Sec. 2609.31 Purpose and scope.

(a) Purpose. This subpart prescribes procedures for debt collection

by tax refund offset, as authorized by section 3720A of subchapter II,

chapter 37 of title 31 of the United States Code (31 U.S.C. 3720A) and

in accordance with applicable IRS regulations (26 CFR 301-6402.6),

including a related procedure for disclosure to a consumer reporting

agency.

(b) Scope. The procedures in this subpart apply to determinations

that a debt of at least $25 is past-due and legally enforceable, to

referrals by the PBGC of past-due, legally enforceable debts to the IRS

for offset, and to any subsequent corrections of information contained

in such referrals.

Sec. 2609.32 Eligibility of debt for tax refund offset.

The PBGC will determine whether a debt is eligible for tax refund

offset in accordance with IRS regulations (26 CFR 301.6402-6 (c) and

(d)). The PBGC may refer a past-due, legally enforceable debt to the

IRS for offset if:

(a) The debt is a judgment debt, or the PBGC's right of action

accrued not more than 10 years earlier (unless the debt is specifically

exempt from this requirement);

(b) The PBGC cannot currently collect the debt by salary offset

(pursuant to 5 U.S.C. 5514(a)(1));

(c) The debt is ineligible for administrative offset (by reason of

31 U.S.C. 3716(c)(2)), or the PBGC cannot currently collect the debt by

administrative offset (under 31 U.S.C. 3716 and subpart B of this part)

against amounts payable by the debtor to the PBGC;

(d) The PBGC has notified, or attempted to notify, the debtor of

its intent to refer the debt, given the debtor an opportunity to

present evidence that all or part of the debt is not past-due or not

legally enforceable, considered any evidence presented by the debtor in

accordance with Sec. 2609.33 of this part, and determined that the debt

is past-due and legally enforceable;

(e) If the debt is a consumer debt and exceeds $100, the PBGC has

disclosed the debt to a consumer reporting agency (as authorized by 31

U.S.C. 3711(f) and provided in Sec. 2609.33 of this part), unless a

consumer reporting agency would be prohibited from reporting

information concerning the debt (by reason of 15 U.S.C. 1681c); and

(f) The debt is at least $25.

Sec. 2609.33 Tax refund offset procedures.

(a) General. Before referring a debt for tax refund offset, the

PBGC will complete the procedures specified in paragraph (b) of this

section and, if applicable, paragraph (c) of this section. The PBGC may

satisfy these requirements in conjunction with any other procedures

that apply to the same debt, such as those prescribed in Sec. 2609.23

of this part or part 2606 of this subchapter.

(b) Notice, opportunity to present evidence, and determination of

indebtedness. (1) The PBGC will notify, or make a reasonable attempt to

notify, a person owing a debt (a ``debtor'') that a debt is past-due

and if not repaid within 60 days, the PBGC will refer the debt to the

IRS for offset against any overpayment of tax. For this purpose,

compliance with IRS procedures (26 CFR 301.6402-6(d)(1)) constitutes a

reasonable attempt to notify a debtor.

(2) A debtor will have at least 60 days to present evidence, for

consideration by the PBGC, that all or part of a debt is not past-due

or not legally enforceable.

(3) If evidence that all or part of a debt is not past-due or not

legally enforceable is considered by an agent or person other than a

PBGC employee acting on behalf of the PBGC, a debtor will have at least

30 days from the date of the determination on the debt to request

review by the Director of the Financial Operations Department (or a

department official designated by the Director).

(4) The PBGC will notify a debtor of its determination as to

whether all or part of a debt is past-due and legally enforceable.

(c) Consumer reporting agency disclosure. (1)(i) If a consumer debt

exceeds $100, the Director of the Financial Operations Department (or a

department official designated by the Director), after verifying the

validity and overdue status of the debt and that section 605 of the

Consumer Credit Protection Act (15 U.S.C. 1681c) does not prohibit a

consumer reporting agency from reporting information concerning the

debt because it is obsolete, will send the individual who owes the debt

a written notice--

(A) That the debt is past-due;

(B) That the PBGC intends to disclose to a consumer reporting

agency that the individual is responsible for the debt and the specific

information to be disclosed; and

(C) How the individual may obtain an explanation of the debt,

dispute the information in PBGC's records, and obtain administrative

review of the debt.

(ii) If the PBGC does not have a current address for an individual,

the Director of the Financial Operations Department (or a department

official designated by the Director) will take reasonable action to

locate the individual.

(2) The Director of the Financial Operations Department (or a

department official designated by the Director) will disclose the debt

if, within 60 days (or, at his or her discretion, more than 60 days)

after sending the notice described in paragraph (c)(1) of this section,

the individual has not repaid the debt, or agreed to repay the debt

under a written agreement, or requested administrative review of the

debt.

Sec. 2609.34 Referral of debt for tax refund offset.

The Director of the Financial Operations Department (or a

department official designated by the Director) will refer debts to the

IRS for refund offset, and will correct referrals, in accordance with

IRS regulations (26 CFR 301.6402-6 (e) and (f)).

Subpart D--Salary Offset [Reserved]

Issued in Washington, DC, this 30 day of November, 1994.

Martin Slate,

Executive Director, Pension Benefit Guaranty Corporation.

[FR Doc. 94-29879 Filed 12-5-94; 8:45 am]

BILLING CODE 7708-01-M