# Debt Collection ProceduresTax Refund Offset

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A94-29879

## Record

- **Collection:** Federal Register
- **Document type:** Uncategorized Document
- **Published:** December 6, 1994

## Text

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.

-----------------------------------------------------------------------

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

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A94-29879. Public record. Not legal advice.