Salary Offset

SUMMARY: The Debt Collection Improvement Act of 1996 (DCIA) requires

the Federal Government to withhold or reduce certain Federal payments

to satisfy the delinquent nontax debts owed to the United States by the

payee. This process is known as ``administrative offset.'' In addition,

the DCIA requires Federal agencies, using a process known as

centralized salary offset computer matching, to identify Federal

employees who owe delinquent nontax debt to the United States. This

interim rule establishes centralized computer matching procedures for

comparing delinquent debt information with Federal salary payment

information for the purpose of offsetting the salary payments of those

employees who owe debt to the United States once they are identified.

This interim rule also establishes the rules governing the

administrative offset of Federal salary payments through a centralized

offset process operated by the Financial Management Service of the U.S.

Department of the Treasury.

DATES: This rule is effective April 28, 1998. Comments must be received

on or before May 28, 1998.

ADDRESSES: All comments should be addressed to Gerry Isenberg,

Financial Program Specialist, Debt Management Services, Financial

Management Service, 401 14th Street SW, Room 151, Washington, D.C.

20227. A copy of this interim rule is being made available for

downloading from the Financial Management Service web site at the

following address: http://www.fms.treas.gov.

FOR FURTHER INFORMATION CONTACT: Gerry Isenberg, Financial Program

Specialist, at (202) 874-6859; or Ellen Neubauer or Ronda Kent, Senior

Attorneys, at (202) 874-6680.

SUPPLEMENTARY INFORMATION:

Background

A major purpose of the Debt Collection Improvement Act of 1996

(DCIA), Pub. L. 104-134, 110 Stat. 1321-358 et seq. (April 26, 1996),

is to increase the collection of delinquent nontax debts owed to the

Federal Government. Among other things, the DCIA established a

centralized process for withholding or reducing eligible Federal

payments, including Federal salary payments, to pay the payee's

delinquent debt owed to the United States. This process is known as

``administrative offset.'' The DCIA also established a requirement that

Federal agencies match their delinquent debtor records with records of

Federal employees, at least annually, to identify Federal employees who

owe delinquent debt to the Federal Government. This rule establishes

centralized procedures for matching delinquent debt records with

Federal salary payment records for the purpose of offsetting a debtor's

Federal salary payments where a match occurs.

The Financial Management Service (FMS), a bureau of the Department

of the Treasury (Treasury), disburses more than 850 million Federal

payments annually, including Federal salary payments. As the Treasury

disbursing agency, FMS is responsible for the implementation of

centralized administrative offset of Federal payments for the

collection of delinquent nontax debt. To meet this responsibility, FMS

has established the Treasury Offset Program. By participating in the

Treasury Offset Program in accordance with the provisions of this rule,

Federal agencies will comply with the DCIA requirements regarding

Federal employees who owe delinquent nontax debts to the United States.

The Treasury Offset Program works as follows. FMS maintains a

delinquent debtor database. The database includes delinquent debtor

information submitted and updated by Federal agencies and States. Under

the DCIA, Federal agencies are required to notify FMS of all past-due,

legally enforceable nontax debts owed to the United States that are

over 180 days delinquent for inclusion in this delinquent debtor

database.

As part of the Federal payment process, FMS and other Federal

disbursing officials compare the payee information with debtor

information in the delinquent debtor database operated by FMS. If the

payee's name and taxpayer identifying number (TIN) match the name and

TIN of a debtor, the payment is offset, in whole or part, to satisfy

the debt, to the extent allowed by law. This rule establishes specific

procedures for the comparison of information contained in the

delinquent debtor database with payee information contained on Federal

salary payments and for the offset of those payments where a match

occurs.

Amounts collected are transmitted to the appropriate agencies owed

the delinquent debt after the disbursing official deducts a fee charged

to cover the cost of the offset program. The authority of disbursing

officials to charge fees is found at 31 U.S.C. 3716(c)(4).

Additionally, as authorized by 5 U.S.C. 5514, agencies that perform

centralized salary offset computer matching services may charge a fee

sufficient to cover the full cost for such services. Under 31 U.S.C.

3717(e) the agencies which are owed the delinquent debt may add the

fees to the debt as part of the administrative cost, if permitted by

law.

Information about a delinquent debt remains in the debtor database

and offsets of eligible Federal salary and other payments will continue

until debt collection activity for the debt is terminated because of

full payment, establishment of a repayment plan, compromise, write-off

or other reasons justifying termination. In centralizing offset through

the Treasury Offset Program, FMS will consolidate and simplify offset

procedures for the Federal Government.

Other rules and procedures reflect requirements for other types of

payments or debts, as well as the general rules applicable to

collection of debts by offset. FMS has promulgated or will promulgate

other rules governing the centralized offset of Federal payments (other

than Federal salary payments) for the collection of debts owed to

Federal agencies, for the collection of debts owed to States, and for

the collection of past-due child support. FMS anticipates that Part 285

of this title will contain all of the provisions relating to the

centralized offset of Federal payments for the collection of debts owed

to the Federal Government and to State governments, including past-due

child support.

Section Analysis

(a) Purpose and Scope. Paragraph (a) explains that this rule

establishes procedures for matching records of delinquent debtors with

Federal employee records as required under 5 U.S.C. 5514(a)(1) and,

where a match occurs, for offsetting Federal salary payments through

centralized administrative offset under 31 U.S.C. 3716. Nothing in this

rule precludes an agency from pursuing collection remedies in addition

to salary offset.

(b) Definitions. This rule includes the following definitions.

Administrative offset. The term ``administrative offset'' or

``offset'' as

[[Page 23355]]

defined in this rule has the same meaning as found in 31 U.S.C.

3701(a)(1).

Agency. The term ``agency'' as defined in this rule has the same

meaning as found in 31 U.S.C. 3701(a)(4) and includes all agencies

required by 5 U.S.C. 5514(a)(1) to participate in centralized salary

offset computer matching. The term refers to an agency in the

executive, judicial or legislative branches of the Government,

including government corporations, that administers the program that

gave rise to the debt.

Centralized salary offset computer matching. The phrase

``centralized salary offset computer matching'' describes the

computerized process used to match delinquent debt records with Federal

salary payment records when the purpose of the match is to identify

Federal employees who owe debt to the Federal Government.

Debt. For the purposes of this rule, the term ``debt'' has the same

meaning as found in 31 U.S.C. 3701(b)(1) and does not include tax debt.

Delinquent debt record. For purposes of this rule, the term

``delinquent debt record'' refers to the information about a debt that

an agency submits to FMS when the agency refers the debt for collection

by offset in accordance with the provisions of 31 U.S.C. 3716.

Disbursing official. ``Disbursing official'' means an official who

has authority to disburse Federal salary payments pursuant to 31 U.S.C.

3321 or another law. It includes disbursing officials of the Department

of the Treasury, the Department of Defense, the United States Postal

Service, or any other government corporation, any disbursing official

of the United States designated by the Secretary of the Treasury, or

any disbursing official of any other executive department or agency

that disburses Federal salary payments.

Disposable pay. ``Disposable pay'' has the same meaning as

prescribed by the Office of Personnel Management (OPM) in 5 CFR

550.1103. As defined by OPM, ``disposable pay'' means that part of

current basic pay, special pay, incentive pay, retired pay, retainer

pay, or in the case of an employee not entitled to basic pay, other

authorized pay remaining after the deduction of (a) any amount required

by law to be withheld; (b) amounts properly withheld for Federal, state

or local income tax purposes; (c) amounts deducted as health insurance

premiums; (d) amounts deducted as normal retirement contributions, not

including amounts deducted for supplementary coverage; and (e) amounts

deducted as normal life insurance premiums not including amounts

deducted for supplementary coverage.

Federal employee. The term ``Federal employee'' is intended to

cover any individual who is employed by any agency of the Federal

Government, including temporary and seasonal employees.

Federal employee records. ``Federal employee records'' are the

Federal salary payment records. To request salary payments for their

employees, Federal agencies prepare and certify payment vouchers.

Disbursing officials of the Federal Government issue salary payments

upon receipt of certified payment vouchers. To identify Federal

employees who owe debt to the United States, the Federal salary payment

records will be compared with the delinquent debt records submitted to

FMS.

Paying agency. The ``paying agency'' is the employing agency or the

payroll agency (e.g., the United States Department of Agriculture's

National Finance Center). The paying agency prepares and certifies

payment vouchers pursuant to which disbursing officials issue salary

payments.

Salary offset. ``Salary offset'' is a type of administrative

offset. As amended by section 31001(d)(2)(B) of the DCIA, 31 U.S.C.

3716 is applicable to the offset of all Federal payments even if

another statute provides for using offset to collect a particular type

of debt. See 31 U.S.C. 3716(e) (formerly 31 U.S.C. 3716(c)). Thus, the

provisions of 31 U.S.C. 3716 apply to salary offset even though

procedures governing the offset of a Federal employee's salary are

provided for in 5 U.S.C. 5514. The requirements to provide a Federal

employee with notice and an opportunity to dispute the debt are

contained in 5 U.S.C. 5514 and implementing regulations. Nothing in

this rule is intended to change the prerequisites to salary offset.

Taxpayer identifying number. For an individual the ``taxpayer

identifying number'' is the social security number. An offset of an

individual's salary payment will not occur unless the taxpayer

identifying number and name of the payee match the taxpayer identifying

number and name of the debtor.

(c) Establishment of the consortium. Paragraph (c) defines the

interagency consortium that the Secretary, by issuance of this rule,

establishes in accordance with the requirement contained in 5 U.S.C.

5514(a)(1). The purpose of the interagency consortium is to establish a

centralized salary offset computer matching process. Therefore,

paragraph (c) provides that the interagency consortium initially

consists of all agencies which disburse Federal salary payments and

which are required to offset Federal payments to collect debts. See 31

U.S.C. 3716(c)(1)(A). These agencies have the information necessary to

identify all Federal employees who are receiving Federal salary

payments. The membership of the consortium may be changed at the

discretion of the Secretary, and the Secretary will be responsible for

the ongoing coordination of the activities of the consortium.

(d) Creditor agency participation. The DCIA requires agencies to

notify FMS of all past-due, legally enforceable debt over 180 days

delinquent for purposes of administrative offset. See 31 U.S.C.

3716(c)(6). As explained in paragraph (d)(1), by complying with this

notification requirement, agencies simultaneously will comply with the

salary offset matching requirement under 5 U.S.C. 5514(a)(1). It is

anticipated that all Federal disbursing officials will match Federal

salary payment records against the debtor records contained in the

delinquent debtor database. Currently, however, full implementation of

the centralized salary offset computer matching process is not

complete. Therefore, until the procedures described in this rule are

fully implemented, it is important that agencies continue existing

salary matching processes to identify, and collect debt owed from the

salaries of, Federal employees who may not be identified through the

Treasury Offset Program process.

Debts referred to FMS for purposes of administrative offset will be

matched with all Federal payment records, including Federal salary

payments. After a match occurs, unless offset is legally prohibited,

the payee's payment will be offset to pay the payee's debt after proper

notice and opportunity to review and dispute the debt have been

provided to the payee (see paragraph (d)(3) of this section). Agencies

also may refer debts less than 180 days delinquent so long as the debt

is past-due and legally enforceable and all prerequisites to offset

have been met.

Paragraph (d)(2) provides that before submitting a debt to FMS for

purposes of administrative offset and salary offset matching, agencies

must have issued regulations governing the collection of debt by both

administrative offset and salary offset. Agency regulations governing

the collection of debt by administrative offset must comply with 31

U.S.C. 3716(b) and with the Federal Claims Collection Standards (4 CFR

Parts 101-105; see also, Notice of

[[Page 23356]]

Proposed Rulemaking concerning revisions to the Federal Claims

Collection Standards, 62 FR 68475, Dec. 31, 1997). Agency regulations

governing the collection of debt by salary offset must comply with 5

U.S.C. 5514 and with regulations issued by OPM (5 CFR 550.1101 through

550.1108; see also, Notice of Proposed Rulemaking concerning revisions

to the OPM regulations, 63 FR 18850, April 16, 1998). Although salary

offsets under this rule are being conducted through a centralized

process under 31 U.S.C. 3716, agencies must nevertheless comply with

the requirements for regulations contained in 5 U.S.C. 5514 and OPM

regulations. An agency that has already published offset regulations

need not publish new regulations except as may be necessary to conform

the regulations to DCIA requirements.

Paragraph (d)(3) describes agency certification requirements when

submitting a debt to FMS for offset, including salary offset. Nothing

in the DCIA modified the pre-offset due process notices and

opportunities afforded to debtors, in general, and Federal employees,

in particular. Therefore, a debt may not be submitted to FMS for offset

and salary offset matching unless the creditor agency certifies, in

writing, that the debtor has been afforded the legally required due

process. Paragraph (d)(3)(iv) explains that, with the approval of FMS,

the specific notices and opportunities required as a prerequisite to

salary offset may be provided to the debtor after the debt is submitted

to FMS, but must be provided prior to the offset of an employee's

salary.

Paragraph (d)(4) explains that the creditor agency is responsible

for notifying FMS of any changes to the debt amount (other than offset

collections) and any changes to the status of the legal enforceability

of the debt. For example, unless the creditor agency determines that

the automatic stay imposed at the time of a bankruptcy filing pursuant

to 11 U.S.C. 362 has been lifted or is no longer in effect, in most

cases collection activity against the debtor should stop immediately.

Therefore, it is imperative that the creditor agency notify FMS

immediately upon learning that a bankruptcy petition has been filed

with respect to a debtor.

(e) Centralized salary offset computer match. Paragraph (e)

explains that the delinquent debt records submitted by creditor

agencies will be compared with the Federal employee records (salary

payment records) maintained by the members of the consortium described

in paragraph (c). A match will occur when the taxpayer identifying

number and name of a payee match the taxpayer identifying number and

name of a debtor. For purposes of the computer matching process, the

``name'' will be a portion of the name, known as a ``name control,''

designed to ensure accurate matching. The purpose of the computer

matching process is to identify those Federal employees who owe

delinquent debt and, once identified, to offset the employee's salary

to pay the employee's delinquent debt. As noted above, salary offset is

a type of administrative offset.

Although generally such computer matches are subject to the

Computer Matching and Privacy Protection Act of 1988, Pub. L. No. 100-

503 (Computer Matching Act), the DCIA authorizes the Secretary to waive

certain provisions of the Computer Matching Act for administrative

offset. See 31 U.S.C. 3716(f). Specifically, the Secretary is

authorized to waive the Computer Matching Act requirements of

completing matching agreements (contained in 5 U.S.C. 552a(o)) and

post-match notification to the individual and verification of the

resulting data (contained in 5 U.S.C. 552a(p)). The waiver is

authorized upon the written certification by the head of the creditor

agency that the requirements of 31 U.S.C. 3716(a) have been met. The

waiver authority has been delegated by the Secretary to FMS. The

certification that agencies are required to submit when referring their

debts to FMS for offset, as described in paragraph (d)(3)(iii) of the

rule, meets the certification requirement for waiver. Section 3716(a)

requires that, prior to collecting a debt by administrative offset,

agencies shall provide the debtor with written notice of the nature and

amount of the debt and an opportunity to inspect and copy records, for

review of the debt determination, and to enter into a repayment

agreement. Agencies also must notify the debtor that the agency intends

to collect the debt by administrative offset. FMS will not accept any

debts into the debtor database (and therefore will not conduct any

computer matches for offset purposes) unless the debts are accompanied

by the written certification required by paragraph (d)(3)(iii) of this

rule. In addition to certifying that the agency has complied with the

requirements of 31 U.S.C. 3716 for offset, prior to offset of an

employee's salary, the creditor agency must certify that the

prerequisites to salary offset also have been met.

(f) Salary offset. Paragraph (f) states that when a match occurs,

and all other requirements for offset have been met, Federal disbursing

officials will offset the Federal employee's salary payment to satisfy,

in whole or in part, the debt. As discussed in paragraph (e)(1), a

match occurs when the taxpayer identifying number and name of a payee

match the taxpayer identifying number and name of a debtor.

Under 5 U.S.C. 5514 and as described in paragraph (g), the amount

that may be offset from a Federal employee's salary payment is limited

to 15% of the employee's disposable pay. Since disbursing officials may

not have the information necessary to calculate 15% of an employee's

disposable pay, disbursing officials may request that the paying agency

deduct the amount to be offset before payment is certified to a

disbursing official for payment.

(g) Offset amount. Under 5 U.S.C. 5514, the amount that may be

offset from an employee's salary payment is limited to 15% of the

employee's disposable pay. A disbursing official, after notifying the

creditor agency or at the request of a creditor agency, may offset less

than 15%. In addition, the debtor may agree to the offset of an amount

greater than 15%.

(h) Priorities. As required by 5 U.S.C. 5514(d), paragraph (h)(1)

of this section provides that tax levies imposed by the Internal

Revenue Service take precedence over deductions from an employee's

salary to pay a nontax debt owed to the United States.

Paragraph (h)(2) states that amounts offset from a Federal

employee's salary will be applied first to the employee's past-due

child support obligations which have been assigned to a State before

being applied to the nontax debts owed by the employee to the United

States. As currently set forth in this rule, only those child support

debts which have been assigned to a State as reimbursement for public

assistance paid to a family are given priority over debts owed to the

Federal government. Amounts offset from a Federal employee's salary

will be applied to child support obligations that have not been

assigned to a State (and are owed directly to the custodial family)

after payment of assigned child support debts and Federal debts owed by

the employee. The priorities set forth in this interim rule parallel

the statutory priorities that govern the offset of a debtor's tax

refund payment. See 26 U.S.C. 6402(c) and 6402(d)(2). The public is

invited to comment specifically on the priorities set forth in this

rule and whether, for salary offset purposes, child support debts

assigned to a State should have priority over debts owed to the Federal

government. In addition, the public is invited to comment specifically

on whether debts owed to the Federal government should

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have priority over child support debts which have not been assigned to

a State.

(i) Notice. Before offsetting a salary payment, the disbursing

official, or the paying agency on behalf of the disbursing official,

must notify the Federal employee in writing of the date deductions from

salary will begin and of the amount of such deductions. The amount of

the deductions may be stated as a percentage of pay. Additionally, once

an offset of a salary payment has occurred, the disbursing official, or

the paying agency on behalf of the disbursing official, must provide

written notice to the Federal employee that the offset has occurred.

This written notice may appear on a Leave and Earnings Statement (or

similar statement) provided to the Federal employee. The disbursing

official also will inform the creditor agency that an offset has

occurred but will not inform the creditor agency of the payment source

of the amounts collected. Since disbursing agencies will be conducting

offsets of various payment types, debt repayment may result from any

one of a number of payment sources.

(j) Fees. Agencies that perform salary offset matching services may

charge fees pursuant to 5 U.S.C. 5514(a)(1). FMS, or a paying agency

acting on behalf of FMS, may charge a fee sufficient to cover the full

cost of implementing the offset program pursuant to 31 U.S.C.

3716(c)(4). The creditor agency may add any fees to the debt as an

administrative cost pursuant to 31 U.S.C. 3717(e), if permitted by law.

Fees may be deducted from the amount offset before that amount is

transmitted to the creditor agency. The amount of the fee may be

adjusted annually to ensure that the fee adequately covers the

administrative costs of the offset program.

(k) Disposition of amounts collected. Paragraph (k) describes how

amounts collected from salary payments will be transmitted to creditor

agencies.

Regulatory Analysis

This interim rule is not a significant regulatory action as defined

in Executive Order 12866. Because no notice of proposed rulemaking is

required for this interim rule, the provisions of the Regulatory

Flexibility Act do not apply.

Special Analyses

FMS is promulgating this interim rule without opportunity for prior

public comment pursuant to the Administrative Procedure Act, 5 U.S.C.

553 (the ``APA''), because FMS has determined, for the following

reasons, that a comment period would be unnecessary, impracticable and

contrary to the public interest. A comment period is unnecessary

because this interim rule does not change how the Federal salary offset

process affects the Federal employee who owes delinquent nontax debt.

The interim rule reflects changes to the procedures as to how creditor

agencies will identify Federal employees who owe delinquent nontax debt

for purposes of offsetting the salary payments of the identified

Federal employees. Under this interim rule, creditor agencies are

required to provide to the debtor the same pre-offset notice,

opportunities, and rights to dispute the debt and seek waiver as

currently required under 5 U.S.C. 5514 and implementing regulations.

FMS has determined that good cause exists to make this interim rule

effective upon publication without providing the 30 day period between

publication and the effective date contemplated by 5 U.S.C. 553(d). The

purpose of a delayed effective date is to afford persons affected by a

rule a reasonable time to prepare for compliance. However, in this

case, as required by the DCIA which was effective on April 26, 1996,

agencies already participate in the Treasury Offset Program. Many

agencies have collected debts by salary offset over the last 15 years.

Procedures affecting debtors remain unchanged in this rule.

Centralized salary offset computer matching for offset purposes

will improve the efficiency of Treasury's government-wide collection of

nontax delinquent debts owed by Federal employees. This rule provides

critical guidance that will facilitate creditor agencies' participation

in centralized salary offset computer matching as required by the DCIA.

Therefore, FMS believes that good cause exists and that it is in the

public interest to issue the interim rule without opportunity for prior

public comment.

The public is invited to submit comments on the interim rule in

general and on the specific points mentioned above which will be taken

into account before a final rule is issued.

List of Subjects in 31 CFR Part 285

Administrative practice and procedure, Claims, Debt, Federal

employees, Salaries, Wages.

Authority and Issuance

For the reasons set forth in the preamble, part 285 of 31 CFR

chapter II, subchapter A, is amended as follows:

PART 285--DEBT COLLECTION AUTHORITIES UNDER THE DEBT COLLECTION

IMPROVEMENT ACT OF 1996

1. The authority citation for part 285 is revised to read as

follows:

Authority: 5 U.S.C. 5514; 26 U.S.C. 6402; 31 U.S.C. 321, 3701,

3711, 3716, 3720A; E.O. 13019; 3 CFR, 1996 Comp., p. 216.

2. Section 285.7 is added to Subpart A to read as follows:

Sec. 285.7 Salary offset.

(a) Purpose and scope. (1) This section establishes procedures for

the offset of Federal salary payments, through FMS' administrative

offset program, to collect delinquent debts owed to the Federal

Government. This process is known as salary offset. Rules issued by the

Office of Personnel Management contain the requirements Federal

agencies must follow prior to conducting salary offset and the

procedures for requesting offsets directly from a paying agency. See 5

CFR 550.1101 through 550.1108.

(2) This section implements the requirement under 5 U.S.C.

5514(a)(1) that all Federal agencies, using a process known as

centralized salary offset computer matching, identify Federal employees

who owe delinquent nontax debt to the United States. Centralized salary

offset computer matching is the computerized comparison of delinquent

debt records with records of Federal employees. The purpose of

centralized salary offset computer matching is to identify those

debtors whose Federal salaries should be offset to collect delinquent

debts owed to the Federal Government.

(3) This section specifies the delinquent debt records and Federal

employee records that must be included in the salary offset matching

process. For purposes of this section, delinquent debt records consist

of the debt information submitted to the Financial Management Service

for purposes of administrative offset as required under 31 U.S.C.

3716(c)(6). Agencies that submit their debt to FMS for purposes of

administrative offset are not required to submit duplicate information

for purposes of centralized salary offset computer matching under 5

U.S.C. 5514 and this section.

(4) This section establishes an interagency consortium to implement

centralized salary offset computer matching on a government-wide basis

as required under 5 U.S.C. 5514(a)(1). Federal employee records consist

of records of Federal salary payments disbursed by members of the

consortium.

[[Page 23358]]

(5) The receipt of collections from salary offsets does not

preclude a creditor agency from pursuing other debt collection

remedies, including the offset of other Federal payments to satisfy

delinquent nontax debt owed to the United States. A creditor agency

should pursue, when deemed appropriate by such agency, such debt

collection remedies separately or in conjunction with salary offset.

(b) Definitions. For purposes of this section:

Administrative offset means withholding funds payable by the United

States to, or held by the United States for, a person to satisfy a debt

owed by the payee.

Agency means a department, agency or subagency, court, court

administrative office, or instrumentality in the executive, judicial,

or legislative branch of the Federal government, including government

corporations.

Centralized salary offset computer matching means the computerized

comparison of Federal employee records with delinquent debt records to

identify Federal employees who owe such debts.

Creditor agency means any agency that is owed a debt.

Debt means any amount of money, funds, or property that has been

determined by an appropriate official of the Federal government to be

owed to the United States by a person, including debt administered by a

third party acting as an agent for the Federal Government. For purposes

of this section, the term ``debt'' does not include debts arising under

the Internal Revenue Code of 1986 (26 U.S.C.).

Delinquent debt record means information about a past-due, legally

enforceable debt, submitted by a creditor agency to FMS for purposes of

administrative offset (including salary offset) in accordance with the

provisions of 31 U.S.C. 3716 and applicable regulations. Debt

information includes the amount and type of debt and the debtor's name,

address, and taxpayer identifying number.

Disbursing official means an officer or employee designated to

disburse Federal salary payments. This section applies to all

disbursing officials of Federal salary payments, including but not

limited to, disbursing officials of the Department of the Treasury, the

Department of Defense, the United States Postal Service, any government

corporation, and any disbursing official of the United States

designated by the Secretary.

Disposable pay has the same meaning as that term is defined in 5

CFR 550.1103.

Federal employee means a current employee of an agency, including a

current member of the Armed Forces or a Reserve of the Armed Forces

(Reserves), employees of the United States Postal Service, and seasonal

and temporary employees.

Federal employee records means records of Federal salary payments

that a paying agency has certified to a disbursing official for

disbursement.

FMS means the Financial Management Service, a bureau of the

Department of the Treasury.

Paying agency means the agency that employs the Federal employee

who owes the debt and authorizes the payment of his or her current pay.

A paying agency also includes an agency that performs payroll services

on behalf of the employing agency.

Salary offset means administrative offset to collect a debt owed by

a Federal employee from the current pay account of the employee.

Secretary means the Secretary of the Treasury or his or her

delegate.

Taxpayer identifying number means the identifying number described

under section 6109 of the Internal Revenue Code of 1986 (26 U.S.C.

6109). For an individual, the taxpayer identifying number is the

individual's social security number.

(c) Establishment of the consortium. As required by the provisions

of 5 U.S.C. 5514(a)(1), by issuance of this section, the Secretary

establishes an interagency consortium to implement centralized salary

offset computer matching. The consortium initially includes all

agencies that disburse Federal salary payments, including but not

limited to, FMS, the Department of Defense, the United States Postal

Service, government corporations, and agencies with Treasury-designated

disbursing officials. The membership of the consortium may be changed

at the discretion of the Secretary, and the Secretary will be

responsible for the ongoing coordination of the activities of the

consortium.

(d) Creditor agency participation. (1) As required under 5 U.S.C.

5514(a)(1), creditor agencies shall participate at least annually in

centralized salary offset computer matching. To meet this requirement,

creditor agencies shall notify FMS of all past-due, legally enforceable

debts delinquent for more than 180 days for purposes of administrative

offset, as required under 31 U.S.C. 3716(c)(6). Additionally, creditor

agencies may notify FMS of past-due, legally enforceable debts

delinquent for less than 180 days for purposes of administrative

offset.

(2) Prior to submitting debts to FMS for purposes of administrative

offset (including salary offset) and centralized salary offset computer

matching, Federal agencies shall prescribe regulations in accordance

with the requirements of 31 U.S.C. 3716 (administrative offset) and 5

U.S.C. 5514 (salary offset).

(3) Prior to submitting a debt to FMS for purposes of collection by

administrative offset, including salary offset, creditor agencies shall

provide written certification to FMS that:

(i) The debt is past-due and legally enforceable in the amount

submitted to FMS and that the creditor agency will ensure that

collections (other than collections through offset) are properly

credited to the debt;

(ii) Except in the case of a judgment debt or as otherwise allowed

by law, the debt is referred for offset within ten years after the

agency's right of action accrues;

(iii) The creditor agency has complied with the provisions of 31

U.S.C. 3716 (administrative offset) and related regulations including,

but not limited to, the provisions requiring that the creditor agency

provide the debtor with applicable notices and opportunities for a

review of the debt; and

(iv) The creditor agency has complied with the provisions of 5

U.S.C. 5514 (salary offset) and related regulations including, but not

limited to, the provisions requiring that the creditor agency provide

the debtor with applicable notices and opportunities for a hearing.

(4) FMS may waive the certification requirement set forth in

paragraph (d)(3)(iv) of this section as a prerequisite to submitting

the debt to FMS. If FMS waives the certification requirement, before an

offset occurs, the creditor agency shall provide the Federal employee

with the notices and opportunities for a hearing as required by 5

U.S.C. 5514 and applicable regulations, and shall certify to FMS that

the requirements of 5 U.S.C. 5514 and applicable regulations have been

met.

(5) The creditor agency shall notify FMS immediately of any

payments credited by the creditor agency to the debtor's account, other

than credits for amounts collected by offset, after submission of the

debt to FMS. The creditor agency also shall notify FMS immediately of

any change in the status of the legal enforceability of the debt, for

example, if the creditor agency receives notice that the debtor has

filed for bankruptcy protection.

(e) Centralized salary offset computer match. (1) Delinquent debt

records will

[[Page 23359]]

be compared with Federal employee records maintained by members of the

consortium or paying agencies. The records will be compared to identify

Federal employees who owe delinquent debts for purposes of collecting

the debt by administrative offset. A match will occur when the taxpayer

identifying number and name of a Federal employee are the same as the

taxpayer identifying number and name of a debtor.

(2) As authorized by the provisions of 31 U.S.C. 3716(f), FMS,

under a delegation of authority from the Secretary, has waived certain

requirements of the Computer Matching and Privacy Protection Act of

1988, 5 U.S.C. 552a, as amended, for administrative offset, including

salary offset, upon written certification by the head of the creditor

agency that the requirements of 31 U.S.C. 3716(a) have been met.

Specifically, FMS has waived the requirements for a computer matching

agreement contained in 5 U.S.C. 552a(o) and for post-match notice and

verification contained in 5 U.S.C. 552a(p). The creditor agency will

provide certification in accordance with the provisions of paragraph

(d)(3)(iii) of this section.

(f) Salary offset. When a match occurs and all other requirements

for offset have been met, as required by the provisions of 31 U.S.C.

3716(c) the disbursing official shall offset the Federal employee's

salary payment to satisfy, in whole or part, the debt owed by the

employee. Alternatively, the paying agency, on behalf of the disbursing

official, may deduct the amount of the offset from an employee's

disposable pay before the employee's salary payment is certified to a

disbursing official for disbursement.

(g) Offset amount. (1) The amount offset from a salary payment

under this section shall be the lesser of:

(i) The amount of the debt, including any interest, penalties and

administrative costs; or

(ii) An amount up to 15% of the debtor's disposable pay.

(2) Alternatively, the amount offset may be an amount agreed upon,

in writing, by the debtor and the creditor agency.

(3) Offsets will continue until the debt, including any interest,

penalties, and costs, is paid in full or otherwise resolved to the

satisfaction of the creditor agency.

(h) Priorities. (1) A levy pursuant to the Internal Revenue Code of

1986 shall take precedence over other deductions under this section.

(2) When a salary payment may be reduced to collect more than one

debt, amounts offset under this section will be applied to a debt only

after amounts offset have been applied to satisfy past due child

support debts assigned to a State pursuant to 402(a)(26) or section

471(a)(17) of the Social Security Act.

(i) Notice. (1) Before offsetting a salary payment, the disbursing

official, or the paying agency on behalf of the disbursing official,

shall notify the Federal employee in writing of the date deductions

from salary will commence and of the amount of such deductions.

(2)(i) When an offset occurs under this section, the disbursing

official, or the paying agency on behalf of the disbursing official,

shall notify the Federal employee in writing that an offset has

occurred including:

(A) A description of the payment and the amount of offset taken;

(B) The identity of the creditor agency requesting the offset; and,

(C) A contact point within the creditor agency that will handle

concerns regarding the offset.

(ii) The information described in paragraphs (i)(2)(i)(B) and

(i)(2)(i)(C) of this section does not need to be provided to the

Federal employee when the offset occurs if such information was

included in a prior notice from the disbursing official or paying

agency.

(3) The disbursing official will advise each creditor agency of the

names, mailing addresses, and taxpayer identifying numbers of the

debtors from whom amounts of past-due, legally enforceable debt were

collected and of the amounts collected from each debtor for that

agency. The disbursing official will not advise the creditor agency of

the source of payment from which such amounts were collected.

(j) Fees. Agencies that perform centralized salary offset computer

matching services may charge a fee sufficient to cover the full cost

for such services. In addition, FMS, or a paying agency acting on

behalf of FMS, may charge a fee sufficient to cover the full cost of

implementing the administrative offset program. FMS may deduct the fees

from amounts collected by offset or may bill the creditor agencies.

Fees charged for offset shall be based on actual administrative offsets

completed.

(k) Disposition of amounts collected. The disbursing official

conducting the offset will transmit amounts collected for debts, less

fees charged under paragraph (j) of this section, to the appropriate

creditor agency. If an erroneous offset payment is made to a creditor

agency, the disbursing official will notify the creditor agency that an

erroneous offset payment has been made. The disbursing official may

deduct the amount of the erroneous offset payment from future amounts

payable to the creditor agency. Alternatively, upon the disbursing

official's request, the creditor agency shall return promptly to the

disbursing official or the affected payee an amount equal to the amount

of the erroneous payment (without regard to whether any other amounts

payable to such agency have been paid). The disbursing official and the

creditor agency shall adjust the debtor records appropriately.

Dated: April 22, 1998.

Richard L. Gregg,

Commissioner.

[FR Doc. 98-11203 Filed 4-27-98; 8:45 am]

BILLING CODE 4810-35-P