Pay Administration (General); Collection by Offset from Indebted Government Employees

OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 550

RIN 3206-AH63

Pay Administration (General); Collection by Offset from Indebted

Government Employees

AGENCY: Office of Personnel Management.

ACTION: Proposed rule with request for comments.

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SUMMARY: The Office of Personnel Management is issuing proposed changes

in the salary offset regulations to comply with the Debt Collection

Improvement Act of 1996. The principal changes relate to the roles

played by disbursing officials and debt collection centers with respect

to salary offset. Also included are new expedited salary offset

procedures for certain types of recent or small-amount debts.

DATES: Comments must be received on or before June 15, 1998.

ADDRESSES: Comments may be sent or delivered to Donald J. Winstead,

Assistant Director for Compensation Administration, Workforce

Compensation and Performance Service, Office of Personnel Management,

Room 7H31, 1900 E Street NW., Washington, DC 20415, FAX: (202) 606-

0824, or email to [email protected].

FOR FURTHER INFORMATION CONTACT: Paul Shields, (202) 606-2858, FAX:

(202) 606-0824, or email to [email protected].

SUPPLEMENTARY INFORMATION: For many years, Federal agencies have made

deductions from employees' pay to recover debts owed to the Government.

(See 5 U.S.C. 5514.) Office of Personnel Management (OPM) regulations

provide specific requirements for collecting debts by offsetting

salaries and procedures for employee notification and hearings.

The Debt Collection Improvement Act of 1996 (section 31001 of

Public Law 104-134, April 26, 1996) (DCIA) made changes to maximize the

collection of delinquent debts owed to the Government while minimizing

the costs of debt collection by consolidating related functions and

using interagency teams. The DCIA requires all Federal agencies to

which outstanding delinquent debts are owed to participate in an annual

computer match of their delinquent debt records with records of Federal

employees. The Secretary of the Treasury is required to establish an

inter-agency consortium to implement this centralized salary offset

computer matching and promulgate regulations for that program.

In addition, the DCIA established mandatory centralized

administrative offset. Under 31 U.S.C. 3716, Federal agencies are

required to notify the Secretary of the Treasury of all debts which are

over 180 days delinquent. Agencies may also notify the Secretary of the

Treasury of any debt which is delinquent for 180 days or less. The

Secretary of the Treasury and other Federal disbursing officials will

match payments to the debtor from the Federal Government, including

Federal salary payments, against these debts. Where a match occurs, and

all the requirements for offset have been met, the payment will be

offset to satisfy the debt in whole or part. Federal agencies must

notify Treasury of all debts over 180 days delinquent, including debts

owed by Federal employees which the agency seeks to collect from the

employee's pay account at another agency. Thus, compliance with the

administrative offset provisions of the DCIA will accomplish salary

offset and negate the need to follow the procedures under section

550.1109 in these proposed regulations (currently section 550.1108).

The procedures outlined in section 550.1109 will continue to apply,

however, until salary offset can be accomplished by centralized

administrative offset. It is anticipated that the procedures under

section 550.1109 will eventually be eliminated.

The DCIA amended the salary offset law for Federal employees

covered under 5 U.S.C. 5514 as follows:

(1) Pay adjustments made to correct clerical or administrative

errors or delays if the overpayment occurred within the 4 pay periods

preceding the adjustment, and collection of a debt amounting to $50 or

less, are excluded from the normally required administrative procedures

(e.g. notice and hearing).

(2) The definition of ``agency'' is modified to clarify that it

includes executive departments and agencies; the United States Postal

Service; the Postal Rate Commission; the United States Senate; the

United States House of Representatives; any court, court administrative

office, or instrumentality in the judicial or legislative branches of

the Government; and Government corporations.

(3) In determining the order of deductions from pay, a levy

pursuant to the Internal Revenue Code takes precedence over offsets

under section 5514.

In response to these changes, OPM proposes regulatory changes

needed to implement salary offsets by centralized administrative

offset, accommodate the role of debt collection centers, modify

definitions, limit the required procedures in some instances for small

debts and for clerical or administrative errors or delays, and make

other conforming or clarifying changes, including those described

below.

OPM proposes to revise section 550.1102(b)(1) to remove the

reference to debts arising under the Social Security Act in the listing

of debts that are excluded from collection via salary offset. Under

subsection (z)(2) of the DCIA, section 204 of the Social Security Act

(42 U.S.C. 404) is amended to authorize the Commissioner of Social

Security to collect delinquent claims by salary offset under 5 U.S.C.

5514.

OPM proposes to revise section 550.1102(b)(2) to reflect

elimination of the General Accounting Office's role in waiving certain

overpayment debt claims against Federal employees, consistent with

Public Law 104-316 (October 19, 1996) and the Office of Management and

Budget ``Determination with Respect to the Transfer of Functions

Pursuant to Public Law 104-316,'' dated December 17, 1996.

OPM proposes to revise section 550.1104(d)(3) to clarify that, in a

salary offset notice to an employee, the ``amount'' of a deduction may

be expressed as a percentage of pay, not to exceed 15 percent of

disposable pay. The requirements to include the commencement date and

duration of deductions in the salary offset notice are removed, since

this information is not

[[Page 18851]]

required by law and its inclusion can pose an unnecessary

administrative burden. Also, when the deduction amount is expressed as

a percentage of disposable pay, which can change over a period of time,

the duration of deductions cannot be specified. However, debtor

employees can easily estimate the duration of deductions by dividing

the total debt amount by the initial dollar amount of the initial

deduction.

OPM proposes a new section 550.1107(c) to clarify that a

determination of a hearing official that a debt may not be collected

via salary offset under 5 U.S.C. 5514 does not preclude the creditor

agency from seeking collection of a debt it considers to be valid

through other appropriate means, since the hearing official's

determination pertains only to salary offset. This is consistent with

Comptroller General opinion B-211626, December 19, 1984.

When final regulations are published, covered agencies will be

required to make necessary conforming changes in their agency salary

offset regulations. Under 5 CFR 550.1105(b), significant proposed

changes in creditor agency regulations must be submitted to OPM for

review and approval. However, as long as these changes in agency

regulations are made merely to conform with the changes made in OPM

regulations, no OPM review will be required.

Regulatory Flexibility Act

I certify that these regulations would not have a significant

economic impact on a substantial number of small entities because they

would only apply to Federal agencies and employees.

List of Subjects in 5 CFR Part 550

Administrative practice and procedure, Claims, Government

employees, Wages.

Office of Personnel Management.

Janice R. Lachance,

Director.

Accordingly, OPM is proposing to amend part 550 of title 5 of the

Code of Federal Regulations as follows:

PART 550--PAY ADMINISTRATION (GENERAL)

Subpart K--Collection by Offset From Indebted Government Employees

1. The authority citation for subpart K of part 550 continues to

read as follows:

Authority: 5 U.S.C. 5514; sec. 8(1) of E.O. 11609; redesignated

in sec. 2-1 of E.O. 12107.

2. In Sec. 550.1102, paragraph (b) is revised to read as follows:

Sec. 550.1102 Scope.

* * * * *

(b) Applicability. This subpart and 5 U.S.C. 5514 apply in

recovering certain debts by administrative offset, except where the

employee consents to the recovery, from the current pay account of the

employee. Because salary offset is a type of administrative offset,

debt collection procedures for salary offset which are not specified in

5 U.S.C. 5514 and this subpart should be consistent with the provisions

of the Federal Claims Collections Standards (FCCS, as defined in

Sec. 550.1103) (dealing with administrative offset generally) and 31

CFR part 285 (dealing with centralized administrative offset under 31

U.S.C. 3716). Section 550.1108 addresses the use of centralized

administrative offset procedures to effect salary offset. Generally,

the procedures under Sec. 550.1109 should apply only when centralized

administrative offset cannot be accomplished.

(1) Excluded debts. The procedures contained in this subpart do not

apply to debts arising under the Internal Revenue Code (26 U.S.C. 1 et

seq.) or the tariff laws of the United States; or to any case where

collection of a debt by salary offset is explicitly provided for or

prohibited by another statute (e.g., travel advances in 5 U.S.C. 5705

and employee training expenses in 5 U.S.C. 4108).

(2) Waiver requests. This subpart does not preclude an employee

from requesting waiver of an erroneous payment under 5 U.S.C. 5584, 10

U.S.C. 2774, or 32 U.S.C. 716, or in any way questioning the amount or

validity of a debt, in the manner prescribed by the head of the

responsible agency. Similarly, this subpart does not preclude an

employee from requesting waiver of the collection of a debt under any

other applicable statutory authority.

3. In Sec. 550.1103, the definitions of agency, creditor agency,

disposable pay, and FCCS are revised, and the definition of debt

collection center is added in alphabetical order, to read as follows:

Sec. 550.1103 Definitions.

* * * * *

Agency means an executive department or agency; the United States

Postal Service; the Postal Rate Commission; the United States Senate;

the United States House of Representatives; any court, court

administrative office, or instrumentality in the judicial or

legislative branches of the Government; or a Government corporation.

Creditor Agency means the agency to which the debt is owed,

including a debt collection center when acting in behalf of a creditor

agency in matters pertaining to the collection of a debt (as provided

in Sec. 550.1110).

* * * * *

Debt collection center means the Department of the Treasury or

other Government agency or division designated by the Secretary of the

Treasury with authority to collect debts on behalf of creditor agencies

in accordance with 31 U.S.C. 3711(g).

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 any amount required by law to be withheld (other than

deductions to execute garnishment orders in accordance with parts 581

and 582 of this chapter). Among the legally required deductions that

must be applied first to determine disposable pay are levies pursuant

to the Internal Revenue Code (Title 26, United States Code) and

deductions described in Sec. 581.105 (b) through (f) of this chapter.

* * * * *

FCCS means the Federal Claims Collection Standards published in 4

CFR 101 through 105.

* * * * *

4. Section 550.1104 is amended, in paragraph (d), in the second

sentence of the introductory text, by removing ``or his designee'' and

adding in its place ``(or authorized designee)'; in paragraph (d)(4),

by adding ``as defined in Sec. 550.1103'' after ``FCCS''; in paragraph

(d)(6), by removing ``(4 CFR 102.2(e))'' and adding in its place ``(see

the FCCS)''; in paragraph (e)(1), by adding the word ``creditor''

before the second appearance of the word ``agency'; in paragraph

(g)(2), by removing ``4 CFR 102.3(c)'' and adding in its place ``the

FCCS''; in paragraph (m), by removing ``4 CFR 102.3'' and adding in its

place ``the FCCS''; in paragraph (n), by removing ``4 CFR 102.13'' and

adding in its place ``the FCCS''; and by revising paragraphs (c) and

(d)(3) to read as follows:

Sec. 550.1104 Agency regulations.

* * * * *

(c) Exception to entitlement to notice, hearing, written responses,

and final decisions. In regulations covering internal collections, an

agency shall except from the provisions of paragraph (b) of this

section--

(1) Any adjustment to pay arising out of an employee's election of

coverage or a change in coverage under a Federal

[[Page 18852]]

benefits program requiring periodic deductions from pay, if the amount

to be recovered was accumulated over 4 pay periods or less;

(2) A routine intra-agency adjustment of pay that is made to

correct an overpayment of pay attributable to clerical or

administrative errors or delays in processing pay documents, if the

overpayment occurred within the 4 pay periods preceding the adjustment

and, at the time of such adjustment, or as soon thereafter as

practical, the individual is provided written notice of the nature and

the amount of the adjustment and point of contact for such adjustment;

or

(3) Any adjustment to collect a debt amounting to $50 or less, if,

at the time of such adjustment, or as soon thereafter as practical, the

individual is provided written notice of the nature and the amount of

the adjustment and a point of contact for contesting such adjustment.

(d) * * *

(3) The frequency and amount of the intended deduction (stated as a

fixed dollar amount or as a percentage of pay, not to exceed 15 percent

of disposable pay) and the intention to continue the deductions until

the debt is paid in full or otherwise resolved;

* * * * *

Sec. 550.1106 [Amended]

5. Section 550.1106 is amended by removing ``4 CFR 102.3(b)(3)''

and adding ``the FCCS as defined in Sec. 550.1103'' in its place.

Sec. 550.1107 Obtaining the services of a hearing official.

6. Section 550.1107 is amended, in paragraph (a), by removing ``4

CFR 102.1'' and adding ``the FCCS as defined in Sec. 550.1103'' in its

place; in paragraph (b), by removing ``4 CFR 102.1'' and adding ``the

FCCS'' in its place; and by adding a new paragraph (c) to read as

follows:

* * * * *

(c) The determination of a hearing official designated under this

section is considered to be an official certification regarding the

existence and amount of the debt for purposes of executing salary

offset under 5 U.S.C. 5514. A creditor agency may make a certification

to the Secretary of the Treasury under Sec. 550.1108 or a paying agency

under Sec. 550.1109 regarding the existence and amount of the debt

based on the certification of a hearing official. If a hearing official

determines that a debt may not be collected via salary offset, but the

creditor agency finds that the debt is still valid, the creditor agency

may still seek collection of the debt through other means, such as

offset of other Federal payments, litigation, etc.

7. Section 550.1108 is redesignated as Sec. 550.1109 and is amended

by removing the ``(b)'' after ``5514'' in paragraph (a)(3), adding

``claim'' after the first appearance of ``debt'' in paragraph (b)(2),

removing ``creditor agency's'' in paragraph (b)(3), and adding

introductory text at the beginning of the section; and a new

Sec. 550.1108 is added to read as follows:

Sec. 550.1108 Requesting recovery through centralized administrative

offset.

Under 31 U.S.C. 3716, creditor agencies must notify the Secretary

of the Treasury of all debts over 180 days delinquent (as defined in

the FCCS, see Sec. 550.1103) so that recovery may be made by

centralized administrative offset. This includes those debts the agency

seeks to recover from the pay account of an employee of another agency

via salary offset. The Secretary of the Treasury and other Federal

disbursing officials will match payments, including Federal salary

payments, against these debts. Where a match occurs, and all the

requirements for offset have been met, the payment will be offset to

satisfy the debt in whole or part. Prior to offset of the pay account

of an employee, an agency must comply with the requirements of 5 U.S.C.

5514, this subpart, and agency regulations issued thereunder. Specific

procedures for notifying the Secretary of the Treasury of debt for

purposes of collection by centralized administrative offset are

contained in 31 CFR part 285 and the FCCS. At their discretion,

creditor agencies may notify the Secretary of the Treasury of debts

that have been delinquent for 180 days or less, including debts the

agency seeks to recover from the pay account of an employee via salary

offset.

Sec. 550.1109 Requesting recovery from the paying agency.

When possible, salary offset through the centralized administrative

offset procedures in Sec. 550.1108 should be attempted before applying

the procedures in this section.

* * * * *

8. A new section Sec. 550.1110 is added to read as follows:

Sec. 550.1110 Debt collection centers.

A debt collection center may act in behalf of a creditor agency to

collect claims via salary offset consistent with this section, subject

to any limitations on its authority established by the creditor agency

it represents or by the U.S. Department of the Treasury.

(a) A debt collection center may be authorized to enter into a

written agreement with the indebted employee regarding the repayment

schedule or, in the absence of such agreement, to establish the terms

of the repayment schedule.

(b) A debt collection center may make certifications to the

Secretary of the Treasury under Sec. 550.1108 or to a paying agency

under Sec. 550.1109 based on the certifications it has received from

the creditor agency or a hearing official.

(c) A debt collection center responsible for collecting a

particular debt may not act in behalf of a creditor agency for the

purpose of making determinations regarding the existence or amount of

that debt.

(d) A debt collection center responsible for collecting a

particular debt may arrange for a hearing on the existence or amount of

the debt or the repayment schedule by an administrative law judge or,

alternatively, another hearing official not under the supervision or

control of the head of the creditor agency or the debt collection

center.

[FR Doc. 98-9972 Filed 4-15-98; 8:45 am]

BILLING CODE 6325-01-P