U n i t e d S t a t e s G o v e r n m e n t FORM 0-1151 (1-52)

M e m o r a n d u m

R a i l r o a d R e t i r e m e n t b o a r d

1- 96-17

MAY 061996

TO The Board

FROM Catherine C. Cook 

General Counsel

SUBJECT : Debt Collection Improvement Act of 1996 - Chapter 10 of Public

Law 104-134

This is a preliminary analysis of those portions of the above referenced act of interest 

to this agency. Public Law 104-34 w as signed into law on April 26, 1996. The Debt 

Collection Improvement Act of 1996 is contained in section 31001 of Public Law 

104-134.

Subsection (c) of the Debt Collection Improvement Act of 1996 am ends section 3716 

of Title 31 of the United States Code to require Federal disbursing officials, such as 

the D epartm ent of the Treasury in the case of paym ents m ade by this agency, to 

offset Federal claims th at have been delinquent for at least 180 days against 

paym ents to be m ade by the disbursing officials. This is to be done at least annually. 

Included am ong the Federal paym ents th at would be subject to offset recovery are 

social security benefits, black lung benefits, railroad retirem ent benefits other than tier 

II benefits, and railroad unemployment and sickness insurance benefits. An am ount 

equal to $9000 in the benefits identified in the preceding sentence th at may be 

received in a tw elve month period is exem pt from offset recovery. W here the total 

of such benefits exceeds $9000, the disbursing official is to apply a prorated share 

of the exem pt am ount to each periodic paym ent to be made to the debtor within the 

tw elve month period. The am endm ents with respect to offset against social security, 

railroad retirem ent, railroad unemployment and sickness insurance, and black lung 

benefits only apply to paym ents made after the date 4 m onths after April 26, 1996, 

the date of enactm ent.

The am endm ent to section 3716 of the United States Code requires Federal agencies 

th at are ow ed a debt th at is delinquent by at least 180 days to notify the Secretary 

of the Treasury of all such debts for administrative offset. The Secretary of the 

Treasury is authorized to assess a fee to cover the full cost of conducting 

administrative offsets.
The Board

2

A new subsection (d) added to section 3716 provides that nothing in section 3716 

shall be construed to limit the use of administrative offset under any other statu te or 

common law. Accordingly, the am endm ent to section 3716 would have no effect on 

the Board's use of its offset authority under section 10 of the Railroad Retirement 

Act, section 2(d) of the Railroad Unemployment Insurance Act, or tax refund offset 

authority contained in section 3720A of Title 31 of the United States Code.

Section 3716 is also am ended by adding a new subsection (h) to authorize the 

Secretary, in his or her discretion, to use administrative offset of Federal paym ents to 

collect debts ow ed to states. This provision does not, however, apply to social 

security, railroad retirem ent, railroad unemployment and sickness, and black lung 

benefits.

Subsection (h) of the Debt Collection Improvement Act of 1996 am ends section 5514 

of Title 5 of the United States Code, which authorizes administrative offset against 

Federal salaries, to require Federal agencies th at have outstanding delinquent debt to 

participate in a com puter m atch with records of Federal em ployees to identify 

em ployees who are delinquent. Section 5514 is also am ended to waive the 

procedural requirem ents th at m ust be m et prior to administrative offset against a 

Federal salary paym ent in the case of claims for certain small am ounts attributable to 

clerical or administrative error.

Subsection (i) of the Debt Collection Improvement Act of 1996 am ends section 7701 

of Title 31 of the United States Code to provide th at an agency m ust require th at a 

person doing business with the agency provide the agency with the p erson's 

taxpayer identification number. A person doing business with an agency includes an 

applicant for benefits and contractors of the agency. Although the am endm ent 

provides th at an agency require an applicant for benefits to provide his or her taxpayer 

identification number, the am endm ent does not indicate w hat an agency, such as the 

Railroad Retirement Board, paying benefits considered to be entitlem ents, should do 

if the applicant refuses to provide a taxpayer identification number. Of course, this 

question would be answ ered if section 202 of H.R. 2233, which would require new 

applicants for benefits to provide their social security number, w ere enacted. In the 

absence of authority such as th at contained in section 202 of H.R. 2233, I do not 

believe that failure to provide a taxpayer identification number would provide a basis 

for denying benefits under the Acts administered by the Board.

Subsection (I) of the Debt Collection Improvement Act of 1996 am ends section 3718 

of Title 31 of the United States Code to expand slightly the authority contained in th at 

section to contract with private entities for debt collection services. The additional
The Board

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authority granted would allow agencies to contract with private entities to locate or 

recover a ssets of the United States as well as to recover debts. It does not appear 

th at this am endm ent will have a significant impact on this agency.

Subsection (m) of the Debt Collection Improvement Act of 1996 am ends section 

3711 of Title 31 of the United States Code to provide that, with several exceptions, 

the head of a Federal agency shall transfer claims th at have been delinquent for at 

least 180 days to the Secretary of the Treasury who shall be responsible for collection 

or termination of collection of the claim. The exceptions include claims in litigation, 

claims referred to a private collection agency, claims being collected by internal offset 

if recovery is likely within 3 years of the date on which the claim becam e delinquent, 

and other classes of claims exem pted by the Secretary of the Treasury pursuant to 

the request of a Federal agency. The Secretary of the Treasury may designate debt 

collection centers to be operated by Federal agencies to assist in carrying out the 

responsibilities for collection of delinquent debts. Federal agencies operating debt 

collection centers may charge a fee sufficient to cover the full co st of collection 

efforts. The intent of this am endm ent is to centralize debt collection activities in 

agencies with effective claims collection operations.

Subsection (m) of the Debt Collection Improvement Act of 1996 also am ends section 

6050P of the Internal Revenue Code to include Federal agencies in the entities 

required to file returns with respect to the cancellation of certain indebtedness. 

Further examination of this am endm ent will be required to determ ine w hat, if any, 

affect it will have on the Board.

Subsection (o) of the Debt Collection Improvement A ct of 1996 adds a new section 

3720D to Title 31 of the United States Code to authorize agencies to garnish directly 

the disposable pay of debtors who are not making repaym ent to the governm ent. The 

new section 3720D imposes numerous procedural safeguards, including notice and 

the opportunity for a hearing, prior to issuance of a garnishm ent order. The section 

also provides safeguards for the debtor in prohibiting the debtor's employer from 

dismissing the debtor solely because of the garnishm ent. The Secretary of the 

Treasury is to issue regulations to implement section 3720D . Section 3720D 

provides authority comparable to th at contained in section 1 of the draft bill we 

subm itted to the Chairman by memorandum dated April 4, 1996, except th at section 

3720D would apply to debt under the Railroad Retirement Act as well as to debt 

under the Railroad Unemployment Insurance Act. In view of this am endm ent, there 

is no need to pursue the am endm ent contained in section 1 of the April 4, 1996 draft 

bill.
The Board

4

Subsection (p) of the Debt Collection Improvement Act of 1996 adds a new 

subsection (I) to section 3711 of Title 31 of the United States Code to authorize the 

heads of agencies to sell, subject to section 504(b) of the Federal Credit Reform Act 

of 1980 and using competitive m ethods, debt th at has been delinquent for more than 

90 days. The new subsection (i) also contains a reporting requirement applicable to 

executive agencies with "collateralized debt." It is the responsibility of the Director 

of the Office of M anagem ent and Budget to develop standards for this reporting 

requirement; how ever, it does not appear th at it will apply to this agency.

Section 3717 of the United States Code, which authorizes the assessm en t of interest, 

penalties, and administrative charges on Federal claims, is am ended by subsection (q) 

of the Debt Collection Improvement Act to allow agencies to increase a claim by the 

co st of living in lieu of charging interest and penalties.

Subsection (r) of the Debt Collection Improvement Act of 1996 adds a new section 

3720E to Title 31 of the United States Code to authorize agencies to publicly 

dissem inate information concerning the identity of persons indebted to the 

governm ent. Such a disclosure would appear to violate the nondisclosure provisions 

of the Railroad Retirement and Railroad Unemployment Insurance Acts.

The Federal Civil Penalties Inflation Adjustment Act of 1990 is am ended by subsection 

(s) of the Debt Collection Improvement Act to require agencies to publish regulations 

to provide for the adjustm ent of civil m onetary penalties provided by law and within 

the jurisdiction of the agency.

The term "civil m onetary penalties" means:

Any penalty, fine, or other sanction th at - (A)(i) is for a specific 

m onetary am ount as provided for by Federal law; or (ii) has a maximum 

am ount provided for by Federal law; and (B) is assessed or enforced by 

an agency pursuant to Federal law; and (C) is assessed or enforced 

pursuant to an administrative proceeding or a civil action in the Federal 

courts....

Exempt from this requirem ent are penalties under the Social Security A ct and the 

Internal Revenue Code. Penalties that are assessed under the RUIA on the basis of 

incorporation of the penalty provisions applicable under the Railroad Retirement Tax 

Act would be exem pt. The only civil penalty th at this agency im poses th at may come 

within the above provision would be penalties under the Program Fraud Civil Remedies 

Act. It is not clear to me w hether such penalties would be considered to be within 

the jurisdiction of the Railroad Retirement Board. We will examine this issue further.
The Board

5

Subsection (t) of the Debt Collection Improvement Act adds a new section 3720C to 

Title 31 of the United S tates Code to establish a Debt Collection Im provem ent 

A ccount th at would receive a portion of the proceeds of am ounts of delinquent debt 

recovered by agencies. Agencies transferring am ounts to the account could use funds 

in the account to fund improvements in debt collection. It is not clear w hether this 

am endm ent would affect the Board. The Secretary of the Treasury is required to 

adopt regulations and procedures to implement this am endm ent.

Subsection (x) of the Debt Collection Improvement Act am ends section 3332 of the 

United States Code to impose stricter requirem ents for the use of electronic funds 

transfer for making Federal paym ents. Persons who first becom e eligible for Federal 

paym ents 90 days after April 26, 1996, the date of enactm ent of the Debt Collection 

Improvement Act, m ust receive those benefits by electronic funds transfer unless the 

recipient subm its a written certification stating th at he or she does not have an 

account at a financial institution or an authorized pay agent. All Federal paym ents 

m ade after January 1, 1999 are to be made by electronic funds transfer except as 

authorized by the Secretary of the Treasury. The Secretary may w aive the 

requirem ent for electronic funds transfer for individuals or classes of payees for whom 

compliance would cause a hardship, or for certain classifications or types of checks, 

or in other circum stances as may be necessary. These am endm ents will apply to 

paym ents m ade by the Board.

Subsection (y) of the Debt Collection Improvement Act am ends section 3325 of Title 

31 of the United States Code to require th at vouchers for paym ent include the 

taxpayer identification number of the recipients of paym ents.

cc: Inspector General

Director of Administration

Director of Programs

Deputy General Counsel/Director of Law

Chief Financial Officer

Director of Unemployment and Sickness Insurance 

Director of Legislative Affairs

SABartholow:cmw

PL104134.SAB