[Federal Register: April 16, 1998 (Volume 63, Number 73)]
[Proposed Rules]
[Page 18850-18852]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16ap98-18]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.

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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 payleave@opm.gov.

FOR FURTHER INFORMATION CONTACT: Paul Shields, (202) 606-2858, FAX:
(202) 606-0824, or email to payleave@opm.gov.

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