[Federal Register: August 28, 1998 (Volume 63, Number 167)]
[Rules and Regulations]
[Page 46141-46146]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28au98-32]

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_______________________________________________________________________

Part VIII

Department of the Treasury

_______________________________________________________________________

Fiscal Service

_______________________________________________________________________

31 CFR Part 285

Administrative Offset--Collection of Past-Due Support; Final Rule

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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 285

RIN 1510-AA58


Administrative Offset--Collection of Past-Due Support

AGENCY: Financial Management Service, Fiscal Service, Treasury.

ACTION: Final rule; adoption of interim rule with changes.

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SUMMARY: The Debt Collection Improvement Act of 1996 (DCIA), enacted on
April 26, 1996, authorized the Secretary of the Treasury (Secretary) to
collect past-due support by the administrative offset of Federal
payments. Executive Order 13019 of September 28, 1996 directed the
Secretary to promptly develop and implement procedures necessary for
the collection of past-due support debts by administrative offset. The
Financial Management Service (FMS), a bureau of the Department of the
Treasury, published an interim rule on July 7, 1997. This final rule
adopts the interim rule with changes incorporating suggestions provided
in comments on the interim rule.

EFFECTIVE DATE: September 28, 1998.

ADDRESSES: Inquiries may be mailed to Gerry Isenberg, Financial Program
Specialist, Debt Management Services, Financial Management Service,
Department of the Treasury, 401 14th Street S.W., Room 151, Washington,
D.C. 20227. A copy of this final 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) 874-6660; J. Martin Mills, Director, Treasury
Offset Program, at (202) 874-8700; Randall S. Lewis, Attorney-Advisor,
at (202) 874-6680.

SUPPLEMENTARY INFORMATION:

Background

    The Debt Collection Improvement Act of 1996 (DCIA), Pub. L. 104-
134, 110 Stat. 1321-358 et seq. (April 26, 1996), requires that
disbursing officials of the Department of the Treasury and other
Federal disbursing officials offset Federal payments to collect nontax
delinquent debts owed to the Federal government. In addition,
subsection (h) of 31 U.S.C. 3716, as added by section 31001(f) of the
DCIA, authorizes the Secretary of the Treasury (Secretary) to collect
debts owed to States, including past-due support, by the administrative
offset of Federal payments. See also section 31001(z)(1)(B) of the
DCIA, codified at 31 U.S.C. 3701(b)(2). To accomplish these goals,
Treasury has established a centralized offset program, known as the
Treasury Offset Program (TOP). Under TOP, Federal payments are matched
against a database of delinquent debtors maintained by FMS. When a
match occurs and all of the prerequisites for offset have been met, the
payment is offset to satisfy the debt. The TOP will include offsets of
all eligible Federal payments, including, as of January 1, 1999,
Federal tax refund payments.
    On September 28, 1996, the President issued Executive Order 13019
entitled ``Supporting Families: Collecting Delinquent Child Support
Obligations'' (Executive Order) which requires that the Secretary
promptly develop and implement procedures necessary to collect past-due
support debts by administrative offset. The Executive Order recognizes
that the failure of some parents to meet their child support
obligations threatens the health, education, and well-being of their
children and requires the collection of delinquent child support
obligations from persons who may be entitled or eligible to receive
certain Federal payments. FMS published an interim regulation on July
7, 1997 (62 FR 36205) describing the procedures applicable to the
collection of past-due support debts by administrative offset of non-
tax Federal payments in accordance with 31 U.S.C. 3716(h) and the
Executive Order.
    Currently, regulations promulgated by the Internal Revenue Service
and the Department of Health and Human Services (HHS) govern the
offsetting of federal tax refund payments to collect past due child
support as authorized under 26 U.S.C. 6402 and 42 U.S.C. 664. See 26
CFR 301.6402-5 and 45 CFR 303.72. Effective January 1, 1999, FMS will
operate the tax refund offset program as part of TOP. FMS will publish
a regulation governing the offsetting of tax refund payments to collect
past-due support beginning January 1, 1999. In addition, FMS has
promulgated or will promulgate other rules governing the offset of
Federal payments to collect debts other than child support owed to
Federal agencies and States. FMS anticipates that Part 285 of this
title ultimately will contain all of the provisions relating to
centralized offset for the collection of debts owed to the Federal
Government and to State governments, including past-due child support
being enforced by States.
    FMS continues to work closely with HHS to implement procedures
necessary to report to the Secretary information on past-due support
debts referred to HHS by States under 31 U.S.C. 3716(h) and this rule.
HHS issued guidance to all States on August 8, 1997. In addition, FMS
is working closely with HHS to implement procedures necessary to report
to the Secretary information on past-due support debts referred to HHS
by States for tax refund offset purposes under 42 U.S.C. 664 and 26
U.S.C. 6402(c). It is anticipated that States will continue to refer
debts to HHS and that HHS will report those debts to the Secretary for
offset from both Federal tax refunds and other Federal payments.

Public Comments

    FMS received comments from 11 states and one Federal agency on the
interim rule published on July 7, 1997. Many of the comments related to
technical questions such as specifications for the electronic
submission of past-due support information. Such questions are not
addressed in this final rule, but will be addressed by FMS or HHS in
separate procedural instructions. Following is a discussion of the
substantive issues raised in the comments.

Relationship among Treasury, HHS, and the States

    States will continue to refer debts to HHS for the collection of
past-due support through the offset of both Federal tax payments under
the tax refund offset program (TROP) and other Federal payments under
administrative offset (AO). HHS will report these debts to Treasury for
offset purposes. Though this rule provides States with the flexibility
to refer past-due support debts directly to FMS, current HHS rules
governing programs under Chapter 7, Subchapter IV, Part D (IV-D) of the
Social Security Act require States to report past-due support debts to
HHS. This rule is not intended to supersede existing HHS rules; it
merely provides flexibility should HHS decide to amend its rules in the
future to allow States to refer past-due support debts directly to FMS.

Relationship between AO and TROP

    The referral of past-due support to Treasury for collection by AO
is voluntary. Therefore, cases submitted for TROP will not
automatically be processed through AO. The TOP, which encompasses both
TROP and AO, when fully developed, will allow States to control which
debts may be collected by offset of tax refunds, other Federal

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payments, or both. States also will be able to control whether a
particular type of payment, such as Federal salary payments, should be
offset with respect to an individual debtor.

Comments outside the scope of this rule

    Several comments were outside the scope of this rule and have not
been addressed. For example, one commenter was concerned about the
reporting of past-due support balances exceeding $5,000 to the
Secretary of State for purposes of denying passports to the obligors
under 42 U.S.C. 652(k) and 654(31). Another commenter was concerned
that past-due support debts would be reported to consumer reporting
agencies by Treasury. Federal agencies are not authorized to report
such amounts to consumer reporting agencies. FMS also received several
comments regarding choice of law in situations involving more than one
State. Paragraph (d) of this final rule requires States to certify that
they have complied with all of the requirements of this rule, as well
as State law and procedure. Determination of applicable State law is
outside the scope of this rule, and must be determined under applicable
Federal and State law by the States involved in a particular situation.

Sec. 285.1(a)--Definition of past-due support

    In response to several comments, the definition of ``past-due
support'' has been amended by adding the following at the end of the
definition included in the interim rule: ``The term child as used in
this definition is not limited to minor children.'' This amendment
clarifies that, unless prohibited by court order, or by State law or
procedure, past-due support may be collected by offsetting the
obligor's nontax Federal payments even after the child has reached the
age of majority. Compare Federal law governing tax refund offset which,
unlike administrative offset, prohibits collection of past-due support
(which has not been assigned to a State) for a child who has reached
the age of majority. See 42 U.S.C. 664(c)(2).

Sec. 285.1(a)--Definition of past-due support being enforced by the
State

    The definition of ``past-due support being enforced by the State''
has been amended to clarify that AO may be used to collect past-due
support debts enforced by States pursuant to cooperative agreements
with or by Indian tribal governments. See Section 1(b) of the Executive
Order.

Sec. 285.1(a)--Definition of State

    The public was specifically invited to comment on the impact of
including or excluding legal subdivisions of States in the definition
of State. Three States commented that FMS was correct in not including
subdivisions within the definition of State. A fourth State indicated
that it would prefer to certify cases on a statewide basis, but
believed that States which operate on a county basis should have the
discretion to certify cases at the county level. Based on the comments
received and discussions with HHS regarding current procedures for
county reporting, FMS determined that the existing definition does not
create an impediment to the collection of past-due support. Counties
seeking to participate may do so by reporting through the State's IV--D
program director. Therefore, the definition of ``State'' was not
changed to include legal subdivisions.

Sec. 285.1(c)--Agreements

    One commenter expressed concern over the amount of time the States
will have to review and approve reciprocal agreements for the referral
of past-due child support. As stated previously, FMS anticipates that
States will continue to refer past-due support debts to HHS until such
time as HHS changes its rules and reciprocal agreements are in place.
Currently, there is no need for reciprocal agreements between FMS and
States for the purpose of referring past-due support debts. However,
should HHS change its rules to allow States the option of referring
past-due support debts directly to FMS, States will be provided the
time necessary to review and approve any reciprocal agreement that
would be the basis for such referrals.

Sec. 285.1(d)--Notification to FMS of past-due support

    Several States commented that the interim rule should be revised to
define better which State should submit a debt for offset when a
particular past-due support debt involves more than one State. One
State commented that HHS guidance requires that, in non-assignment
cases, the case must be submitted by the State in which the child
resides. Another State suggested that, in assignment cases, the case
should be submitted by the State in which the custodial parent applied
for public assistance. Other States questioned whether the interim rule
is consistent with provisions of 28 U.S.C. 1738B, Full Faith and Credit
for Child Support Orders Act (FFCCSOA).
    In response to these comments, FMS, after consulting with HHS,
determined that this provision of section 285.1(d) of the final rule
will be unchanged from the interim rule. Paragraph 285.1(d) covers all
situations that may arise as the residence and status of the parties
change, and is not inconsistent with the FFCCSOA.
    Several States also were concerned as to whether the notification
requirements that apply when more than one State is involved create an
administrative burden. One State was particularly concerned that the
notice requirement would result in the creation of a separate, unique
notification system for these types of cases, and suggested that an
easier and less burdensome way to provide such notices be developed.
After consulting with HHS, FMS determined that the final rule should
remain unchanged. The provision requiring a State to notify other
States involved in enforcing the past-due support when it refers the
debt for offset is necessary to ensure that debts are not referred by
more than one State. Further, this requirement is consistent with
existing HHS regulations governing the offset of tax refund payments,
and, therefore, should not result in the creation of a new, separate
reporting system by the States. See 45 CFR 303.72(d).
    One State requested that the rule include a specific listing of the
types of past-due support that may be submitted for offset against
Federal non-tax payments, including statutory citations for each type
of past-due support. Such a list is unnecessary. Unlike the statutory
authority for offsets against Federal tax refund payments, which
includes specific references to 42 U.S.C. 608(a)(3), 671(a)(17) and
654(4), the statutory authority for offset against other Federal
payments does not include specific references to the type of past-due
support debts that may be collected under AO. The only requirement is
that the debt be past-due support being enforced by the State. Although
FMS currently intends to accept only those types of past-due support
debts that are eligible for offset against Federal tax payments, FMS
will not apply the age and minimum debt amount restrictions applicable
to TROP to AO. FMS and/or HHS will provide additional guidance relating
to the referral of past-due support collection by AO under this rule.

Sec. 285.1(e)--Minimum amount of past-due support

    Several States commented that the $25 threshold for reporting cases
for AO is too low. FMS has determined that the

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administrative costs associated with the collection of past-due support
debts less than $25 exceed the amount of such debts. Therefore, it is
not cost-effective for FMS to process debts less than $25. States,
however, may determine that their costs to collect justify a higher
threshold amount for referring debts to FMS for offset purposes. Since
the referral of past-due support for collection by AO is voluntary,
States are not required to refer all debts over $25, but may establish
their own higher threshold based on their own cost-effectiveness
determination.

Sec. 285.1(g)--Notification of changes in status of debt

    Eight States commented on the provisions concerning notification of
changes in the status of debt. Several comments related specifically to
the amount and/or timing of changes that must be reported. In the past,
it has not been necessary for States to report insignificant decreases
in the amounts of debt balances because States were not allowed to
report increases in debt balances. Insignificant decreases generally
were less than unreported increases, and, as a result, there generally
were no problems with offsets that were greater than the actual amount
of the debt balance. However, because States now may refer increases in
the amount of debts as well as decreases, to avoid situations where
offsets exceed the actual amount of the debt balance, it is imperative
that all decreases in debt balances be reported. There will, however,
be flexibility in the time and manner in which decreases may be
reported. To make the rule as flexible as possible with regard to the
timing and manner of reporting changes in the amounts of debts, the
word ``any'' was deleted from paragraph (g) in the final rule. FMS or
HHS will provide additional guidance relating to the timing and manner
in which the amounts of increases and decreases in debt balances must
be reported.
    States also expressed concern that the regulation does not
specifically allow States to report changes in the status of debt by
providing updated balances. FMS and/or HHS will provide additional
guidance on how States will report changes in the amount of a debt
referred for administrative offset.

Sec. 285.1(h)--Advance notice of intent to collect by administrative
offset

    Several States commented on the provisions governing advance
notices to debtors providing notice of the States' intent to submit
past-due support for administrative offset. Two States requested that
the language of the rule be revised to make clear that a one-time
notice to a debtor is sufficient. A third State expressed a concern
that the regulation could result in debtors being notified that
payments were to be offset to pay debts that had not yet accrued.
    As stated in the preamble to the interim rule, before a State may
report increases to the amount of a past-due support debt referred for
AO, the State must meet the requirements of paragraph (h) as well as
State law and procedure; only then has a State met the due process
requirements of Federal law with respect to the offset of Federal
payments set forth in 31 U.S.C. 3716(a). A notice to an obligor that
includes a statement to the effect that future amounts, in addition to
the amount included in the notice, will be collected by means of AO
(i.e., a ``one-time'' notice), is sufficient for purposes of paragraph
(h) only if such a statement meets the notice requirements of
applicable State law as determined by the State. Thus, no changes to
the rule have been made.
    One State requested that the provision regarding case reviews by
the States be revised to reflect provisions of the FFCCSOA relating to
exclusive jurisdiction. After consulting with HHS, FMS determined that
provisions in the rule regarding reviews are not inconsistent with the
provisions of the FFCCSOA. The rule provides the flexibility necessary
for a review to be held in any State as may be authorized in any given
situation under the FFCCSOA.

Sec. 285.1(i)--Payments subject to offset

    One State requested that the final rule include a listing of the
payments subject to AO; another State asked whether a particular type
of payment would be subject to offset. Such a list is impractical.
Federal agencies make payments under hundreds of Federal programs.
Payments under all such programs are subject to offset unless the
payment type is exempted either by statute or by the Secretary of the
Treasury upon request by the head of an agency. A list of payment types
that are exempt from AO may be obtained from the FMS website.

Sec. 285.1(j)--Special provisions applicable to Federal salary payments

    FMS received several comments concerning the special provisions
applicable to Federal salary payments. One State questioned whether FMS
would deduct up to 65% in a situation where a lower percentage had been
agreed to or had been determined by court order. In such situations,
States will be able to indicate the lower percentage to be applied, or
will be able to indicate that a particular debt is not to be collected
by administrative offset of a Federal salary payment. Paragraph (j) of
the final rule has been revised to state that, when a lower percentage
is to be applied, the State must inform FMS or HHS of the lower
percentage at the time the debt is referred for collection by AO. FMS
and/or HHS will provide additional guidance to States regarding this
process.
    Another commenter questioned the allowable deductions from a
Federal salary payment when calculating the applicable withholding
percentage. FMS adopted the standards of the Consumer Credit Protection
Act, 15 U.S.C. 1671 et seq., as well as the standards of 42 U.S.C. 659
which apply to the enforcement of individual's legal obligations to
provide child support or make alimony payments by means of income
withholding, garnishment, and similar proceedings against amounts
payable to Federal employees. The exclusions included in this paragraph
are consistent with Office of Personnel Management regulations
governing Salary Offset (5 CFR 550.1101 et seq.) and Processing
Garnishment Orders for Child Support and/or Alimony (5 CFR Part 581).

Sec. 285.1(k)--Payments exempt from administrative offset

    One State asked FMS to include in the regulation a list of payments
that are exempt from administrative offset. Because the list of exempt
payments changes as the Secretary of the Treasury approves requests
from Federal agencies and/or as Federal laws are promulgated or
amended, it is inappropriate for the regulation to include such a
listing. However, a listing of exemptions may be obtained from the FMS
website.

Sec. 285.1(l)--Fees

    The preamble of the interim rule applicable to the fees provision
included the follow up statement, ``[s]tates may add [the] fee to the
amount of the debt if permitted by law.'' One commenter was concerned
that paragraph (l) of the interim rule may be inconsistent with HHS
rules which provide that ``past-due support may not include fees or
court costs or any other non-child support debts owed to the State or
to the family.''
    There is no inconsistency. The guidance cited by the commenter
specifically applies to collections of past-due support through the tax
refund offset process and reflects statutory restrictions, codified at
42 U.S.C. 664, that require the full amounts offset from tax refund
payments to be paid to the

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states for distribution. There are no similar restrictions applicable
to amounts collected by means of AO. The statement in the preamble
explains that States may add the fees charged under this rule to the
amount of the debt owed only if permitted by law. Statutes or
regulations prohibiting States from adding fees to the amount of the
debt are not superseded by this regulation.
    In addition, several States commented on the amount of the fees
charged by FMS for collection of past-due support by AO. One State was
concerned that States could end up owing FMS where the amount of an
offset was less than the fee charged; other States believed that the
fee amount was too high and should either be limited to a maximum
amount per month or be less for subsequent offsets when the collection
is from an on-going stream of payments. One State requested that the
regulation include the fee schedule. Under 31 U.S.C. 3716(c)(4), the
Secretary may charge a fee sufficient to cover the full cost of
conducting AO. FMS will review the amount of the fee periodically to
ensure that the fees charged and collected meet, but do not exceed, the
costs of the program. With regard to concerns that States may owe FMS
in instances where the amount collected is less than the offset fee,
since AO is voluntary, States may withdraw debts from the program at
any time pursuant to the provisions of paragraph (g) when collection by
offset is no longer cost effective. States will be advised of any
changes in the fee schedule.

Sec. 285.1(m)--Conducting the offset

    One State asked about FMS' authority to reverse an offset made in
error. In response, a provision concerning reversals was added to
paragraph (m) which provides that FMS will notify HHS or the
appropriate State when an erroneous offset payment has been made. FMS
will collect the amount of the erroneous payment from HHS or the State
either by deducting the amount from future payments by FMS or by
requesting a return of the erroneous offset payment by HHS or the
State. FMS will provide States with additional procedural guidance
concerning how and when reversals will be conducted.
    One State asked what restrictions will apply to payment amounts
eligible for offset, and how they will be applied; another asked
whether each Federal payment agency will set the terms and conditions
for enforcing AO. With regard to the restrictions that apply to payment
amounts under AO, as noted previously, payments subject to AO are made
under hundreds of Federal programs and are governed by the laws
applicable to those programs. FMS will work with payment agencies in
determining the appropriate amount that should be offset against their
payments. Thus, there may be specific limitations on the amount which
can be offset from a particular payment type. The provisions of this
regulation apply to all disbursing officials who conduct offsets under
the AO program.

Sec. 285.1(n)--Priorities

    Several States commented that the priorities included in the
interim rule are inconsistent with the distribution rules outlined in
42 U.S.C. 657 and HHS guidance. Other States commented that the
regulation should address other situations such as when more than one
State is attempting to offset the same payment; still others suggested
that amounts collected be prorated among States without regard to case
type.
    The final rule retains the priorities specified in the interim
rule. Unlike the statute governing TROP, 26 U.S.C. 6402(c), 31 U.S.C.
3716 does not include provisions governing priority when debts are
being collected by administrative offset. Furthermore, the priorities
in this rule do not conflict with the distribution rules in 42 U.S.C.
657 and HHS guidance. The priorities applied by the States to amounts
collected for distribution under 42 U.S.C. 657 are distinct from the
priorities applied by FMS when collecting debts under 31 U.S.C. 3716.
In order to clarify this distinction, paragraph (n) has been revised.
As suggested, paragraph (n) of the final rule is labeled Administrative
Offset Priorities, and specifically refers to offsets by FMS and other
disbursing officials. FMS will include information relating to
priorities within debt categories in procedural guidance.

Sec. 285.1(o)--Notification of offset

    Several States commented that they need information regarding the
source of collection, as well as information relating to cases for
which there is no offset. Executive Order No. 13109 requires FMS, to
the extent permitted by law, to provide to the Secretary of HHS certain
information from payment records of persons who are delinquent in child
support obligations. Under 42 U.S.C. 653, the Secretary of HHS may
request such information. The rule has been revised to state that FMS
and other disbursing agencies, upon the request of the Secretary of
HHS, will provide such information to HHS to the extent such
information is available from TOP activities. HHS will provide
information to the States to the extent authorized by law.

Regulatory Analyses

    This rule is not a significant regulatory action as defined in
Executive Order 12866. It is hereby certified that this rule will not
have a significant economic impact on a substantial number of small
entities. Therefore, a regulatory flexibility analysis is not required.
This regulation only impacts individuals and States and will not impose
significant costs on small businesses.
    The collections of information contained in this final regulation
have been reviewed and approved by the Office of Management and Budget
in accordance with the requirements of the Paperwork Reduction Act (44
U.S.C. 3507) under control number 1510-0069.

Authority and Issuance

    Accordingly, the interim rule amending 31 CFR part 285 which was
published at 62 FR 36205 on July 7, 1997, is adopted as a final rule
with the following changes:
    1. The authority citation for part 285 continues to read as
follows:

    Authority: 26 U.S.C. 6402; 31 U.S.C. 321, 3701, 3711, 3716,
3720A, 3720D; E.O. 13019; 3 CFR, 1996 Comp., p. 216.

    2. In Sec. 285.1, amend paragraph (a) by revising the definitions
for ``past-due support'' and ``past-due support being enforced by the
State''; revise paragraphs (g), (m), (n) and (o); and add paragraph
(j)(5) to read as follows:

Sec. 285.1  Collection of Past-Due Support By Administrative Offset.

    (a) * * *
    Past-due support means the amount of support determined under a
court order, or an order of an administrative procedure established
under State law, for support and maintenance of a child, or of a child
and the parent with whom the child is living, which has not been paid.
The term child as used in this definition is not limited to minor
children.
    Past-due support being enforced by the State means there has been
an assignment of the support rights to the State, or the State making
the request for offset is providing services to individuals pursuant to
42 U.S.C. 654(5) (section 454(5) of the Social Security Act), or the
State is enforcing support pursuant to a cooperative agreement with or
by an Indian tribal government.
* * * * *
    (g) Notification of changes in status of debt. The State notifying
FMS or HHS of past-due support shall, in the manner and in the time
frames provided by FMS or HHS, notify FMS or HHS of deletions or
decreases in the amount of a debt

[[Page 46146]]

referred for collection by administrative offset. The State may notify
FMS or HHS of any increases in the amount of a debt referred for
collection by administrative offset provided the State has complied
with the requirements of paragraph (h) of this section with regard to
those amounts.
* * * * *
    (j) Special provisions applicable to Federal salary payments. * * *
    (5) At the time the past-due support debt is submitted for offset,
the State shall advise FMS or HHS if the maximum amount of a Federal
salary payment that may be offset is less than the amount described
under this paragraph.
* * * * *
    (m) Offsetting payments. (1) Conducting the offset. 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, or any disbursing official of an executive department or
agency that disburses Federal payments shall offset payments subject to
offset under this section to satisfy, in whole or part, a debt owed by
the payee. Disbursing officials shall compare payment certification
records with records of debts submitted to FMS for collection by
administrative offset. A match will occur when the taxpayer identifying
number and name control of a payment record are the same as the
taxpayer identifying number and name control of a debt record. The
taxpayer identifying number for an individual is the individual's
social security number. When a match occurs and all other requirements
for offset have been met, the disbursing official shall offset the
payment to satisfy, in whole or part, the debt. Any amounts not offset
shall be paid to the payee. The amount that can be offset from a single
payment is the lesser of the amount of the debt (including interest,
penalties, and administrative costs); the amount of the payment; or the
amount of the payment available for offset if a statute or regulation
prohibits offset of the entire amount. Debts remain subject to
collection by offset until paid in full.
    (2) Disposition of amounts collected. FMS will transmit amounts
collected for debts, less fees charged under paragraph (l) of this
section, to HHS or to the appropriate State. If FMS learns that an
erroneous offset payment has been made to HHS or any State, FMS will
notify HHS or the appropriate State that an erroneous offset payment
has been made. FMS may deduct the amount of the erroneous offset
payment from amounts payable to HHS or the State, as the case may be.
Alternatively, upon FMS' request, the State shall return promptly to
the affected payee or FMS an amount equal to the amount of the
erroneous payment (unless the State previously has paid such amounts,
or any portion of such amounts, to the affected payee). HHS and States
shall notify FMS any time HHS or a State returns an erroneous offset
payment to an affected payee. FMS and HHS, or the appropriate State,
will adjust their debtor records accordingly.
    (n) Administrative offset priorities. When a payee/debtor owes more
than one debt which has been referred to FMS for collection by
administrative offset, any offset by a disbursing official will be
applied first to past-due support assigned to a State and will be
applied to any other past-due support after any other reductions
allowed by law.
    (o) Notification of offset. (1) Disbursing officials of FMS or any
other disbursing official which conducts an offset will notify the
payee in writing of the occurrence of the offset to satisfy past-due
support. The notice shall inform the payee of the type and amount of
the payment that was offset; the identity of the State which requested
the offset; and a contact point within the State that will handle
concerns regarding the offset. Disbursing officials shall not be liable
for failure to provide this notice.
    (2) Disbursing officials of FMS or any other disbursing official
which conducts an offset under this section will share with HHS, upon
request by the Secretary of HHS, information contained in payment
certification records of persons who are delinquent in child support
obligations that would assist in the collection of such debts. When no
offset is conducted, disbursing officials of FMS or any other
disbursing official, will provide such information to HHS to the extent
such information is available from offset activities conducted by FMS
and other disbursing officials.
* * * * *

    Dated: August 24, 1998.
Richard L. Gregg,
Commissioner.
[FR Doc. 98-23093 Filed 8-27-98; 8:45 am]
BILLING CODE 4810-35-P