Friday


August 21, 1998


federal register
 Part III 

Department of the 

Treasury 

Fiscal Service 

31 CFR Part 285 

Offset of Federal Benefit Payments to 

Collect Past-due, Legally Enforceable 

Nontax Debt; Interim and Proposed Rules 

44985 
44986 Federal Register / Vol. 63, No. 162 / Friday, August 21, 1998 / Rules and Regulations 

DEPARTMENT OF THE TREASURY 

Fiscal Service 

31 CFR Part 285 

RIN 1510–AA74 

Offset of Federal Benefit Payments To 

Collect Past-due, Legally Enforceable 

Nontax Debt 

AGENCY: Financial Management Service, 

Fiscal Service, Treasury. 

ACTION: Interim rule with request for 

comments. 

SUMMARY: The Debt Collection 

Improvement Act of 1996 requires the 

Federal Government to withhold or 

reduce certain Federal payments to 

satisfy delinquent nontax debts owed to 

the United States by the payee. This 

process is known as ‘‘administrative 

offset.’’ This interim rule establishes the 

rules governing the administrative offset 

of Federal benefit payments issued 

under the Social Security Act (other 

than Supplemental Security Income), 

part B of the Black Lung Benefits Act, 

and any law administered by the 

Railroad Retirement Board (other than 

tier 2 benefit payments). This rule 

affects individuals who receive these 

types of benefit payments and who owe 

delinquent nontax debts to the Federal 

Government. 

DATES: Effective: August 21, 1998. 

Comments must be received on or 

before September 21, 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/debt/dms.html. 

FOR FURTHER INFORMATION CONTACT: 

Gerry Isenberg, Financial Program 

Specialist, at (202) 874–6660; 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 certain 

benefit payments, to pay the payee’s 

delinquent debt owed to the United 

States. This process is known as 

‘‘administrative offset.’’ 

The Financial Management Service 

(FMS), a bureau of the Department of 

the Treasury (Treasury), disburses more 

than 850 million Federal payments 

annually, including Federal benefit 

payments on behalf of agencies such as 

the Social Security Administration, the 

Railroad Retirement Board, and the 

Department of Veterans Affairs. 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. 

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 either owed debts (creditor 

agencies) or collecting debts on behalf of 

other Federal agencies. Before a Federal 

payment is disbursed to a payee, FMS 

compares the payee information with 

debtor information in FMS’’ delinquent 

debtor database. 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 in part, 

to satisfy the debt, to the extent legally 

allowed. 

FMS transmits amounts collected 

through offset to the appropriate 

agencies owed the delinquent debt after 

deducting a fee charged to cover the cost 

of the offset program. FMS’ authority to 

charge fees is found at 31 U.S.C. 

3716(c)(4). 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 not 

otherwise prohibited by law. 

Information about a delinquent debt 

remains in the debtor database and 

offsets of eligible Federal benefit and 

other payments will continue until debt 

collection activity for the debt is 

terminated because of full payment, 

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. 

This interim rule governs only the 

administrative offset of Federal benefit 

payments issued under the Social 

Security Act (other than Supplemental 

Security Income (SSI)); part B of the 

Black Lung Benefits Act (governing 

claims for benefits filed before 

December 31, 1973); and any law 

administered by the Railroad Retirement 

Board (other than tier 2 benefit 

payments, i.e., the portion of the 

railroad retirement annuity based 

exclusively on railroad service) for the 

collection of delinquent nontax debt 

owed to 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 

and will promulgate other rules 

governing the centralized offset of 

Federal payments (other than Federal 

benefit 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. 

FMS developed this interim rule in 

consultation with the Social Security 

Administration, the Railroad Retirement 

Board, the Department of Labor, the 

Department of Veterans Affairs, the 

Office of Management and Budget, and 

other affected agencies, and 

acknowledges their constructive 

assistance. 

Phased Implementation 

Under the DCIA, Federal benefit 

payments issued under the Social 

Security Act (other than SSI); part B of 

the Black Lung Benefits Act; and any 

law administered by the Railroad 

Retirement Board (other than tier 2 

benefit payments), hereinafter referred 

to as ‘‘covered benefit payments,’’ may 

be offset to collect delinquent debt owed 

to the United States subject to certain 

limitations. First, the DCIA provides for 

a threshold level of covered benefit 

payments which a debtor must receive 

before an offset may occur. Under the 

DCIA, only those amounts of covered 

benefit payments which a debtor 

receives in excess of $9,000 per year (or 

$750 per month) may be offset. Second, 

the DCIA requires a reduction in this 

threshold amount by the amount of 

benefit payments a debtor receives 

which are not subject to offset. Benefit 

payments not subject to offset include 

without limitation, SSI payments and 

benefit payments paid under any law 

administered by the Secretary of 

Veterans Affairs; part C of the Black 

Lung Benefits Act; any law 

administered by the Railroad Retirement 

Board that such Board determines to be 

tier 2 benefits; and any other law under 

which Federal benefit payments are 
Federal Register / Vol. 63, No. 162 / Friday, August 21, 1998 / Rules and Regulations 44987 

made if such payments are exempt from 

offset. 

FMS intends to implement the offset 

of covered benefit payments in two 

phases. During phase I and as described 

in this rule, FMS will offset only those 

monthly covered benefit payments 

which individually exceed the $750 

threshold. During phase II, FMS will 

offset all covered benefit payments, 

provided the total amount received by 

the debtor exceeds the threshold 

amount. The DCIA requirement that the 

amount offset be increased for 

individuals who also receive benefit 

payments not subject to offset will be 

implemented during phase II. 

Calculating the maximum allowable 

offset amount for debtors who receive 

more than one type of benefit payment 

is operationally complex. FMS therefore 

has adopted a phased approach to allow 

for some offsets to begin (i.e., offsets of 

monthly covered benefit payments 

which exceed $750), while FMS 

continues to work out the complexities 

of fully implementing the DCIA’s 

benefit offset provisions. This approach 

will allow for the orderly 

implementation of benefit offset 

ensuring that more complex offsets are 

accomplished in an efficient and costeffective manner. Prior to 

implementation of phase II, FMS will 

amend this rule to include the 

procedures applicable to phase II. 

Section Analysis 

(a) Scope 

Paragraph (a) explains that the rules 

contained in this regulation apply only 

to the offset of certain Federal benefit 

payments, i.e., benefit payments payable 

to individuals under the Social Security 

Act (other than SSI payments); part B of 

the Black Lung Benefits Act; and any 

law administered by the Railroad 

Retirement Board (other than payments 

that such Board determines to be tier 2 

benefits). 

This paragraph also explains that 

FMS and/or the agency that authorizes 

a payment, are not liable for amounts 

offset on the basis that the underlying 

obligation, that is, the amount of the 

payment before the offset was taken, 

was not satisfied. For example, where 

an individual is ‘‘due’’ a Social Security 

payment of $900, the obligation to pay 

$900 to that individual is met even 

though a portion of that payment was 

offset and thus not actually received by 

the individual. 

(b) Definitions 

The term ‘‘covered benefit payments’’ 

is used throughout the rule to describe 

those benefit payments which are 

subject to the provisions of this rule. 

Covered benefit payments means all 

Federal benefit payments payable to an 

individual under the Social Security Act 

(other than SSI payments); part B of the 

Black Lung Benefits Act; and any law 

administered by the Railroad Retirement 

Board (other than payments that such 

Board determines to be tier 2 benefits). 

The amount of the covered benefit 

payment payable to a debtor for 

purposes of this rule will be the amount 

after reduction or deduction required 

under the laws authorizing the program. 

For example, if the amount of a debtor’s 

$450 monthly Social Security payment 

is reduced by a $45 monthly Medicare 

insurance premium, the amount of $405 

will be used in calculating the amount 

available for offset. Reductions to 

recover benefit overpayments are 

likewise excluded from the covered 

benefit payment when calculating 

amounts available for offset. 

It is important to note that there are 

other Federal benefit payments which 

may be subject to offset under 31 U.S.C. 

3716 but are not covered by this rule, 

such as Office of Personnel Management 

retirement payments. 

‘‘Monthly covered benefit payments’’ 

are defined as covered benefit payments 

which are payable to a payee on a 

recurring basis at monthly intervals and 

are expected to continue for at least 12 

months. 

The term ‘‘payee’’ as defined in the 

rule refers to a person who is entitled to 

receive the benefit of all or part of a 

payment. FMS recognizes that many 

Federal benefit payments are made to 

third parties, sometimes known as 

representative payees, acting on behalf 

of the person entitled to receive the 

benefit of all or part of the payment (the 

beneficiary). Under these circumstances, 

an offset will not occur unless the name 

and TIN of the beneficiary match the 

name and TIN of the debtor. For 

example, if X owes a debt and receives 

a Social Security retirement payment on 

his/her own behalf, the Social Security 

retirement payment could be offset to 

satisfy the debt. If, however, X receives 

a Social Security retirement payment as 

the representative payee of Y, the 

payment could not be offset to satisfy 

X’s debt. In this case the offset could 

occur only if Y, the beneficiary, is the 

debtor. FMS is working with payment 

agencies to insure that the names and 

TINs of beneficiaries are identified. 

(c) Administrative Offset, Generally 

Paragraph (c) explains how the 

administrative offset program works 

generally and explains that covered 

benefit payments are among the types of 

payments which are offset to collect 

debts owed to the United States. 

(d) Submission of Debts to FMS for 

Collection by Administrative Offset 

Paragraph (d) states the DCIA 

requirement that creditor agencies must 

notify FMS of all past-due, legally 

enforceable debt delinquent for more 

than 180 days for purposes of collection 

by administrative offset. Additionally, 

this paragraph provides that creditor 

agencies may notify FMS of debts 

delinquent for less than 180 days for 

purposes of administrative offset. Before 

submitting a delinquent debt to FMS for 

collection by offset, creditor agencies 

are responsible for notifying debtors that 

their debt is delinquent and that the 

agency intends to collect the debt by 

offset. The DCIA and this rule do not 

change pre-offset due process and other 

requirements under 31 U.S.C. 3716(a) 

and agency specific laws and 

regulations. By written notice, the 

creditor agency must inform debtors of 

the opportunity to review applicable 

agency records and to seek a review of 

the determination of the debt. Upon 

receipt of the notice, the debtor may 

provide evidence to the creditor agency 

that collection of the debt by 

administrative offset would result in a 

financial hardship and make alternate 

arrangements, acceptable to the creditor 

agency, to repay the debt. This section 

provides that the creditor agency must 

certify to FMS that the requirements of 

31 U.S.C. 3716(a) and applicable 

agency-specific laws and regulations 

related to offset have been met. 

(e) Offset Amount 

As described in paragraph (e)(1), the 

amount offset from a monthly covered 

benefit payment will be the lesser of: (i) 

the amount of the debt; (ii) an amount 

equal to 15% of the monthly covered 

benefit payment; or, (iii) the amount, if 

any, by which the monthly covered 

benefit payment exceeds $750. 

15% Limitation. When the DCIA was 

enacted, members of Congress expressed 

concern that regulations developed by 

Treasury contain safeguards to separate 

those debtors who cannot repay their 

debts from those who refuse to pay. 

Federal benefit recipients, particularly 

Social Security benefit recipients, may 

be dependent upon their Federal 

benefits for a substantial part of their 

income. See House Conference Report 

No. 104–537 on H.R. 3019, Balanced 

Budget Down Payment Act, II (April 25, 

1996); Senate Report No. 104–330 on 

H.R. 3756, Treasury, Postal Service, and 

General Government Appropriation Bill 

1997 (July 23, 1996); Conference Report 

accompanying the 1997 Appropriations 
44988 Federal Register / Vol. 63, No. 162 / Friday, August 21, 1998 / Rules and Regulations 

Act, Congressional Record, September 

28, 1996, H12005. Recognizing the 

dependence recipients may have on 

their Federal benefits, this rule limits 

the maximum amount that will be offset 

from an individual’s covered benefit 

payment to 15% of the payment. 

$750 Threshold. Under the DCIA, 

only those covered benefit payments 

which exceed an annual threshold 

amount of $9,000 are subject to offset. 

The DCIA provides that the $9,000 

annual threshold may be prorated when 

applied to monthly benefit payments. 

Thus the threshold amount for monthly 

benefit payments is $750. 

Paragraph (e)(2) explains that a debtor 

is not entitled to a refund of amounts 

offset if monthly benefit payments are 

reduced, terminated, suspended or 

otherwise not actually received for a 

period of 12 months. 

Paragraph (e)(3) contains the 

following examples to illustrate how the 

amount offset will be determined for 

offsets which occur during phase I: 

Example (i): A debtor receives 

monthly Social Security benefits of 

$850. The amount offset is the lesser of 

$127.50 (15% of $850) or $100 (the 

amount by which $850 exceeds $750). 

In this example, the amount offset is 

$100 (assuming the debt is $100 or 

more). 

Example (ii): A debtor receives 

monthly Social Security benefits of 

$1250. The amount offset is the lesser of 

$187.50 (15% of $1250) or $500 (the 

amount by which $1250 exceeds $750). 

In this example, the amount offset is 

$187.50 (assuming the debt is $187.50 

or more). 

Example (iii): A debtor receives 

monthly Social Security payments of 

$650. No amount will be offset because 

$650 is less than $750. 

(f) Notification of Offset 

Paragraph (f) explains that before FMS 

begins to offset a debtor’s monthly 

covered benefit payments, although not 

required by the DCIA to do so, FMS 

intends to notify the debtor of the 

anticipated offset, the name of the 

creditor agency to which any amounts 

offset will be paid, and a contact within 

that creditor agency who will handle 

questions regarding the delinquent debt. 

As required by the DCIA, when FMS 

offsets a payment, FMS will notify the 

debtor of the amount and date of the 

offset, the creditor agency to which the 

amount offset was paid, and a contact 

within the creditor agency who will 

handle concerns or questions regarding 

the delinquent debt which triggered the 

offset. See 31 U.S.C. 3716(c)(7). 

Typically, this notice will be provided 

no later than the date the debtor is 

otherwise scheduled to receive the 

payment, or as soon as practical 

thereafter. Non-receipt by the debtor of 

the notices referenced in paragraph (f) of 

this section does not impair the legality 

of the offset. 

(g) Fees 

Paragraph (g) describes the authority 

under the DCIA, codified at 31 U.S.C. 

3716(c)(4), for FMS to charge a fee for 

the full cost of conducting offsets. 

Under 31 U.S.C. 3717(e) the agencies 

which are owed the delinquent debt 

may add this fee to the debt as part of 

the administrative cost of collection 

unless otherwise prohibited under 31 

U.S.C. 3717(g). 

(h) Disposition of Amounts Collected 

Paragraph (h) describes how amounts 

collected from covered benefit payments 

will be transmitted to creditor agencies. 

Regulatory Analyses 

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. The DCIA 

provision authorizing the offset of 

covered benefit payments to collect 

delinquent debt owed to the United 

States was effective on August 26, 1996. 

A comment period is unnecessary 

because this interim rule does not 

change the ongoing offset process under 

the Treasury Offset Program, but rather 

provides guidance for creditor agencies 

and disbursing officials to facilitate the 

addition of covered benefit payments 

into the Treasury Offset Program. 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 31 

U.S.C. 3716 and implementing 

regulations. Since this interim rule 

provides critical guidance needed to 

facilitate the offset of benefit payments 

to collect delinquent debt owed to the 

United States, FMS believes that it is in 

the public interest to issue this interim 

rule without opportunity for prior 

public comment. 

The public is invited to submit 

comments on the interim rule which 

will be taken into account before a final 

rule is issued. 

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, 

agencies already participate in the 

Treasury Offset Program. Inasmuch as 

this interim rule provides important 

guidance that is expected to facilitate 

implementation of the authority 

contained in the law, and effective as of 

August 26, 1996, FMS believes that 

good cause exists to make the rule 

effective upon publication. 

List of Subjects in 31 CFR Part 285 

Administrative practice and 

procedures, Black lung benefits, Claims, 

Debts, Disability benefits, Railroad 

retirement, Railroad unemployment 

insurance, Social Security benefits, 

Supplemental Security Income (SSI), 

Veterans benefits. 

Authority and Issuance 

For the reasons set forth in the 

preamble, 31 CFR Part 285 is amended 

as follows: 

PART 285—DEBT COLLECTION 

AUTHORITIES UNDER THE DEBT 

COLLECTION IMPROVEMENT ACT OF 

1996 

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. Section 285.4 is added to Part 285, 

Subpart A, to read as follows: 

§ 285.4 Offset of Federal benefit payments 

to collect past-due, legally enforceable 

nontax debt. 

(a) Scope. (1) This section sets forth 

special rules applicable to the offset of 

Federal benefit payments payable to an 

individual under the Social Security Act 

(other than Supplemental Security 

Income (SSI) payments), part B of the 

Black Lung Benefits Act, or any law 

administered by the Railroad Retirement 

Board (other than payments that such 

Board determines to be tier 2 benefits) 

to collect delinquent nontax debt owed 

to the United States. 

(2) As used in this section, benefit 

payments ‘‘due to’’ an individual, 

‘‘payable to’’ an individual, and/or 
Federal Register / Vol. 63, No. 162 / Friday, August 21, 1998 / Rules and Regulations 44989 

benefit payments ‘‘received by’’ an 

individual, refer to those benefit 

payments expected to be paid to an 

individual before any amounts are offset 

to satisfy the payee’s delinquent debt 

owed to the United States. Nothing in 

these phrases, similar phrases, or this 

section is intended to imply or confer 

any new or additional rights or benefits 

on an individual with respect to his or 

her entitlement to benefit payments. 

The Financial Management Service 

(FMS), the Social Security 

Administration, the Railroad Retirement 

Board, and other payment agencies are 

not liable for the amount offset from an 

individual’s benefit payment on the 

basis that the underlying obligation, 

represented by the payment before the 

offset was taken, was not satisfied. See 

31 U.S.C. 3716(c)(2)(A). 

(b) Definitions. As used in this 

section: 

Administrative offset or offset means 

withholding funds payable by the 

United States (including funds payable 

by the United States on behalf of a State 

government) to, or held by the United 

States for, a person to satisfy a debt. 

Agency or Federal agency means a 

department, agency, court, court 

administrative office, or instrumentality 

in the executive, judicial, or legislative 

branch of the Federal Government, 

including government corporations. 

Covered benefit payment means a 

Federal benefit payment payable to an 

individual under the Social Security Act 

(other than SSI payments), part B of the 

Black Lung Benefits Act, or any law 

administered by the Railroad Retirement 

Board (other than payments that such 

Board determines to be tier 2 benefits). 

The amount of the covered benefit 

payment payable to a debtor for 

purposes of this section will be the 

amount after reduction or deduction 

required under the laws authorizing the 

program. Reductions to recover benefit 

overpayments are excluded from the 

covered benefit payment when 

calculating amounts available for offset. 

Creditor agency means a Federal 

agency owed a debt that seeks to collect 

that debt through administrative offset. 

Debt or claim means an amount of 

money, funds, or property which has 

been determined by an agency official to 

be due the United States from any 

person, organization, or entity except 

another Federal agency. Debt or claim 

does not include a debt or claim arising 

under the Internal Revenue Code of 

1986 or the tariff laws of the United 

States. 

Debtor means a person who owes a 

debt. The term ‘‘person’’ includes any 

individual, organization or entity, 

except another Federal agency. 

Disbursing official means an official 

who has authority to disburse public 

money pursuant to 31 U.S.C. 3321 or 

another law, including an official of the 

Department of the Treasury, the 

Department of Defense, the United 

States Postal Service, or any other 

government corporation, or any official 

of the United States designated by the 

Secretary of the Treasury to disburse 

public money. 

FMS means the Financial 

Management Service, a bureau of the 

Department of the Treasury. 

Monthly covered benefit payment 

means a covered benefit payment 

payable to a payee on a recurring basis 

at monthly intervals that is not 

expressly limited in duration, at the 

time the first payment is made, to a 

period of less than 12 months. 

Payee means a person who is due a 

payment from a disbursing official. For 

purposes of this section, a ‘‘payee’’ is a 

person who is entitled to the benefit of 

all or part of a payment from a 

disbursing official. 

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 generally is the individual’s 

social security number. 

(c) Administrative offset, generally. 

Disbursing officials shall offset 

payments to satisfy, in whole or in part, 

debts owed by the payee. Disbursing 

officials shall compare payment records 

with records of debts submitted to FMS 

for collection by administrative offset. A 

match will occur when the taxpayer 

identifying number and name of the 

payee (as defined in paragraph (b) of 

this section) on a payment record are 

the same as the taxpayer identifying 

number and name of the debtor on a 

debt record. 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 in part, the debt. Any amounts not 

offset shall be paid to the payee. 

Covered benefit payments, i.e., 

payments made to individuals under the 

Social Security Act (other than 

Supplemental Security Income (SSI) 

payments), part B of the Black Lung 

Benefits Act, or any law administered 

by the Railroad Retirement Board (RRB) 

(other than tier 2 benefit payments) are 

among the types of payments which 

may be offset to collect debts owed to 

the United States. Offset of covered 

benefit payments are subject to the 

limitations contained in this section. 

Offsets of covered benefit payments will 

occur only if the name and taxpayer 

identifying number of the person who is 

entitled to the benefit of all or a part of 

the payment matches the name and 

taxpayer identifying number of the 

debtor. 

(d) Submission of debts to FMS for 

collection by administrative offset. 

Creditor agencies must notify FMS of all 

past-due, legally enforceable debt 

delinquent for more than 180 days for 

purposes of collection by administrative 

offset. Creditor agencies may notify FMS 

of all debt delinquent for less than 180 

days for purposes of collection by 

administrative offset. Prior to such 

notification, creditor agencies must 

certify to FMS that the debt is past-due, 

legally enforceable, and that the creditor 

agency has provided the debtor with 

notice and an opportunity for a review 

in accordance with the provisions of 31 

U.S.C. 3716(a) and other applicable law. 

(e) Offset amount. (1) The amount 

offset from a monthly covered benefit 

payment shall be the lesser of: 

(i) The amount of the debt, including 

any interest, penalties and 

administrative costs; 

(ii) An amount equal to 15% of the 

monthly covered benefit payment; or 

(iii) The amount, if any, by which the 

monthly covered benefit payment 

exceeds $750. 

(2) A debtor shall not receive a refund 

of any amounts offset if the debtor’s 

monthly covered benefit payments are 

reduced, suspended, terminated, or 

otherwise not received for a period of 12 

months. 

(3) Examples. (i) A debtor receives 

monthly Social Security benefits of 

$850. The amount offset is the lesser of 

$127.50 (15% of $850) or $100 (the 

amount by which $850 exceeds $750). 

In this example, the amount offset is 

$100 (assuming the debt is $100 or 

more). 

(ii) A debtor receives monthly Social 

Security benefits of $1250. The amount 

offset is the lesser of $187.50 (15% of 

$1250) or $500 (the amount by which 

$1250 exceeds $750). In this example, 

the amount offset is $187.50 (assuming 

the debt is $187.50 or more). 

(iii) A debtor receives monthly Social 

Security payments of $650. No amount 

will be offset because $650 is less than 

$750. 

(f) Notification of offset. (1) Before 

offsetting a covered benefit payment, the 

disbursing official will notify the payee 

in writing of the date offset will 

commence. The notice shall inform the 

payee of the type of payment that will 

be offset; the identity of the creditor 

agency which requested the offset; and 

a contact point within the creditor 

agency that will handle concerns 

regarding the offset. 
44990 Federal Register / Vol. 63, No. 162 / Friday, August 21, 1998 / Rules and Regulations 

(2) The disbursing official conducting 

the offset will notify the payee in 

writing of the occurrence of the offset to 

satisfy, in whole or in part, a delinquent 

debt owed to the United States. The 

notice shall inform the payee of the type 

and amount of the payment that was 

offset; the identity of the creditor agency 

which requested the offset; and a 

contact point within the creditor agency 

that will handle concerns regarding the 

offset. 

(3) Non-receipt by the debtor of the 

notices described in paragraphs (f)(1) 

and (f)(2) of this section shall not impair 

the legality of the administrative offset. 

(g) Fees. A fee which FMS has 

determined to be sufficient to cover the 

full cost of the offset procedure, shall be 

deducted from each offset amount. 

Creditor agencies may add this fee to the 

debt if not otherwise prohibited by law. 

(h) Disposition of amounts collected. 

The disbursing official conducting the 

offset will transmit amounts collected 

for debts, less fees charged under 

paragraph (g) 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. The disbursing official and the 

creditor agency shall adjust the debtor 

records appropriately. 

Dated: August 13, 1998. 

Richard L. Gregg, 

Commissioner. 

[FR Doc. 98–22394 Filed 8–20–98; 8:45 am] 

BILLING CODE 4810–35–P