05-8640. Salary Offset

AGENCY:

Financial Management Service, Fiscal Service, Treasury.

ACTION:

Final rule.

SUMMARY:

This final rule describes the rules and procedures applicable to the centralized offset of Federal salary payments to collect delinquent nontax debts owed by Federal employees to the United States. The Financial Management Service (FMS), a bureau of the U.S. Department of the Treasury, administers centralized salary offset through the Treasury Offset Program (TOP).

DATES:

This rule is effective May 3, 2005.

FOR FURTHER INFORMATION CONTACT:

Gerry Isenberg, Financial Program Specialist, at [phone]; or Tricia Long, Attorney, at [phone].

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 Federal salary payments, to pay the payees' delinquent debts owed to the United States. This process is known as “centralized administrative offset.” The DCIA also established a requirement that Federal agencies match their delinquent debtor records with records of Federal employees, at least annually, to identify Federal employees who owe delinquent debt to the Federal Government. This rule establishes centralized procedures for matching information about delinquent debts with information about Federal salary payments for the purpose of offsetting a debtor's Federal salary payments to satisfy the debt.

On April 28, 1998, FMS issued an interim rule with request for comments that established the centralized salary offset program operated by FMS through TOP. See 63 FR 23354. We did not receive comments from any individuals or entities outside the Federal government. However, we received comments from three Federal agencies, many of which were operational in nature and, therefore, not appropriate for a regulatory rulemaking. Since the time of the publication of the interim rule, FMS has worked with Federal agencies—including the three commenters—to develop systems and procedures that addressed their operational concerns. Therefore, we have not addressed those operational comments in this rulemaking.

Discussion of Comments

General

As indicated above, FMS received comments from three Federal agencies. The comments to the rule that were regulatory in nature are discussed in this final rule. In addition, FMS has corrected the list of authorities to include 31 U.S.C. 3720B and 42 U.S.C. 664, which were inadvertently deleted in previous amendments to this Part 285, and has made minor editorial changes for purposes of clarity and consistency.

Comment Analysis

Interim Rule § 285.7(a), Purpose and Scope

One commenter recommended that paragraph (a)(1) expressly state that this section applies only to the collection of nontax debts. FMS agrees that such clarification would be beneficial and has made this change to paragraph (a)(1).

It was also brought to FMS's attention that the rule does not expressly state that the centralized offset of final salary payments and any final, lump-sum payment made to an employee after the employee leaves Federal service is governed by the provisions of 31 U.S.C. 3716 and implementing regulations found at 31 CFR 285.5, rather than this rule. FMS has, therefore, added a new paragraph (a)(6) to clarify that this rule does not apply to the offset of final salary payments or final, lump-sum payments made to former employees. Among other things, this means that a disbursing official may offset up to 100% of a former employee's final payment, whereas for current employees, the offset amount is limited to 15% of disposable pay. This new provision is consistent with the salary offset provisions promulgated by the Office of Personnel Management in Subpart K of 5 CFR part 550. See 5 CFR 550.1104(l), Liquidation from final check.

Interim Rule § 285.7(b), Definitions

One commenter suggested that FMS expand the definition of “Federal employee records” to include Federal payroll records and employment records in order to facilitate the matching process for salary offset. FMS has not amended the definition of “Federal employee records” in response to this comment, but it has deleted the reference to Federal employee records in paragraph (a)(4) and revised paragraph (f) to clarify that Federal employee records are only those records required for identifying Federal employees who owe delinquent Federal debts. For purposes of this rule, “Federal employee records” are records of Federal salary payments that a paying agency has certified to a disbursing official for disbursement. Such records are sufficient for the disbursing official to identify Federal employees who owe delinquent debts. Paying agencies, however, may require additional types of records to calculate the amount of disposable pay due to a Federal employee for purposes of paragraph (f) of this section. Paragraph (f) authorizes paying agencies to deduct the offset amount from disposable pay before certifying a salary payment to a disbursing official. Paying agencies may use such records as are necessary to calculate disposable pay in accordance with 5 CFR part 550, which governs the calculation of disposable pay.

Interim Rule § 285.7(d), Creditor Agency Participation

One commenter recommended that the rule specify that notifying Treasury of all past-due, legally enforceable debts for purposes of administrative offset relieves agencies of the need to enter into computer matching agreements with other Federal disbursing officials to satisfy the statutory salary offset requirement set forth in 5 U.S.C. 5514. The commenter noted that the Supplementary Information portion of the interim rule indicated that compliance with this section would mean that the agency was also in compliance with the statutory requirement. In response to this comment, FMS has revised paragraph (d)(1) to state expressly that creditor agencies that notify FMS of all past-due legally enforceable debts for purposes of administrative offset have complied with the statutory requirement set forth in 5 U.S.C. 5514. Notwithstanding this change, FMS encourages agencies to maintain matching agreements with any salary paying agencies that have not yet participated in the interagency consortium established under 285.7(c) to implement centralized salary offset computer matching. Such matching helps maximize the Government's collection of delinquent nontax debt. FMS has therefore declined to put a provision in the rule that states that creditor agencies do not need to enter into computer matching agreements with other Federal agencies.

Two commenters suggested that FMS eliminate the waiver requirement in paragraph (d)(4) of the interim rule. FMS has made the suggested change. Paragraph (d)(4) required a waiver from Treasury before a creditor agency could submit a debt to TOP without first certifying that the creditor agency has complied with the salary offset due process requirements of 5 U.S.C. 5514. See paragraph (d)(3)(iv) of this section. Such certification is referred to informally as a “partial certification,” because the creditor agency is not relieved from the requirement to certify its compliance with those due process pre-requisites applicable to the offset of non-salary payments. See 31 CFR 285.5(d)(6), Creditor agency certification. With a partial certification, TOP compares debtor information with Federal salary payment information to determine if the debtor receives a Federal salary and informs the creditor agency if there is a match. Such matching affords the creditor agency time to perform the necessary due process prior to submitting the completed certification that all due process requirements of 5 U.S.C. 5514 have been met. An offset will only occur after the creditor agency submits the completed certification. The creditor agency may only submit a debt to TOP with a partial certification if it uses the match information for offset purposes—that is to complete due process and resubmit the debt to TOP with the completed certification.

FMS agrees that it is appropriate to allow creditor agencies to submit debts with the partial certification without an express waiver from Treasury. FMS's experience since the publication of the interim rule is that the partial certification process works well to allow agencies time to complete due process, and that an express waiver is no longer necessary. Therefore, paragraph (d)(4) has been amended to remove the requirement for a waiver from Treasury prior to submitting a partial certification. Paragraph (d)(4) has also been amended to add a provision to make clear that such partial certification is only permitted when the creditor agency intends to use the Federal salary information to provide due process for offset under this section and fully certify the debt in the future.

Interim Rule § 285.7(g)(1), Offset Amount

One commenter suggested that paragraph (g)(1) be amended to clarify that when a debtor is receiving more than one Federal salary at the same time (e.g., when a person receives both civilian and military reserve pay), that the offset amount is 15% of each of those payments. FMS has not made a change to the rule in response to this comment, because the current language of (g)(1) refers to disposable pay, and disposable pay is defined as having the same meaning as that term is defined in 5 CFR 550.1103. Section 550.1103 makes clear that disposable pay includes any pay to a Federal employee. Paragraph (g)(1), therefore, allows the Government to offset up to 15% of all Federal salaries paid to the debtor.

Interim Rule § 287.7(h), Priorities

One commenter recommended that Treasury require that tax levies imposed by the Internal Revenue Service (IRS) be served directly on FMS, rather than on Federal agencies directly. FMS has not changed this rule in response to this comment. This rule applies only to the collection of nontax debts. Moreover, service of IRS levies is governed by the Internal Revenue Code, which is administered solely by the IRS. Service of levies to collect delinquent tax obligations is therefore outside the scope of this rule.

Regulatory Analysis

This final rule is not a significant regulatory action as defined in Executive Order 12866. Because no notice of proposed rulemaking was required for this rule, the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) do not apply.

Special Analysis

FMS has determined that good cause exists to make this final 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, the agencies affected by this rule have already been accomplishing centralized salary offset in accordance with the terms of this rule, and procedures affecting debtors remain unchanged in this rule. Moreover, this final rule makes only minor changes to the currently effective interim final rule and provides guidance that is expected to facilitate Federal agencies' participation in the centralized offset program. Therefore, FMS believes that good cause exists, and that it is in the public interest, to make this final rule effective upon publication.

List of Subjects in 31 CFR Part 285

• Administrative practice and procedure
• Black lung benefits
• Child support
• Claims
• Credit
• Debts
• Disability benefits
• Federal employees
• Garnishment of wages
• Hearing and appeal procedures
• Loan programs
• Privacy
• Railroad retirement
• Railroad unemployment insurance
• Salaries
• Social Security benefits
• Supplemental Security Income (SSI)
• Taxes
• Veteran's benefits
• Wages

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 is revised to read as follows:

Authority: 5 U.S.C. 5514; 26 U.S.C. 6402; 31 U.S.C. 321, 3701, 3711, 3716, 3719, 3720A, 3720B, 3720D; 42 U.S.C. 664; E.O. 13019, 61 FR 51763, 3 CFR, 1996 Comp., p. 216.

2. Amend § 285.7 as follows:

a. Revise paragraph (a)(1);

b. Remove the last sentence of paragraph (a)(4);

c. Add a new paragraph (a)(6);

d. Revise paragraph (d)(1);

e. Revise paragraph (d)(4); and

f. Add a new sentence to the end of paragraph (f).

The revisions and additions read as follows:

§ 285.7

Salary offset.

(a) Purpose and scope. (1) This section establishes FMS's procedures for the centralized offset of Federal salary payments to collect delinquent nontax debts owed to the United States. This process is known as centralized salary offset. Rules issued by the Office of Personnel Management contain the requirements Federal agencies must follow prior to conducting centralized or non-centralized salary offset and the procedures for requesting offsets directly from a paying agency, rather than through TOP. See 5 CFR 550.1101 through 550.1108.

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(6) This section does not govern the centralized offset of final salary payments or lump-sum payments made to employees who have left an agency's employ. The centralized offset of such payments is governed by § 285.5 of this part.

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(d) Creditor agency participation. (1) As required under 5 U.S.C. 5514(a)(1), creditor agencies shall participate at least annually in centralized salary offset computer matching. By notifying FMS of all past-due, legally enforceable debts delinquent for more than 180 days for purposes of 31 U.S.C. 3716(c)(6), creditor agencies shall have met the requirement set forth in 5 U.S.C. 5514(a)(1). Additionally, creditor agencies may notify FMS of past-due, legally enforceable debts delinquent for less than 180 days for purposes of centralized offset.

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(4) The creditor agency is not required to submit the certification set forth in paragraph (d)(3)(iv) of this section prior to submitting a debt to FMS. However, if the creditor agency does not provide such certification initially, the creditor agency shall provide the Federal employee with the notices and opportunity for a hearing, as required by 5 U.S.C. 5514 and applicable regulations, and shall make the necessary certification before the disbursing official offsets a salary payment pursuant to this section. A creditor agency may submit a debt without the requirement set forth in paragraph (d)(3)(iv) of this section, only if the creditor agency intends to complete the certification after complying with the provisions of 5 U.S.C. 5514 and applicable regulations.

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(f) Salary offset. * * * The salary paying agency shall use such records as it deems necessary to accurately calculate disposable pay in accordance with 5 CFR 550.1103.

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Dated: April 22, 2005.

Richard L. Gregg,

Commissioner.