[Federal Register Volume 59, Number 97 (Friday, May 20, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-12426]


[[Page Unknown]]

[Federal Register: May 20, 1994]


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PENSION BENEFIT GUARANTY CORPORATION
29 CFR Part 2609
RIN 1212-AA64
 

Debt Collection by Administrative Offset
AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Proposed rule.

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SUMMARY: The Pension Benefit Guaranty Corporation (``PBGC'') is 
proposing to provide for debt collection by administrative offset. The 
PBGC believes that adoption of this proposed rule would enhance its 
debt collection ability. The procedures in this proposed rule implement 
administrative offset, as authorized by the Federal Claims Collection 
Act of 1966, as amended by the Debt Collection Act of 1982, and in 
accordance with standards prescribed by the Comptroller General of the 
United States and the Attorney General of the United States.

DATES: Comments must be received on or before July 19, 1994.

ADDRESSES: Comments may be mailed to the Office of the General Counsel 
(Suite 340), Pension Benefit Guaranty Corporation, 1200 K Street NW., 
Washington, DC 20005-4026, or hand-delivered to the above address 
between 9 a.m. and 5 p.m., Monday through Friday. Comments will be 
available for public inspection at the PBGC's Communications and Public 
Affairs Department, suite 240, at the above address between 9 a.m. and 
4 p.m., Monday through Friday.

FOR FURTHER INFORMATION CONTACT:
Catherine B. Klion, Attorney, Office of the General Counsel (Suite 
340), Pension Benefit Guaranty Corporation, 1200 K Street NW., 
Washington, DC 20005-4026, 202-316-4125 (202-326-4179 for TTY and TDD). 
(These are not toll-free numbers.)

SUPPLEMENTARY INFORMATION: The Pension Benefit Guaranty Corporation 
(``PBGC'') administers the pension plan termination insurance program 
under title IV of the Employee Retirement Income Security Act of 1974, 
as amended (``ERISA'') (29 FHWA 1301 et seq.). In conjunction with the 
pension plan termination insurance program, persons (including 
organizations and entities) incur various types of debts to the PBGC, 
and the PBGC incurs various types of liabilities (including contractual 
obligations).
    The PBGC uses various methods to collect its debts; however, it 
currently does not use administrative offset. The PBGC anticipates that 
the ability to use administrative offset, particularly against payments 
to be made by other agencies in connection with government contracts, 
would enhance its debt collection ability. Therefore, the PBGC is 
proposing to add part 2609, Debt Collection--Administrative Offset, to 
its regulations (29 CFR part 2609). (Other debt collection tools 
currently available to the PBGC include the use of collection agencies 
and salary offset. Tax refund offset potentially is available to the 
PBGC.)
    The Debt Collection Act of 1982, which amended the Federal Claims 
Collection Act of 1966 (31 U.S.C. 3701 et seq.), authorizes the 
collection of debts owed to the United States by administrative offset 
(31 U.S.C. 3716). Administrative offset is defined as ``withholding 
money payable by the United States Government to, or held by the 
Government for, a person to satisfy a debt the person owes the 
Government'' (31 U.S.C. 3701(a)(1)).
    Before collecting a claim by administrative offset under the 
Federal Claims Collection Act, the head of an agency must prescribe 
regulations on administrative offset based on the best interests of the 
United States Government, the likelihood of collecting a claim by 
administrative offset, and, for collecting a claim by administrative 
offset after the six-year period for bringing a civil action on a claim 
under 28 U.S.C. 2415 has expired, the cost-effectiveness of leaving a 
claim unresolved for more than six years (31 U.S.C. 3716(b)).
    The Comptroller General of the United States and the Attorney 
General of the United States jointly issued amendments to the Federal 
Claims Collections Standards (``FCCS'') (4 CFR parts 101 through 105) 
to implement the Debt Collection Act of 1982. Part 102 of those 
regulations prescribes standards for the administrative collection of 
claims, including, in Sec. 102.3, collection by administrative offset. 
The FCCS do not cover offset of debts against salaries of federal 
employees (48 FR 23249, May 24, 1983). (See PBGC Notice No. 89-28 (Nov. 
13, 1989) for the agency's salary offset procedures.) (See Sec. 101.3 
for other limitations on the applicability of the FCCS.)
    The FCCS use the terms ``claim'' and ``debt'' synonymously and 
interchangeably to ``refer to an amount of money or property which has 
been determined by an appropriate agency official to be owed to the 
United States from any person, organization, or entity, except another 
federal agency'' (Sec. 101.2(a)). They provided that collection by 
administrative offset is to be undertaken, in accordance with an 
agency's implementing regulations, on claims that are liquidated or 
certain in amount when such collection is determined to be feasible and 
not otherwise prohibited (Sec. 102.3(a)). The creditor agency is to 
determine whether collection by administrative offset is feasible on a 
case-by-case basis, in the exercise of sound discretion, based on 
various factors; agencies are not required to use offset in every 
instance in which there is an available source of funds 
(Sec. 102.3(a)(2)).
    Except as otherwise required by law, the procedures to be 
established by agency regulations must provide the debtor with written 
notice of the nature and amount of the debt and the agency's intention 
to collect by offset, opportunity to inspect and copy agency records 
pertaining to the debt, opportunity to obtain review within the agency 
of the agency's determination of indebtedness, and opportunity to enter 
into a written agreement with the agency to repay the debt (``repayment 
agreement''). An agency's regulations also must establish procedures 
for making requests for offset to other agencies holding funds payable 
to the debtor and procedures for processing requests for offset that 
are received from other agencies (Sec. 102.3(b)).
    The FCCS provide that agencies may not initiate administrative 
offset to collect a debt under 31 U.S.C. 3716 more than 10 years after 
the government's right to collect the debt first accrued unless facts 
material to its right to collect the debt were not known and could not 
reasonably have been known by the official(s) charged with the 
responsibility to discover and collect such debts (Sec. 102.3(b)(3)). 
Nor may agencies use administrative offset under 31 U.S.C. 3716 with 
respect to debts owed by state or local governments or arising under 
the Social Security Act, the Internal Revenue Code, or United States 
tariff laws or in cases in which collection of the type of debt 
involved is ``explicitly provided for or prohibited by another 
statute'' (Sec. 102.3(b)(4)). (Administrative offset is not 
``explicitly provided for or prohibited'' by Title IV of ERISA.) 
However, unless otherwise provided by contract or law, such debts may 
be collected by administrative offset under the common law or other 
applicable statutory authority. Collection by offset against a judgment 
obtained by a debtor against the United States must be accomplished in 
accordance with 28 U.S.C. 3728 (which provides that the Comptroller 
General shall withhold paying that part of a judgment against the 
United States that is equal to a debt the plaintiff owes the United 
States) (Sec. 102.3(e)).
    The PBGC's Financial Operations Department (``FOD'') would have 
primary responsibility for the new debt collection procedures in this 
proposed rule, including applying amounts recovered by administrative 
offset to multiple debts (Sec. 2609.3(c)), requesting offset by other 
agencies (Sec. 2609.5), and processing requests for offset from other 
agencies (Sec. 2609.6). However, ascertaining the indebtedness and 
providing notice to the debtor and administrative review would continue 
to be handled by the organizational unit with functional responsibility 
for the type of claim involved, including, where applicable, review by 
the Appeals Board (see Sec. 2606.1(b) (5) through (9)). For example, 
the Premium Operations Division of FOD would continue to have 
responsibility for premiums, interest, and late payment penalties, 
including issuing initial determinations and reconsideration in 
accordance with part 2606 (see Sec. 2606.1(b)(4)). (Applicable 
assignments of responsibilities are set forth in the mission and 
functions statements issued by the Executive Director and included 
(along with organization charts) in the PBGC Directives Manual as 
section 30-1 of Part GA (General Administration).)
    Proposed Sec. 2609.1 sets out the purpose and scope of part 2609. 
The PBGC will apply these procedures only when it determines that 
collection by administrative offset of a claim that is liquidated or 
certain in amount is feasible and not otherwise prohibited. As stated 
in proposed Sec. 2609.3(a), the PBGC will determine whether collection 
by administrative offset is feasible on a case-by-case basis, in the 
exercise of sound discretion, as provided in the FCCS 
(Sec. 102.3(a)(2)). (The PBGC generally will not offset against plan 
benefits.)
    Proposed Sec. 2609.3 also reiterates FCCS provisions regarding the 
acceptance of a repayment agreement in lieu of offset and how to apply 
amounts collected by administrative offset on multiple debts 
(Sec. 102.3(b)(2) (i) and (g)). Proposed Sec. 2609.2 defines various 
terms (e.g., ``repayment agreement'') used in this part of the 
regulations.
    Proposed Sec. 2609.4 addresses the procedures that the PBGC 
generally must complete before effecting administrative offset against 
a payment owed to a debtor. The FCCS do not require, however, that an 
agency duplicate procedures provided in connection with the same debt 
under other statutory or regulatory authority. (Sec. 102.3(b)(2)(ii)). 
Accordingly, the PBGC would not do so (proposed Sec. 2609.4(a)). Thus, 
for example, if the PBGC were to use administrative offset to collect a 
debt for premiums, interest, and late payment penalties, it would not 
duplicate any procedural protection previously provided under part 
2606.
    The FCCS provide that whenever an agency is required to afford a 
debtor with a hearing or review within the agency, the agency must 
provide a reasonable opportunity for an oral hearing when: (1) An 
applicable statute authorizes or requires the agency to consider waiver 
of the indebtedness involved, the debtor requests such waiver, and the 
waiver determination turns on an issue of credibility or veracity, or 
(2) the debtor requests reconsideration of the debt and the agency 
determines that the question of the indebtedness cannot be resolved by 
a review of the documentary evidence (Sec. 102.3(c)(1)). However, an 
agency need not provide oral hearings with respect to debt collection 
systems in which determinations of indebtedness or waiver rarely 
involve issues of credibility or veracity and the agency has determined 
that review of the written record ordinarily is an adequate means to 
correct prior mistakes. In administering such a system, the agency is 
not required to sift through all requests received in order to accord 
oral hearings in those few cases which may involve issues of 
credibility or veracity. (Section 102.3(c)(2).)
    Based on its experience, the PBGC has determined that with respect 
to its debt collection system, review of the written record ordinarily 
is adequate, and, therefore, part 2609 does not provide for oral 
hearings. (When reviewing determinations described in Sec. 2606.1(b) 
(5) through (9), the Appeals Board may, at its discretion, permit an 
opportunity to appear or to present witnesses (Sec. 2606.56).)
    If the debtor does not submit a timely request for administrative 
review (see proposed Sec. 2609.4(c)(1)), or if upon review the PBGC has 
notified the debtor of its decision that a debt is owed (see proposed 
Sec. 2609.(c)(3)), then the PBGC may pursue administrative offset 
without further notice to the debtor (see also proposed 
Sec. 2609.4(e)).
    Proposed Sec. 2609.4(d) provides that the PBGC will not consider 
entering a repayment agreement in lieu of offset unless a debtor 
submits information regarding the debtor's financial condition, 
including specified financial statement information (paragraph (d)(1)). 
The PBGC may require appropriate security as a condition of accepting a 
repayment agreement in lieu of offset (paragraph (d)(2)).
    Proposed Sec. 2609.4(e), as authorized by the FCCS 
(Sec. 102.3(b)(5)), provides that the PBGC may effect administrative 
offset prior to completion of the procedures specified in paragraphs 
(b) and (c) under certain circumstances (in particular, to avoid 
prejudicing the Government's ability to collect the debt). Under the 
special rule in Sec. 2622.9(c) of this chapter, the PBGC need not 
follow certain procedures when it believes that its ability to assert 
or obtain payment of liability incurred upon termination of a single-
employer plan is in jeopardy. The PBGC views any case in which it 
applies Sec. 2622.9(c) as one that would meet the criteria in proposed 
Sec. 2609.4(e)(1) and therefore a case in which it could effect 
administrative offset prior to the completion of the specified 
procedures. Proposed Sec. 2609.4(e)(2) reflects this view.
    Proposed Secs. 2609.5 and 2609.6 prescribe procedures for making 
requests for offset to other agencies and for processing requests for 
offset from other agencies, respectively. Any PBGC requests for 
administrative offset against amounts due and payable from the Civil 
Service Retirement and Disability Fund would be made in accordance with 
applicable Office of Personnel Management (``OPM'') regulations (Agency 
Requests to OPM for Recovery of a Debt from the Civil Service 
Retirement and Disability Fund, 5 CFR part 831, subpart R), as well as 
applicable provisions of the FCCS. As provided in the FCCS, 
(Sec. 102.3(d)), the PBGC generally will comply with requests from 
other agencies to initiate administrative offset unless the requesting 
agency has not complied with the applicable provisions of the FCCS or 
the offset would be otherwise contrary to law (proposed 
Sec. 2609.6(a)).

E.O. 12866 and the Regulatory Flexibility Act

    The PBGC has determined that this action is not a ``significant 
regulatory action'' under the criteria set forth in Executive Order 
12866 because the rule would not have an annual effect on the economy 
of $100 or more or adversely affect in a material way the economy, a 
sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, or tribal 
governments or communities, create a serious inconsistency or otherwise 
interfere with an action taken or planned by another agency; materially 
alter the budgetary impact of entitlements, grants, user fees, or loan 
programs or the rights and obligations of recipients thereof; or raise 
novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in Executive Order 
12866. The purpose of the rule is to enhance the PBGC's debt collection 
ability. The procedures will be triggered only by a failure to pay a 
debt already owed.
    For the same reason, the PBGC certifies that, if adopted, this 
proposed rule will not have a significant economic effect on a 
substantial number of small entities. Accordingly, as provided in 
section 605 of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), 
sections 603 and 604 do not apply.

List of Subjects in 29 CFR Part 2609

    Administrative, Practice and procedure, Claims.

    For the reasons set forth above, the PBGC proposes to amend 
subchapter A, chapter XXVI of 29 CFR by adding a new part 2609 to read 
as follows:

PART 2609--DEBT COLLECTION--ADMINISTRATIVE OFFSET

Sec.
2609.1  Purpose and scope.
2609.2  Definitions.
2609.3  Application of Federal Claims Collection Standards.
2609.4  Administrative offset procedures.
2609.5  PBGC requests for offset to other agencies.
2609.6  Requests for offset from other agencies.

    Authority: 29 U.S.C. 1302(b); 31 U.S.C. 3701, 3716; 4 CFR part 
102.


Sec. 2609.1  Purpose and scope.

    (a) Purpose. This part prescribes procedures for debt collection by 
administrative offset, as authorized by the Federal Claims Collection 
Act (31 U.S.C. 3716), and consistent with applicable provisions of the 
Federal Claims Collection Standards.
    (b) Scope. The procedures in this part apply when the PBGC 
determines that collection by administrative offset of a claim that is 
liquidated or certain in amount is feasible and not otherwise 
prohibited or when another agency seeks administrative offset against a 
payment to be made by the PBGC.


Sec. 2609.2  Definitions.

    For purposes of this part:
    Administrative offset has the meaning set forth in 31 U.S.C. 
3701(a)(1).
    Agency means an executive or legislative agency (within the meaning 
of 31 U.S.C. 3701(a)(4)).
    Claim and debt, as defined in the Federal Claims Collection 
Standards (4 CFR 101.2(a)), are used synonymously and interchangeably 
to refer to an amount of money or property which has been determined by 
an appropriate agency official to be owed to the United States from any 
person, organization, or entity, except another Federal agency.
    Federal Claims Collection Act means the Federal Claims Collection 
Act of 1966, as amended (31 U.S.C. 3701 et. seq.).
    Federal Claims Collection Standards means 4 CFR parts 101 through 
105, which are regulations issued jointly by the Comptroller General of 
the United States and the Attorney General of the United States that 
implement the Federal Claims Collection Act.
    PBGC means the Pension Benefit Guaranty Corporation.
    Repayment agreement means a written agreement by a debtor to repay 
a debt to the PBGC.


Sec. 2609.3  Application of Federal Claims Collection Standards.

    The PBGC will determine the feasibility of collection by 
administrative offset, whether to accept a repayment agreement in lieu 
of offset, and how to apply amounts collected by administrative offset 
on multiple debts as provided in the Federal Claims Collection 
Standards (4 CFR 102.3).
    (a) Feasibility. The PBGC will determine whether collection by 
administrative offset is feasible on a case-by-case basis in the 
exercise of sound discretion. In making such determinations, the PBGC 
will consider:
    (1) Whether administrative offset can be accomplished, both 
practically and legally;
    (2) Whether administrative offset is best suited to further and 
protect all governmental interests;
    (3) In appropriate circumstances, the debtor's financial condition; 
and
    (4) Whether offset would tend to interfere substantially with or 
defeat the purposes of the program authorizing the payments against 
which offset is contemplated.
    (b) Repayment agreements. The PBGC will exercise its discretion in 
determining whether to accept a repayment agreement in lieu of offset, 
balancing the Government's interest in collecting the debt against 
fairness to the debtor. If the debt is delinquent (within the meaning 
of 4 CFR 101.2(b)) and the debtor has not disputed its existence or 
amount, the PBGC will accept a repayment agreement in lieu of offset 
only if the debtor is able to establish that offset would result in 
undue financial hardship or would be against equity and good 
conscience.
    (c) Multiple debts. When the PBGC collects multiple debts by 
administrative offset, it will apply the recovered amounts to those 
debts in accordance with the best interests of the United States, as 
determined by the facts and circumstances of the particular case, 
paying special attention to applicable statutes of limitations.


Sec. 2609.4   Administrative offset procedures.

    (a) General. Except as otherwise required by law or as provided in 
paragraph (e) of this section, the PBGC will not effect administrative 
offset against a payment to be made to a debtor prior to the completion 
of the procedures specified in paragraphs (b) and (c) of this section. 
However, the PBGC will not duplicate any notice or other procedural 
protection it previously provided in connection with the same debt 
under some other statutory or regulatory authority, such as part 2606 
of this subchapter.
    (b) Notice. The PBGC will provide written notice informing the 
debtor of the following:
    (1) The nature and amount of the debt, and the PBGC's intention to 
collect by offset;
    (2) That the debtor may inspect and copy PBGC records pertaining to 
the debt in accordance with part 2603 or part 2607 of this subchapter, 
as applicable (access under the Freedom of Information Act (5 U.S.C. 
552) or the Privacy Act (5 U.S.C. 552a), respectively);
    (3) How and from whom the debtor may obtain administrative review 
of a determination of indebtedness;
    (4) The facts and circumstances that the PBGC will consider in 
determining whether to accept a repayment agreement in lieu of offset; 
and
    (5) If the PBGC has not previously demanded payment of the debt, 
the date by which payment must be made to avoid further collection 
action.
    (c) Administrative review. (1) A debtor may obtain review within 
the PBGC of a determination of indebtedness by submitting a written 
request for review, designated as such, to the PBGC official specified 
in the notice of indebtedness. Unless another regulation in this 
chapter specifies a different period of time, such a request must be 
submitted within 30 days after the date of a PBGC notice under 
paragraph (b) of this section.
    (2) A request for review must:
    (i) State the ground(s) on which the debtor disputes the debt; and
    (ii) Reference all pertinent information already in the possession 
of the PBGC and include any additional information believed to be 
relevant.
    (3) The PBGC will review a determination of indebtedness, when 
requested to do so in a timely manner. The PBGC will issue a written 
decision, based on the written record, and will notify the debtor of 
its decision.
    (i) The review will be conducted by an official of at least the 
same level of authority as the person who made the determination of 
indebtedness; and
    (ii) The notice of the PBGC's decision on review will include a 
brief statement of the reason(s) why the determination of indebtedness 
has or has not been changed.
    (4) Upon receipt of a request for administrative review, the PBGC 
may, in its discretion, temporarily suspend transactions in any of the 
debtor's accounts maintained by the PBGC. If the PBGC resolves the 
dispute in the debtor's favor, it will lift the suspension immediately.
    (d) Repayment agreement in lieu of offset. (1) The PBGC will not 
consider entering a repayment agreement in lieu of offset unless a 
debtor submits a copy of the debtor's most recent audited (or if not 
available, unaudited) financial statement (with balance sheets, income 
statements, and statements of changes in financial position), to the 
extent such documents have been prepared, and other information 
regarding the debtor's financial condition (e.g., the types of 
information on assets, liabilities, earnings, and other factors 
specified in in paragraphs (b)(3) through (b)(7) of Sec. 2622.6 of this 
chapter).
    (2) The PBGC may require appropriate security as a condition of 
accepting a repayment agreement in lieu of offset.
    (e) Exception. (1) The PBGC may effect administrative offset 
against a payment to be made to the debtor prior to completing the 
procedures specified in paragraphs (b) and (c) of this section if:
    (i) Failure to take the offset would substantially prejudice the 
government's ability to collect the debt; and
    (ii) The time before the payment is to be made does not reasonably 
permit the completion of those procedures.
    (2) The PBGC has determined that a case in which it applies the 
special rule in Sec. 2622.9(c) of this chapter meets the criteria in 
paragraph (e)(1) of this section.
    (3) If the PBGC effects administrative offset against a payment to 
be made to debtor prior to completing the procedures specified in 
paragraphs (b) and (c) of this section, the PBGC--
    (i) Will promptly complete those procedures; and
    (ii) Will promptly refund any amounts recovered by offset but later 
found not to be owed to the Government.


Sec. 2609.5  PBGC Requests for offset by other agencies.

    (a) General. The PBGC may request that funds payable to its debtor 
by another agency be administratively offset to collect a debt owed to 
the PBGC by the debtor. A PBGC request for administrative offset 
against amounts due and payable from the Civil Service Retirement and 
Disability Fund will be made in accordance with 5 CFR part 831, supbart 
R (Agency Requests to OPM for Recovery of a Debt from the Civil Service 
Retirement and Disability Fund).
    (b) Certification. In requesting administrative offset, the 
Director of the Financial Operations Department (or a department 
official designated by the Director) will certify in writing to the 
agency holding funds of the debtor--
    (1) That the debtor owes the debt (including the amount) and that 
the PBGC has fully complied with the provisions of 4 CFR 102.3; and
    (2) In a request for administrative offset against amounts due and 
payable from the Civil Service Retirement and Disability Fund, that the 
PBGC has complied with applicable statutes and the regulations and 
procedures of the Office of Personnel Management.


Sec. 2609.6  Requests for offset from other agencies.

    (a) General. As provided in the Federal Claims Collections 
Standards (4 CFR 102.3(d)), the PBGC generally will comply with 
requests from other agencies to initiate administrative offset to 
collect debts owed the United States unless the requesting agency has 
not complied with the applicable provisions of the Federal Claims 
Collection Standards or the offset would be otherwise contrary to law.
    (b) Submission of requests. (1) Any agency may request that funds 
payable to its debtor by the PBGC be administratively offset to collect 
a debt owed to such agency by the debtor by submitting the 
certification described in paragraph (c) of this section.
    (2) All such requests should be directed to the Director, Financial 
Operations Department, Pension Benefit Guaranty Corporation, 1200 K 
Street, NW., Washington, DC 20005-4026.
    (c) Certification required. The PBGC will not initiate 
administrative offset in response to a request from another agency 
until it receives written certification from the requesting agency, 
signed by an appropriate agency official, that the debtor owes the debt 
(including the amount) and that the requesting agency has fully 
complied with the provisions of 4 CFR 102.3 (with a citation to the 
agency's own administrative offset regulations).

    Issued in Washington, D.C. this 17th day of May, 1994.
Martin Slate,
Executive Director Pension Benefit Guaranty Corporation.
[FR Doc. 94-12426 Filed 5-19-94; 8:45 am]
BILLING CODE 7708-01-M