[Federal Register Volume 63, Number 81 (Tuesday, April 28, 1998)]
[Rules and Regulations]
[Pages 23354-23359]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-11203]


      

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Part III





Department of the Treasury





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Fiscal Service



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31 CFR Part 285



Salary Offset; Interim Rule

  Federal Register / Vol. 63, No. 81 / Tuesday, April 28, 1998 / Rules 
and Regulations  

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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 285

RIN 1510-AA70


Salary Offset

AGENCY: Financial Management Service, Fiscal Service, Treasury.

ACTION: Interim rule with request for comments.

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SUMMARY: The Debt Collection Improvement Act of 1996 (DCIA) requires 
the Federal Government to withhold or reduce certain Federal payments 
to satisfy the delinquent nontax debts owed to the United States by the 
payee. This process is known as ``administrative offset.'' In addition, 
the DCIA requires Federal agencies, using a process known as 
centralized salary offset computer matching, to identify Federal 
employees who owe delinquent nontax debt to the United States. This 
interim rule establishes centralized computer matching procedures for 
comparing delinquent debt information with Federal salary payment 
information for the purpose of offsetting the salary payments of those 
employees who owe debt to the United States once they are identified. 
This interim rule also establishes the rules governing the 
administrative offset of Federal salary payments through a centralized 
offset process operated by the Financial Management Service of the U.S. 
Department of the Treasury.

DATES: This rule is effective April 28, 1998. Comments must be received 
on or before May 28, 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.

FOR FURTHER INFORMATION CONTACT: Gerry Isenberg, Financial Program 
Specialist, at (202) 874-6859; or 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 Federal salary payments, to pay the payee's 
delinquent debt owed to the United States. This process is known as 
``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 delinquent debt records with 
Federal salary payment records for the purpose of offsetting a debtor's 
Federal salary payments where a match occurs.
    The Financial Management Service (FMS), a bureau of the Department 
of the Treasury (Treasury), disburses more than 850 million Federal 
payments annually, including Federal salary payments. 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. By participating in the 
Treasury Offset Program in accordance with the provisions of this rule, 
Federal agencies will comply with the DCIA requirements regarding 
Federal employees who owe delinquent nontax debts to the United States.
    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 and States. Under 
the DCIA, Federal agencies are required to notify FMS of all past-due, 
legally enforceable nontax debts owed to the United States that are 
over 180 days delinquent for inclusion in this delinquent debtor 
database.
    As part of the Federal payment process, FMS and other Federal 
disbursing officials compare the payee information with debtor 
information in the delinquent debtor database operated by FMS. 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 part, to satisfy 
the debt, to the extent allowed by law. This rule establishes specific 
procedures for the comparison of information contained in the 
delinquent debtor database with payee information contained on Federal 
salary payments and for the offset of those payments where a match 
occurs.
    Amounts collected are transmitted to the appropriate agencies owed 
the delinquent debt after the disbursing official deducts a fee charged 
to cover the cost of the offset program. The authority of disbursing 
officials to charge fees is found at 31 U.S.C. 3716(c)(4). 
Additionally, as authorized by 5 U.S.C. 5514, agencies that perform 
centralized salary offset computer matching services may charge a fee 
sufficient to cover the full cost for such services. 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 permitted by 
law.
    Information about a delinquent debt remains in the debtor database 
and offsets of eligible Federal salary and other payments will continue 
until debt collection activity for the debt is terminated because of 
full payment, establishment of a repayment plan, 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.
    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 or will promulgate 
other rules governing the centralized offset of Federal payments (other 
than Federal salary 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.

Section Analysis

    (a) Purpose and Scope. Paragraph (a) explains that this rule 
establishes procedures for matching records of delinquent debtors with 
Federal employee records as required under 5 U.S.C. 5514(a)(1) and, 
where a match occurs, for offsetting Federal salary payments through 
centralized administrative offset under 31 U.S.C. 3716. Nothing in this 
rule precludes an agency from pursuing collection remedies in addition 
to salary offset.
    (b) Definitions. This rule includes the following definitions.
    Administrative offset. The term ``administrative offset'' or 
``offset'' as

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defined in this rule has the same meaning as found in 31 U.S.C. 
3701(a)(1).
    Agency. The term ``agency'' as defined in this rule has the same 
meaning as found in 31 U.S.C. 3701(a)(4) and includes all agencies 
required by 5 U.S.C. 5514(a)(1) to participate in centralized salary 
offset computer matching. The term refers to an agency in the 
executive, judicial or legislative branches of the Government, 
including government corporations, that administers the program that 
gave rise to the debt.
    Centralized salary offset computer matching. The phrase 
``centralized salary offset computer matching'' describes the 
computerized process used to match delinquent debt records with Federal 
salary payment records when the purpose of the match is to identify 
Federal employees who owe debt to the Federal Government.
    Debt. For the purposes of this rule, the term ``debt'' has the same 
meaning as found in 31 U.S.C. 3701(b)(1) and does not include tax debt.
    Delinquent debt record. For purposes of this rule, the term 
``delinquent debt record'' refers to the information about a debt that 
an agency submits to FMS when the agency refers the debt for collection 
by offset in accordance with the provisions of 31 U.S.C. 3716.
    Disbursing official. ``Disbursing official'' means an official who 
has authority to disburse Federal salary payments pursuant to 31 U.S.C. 
3321 or another law. It includes 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 of the Treasury, or 
any disbursing official of any other executive department or agency 
that disburses Federal salary payments.
    Disposable pay. ``Disposable pay'' has the same meaning as 
prescribed by the Office of Personnel Management (OPM) in 5 CFR 
550.1103. As defined by OPM, ``disposable pay'' means that part of 
current basic pay, special pay, incentive pay, retired pay, retainer 
pay, or in the case of an employee not entitled to basic pay, other 
authorized pay remaining after the deduction of (a) any amount required 
by law to be withheld; (b) amounts properly withheld for Federal, state 
or local income tax purposes; (c) amounts deducted as health insurance 
premiums; (d) amounts deducted as normal retirement contributions, not 
including amounts deducted for supplementary coverage; and (e) amounts 
deducted as normal life insurance premiums not including amounts 
deducted for supplementary coverage.
    Federal employee. The term ``Federal employee'' is intended to 
cover any individual who is employed by any agency of the Federal 
Government, including temporary and seasonal employees.
    Federal employee records. ``Federal employee records'' are the 
Federal salary payment records. To request salary payments for their 
employees, Federal agencies prepare and certify payment vouchers. 
Disbursing officials of the Federal Government issue salary payments 
upon receipt of certified payment vouchers. To identify Federal 
employees who owe debt to the United States, the Federal salary payment 
records will be compared with the delinquent debt records submitted to 
FMS.
    Paying agency. The ``paying agency'' is the employing agency or the 
payroll agency (e.g., the United States Department of Agriculture's 
National Finance Center). The paying agency prepares and certifies 
payment vouchers pursuant to which disbursing officials issue salary 
payments.
    Salary offset. ``Salary offset'' is a type of administrative 
offset. As amended by section 31001(d)(2)(B) of the DCIA, 31 U.S.C. 
3716 is applicable to the offset of all Federal payments even if 
another statute provides for using offset to collect a particular type 
of debt. See 31 U.S.C. 3716(e) (formerly 31 U.S.C. 3716(c)). Thus, the 
provisions of 31 U.S.C. 3716 apply to salary offset even though 
procedures governing the offset of a Federal employee's salary are 
provided for in 5 U.S.C. 5514. The requirements to provide a Federal 
employee with notice and an opportunity to dispute the debt are 
contained in 5 U.S.C. 5514 and implementing regulations. Nothing in 
this rule is intended to change the prerequisites to salary offset.
    Taxpayer identifying number. For an individual the ``taxpayer 
identifying number'' is the social security number. An offset of an 
individual's salary payment will not occur unless the taxpayer 
identifying number and name of the payee match the taxpayer identifying 
number and name of the debtor.
    (c) Establishment of the consortium. Paragraph (c) defines the 
interagency consortium that the Secretary, by issuance of this rule, 
establishes in accordance with the requirement contained in 5 U.S.C. 
5514(a)(1). The purpose of the interagency consortium is to establish a 
centralized salary offset computer matching process. Therefore, 
paragraph (c) provides that the interagency consortium initially 
consists of all agencies which disburse Federal salary payments and 
which are required to offset Federal payments to collect debts. See 31 
U.S.C. 3716(c)(1)(A). These agencies have the information necessary to 
identify all Federal employees who are receiving Federal salary 
payments. The membership of the consortium may be changed at the 
discretion of the Secretary, and the Secretary will be responsible for 
the ongoing coordination of the activities of the consortium.
    (d) Creditor agency participation. The DCIA requires agencies to 
notify FMS of all past-due, legally enforceable debt over 180 days 
delinquent for purposes of administrative offset. See 31 U.S.C. 
3716(c)(6). As explained in paragraph (d)(1), by complying with this 
notification requirement, agencies simultaneously will comply with the 
salary offset matching requirement under 5 U.S.C. 5514(a)(1). It is 
anticipated that all Federal disbursing officials will match Federal 
salary payment records against the debtor records contained in the 
delinquent debtor database. Currently, however, full implementation of 
the centralized salary offset computer matching process is not 
complete. Therefore, until the procedures described in this rule are 
fully implemented, it is important that agencies continue existing 
salary matching processes to identify, and collect debt owed from the 
salaries of, Federal employees who may not be identified through the 
Treasury Offset Program process.
    Debts referred to FMS for purposes of administrative offset will be 
matched with all Federal payment records, including Federal salary 
payments. After a match occurs, unless offset is legally prohibited, 
the payee's payment will be offset to pay the payee's debt after proper 
notice and opportunity to review and dispute the debt have been 
provided to the payee (see paragraph (d)(3) of this section). Agencies 
also may refer debts less than 180 days delinquent so long as the debt 
is past-due and legally enforceable and all prerequisites to offset 
have been met.
    Paragraph (d)(2) provides that before submitting a debt to FMS for 
purposes of administrative offset and salary offset matching, agencies 
must have issued regulations governing the collection of debt by both 
administrative offset and salary offset. Agency regulations governing 
the collection of debt by administrative offset must comply with 31 
U.S.C. 3716(b) and with the Federal Claims Collection Standards (4 CFR 
Parts 101-105; see also, Notice of

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Proposed Rulemaking concerning revisions to the Federal Claims 
Collection Standards, 62 FR 68475, Dec. 31, 1997). Agency regulations 
governing the collection of debt by salary offset must comply with 5 
U.S.C. 5514 and with regulations issued by OPM (5 CFR 550.1101 through 
550.1108; see also, Notice of Proposed Rulemaking concerning revisions 
to the OPM regulations, 63 FR 18850, April 16, 1998). Although salary 
offsets under this rule are being conducted through a centralized 
process under 31 U.S.C. 3716, agencies must nevertheless comply with 
the requirements for regulations contained in 5 U.S.C. 5514 and OPM 
regulations. An agency that has already published offset regulations 
need not publish new regulations except as may be necessary to conform 
the regulations to DCIA requirements.
    Paragraph (d)(3) describes agency certification requirements when 
submitting a debt to FMS for offset, including salary offset. Nothing 
in the DCIA modified the pre-offset due process notices and 
opportunities afforded to debtors, in general, and Federal employees, 
in particular. Therefore, a debt may not be submitted to FMS for offset 
and salary offset matching unless the creditor agency certifies, in 
writing, that the debtor has been afforded the legally required due 
process. Paragraph (d)(3)(iv) explains that, with the approval of FMS, 
the specific notices and opportunities required as a prerequisite to 
salary offset may be provided to the debtor after the debt is submitted 
to FMS, but must be provided prior to the offset of an employee's 
salary.
    Paragraph (d)(4) explains that the creditor agency is responsible 
for notifying FMS of any changes to the debt amount (other than offset 
collections) and any changes to the status of the legal enforceability 
of the debt. For example, unless the creditor agency determines that 
the automatic stay imposed at the time of a bankruptcy filing pursuant 
to 11 U.S.C. 362 has been lifted or is no longer in effect, in most 
cases collection activity against the debtor should stop immediately. 
Therefore, it is imperative that the creditor agency notify FMS 
immediately upon learning that a bankruptcy petition has been filed 
with respect to a debtor.
    (e) Centralized salary offset computer match. Paragraph (e) 
explains that the delinquent debt records submitted by creditor 
agencies will be compared with the Federal employee records (salary 
payment records) maintained by the members of the consortium described 
in paragraph (c). A match will occur when the taxpayer identifying 
number and name of a payee match the taxpayer identifying number and 
name of a debtor. For purposes of the computer matching process, the 
``name'' will be a portion of the name, known as a ``name control,'' 
designed to ensure accurate matching. The purpose of the computer 
matching process is to identify those Federal employees who owe 
delinquent debt and, once identified, to offset the employee's salary 
to pay the employee's delinquent debt. As noted above, salary offset is 
a type of administrative offset.
    Although generally such computer matches are subject to the 
Computer Matching and Privacy Protection Act of 1988, Pub. L. No. 100-
503 (Computer Matching Act), the DCIA authorizes the Secretary to waive 
certain provisions of the Computer Matching Act for administrative 
offset. See 31 U.S.C. 3716(f). Specifically, the Secretary is 
authorized to waive the Computer Matching Act requirements of 
completing matching agreements (contained in 5 U.S.C. 552a(o)) and 
post-match notification to the individual and verification of the 
resulting data (contained in 5 U.S.C. 552a(p)). The waiver is 
authorized upon the written certification by the head of the creditor 
agency that the requirements of 31 U.S.C. 3716(a) have been met. The 
waiver authority has been delegated by the Secretary to FMS. The 
certification that agencies are required to submit when referring their 
debts to FMS for offset, as described in paragraph (d)(3)(iii) of the 
rule, meets the certification requirement for waiver. Section 3716(a) 
requires that, prior to collecting a debt by administrative offset, 
agencies shall provide the debtor with written notice of the nature and 
amount of the debt and an opportunity to inspect and copy records, for 
review of the debt determination, and to enter into a repayment 
agreement. Agencies also must notify the debtor that the agency intends 
to collect the debt by administrative offset. FMS will not accept any 
debts into the debtor database (and therefore will not conduct any 
computer matches for offset purposes) unless the debts are accompanied 
by the written certification required by paragraph (d)(3)(iii) of this 
rule. In addition to certifying that the agency has complied with the 
requirements of 31 U.S.C. 3716 for offset, prior to offset of an 
employee's salary, the creditor agency must certify that the 
prerequisites to salary offset also have been met.
    (f) Salary offset. Paragraph (f) states that when a match occurs, 
and all other requirements for offset have been met, Federal disbursing 
officials will offset the Federal employee's salary payment to satisfy, 
in whole or in part, the debt. As discussed in paragraph (e)(1), a 
match occurs when the taxpayer identifying number and name of a payee 
match the taxpayer identifying number and name of a debtor.
    Under 5 U.S.C. 5514 and as described in paragraph (g), the amount 
that may be offset from a Federal employee's salary payment is limited 
to 15% of the employee's disposable pay. Since disbursing officials may 
not have the information necessary to calculate 15% of an employee's 
disposable pay, disbursing officials may request that the paying agency 
deduct the amount to be offset before payment is certified to a 
disbursing official for payment.
    (g) Offset amount. Under 5 U.S.C. 5514, the amount that may be 
offset from an employee's salary payment is limited to 15% of the 
employee's disposable pay. A disbursing official, after notifying the 
creditor agency or at the request of a creditor agency, may offset less 
than 15%. In addition, the debtor may agree to the offset of an amount 
greater than 15%.
    (h) Priorities. As required by 5 U.S.C. 5514(d), paragraph (h)(1) 
of this section provides that tax levies imposed by the Internal 
Revenue Service take precedence over deductions from an employee's 
salary to pay a nontax debt owed to the United States.
    Paragraph (h)(2) states that amounts offset from a Federal 
employee's salary will be applied first to the employee's past-due 
child support obligations which have been assigned to a State before 
being applied to the nontax debts owed by the employee to the United 
States. As currently set forth in this rule, only those child support 
debts which have been assigned to a State as reimbursement for public 
assistance paid to a family are given priority over debts owed to the 
Federal government. Amounts offset from a Federal employee's salary 
will be applied to child support obligations that have not been 
assigned to a State (and are owed directly to the custodial family) 
after payment of assigned child support debts and Federal debts owed by 
the employee. The priorities set forth in this interim rule parallel 
the statutory priorities that govern the offset of a debtor's tax 
refund payment. See 26 U.S.C. 6402(c) and 6402(d)(2). The public is 
invited to comment specifically on the priorities set forth in this 
rule and whether, for salary offset purposes, child support debts 
assigned to a State should have priority over debts owed to the Federal 
government. In addition, the public is invited to comment specifically 
on whether debts owed to the Federal government should

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have priority over child support debts which have not been assigned to 
a State.
    (i) Notice. Before offsetting a salary payment, the disbursing 
official, or the paying agency on behalf of the disbursing official, 
must notify the Federal employee in writing of the date deductions from 
salary will begin and of the amount of such deductions. The amount of 
the deductions may be stated as a percentage of pay. Additionally, once 
an offset of a salary payment has occurred, the disbursing official, or 
the paying agency on behalf of the disbursing official, must provide 
written notice to the Federal employee that the offset has occurred. 
This written notice may appear on a Leave and Earnings Statement (or 
similar statement) provided to the Federal employee. The disbursing 
official also will inform the creditor agency that an offset has 
occurred but will not inform the creditor agency of the payment source 
of the amounts collected. Since disbursing agencies will be conducting 
offsets of various payment types, debt repayment may result from any 
one of a number of payment sources.
    (j) Fees. Agencies that perform salary offset matching services may 
charge fees pursuant to 5 U.S.C. 5514(a)(1). FMS, or a paying agency 
acting on behalf of FMS, may charge a fee sufficient to cover the full 
cost of implementing the offset program pursuant to 31 U.S.C. 
3716(c)(4). The creditor agency may add any fees to the debt as an 
administrative cost pursuant to 31 U.S.C. 3717(e), if permitted by law. 
Fees may be deducted from the amount offset before that amount is 
transmitted to the creditor agency. The amount of the fee may be 
adjusted annually to ensure that the fee adequately covers the 
administrative costs of the offset program.
    (k) Disposition of amounts collected. Paragraph (k) describes how 
amounts collected from salary payments will be transmitted to creditor 
agencies.

Regulatory Analysis

    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. A comment period is unnecessary 
because this interim rule does not change how the Federal salary offset 
process affects the Federal employee who owes delinquent nontax debt. 
The interim rule reflects changes to the procedures as to how creditor 
agencies will identify Federal employees who owe delinquent nontax debt 
for purposes of offsetting the salary payments of the identified 
Federal employees. 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 5 U.S.C. 5514 and implementing regulations.
    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 which was effective on April 26, 1996, 
agencies already participate in the Treasury Offset Program. Many 
agencies have collected debts by salary offset over the last 15 years. 
Procedures affecting debtors remain unchanged in this rule.
    Centralized salary offset computer matching for offset purposes 
will improve the efficiency of Treasury's government-wide collection of 
nontax delinquent debts owed by Federal employees. This rule provides 
critical guidance that will facilitate creditor agencies' participation 
in centralized salary offset computer matching as required by the DCIA. 
Therefore, FMS believes that good cause exists and that it is in the 
public interest to issue the interim rule without opportunity for prior 
public comment.
    The public is invited to submit comments on the interim rule in 
general and on the specific points mentioned above which will be taken 
into account before a final rule is issued.

List of Subjects in 31 CFR Part 285

    Administrative practice and procedure, Claims, Debt, Federal 
employees, Salaries, Wages.

Authority and Issuance

    For the reasons set forth in the preamble, part 285 of 31 CFR 
chapter II, subchapter A, 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, 3720A; E.O. 13019; 3 CFR, 1996 Comp., p. 216.

    2. Section 285.7 is added to Subpart A to read as follows:


Sec. 285.7  Salary offset.

    (a) Purpose and scope. (1) This section establishes procedures for 
the offset of Federal salary payments, through FMS' administrative 
offset program, to collect delinquent debts owed to the Federal 
Government. This process is known as salary offset. Rules issued by the 
Office of Personnel Management contain the requirements Federal 
agencies must follow prior to conducting salary offset and the 
procedures for requesting offsets directly from a paying agency. See 5 
CFR 550.1101 through 550.1108.
    (2) This section implements the requirement under 5 U.S.C. 
5514(a)(1) that all Federal agencies, using a process known as 
centralized salary offset computer matching, identify Federal employees 
who owe delinquent nontax debt to the United States. Centralized salary 
offset computer matching is the computerized comparison of delinquent 
debt records with records of Federal employees. The purpose of 
centralized salary offset computer matching is to identify those 
debtors whose Federal salaries should be offset to collect delinquent 
debts owed to the Federal Government.
    (3) This section specifies the delinquent debt records and Federal 
employee records that must be included in the salary offset matching 
process. For purposes of this section, delinquent debt records consist 
of the debt information submitted to the Financial Management Service 
for purposes of administrative offset as required under 31 U.S.C. 
3716(c)(6). Agencies that submit their debt to FMS for purposes of 
administrative offset are not required to submit duplicate information 
for purposes of centralized salary offset computer matching under 5 
U.S.C. 5514 and this section.
    (4) This section establishes an interagency consortium to implement 
centralized salary offset computer matching on a government-wide basis 
as required under 5 U.S.C. 5514(a)(1). Federal employee records consist 
of records of Federal salary payments disbursed by members of the 
consortium.

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    (5) The receipt of collections from salary offsets does not 
preclude a creditor agency from pursuing other debt collection 
remedies, including the offset of other Federal payments to satisfy 
delinquent nontax debt owed to the United States. A creditor agency 
should pursue, when deemed appropriate by such agency, such debt 
collection remedies separately or in conjunction with salary offset.
    (b) Definitions. For purposes of this section:
    Administrative offset means withholding funds payable by the United 
States to, or held by the United States for, a person to satisfy a debt 
owed by the payee.
    Agency means a department, agency or subagency, court, court 
administrative office, or instrumentality in the executive, judicial, 
or legislative branch of the Federal government, including government 
corporations.
    Centralized salary offset computer matching means the computerized 
comparison of Federal employee records with delinquent debt records to 
identify Federal employees who owe such debts.
    Creditor agency means any agency that is owed a debt.
    Debt means any amount of money, funds, or property that has been 
determined by an appropriate official of the Federal government to be 
owed to the United States by a person, including debt administered by a 
third party acting as an agent for the Federal Government. For purposes 
of this section, the term ``debt'' does not include debts arising under 
the Internal Revenue Code of 1986 (26 U.S.C.).
    Delinquent debt record means information about a past-due, legally 
enforceable debt, submitted by a creditor agency to FMS for purposes of 
administrative offset (including salary offset) in accordance with the 
provisions of 31 U.S.C. 3716 and applicable regulations. Debt 
information includes the amount and type of debt and the debtor's name, 
address, and taxpayer identifying number.
    Disbursing official means an officer or employee designated to 
disburse Federal salary payments. This section applies to all 
disbursing officials of Federal salary payments, including but not 
limited to, disbursing officials of the Department of the Treasury, the 
Department of Defense, the United States Postal Service, any government 
corporation, and any disbursing official of the United States 
designated by the Secretary.
    Disposable pay has the same meaning as that term is defined in 5 
CFR 550.1103.
    Federal employee means a current employee of an agency, including a 
current member of the Armed Forces or a Reserve of the Armed Forces 
(Reserves), employees of the United States Postal Service, and seasonal 
and temporary employees.
    Federal employee records means records of Federal salary payments 
that a paying agency has certified to a disbursing official for 
disbursement.
    FMS means the Financial Management Service, a bureau of the 
Department of the Treasury.
    Paying agency means the agency that employs the Federal employee 
who owes the debt and authorizes the payment of his or her current pay. 
A paying agency also includes an agency that performs payroll services 
on behalf of the employing agency.
    Salary offset means administrative offset to collect a debt owed by 
a Federal employee from the current pay account of the employee.
    Secretary means the Secretary of the Treasury or his or her 
delegate.
    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 is the 
individual's social security number.
    (c) Establishment of the consortium. As required by the provisions 
of 5 U.S.C. 5514(a)(1), by issuance of this section, the Secretary 
establishes an interagency consortium to implement centralized salary 
offset computer matching. The consortium initially includes all 
agencies that disburse Federal salary payments, including but not 
limited to, FMS, the Department of Defense, the United States Postal 
Service, government corporations, and agencies with Treasury-designated 
disbursing officials. The membership of the consortium may be changed 
at the discretion of the Secretary, and the Secretary will be 
responsible for the ongoing coordination of the activities of the 
consortium.
    (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. To meet this requirement, 
creditor agencies shall notify FMS of all past-due, legally enforceable 
debts delinquent for more than 180 days for purposes of administrative 
offset, as required under 31 U.S.C. 3716(c)(6). Additionally, creditor 
agencies may notify FMS of past-due, legally enforceable debts 
delinquent for less than 180 days for purposes of administrative 
offset.
    (2) Prior to submitting debts to FMS for purposes of administrative 
offset (including salary offset) and centralized salary offset computer 
matching, Federal agencies shall prescribe regulations in accordance 
with the requirements of 31 U.S.C. 3716 (administrative offset) and 5 
U.S.C. 5514 (salary offset).
    (3) Prior to submitting a debt to FMS for purposes of collection by 
administrative offset, including salary offset, creditor agencies shall 
provide written certification to FMS that:
    (i) The debt is past-due and legally enforceable in the amount 
submitted to FMS and that the creditor agency will ensure that 
collections (other than collections through offset) are properly 
credited to the debt;
    (ii) Except in the case of a judgment debt or as otherwise allowed 
by law, the debt is referred for offset within ten years after the 
agency's right of action accrues;
    (iii) The creditor agency has complied with the provisions of 31 
U.S.C. 3716 (administrative offset) and related regulations including, 
but not limited to, the provisions requiring that the creditor agency 
provide the debtor with applicable notices and opportunities for a 
review of the debt; and
    (iv) The creditor agency has complied with the provisions of 5 
U.S.C. 5514 (salary offset) and related regulations including, but not 
limited to, the provisions requiring that the creditor agency provide 
the debtor with applicable notices and opportunities for a hearing.
    (4) FMS may waive the certification requirement set forth in 
paragraph (d)(3)(iv) of this section as a prerequisite to submitting 
the debt to FMS. If FMS waives the certification requirement, before an 
offset occurs, the creditor agency shall provide the Federal employee 
with the notices and opportunities for a hearing as required by 5 
U.S.C. 5514 and applicable regulations, and shall certify to FMS that 
the requirements of 5 U.S.C. 5514 and applicable regulations have been 
met.
    (5) The creditor agency shall notify FMS immediately of any 
payments credited by the creditor agency to the debtor's account, other 
than credits for amounts collected by offset, after submission of the 
debt to FMS. The creditor agency also shall notify FMS immediately of 
any change in the status of the legal enforceability of the debt, for 
example, if the creditor agency receives notice that the debtor has 
filed for bankruptcy protection.
    (e) Centralized salary offset computer match. (1) Delinquent debt 
records will

[[Page 23359]]

be compared with Federal employee records maintained by members of the 
consortium or paying agencies. The records will be compared to identify 
Federal employees who owe delinquent debts for purposes of collecting 
the debt by administrative offset. A match will occur when the taxpayer 
identifying number and name of a Federal employee are the same as the 
taxpayer identifying number and name of a debtor.
    (2) As authorized by the provisions of 31 U.S.C. 3716(f), FMS, 
under a delegation of authority from the Secretary, has waived certain 
requirements of the Computer Matching and Privacy Protection Act of 
1988, 5 U.S.C. 552a, as amended, for administrative offset, including 
salary offset, upon written certification by the head of the creditor 
agency that the requirements of 31 U.S.C. 3716(a) have been met. 
Specifically, FMS has waived the requirements for a computer matching 
agreement contained in 5 U.S.C. 552a(o) and for post-match notice and 
verification contained in 5 U.S.C. 552a(p). The creditor agency will 
provide certification in accordance with the provisions of paragraph 
(d)(3)(iii) of this section.
    (f) Salary offset. When a match occurs and all other requirements 
for offset have been met, as required by the provisions of 31 U.S.C. 
3716(c) the disbursing official shall offset the Federal employee's 
salary payment to satisfy, in whole or part, the debt owed by the 
employee. Alternatively, the paying agency, on behalf of the disbursing 
official, may deduct the amount of the offset from an employee's 
disposable pay before the employee's salary payment is certified to a 
disbursing official for disbursement.
    (g) Offset amount. (1) The amount offset from a salary payment 
under this section shall be the lesser of:
    (i) The amount of the debt, including any interest, penalties and 
administrative costs; or
    (ii) An amount up to 15% of the debtor's disposable pay.
    (2) Alternatively, the amount offset may be an amount agreed upon, 
in writing, by the debtor and the creditor agency.
    (3) Offsets will continue until the debt, including any interest, 
penalties, and costs, is paid in full or otherwise resolved to the 
satisfaction of the creditor agency.
    (h) Priorities. (1) A levy pursuant to the Internal Revenue Code of 
1986 shall take precedence over other deductions under this section.
    (2) When a salary payment may be reduced to collect more than one 
debt, amounts offset under this section will be applied to a debt only 
after amounts offset have been applied to satisfy past due child 
support debts assigned to a State pursuant to 402(a)(26) or section 
471(a)(17) of the Social Security Act.
    (i) Notice. (1) Before offsetting a salary payment, the disbursing 
official, or the paying agency on behalf of the disbursing official, 
shall notify the Federal employee in writing of the date deductions 
from salary will commence and of the amount of such deductions.
    (2)(i) When an offset occurs under this section, the disbursing 
official, or the paying agency on behalf of the disbursing official, 
shall notify the Federal employee in writing that an offset has 
occurred including:
    (A) A description of the payment and the amount of offset taken;
    (B) The identity of the creditor agency requesting the offset; and,
    (C) A contact point within the creditor agency that will handle 
concerns regarding the offset.
    (ii) The information described in paragraphs (i)(2)(i)(B) and 
(i)(2)(i)(C) of this section does not need to be provided to the 
Federal employee when the offset occurs if such information was 
included in a prior notice from the disbursing official or paying 
agency.
    (3) The disbursing official will advise each creditor agency of the 
names, mailing addresses, and taxpayer identifying numbers of the 
debtors from whom amounts of past-due, legally enforceable debt were 
collected and of the amounts collected from each debtor for that 
agency. The disbursing official will not advise the creditor agency of 
the source of payment from which such amounts were collected.
    (j) Fees. Agencies that perform centralized salary offset computer 
matching services may charge a fee sufficient to cover the full cost 
for such services. In addition, FMS, or a paying agency acting on 
behalf of FMS, may charge a fee sufficient to cover the full cost of 
implementing the administrative offset program. FMS may deduct the fees 
from amounts collected by offset or may bill the creditor agencies. 
Fees charged for offset shall be based on actual administrative offsets 
completed.
    (k) Disposition of amounts collected. The disbursing official 
conducting the offset will transmit amounts collected for debts, less 
fees charged under paragraph (j) 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 (without regard to whether any other amounts 
payable to such agency have been paid). The disbursing official and the 
creditor agency shall adjust the debtor records appropriately.

    Dated: April 22, 1998.
Richard L. Gregg,
Commissioner.
[FR Doc. 98-11203 Filed 4-27-98; 8:45 am]
BILLING CODE 4810-35-P