[Federal Register Volume 63, Number 162 (Friday, August 21, 1998)]
[Rules and Regulations]
[Pages 44986-44990]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-22394]



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Part III





Department of the Treasury





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Fiscal Service



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31 CFR Part 285



Offset of Federal Benefit Payments to Collect Past-due, Legally 
Enforceable Nontax Debt; Interim and Proposed Rules

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

[[Page 44986]]


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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.

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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

[[Page 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 cost-effective 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

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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:


Sec. 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

[[Page 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.

[[Page 44990]]

    (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