[Federal Register Volume 66, Number 135 (Friday, July 13, 2001)]
[Rules and Regulations]
[Pages 36703-36711]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-17545]


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DEPARTMENT OF THE TREASURY

31 CFR Part 29


Federal Benefit Payments Under Certain District of Columbia 
Retirement Plans

AGENCY: Departmental Offices, Department of the Treasury.

ACTION: Interim rule with request for comments.

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SUMMARY: The Department of the Treasury, Departmental Offices, is 
issuing an interim rule and requesting comments on this rule, which 
implements the provisions of the Balanced Budget Act of 1997, as 
amended (Act). The Act assigns the Secretary of the Treasury 
responsibility for payment of benefits (hereafter, Federal Benefit 
Payments) under the District of Columbia (District) retirement plans 
for police officers and firefighters, and teachers for benefits based 
on credit for service accrued as of June 30, 1997, and under the 
District retirement plan for judges. The interim rule establishes the 
general rules for the Treasury Department's processes for (1) debt 
collections arising from overpayments of Federal Benefit Payments or 
debt claims by Federal agencies, and (2) waiver of recovery of overpaid 
benefits or amounts otherwise owed to the retirement plans.

DATES: Interim rule effective August 13, 2001; comments must be 
received on or before September 11, 2001.

ADDRESSES: Send comments to Ronald A. Glaser, Director, Office of 
Personnel Policy, Department of the Treasury, Metropolitan Square 
Building, Room 6075, 15th Street and Pennsylvania Avenue, NW, 
Washington, DC 20220. Comments may also be submitted by electronic mail 
to [email protected].

FOR ADDITIONAL INFORMATION CONTACT: Harold L. Siegelman, (202) 622-
1540, Department of the Treasury, Metropolitan Square Building, Room 
6033, 15th Street and Pennsylvania Avenues, NW, Washington, DC 20220.

SUPPLEMENTARY INFORMATION: Title XI of the Balanced Budget Act of 1997, 
Public Law 105-33, 111 Stat. 251, 712-731, 756-759, enacted August 5, 
1997, as amended by the Omnibus Consolidated and Emergency Supplemental 
Appropriations Act for Fiscal Year 1999, Public Law 105-277, 112 Stat. 
2681, 2681-530 through 538, 2681-552, and as further amended by the 
Consolidated Appropriations Act of 2001, Public Law 106-554, 114 Stat. 
2763, transferred certain unfunded pension liabilities from the 
District government to the Federal Government. The Act requires the 
Federal Government to assume responsibility for payment of certain 
benefits that accrued on or before June 30, 1997, under the retirement 
plans for District teachers (Teachers Plan) and police officers and 
firefighters (Police Officers and Firefighters Plan) as they existed on 
June 29, 1997, and for past and future benefits under the retirement 
plan for judges (Judges Plan) (collectively, the Retirement Funds). The 
Act also required the District government to establish replacement 
retirement plans that will provide retirement benefits for service 
after June 30, 1997, for current and future teachers, police, and 
firefighters.
    The Office of D.C. Pensions developed the interim rule in 
consultation with the Department of the Treasury's Financial Management 
Service and acknowledges its constructive assistance.
    1. Requirement to establish processes for debt collection and 
waivers of debt collection. The interim rule implements section 
11021(3) of the Act (codified at D.C. Code Ann. 1-763.1) and section 
11251 (c)(2)(B) of the Act (amending D.C. Code Ann. 11-1570). These 
statutes provide for the collection of, or waiver of collection of, 
overpayments of Federal Benefit Payments.
    The interim rule is based in part on the Office of Personnel 
Management (OPM) regulations with respect to

[[Page 36704]]

similar debt collection functions for retirement programs that OPM 
administers. For the most part, the principles that affect debt 
collection activities are the same for OPM and the Retirement Funds for 
which the Treasury Department is responsible. This is especially true 
for debt collection matters in which OPM and the Treasury Department 
are implementing the same statute--the Federal Claims Collection Act of 
1966, as amended by the Debt Collection Act of 1982 and the Debt 
Collection Improvement Act of 1996, and implemented by 31 CFR 900.1 et 
seq., the Federal Claims Collection Standards.
    With respect to the collection of, or waiver of collection of, 
overpayments of Federal Benefit Payments, the Treasury Department 
intends to follow the practices and guidelines OPM has already 
established. To that end, the interim rule closely adheres to the OPM 
debt collection regulations. With respect to the collection of other 
Federal debts against the payment of Federal Benefit Payments, this 
interim rule refers to the general debt collection regulations 
promulgated by the Treasury Department in parts 5 and 285 of Title 31 
of the Code of Federal Regulations.
    2. Contracting for administrative services. Section 11035(a) and 
(b) and section 11251(b)(1) of the Act provide for the selection of a 
Trustee to administer the Department's responsibilities for the 
Retirement Funds under the Act, including collection of, or waiver of 
collection of, overpayments of Federal Benefit Payments.
    Sections 11035(c) and 11251(b)(1) of the Act authorize the Trustee 
to subcontract with the District government or any person to provide 
services to the Trustee in connection with the Trustee's performance of 
its contract with the Secretary.
    Section 11035(d) of the Act authorizes the Secretary to perform any 
function of the Trustee if the Secretary determines that, in the 
interest of economy and efficiency, the Secretary rather than the 
Trustee should perform such function.
    Section 11041(a) of the Act (codified at D.C. Code Ann. 1-765.1) 
requires the District to continue to discharge its duties with respect 
to making Federal Benefit Payments until such time as the Secretary 
notifies the District that he has directed the Trustee to carry out the 
duties and responsibilities required under the contract or determines 
that the Secretary shall carry out those functions.
    Because it is likely that, after the interim period is over, the 
Retirement Funds will be administered by the Trustee, a subcontractor 
of the Trustee, or another agent of the Secretary, the interim rule 
uses the term ``Benefits Administrator'' throughout this subpart to 
denote the entity charged with recovering or recouping overpayments of 
Federal Benefit Payments and collecting other Federal debts against the 
payment of Federal Benefit Payments. The term ``Benefits 
Administrator'' is also used in the interim regulations in subpart D to 
identify the entity charged with making Federal Benefit Payment 
determinations. It is anticipated that, after the interim period is 
over, the same entity will act as Benefits Administrator for purposes 
of this subpart and subpart D. It should be noted, however, that 
potentially the Secretary may be the Benefits Administrator for the 
purpose of this subpart.
    3. Development of these procedures. Subpart E establishes debt 
collection procedures and standards for waiver of collection of 
overpayments of Federal Benefit Payments. This subpart is in three 
groups of sections.
    Sections 29.501 through 29.506 provide general information helpful 
in understanding the regulations throughout subpart E. This information 
includes a description of the purpose and scope of the subpart, 
definitions of terms used in the subpart, and statements of general 
principles that apply throughout the subpart. This information also 
refers to regulations that govern other aspects of debt collection not 
addressed in this subpart, specifically those governing the compromise, 
suspension, or termination of collection action, and the procedures for 
Federal agencies to submit requests to the Department to offset Federal 
Benefit Payments to collect a debt.
    Sections 29.511 through 29.520 establish procedures for collection 
of debts due the Retirement Funds. The procedures are intended to 
fulfill the Department's obligations under the Federal Claims 
Collection Standards, 31 CFR 900.1 et seq. These sections establish 
safeguards to, in most cases, allow recipients to administratively 
appeal the determination of a debt or seek waiver or compromise of the 
debt before offset of Federal Benefit Payments occurs. See section 
29.516(e). This interim rule also establishes a limit to the amount 
that can be offset from monthly Federal Benefit Payments to protect 
those recipients who depend upon these payments for all or a 
substantial part of their income. Section 29.516(d) establishes a 
formula for calculating the maximum amount which may be offset from a 
monthly Federal Benefit Payment. This formula is identical to one set 
forth in 31 CFR 285.4(e), which limits the amount that can be offset 
from benefit payments under the Social Security Act, the Black Lung 
Benefits Act, and laws administered by the Railroad Retirement Board. 
It is intended that section 29.516(d) be interpreted in an identical 
manner as 31 CFR 285.4(e).
    Sections 29.521 through 29.526 establish standards for the waiver 
of collection of overpayments of Federal Benefit Payments. The 
standards are intended to have the same general effect as the 
corresponding OPM regulations.
    Pursuant to section 553(b)(3)(B) of title 5, United States Code, it 
has been determined that good cause exists for waiving a general notice 
of proposed rulemaking for the rule. Overpayments of Federal Benefit 
Payments must be collected expeditiously to protect and maintain the 
integrity of the Trust Funds from which Federal Benefit Payments are 
made. Delaying implementation of this rule could forestall efforts to 
collect overpayments promptly. Moreover, beneficiaries who are subject 
to debt collection action to collect overpayments of Federal Benefit 
Payments need the clear procedures provided in the rule for seeking 
review of such decisions or waiver of the overpayments. Delaying 
implementation of these provisions would be contrary to the public 
interest.

E.O. 12866, Regulatory Review

    Because the interim rule is not a significant regulatory action for 
purposes of E.O. 12866, a regulatory assessment is not required.

Regulatory Flexibility Act

    It is hereby certified that the rule will not have a significant 
economic impact on a substantial number of small entities. The rule 
will only affect the determination of the Federal portion of retirement 
benefits to certain former employees of the District of Columbia. 
Accordingly, a regulatory flexibility analysis is not required by the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.).

List of Subjects in 31 CFR Part 29

    Administrative practice and procedure, Claims, Disability benefits, 
Firefighters, Government employees, Intergovernmental relations, Law 
enforcement officers, Pensions, Retirement, Teachers.


[[Page 36705]]


Department of the Treasury.
James Flyzik,
Acting Assistant Secretary of the Treasury.


    Accordingly, the Department of the Treasury is amending part 29 of 
Title 31 of the Code of Federal Regulations, as follows:
    1. The authority citation for part 29 is amended to read as 
follows:

    Authority: Sections 11083 and 11251(a) of Public Law 105-33, 111 
Stat. 730 and 756, as amended by Public Law 105-277, 112 Stat. 2681-
530 through 538, and as further amended by Public Law 106-554, 114 
Stat. 2763; subpart D also issued under section 11022 of Public Law 
105-33, 111 Stat. 730 and 756, as amended by Public Law 105-277, 112 
Stat. 2681-530 through 538, and as further amended by Public Law 
106-554, 114 Stat. 2763.


    2. In section 29.102, paragraph (a) is revised and paragraph (f) is 
added to read as follows:


Sec. 29.102  Related regulations.

    (a) This part contains the following subparts:
    (1) General Provisions (Subpart A);
    (2) Coordination with the District Government (Subpart B);
    (3) Split Benefits (Subpart C); \1\
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    \1\ The effective date for section 29.102(a)(3) and Subpart C, 
originally scheduled for March 31, 2001, has been postponed 
indefinitely.
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    (4) Claims and Appeals Procedures (Subpart D); and
    (5) Debt Collection and Waivers of Collection (Subpart E).
* * * * *
    (f) Parts 835 and 845 and subparts M, N, and R of part 831 of title 
5, Code of Federal Regulations, contain information about debt 
collection and waiver of collection under the Civil Service Retirement 
System and the Federal Employees Retirement System.

    3. In Sec. 29.103, paragraph (a) is revised by adding in 
alphabetical order definitions of the terms ``Act,'' ``Benefits 
Administrator,'' ``Reconsideration,'' and ``Retirement Funds'' to read 
as follows:


Sec. 29.103  Definitions.

    (a) * * *
    Act means the Balanced Budget Act of 1997, Public Law 105-33, 111 
Stat. 251, 712-731, 756-759, enacted August 5, 1997, as amended by the 
Omnibus Consolidated and Emergency Supplemental Appropriations Act for 
Fiscal Year 1999, Public Law 105-277, 112 Stat. 2681, 2681-530 through 
538, 2681-552, and by the Consolidated Appropriations Act of 2001, 
Public Law 106-554, 114 Stat. 2763.
    Benefits Administrator means:
    (1) During the interim administration period under section 11041(a) 
of the Act, the District of Columbia government; or
    (2) After the end of the interim administration period,
    (i) The Trustee selected by the Department under section 11035(a) 
of the Act;
    (ii) The Department if a determination is made under section 
11035(d) of the Act that, in the interest of economy and efficiency, 
the Trustee's functions shall be performed by the Department rather 
than the Trustee; or
    (iii) Any other agent of the Department designated to make initial 
benefit determinations and to recover or recoup or waive recovery or 
recoupment of overpayments of Federal Benefit Payments, or to recover 
or recoup debts owed to the Federal Government by annuitants.
* * * * *
    Reconsideration means the process of reexamining an individual's 
entitlement to benefits or liability for a debt to determine whether--
    (1) The law and regulations were properly applied; and/or
    (2) The mathematical computation of the benefit or liability is 
correct.
    Retirement Funds means the District of Columbia Federal Pension 
Liability Trust Fund established under section 11031 of the Act 
(codified at D.C. Code Ann. 1-764.1), the Federal Supplemental District 
of Columbia Pension Fund established under section 11051 of the Act 
(codified at D.C. Code Ann. 1-766.1), and the District of Columbia 
Judicial Retirement and Survivors Annuity Fund established under 
section 11252 of the Act (codified at D.C. Code Ann. 1-714).
* * * * *

    4. Subpart E is added to read as follows:
Subpart E--Debt Collection and Waivers of Collection
Sec.
29.501   Purpose; incorporation by reference; scope.
29.502   Definitions.
29.503   Prohibition against collection of debts.
29.504   Status of debts.
29.505   Compromise of claims; termination and suspension of 
collection actions.
29.506   Recovery of other debts owed to the United States.

Collection of Overpayments

29.511  Demand letters.
29.512  Reconsideration by the Benefits Administrator.
29.513  Appeals to the Department.
29.514  Requests for waiver and/or compromise.
29.515   Judicial review.
29.516   Collection of overpayments.
29.517   Collection by offset.
29.518   Reporting delinquent debts to credit bureaus.
29.519   Referral to a collection agency.
29.520   Referral for litigation.

Standards for Waiver of Overpayments

29.521  Conditions for waiver and other adjustments.
29.522   Fault.
29.523   Equity and good conscience.
29.524   Financial hardship.
29.525   Ordinary and necessary living expenses.
29.526   Waiver precluded.

Subpart E--Debt Collection and Waivers of Collection


Sec. 29.501  Purpose; incorporation by reference; scope.

    (a) This subpart regulates--
    (1) The recovery of overpayments of Federal Benefit Payments;
    (2) The standards for waiver of recovery of overpayments of Federal 
Benefit Payments; and
    (3) The use of Federal Benefit Payments to recover certain other 
debts due the United States.
    (b) The regulations of this subpart incorporate by this reference 
all provisions of the Federal Claims Collection Standards (FCCS) (parts 
900-904 of Title 31, Code of Federal Regulations), and supplement those 
regulations by the prescription of procedures and directives necessary 
and appropriate for the operation and administration of the Retirement 
Funds. To the extent they are not inconsistent with the regulations 
contained in this subpart, the regulations in part 5 of title 31, Code 
of Federal Regulations, also apply to the collection of debts under 
this subpart.
    (c)(1) Debts based on fraud, misrepresentation, or the presentation 
of a false claim. This subpart does not apply to any overpayments of 
Federal Benefit Payments which arose, in whole or in part, due to 
fraud, misrepresentation, or the presentation of a false claim by the 
debtor or any party having an interest in the claim. Such debts should 
be referred by the Benefits Administrator immediately to the U.S. 
Justice Department for action pursuant to 31 CFR 900.3.
    (2) Tax debts. This subpart does not apply to tax debts.
    (d)(1) Sections 29.501 through 29.506 state the rules of general 
applicability to this subpart.
    (2) Sections 29.511 through 29.520 prescribe procedures to be 
followed by the Benefits Administrator which are consistent with the 
FCCS in the collection of debts owed to the Retirement Funds.
    (3) Sections 29.521 through 29.526 prescribe the standards that the

[[Page 36706]]

Department will apply in decisions to waive recoupment or recovery of 
overpayments from the Retirement Funds under sections 11021(3) and 
11251(c)(2)(B) of the Act.


Sec. 29.502  Definitions.

    For purposes of this subpart--
    Additional charges means interest, penalties, and/or administrative 
costs owed on a debt.
    Administrative offset, as defined in 31 U.S.C. 3701(a)(1), means 
withholding funds payable by the United States to, or held by the 
United States for, a person to satisfy a debt the person owes the 
United States.
    Agency means: 
    (1) An Executive agency as defined in section 105 of title 5, 
United States Code, including the U.S. Postal Service and the U.S. 
Postal Rate Commission;
    (2) A military department, as defined in section 102 of title 5, 
United States Code;
    (3) An agency or court in the judicial branch, including a court as 
defined in section 610 of title 28, United States Code, the District 
Court for the Northern Mariana Islands, and the Judicial Panel on 
Multidistrict Litigation;
    (4) An agency of the legislative branch, including the U.S. Senate 
and the U.S. House of Representatives; and
    (5) Other independent establishments that are entities of the 
Federal Government.
    Annuitant means a retired participant, former spouse, spouse, 
widow(er), child or other beneficiary receiving recurring Federal 
Benefit Payments.
    Annuity means the monthly benefit (including a retirement salary 
under the Judges Plan) of indefinite duration payable to an annuitant.
    Anticipated expenses means expenditures which are expected to occur 
and for which the debtor can provide documentation of the estimated 
cost.
    Beneficiary means an individual designated by a participant, or by 
the terms of the Judges Plan, Police Officers and Firefighters Plan, or 
Teachers Plan, who is or may become entitled to a benefit under those 
plans.
    Change of position for the worse means an individual would be left 
in a worse financial position after recovery of the overpayment than 
prior to the receipt of the overpayment because the individual 
reasonably relied on the amount of the overpayment to his or her 
detriment. For example, an individual has ``changed position for the 
worse'' if he or she made expenditures or assumed new liabilities that 
he or she would not have otherwise done, and he or she is unable to 
withdraw from the commitment without incurring significant financial 
loss.
    Compromise means accepting less than payment in full in 
satisfaction of a debt.
    Consent means the debtor has agreed in writing to administrative 
offset of one or more Federal Benefit Payments after receiving notice 
of the available rights under 31 U.S.C. 3716 and this subpart; to 
Federal salary offset after receiving notice of the available rights 
under 5 U.S.C. 5514 and 31 CFR part 5; and to judgment offset under 
section 124 of Public Law 97-276, 96 Stat. 1195-1196.
    Credit bureau has the same meaning as the definition of ``consumer 
reporting agency'' provided in 31 U.S.C. 3701(a)(3).
    Creditor agency means the agency to which a debt is owed.
    Debt has the same meaning as the definition of ``debt'' provided in 
31 U.S.C. 3701(b)(1), and includes an overpayment of Federal Benefit 
Payments.
    Debtor means a person who owes a debt or from whom a debt is to be 
recovered, including an annuitant.
    Delinquent means delinquent as defined in 31 CFR 900.2(b).
    Department means the Secretary of the Treasury or a designee 
authorized to exercise the Secretary's authority with respect to 
Federal Benefit Payments under the Act.
    FCCS means the Federal Claims Collection Standards (parts 900-904 
of Title 31, Code of Federal Regulations).
    Liquid asset means cash or other property readily convertible into 
cash with little or no loss of value.
    Lump-sum credit means:
    (1) Under the Judges Plan, the Police Officers and Firefighters 
Plan, and the Teachers Plan, the unrefunded amount consisting of--
    (i) Retirement contributions from the basic salary of a 
participant;
    (ii) Amounts deposited covering earlier creditable service; and
    (iii) Such interest as authorized by statute to be included in the 
payment of refunds of retirement contributions; and
    (2) Under the Judges Plan, ``lump-sum credit for survivor annuity'' 
is defined in section 11-1561(10) of the D.C. Code.
    Offset means to withhold the amount of a debt, or a portion of that 
amount, from one or more payments due the debtor. Offset also means the 
amount withheld in this manner.
    Ordinary and necessary living expenses means such expenses as rent, 
mortgage payments, utilities, maintenance, food (including expenses for 
dining out), clothing, insurance (life, health, and accident), taxes, 
installment payments, medical expenses, reasonable expenses for 
recreation and vacations, expenses for support of a dependent when the 
debtor holds primary or joint legal responsibility for such support, 
and other miscellaneous expenses that the debtor can establish as being 
ordinary and necessary.
    Overpayment or overpayment debt means a payment of one or more 
Federal Benefit Payments to an individual in the absence of entitlement 
or in excess of the amount to which an individual is properly entitled.
    Participant means an individual who is or may become eligible to 
receive a benefit under the Police Officers and Firefighters Plan or 
Teachers Plan based on credit for service accrued as of June 30, 1997, 
or under the Judges Plan, or whose beneficiaries may be eligible to 
receive any such benefit.
    Refund means the payment of a lump-sum credit to an individual who 
meets all requirements for payment and files an application for it.
    Relinquish a valuable right means the individual has relinquished a 
valuable privilege, claim, entitlement, or benefit having monetary 
worth because of the overpayment or because of notice that such a 
payment would be made.
    Repayment schedule means the amount of each payment and the number 
of payments to be made to liquidate the debt as determined by the 
Department or the Benefits Administrator.
    Salary offset means any offset authorized by 5 U.S.C. 5514 and 31 
U.S.C. 3716.
    Substantially all, as used in Sec. 29.524, means that a debtor's 
income is less than or equal to his or her ordinary and necessary 
expenses plus a reasonable monthly allowance for unexpected or 
emergency expenses and does not allow for the deduction of a reasonable 
monthly installment payment to recover the debt.
    Voluntary repayment agreement means an agreement wherein the debtor 
makes installment payments to repay an overpayment debt in accordance 
with a repayment schedule agreed to by the Benefits Administrator or 
the Department.
    Waiver means a decision not to recover all or part of an 
overpayment debt owed to the Retirement Funds under authority of 
sections 11021(3) or 11251(c)(2)(B) of the Act.


Sec. 29.503  Prohibition against collection of debts.

    (a) Debts may be collected from Federal Benefit Payments only to 
the extent expressly authorized by Federal debt collection statutes and 
any other applicable Federal law.

[[Page 36707]]

    (b) When collection of a debt from Federal Benefit Payments is 
authorized under paragraph (a) of this section, the collection will be 
made in accordance with this subpart and other applicable federal law.


Sec. 29.504  Status of debts.

    A payment of a Federal Benefit Payment to a debtor because of an 
error on the part of the Department or Benefits Administrator, or the 
failure of the creditor agency to properly and/or timely submit a debt 
claim, does not erase the debt or affect the validity of the claim by 
the creditor agency.


Sec. 29.505  Compromise of debts; termination and suspension of 
collection actions.

    The procedures for compromise of a claim for an overpayment or the 
termination or suspension of a collection action seeking to recover an 
overpayment, other than waiver of an overpayment under Secs. 29.521 
through 29.526, are controlled exclusively by the FCCS and 31 CFR part 
5.


Sec. 29.506  Recovery of other debts owed to the United States.

    (a) Procedures for Creditor Agencies. Agencies seeking to recover a 
debt by offset of Federal Benefit Payments payable to the debtor must 
comply with the offset procedures set forth in 31 U.S.C. 3716 and the 
FCCS. A creditor agency may seek to collect a debt through offset of 
Federal Benefit Payments pursuant to the Department's procedures for 
administrative offset set forth in 31 CFR part 5.
    (b) Offset by the Benefits Administrator. As required by 31 U.S.C. 
3716(c), the Benefits Administrator must compare payment records of the 
Retirement Funds with records of debts submitted to the Financial 
Management Service for collection by administrative offset, and must 
offset payments to satisfy, in whole or in part, debts owed by any 
annuitant.

Collection of Overpayments


Sec. 29.511  Demand letters.

    Except as provided in Sec. 29.516(e), before starting collection 
action to recover an overpayment, the Benefits Administrator must send 
a demand letter that informs the debtor in writing--
    (a) That an overpayment has occurred, the amount of the 
overpayment, and the facts giving rise to the overpayment;
    (b) The date by which payment of the debt should be made to avoid 
additional charges (i.e., interest, penalties and administrative costs) 
permitted by the FCCS and enforced collection;
    (c) The requirement that any overpayment debt delinquent for more 
than 180 days be transferred to the Department of the Treasury's 
Financial Management Service for collection;
    (d) The name, address, and phone number of the appropriate person 
or office the debtor may contact about the debt;
    (e) The remedies which may be used to enforce payment of the debt, 
including assessment of interest, administrative costs and penalties; 
administrative wage garnishment; the use of collection agencies; 
Federal salary offset; tax refund offset; administrative offset; and 
litigation.
    (f) Whether offset is available and, if so, the types of payment(s) 
to be offset or eligible for offset, the repayment schedule (if any), 
the right to request an adjustment in the repayment schedule, and the 
right to request a voluntary repayment agreement in lieu of offset;
    (g) An explanation of the Department's policy on interest, 
penalties, and administrative costs as set forth in 31 CFR part 5, the 
FCCS, and 31 U.S.C. 3717, including a statement that such assessments 
must be made unless excused in accordance with the FCCS;
    (h) The debtor's opportunity to request repayment in installments 
if the debtor can show an inability to repay the debt in one lump sum;
    (i) The debtor's opportunity to inspect and/or receive a copy of 
the records relating to the overpayment;
    (j) The method and time period (60 calendar days) for requesting 
reconsideration, waiver, and/or compromise of the overpayment;
    (k) That all requests for waiver or compromise must be accompanied 
by a disclosure of the debtor's financial condition and ability to pay 
the debt;
    (l) The standards used by the Department in deciding requests for 
waiver (set forth in Secs. 29.521 through 29.526) and compromise (set 
forth in 31 CFR 902.2); and
    (m) The fact that a timely filing of a request for reconsideration, 
waiver and/or compromise, or a subsequent timely appeal of a 
reconsideration decision, will stop collection proceedings, unless--
    (1) Failure to take the offset would substantially prejudice the 
Federal Government's ability to collect the debt; and
    (2) The time before the payment is to be made does not reasonably 
permit the completion of these procedures.


Sec. 29.512  Reconsideration by the Benefits Administrator.

    (a) Right to reconsideration of overpayment determinations. 
Individuals who receive a demand letter and who wish to contest the 
existence or amount of the overpayment may ask the Benefits 
Administrator to reconsider the determination.
    (b) Requests for waiver or compromise. Individuals who wish to seek 
waiver or compromise of the overpayment may file such requests with the 
Department under Sec. 29.514. An individual may file a request for 
reconsideration in addition to a request for waiver or compromise.
    (c) Form and timing of requests for reconsideration. (1) A request 
for reconsideration must be in writing and must state the basis for the 
request. Individuals requesting reconsideration will be given a full 
opportunity to present any pertinent information and documentation 
supporting their position and should, to the extent possible, include 
such information and documentation in their request.
    (2) A request for reconsideration must be received by the Benefits 
Administrator within 60 calendar days of the date of the demand letter. 
The Department may extend the time limit for filing when the individual 
shows that he or she was not notified of the time limit and was not 
otherwise aware of it, or that he or she was prevented by circumstances 
beyond his or her control from making the request within the time 
limit, or for other good and sufficient reason.
    (3) When a request for reconsideration covered by this subpart is 
properly filed before the death of the debtor, it will be processed to 
completion unless the relief sought is nullified by the debtor's death.
    (d) Reconsideration decisions. (1) The Benefits Administrator's 
decision on a request for reconsideration will be based upon the 
individual's written submissions, evidence of record, and other 
pertinent available information.
    (2) A reconsideration decision by the Benefits Administrator must--
    (i) Be in writing;
    (ii) Provide notice of the extent of the individual's liability for 
the overpayment, if any;
    (iii) If the individual is determined to be liable for all or a 
portion of the overpayment, reaffirm or modify the conditions for the 
collection of the overpayment previously proposed in the demand letter;
    (iv) Provide notice of the right to appeal the Benefits 
Administrator's decision to the Department, the address to which such 
an appeal must be submitted, and the time limits applicable to such an 
appeal; and
    (v) State that a timely appeal of the Benefits Administrator's 
decision to the

[[Page 36708]]

Department will suspend action to collect the debt.
    (e) Appeal of reconsideration decisions. The Department will review 
an appeal of a reconsideration decision under Sec. 29.513.


Sec. 29.513  Appeals to the Department.

    (a) Form of appeal. An appeal of a reconsideration decision under 
Sec. 29.512 must be in writing and must state the basis for the appeal.
    (b) Time limits on appeals. (1) An appeal must be received by the 
Department within 60 calendar days from the date of the reconsideration 
decision.
    (2) The Department may extend the time limit for filing when the 
individual shows that he or she was not notified of the time limit and 
was not otherwise aware of it, or that he or she was prevented by 
circumstances beyond his or her control from making the request within 
the time limit, or for other good and sufficient reason.
    (c) Final decision. After consideration of the appeal, the 
Department will issue a final decision. The Department's decision will 
be in writing, will fully set forth the Department's findings and 
conclusions on the appeal, and will contain notice of the right to 
judicial review provided in Sec. 29.515. If the Department determines 
that the individual is liable for all or a portion of the overpayment, 
the decision also will contain the conditions for the collection of the 
overpayment. Copies of the final decision will be sent to the 
individual seeking appeal and to the Benefits Administrator.


Sec. 29.514  Requests for waiver and/or compromise.

    (a) Right to request waiver and/or compromise. Individuals who 
receive a demand letter regarding an overpayment may ask the Department 
to waive and/or compromise, in whole or part, the amount of the 
overpayment.
    (b) Requests for reconsideration. Individuals who have filed a 
request for reconsideration under Sec. 29.512 may also request a waiver 
and/or compromise under this section.
    (c) Form and timing of requests for waiver and/or compromise. (1) A 
request for waiver and/or compromise must be in writing and must state 
the basis for the request. Individuals making such requests will be 
given a full opportunity to present any pertinent information and 
documentation supporting their position and should, to the extent 
possible, include such information and documentation in their request. 
Individuals seeking waiver or compromise of an overpayment must also 
submit required financial information identified in the demand letter.
    (2) A request for waiver or compromise must be filed with the 
Department. If the request is sent by mail, it must be postmarked 
within 60 calendar days of the date of the demand letter. If the 
request is hand delivered or delivered electronically, it must be 
received within 60 calendar days of the date of the demand letter. The 
Department may extend the time limit for filing when the individual 
shows that he or she was not notified of the time limit and was not 
otherwise aware of it, or that he or she was prevented by circumstances 
beyond his or her control from making the request within the time 
limit, or for other good and sufficient reason.
    (3) When a request for waiver and/or compromise under this section 
is properly filed before the death of the debtor, it will be processed 
to completion unless the relief sought is nullified by the debtor's 
death.
    (d) Waiver and/or compromise decisions. (1) The Department's 
decision on a request for waiver and/or compromise will be based upon 
the individual's written submissions, evidence of record, and other 
pertinent available information. An individual's request for waiver 
will be evaluated by the standards set forth in Sec. 29.521 through 
Sec. 29.526. An individual's request for compromise will be evaluated 
by the standards set forth in the FCCS in 31 CFR part 902.
    (2) A waiver or compromise decision by the Department will--
    (i) Be in writing;
    (ii) Provide notice of whether the overpayment will be waived or 
compromised, and the extent to which the individual is still liable for 
the overpayment, if at all;
    (iii) If the individual is determined to be liable for all or a 
portion of the overpayment, reaffirm or modify the conditions for the 
collection of the overpayment previously proposed in the demand letter; 
and
    (iv) Be issued within 120 calendar days from the Department's 
receipt of a timely request for waiver and/or compromise. This time 
limit does not apply to requests for compromise that are referred to 
the Department of Justice for consideration pursuant to 31 CFR 
902.1(b).


Sec. 29.515  Judicial review.

    An individual whose request for reconsideration has been denied (in 
whole or part) in a final decision by the Department under Sec. 29.513 
may, within 180 days of the date of the final decision, file a civil 
action in the United States District Court for the District of 
Columbia. Any such civil action must be filed in accordance with the 
rules of that court.


Sec. 29.516  Collection of overpayments.

    (a) Means of collection. Collection of an overpayment may be made 
by means of offset under Sec. 29.517, or under any statutory provision 
providing for offset of money due the debtor from the Federal 
Government including, but not limited to, Federal Benefit Payments. 
Collection may also be effected by referral to the Justice Department 
for litigation, as provided in Sec. 29.520, or referral to a collection 
agency as provided in Sec. 29.519, or by other means authorized by 
federal law.
    (b) Additional charges. Interest, penalties, and administrative 
costs will be assessed on the overpayment in accordance with standards 
established in 31 U.S.C. 3717 and 31 CFR 901.9. Additional charges will 
be waived when required by the FCCS. The Department will waive the 
collection of interest on the overpayment pending the Benefits 
Administrator's consideration of a request for reconsideration and the 
Department's consideration of a request for waiver and/or compromise or 
the appeal of a reconsideration decision. In addition, such charges may 
be waived when the Department determines--
    (1) Collection of those charges would be against equity and good 
conscience under the standards prescribed in Secs. 29.523 through 
29.525; or
    (2) Waiver of those charges would be in the best interest of the 
United States.
    (c) Collection in installments. (1) Whenever feasible, overpayments 
will be collected in one lump sum.
    (2) However, installment payments may be effected when--
    (i) The debtor establishes that he or she is financially unable to 
pay in one lump sum; or
    (ii)(A) The benefit payable is insufficient to make collection in 
one lump sum;
    (B) The debtor fails to respond to a demand for full payment; and
    (C) Offset is available.
    (d) Offset Amount. (1) The amount offset from a monthly Federal 
Benefit Payment will be the lesser of:
    (i) The amount of the debt, including any interest, penalties and 
administrative costs;
    (ii) An amount equal to 15 percent of the monthly Federal Benefit 
Payment; or
    (iii) The amount, if any, by which the monthly Federal Benefit 
Payment exceeds $750.
    (2) For purposes of this subsection, the ``monthly Federal Benefit 
Payment''

[[Page 36709]]

is the amount of the gross monthly benefit after any reductions or 
deductions required under law, including reductions made to recover 
overpayments of Federal Benefit Payments.
    (e) Commencement of collection. (1) Except as provided in paragraph 
(e)(2) of this section, collection will begin after the time limits for 
requesting further rights stated in Sec. 29.512 through Sec. 29.514 
expire and no such requests have been made, or after the Benefits 
Administrator and/or the Department have issued decisions on all timely 
requests for or appeals of those rights, unless failure to make an 
offset would substantially prejudice the Department's ability to 
collect the overpayment and the time before the payment is to be made 
does not reasonably permit the completion of the proceedings in 
Sec. 29.511 through Sec. 29.514 or litigation. When offset begins 
without completion of the administrative review process, these 
procedures will be completed promptly, and amounts recovered by offset 
but later found not owed will be refunded promptly.
    (2) The procedures identified in Sec. 29.511 through Sec. 29.514 
will not be applied when the overpayment is caused by--
    (i) A retroactive adjustment in the periodic rate of annuity or any 
deduction taken from annuity when the adjustment is a result of the 
annuitant's election of different entitlements under law, if the 
adjustment is made within 120 days of the effective date of the 
election; or
    (ii) interim estimated payments made before the formal 
determination of entitlement to annuity, if the amount is recouped from 
the total annuity payable on the first day of the month following the 
later of--
    (A) The last interim payment or
    (B) The date the formal determination is made.
    (f) Collection of delinquent debts. (1) Debts delinquent over 180 
days. The Benefits Administrator must refer all overpayment debts that 
are over 180 days delinquent to the Secretary for collection pursuant 
to 31 U.S.C. 3711(g) and 3716, and 31 CFR part 901.
    (2) Debts delinquent less than 180 days. Once an overpayment debt 
becomes delinquent, the Benefits Administrator should refer it to the 
Secretary for collection by centralized administrative offset pursuant 
to 31 CFR 901.3, unless collection of the debt by some other means is 
likely to occur in a more timely and efficient manner.
    (3) Once a debt is referred under this subsection, the Benefits 
Administrator has no further obligation to collect the debt.


Sec. 29.517  Collection by offset.

    (a) Offset from retirement payments. An overpayment may be 
collected in whole or in part from any refund payment or recurring 
Federal Benefit Payments.
    (b) Offset from other payments--(1) Administrative offset. When 
offset under subsection (a) is not available, an overpayment may be 
offset from other Federal payments due the debtor from other agencies 
under the procedures set forth in 31 CFR part 5 and 31 CFR 901.3(c).
    (2) Salary offset. When the debtor is an employee of the Federal 
Government, the Department may effect collection of an overpayment by 
offset of the debtor's pay in accordance with regulations published to 
implement such offsets under 5 U.S.C. 5514 (see 5 CFR part 550, subpart 
K; 31 CFR 285.7; and 31 CFR Part 5). Due process described in the 
federal salary offset regulations of 31 CFR part 5 will apply. When the 
debtor did not receive a hearing under those regulations and requests 
such a hearing, one will be conducted in accordance with 5 CFR part 
550, subpart K and 31 CFR part 5.
    (3) Tax refund offset. The Department may effect collection of an 
overpayment by offset of the debtor's tax refund in accordance with the 
Department's tax refund offset regulations found at 31 CFR part 5.


Sec. 29.518  Reporting delinquent debts to credit bureaus.

    (a) Notice. If a debtor's response to the demand letter does not 
result in payment in full, payment by offset, or payment in accordance 
with a voluntary repayment agreement or other repayment schedule 
acceptable to the Benefits Administrator, and the debtor's rights under 
Sec. 29.512 through Sec. 29.514 have been exhausted, the Benefits 
Administrator must report the debtor to a credit bureau. In addition, a 
debtor's failure to make subsequent payments in accordance with a 
repayment schedule must result in a report to a credit bureau. Before 
making a report to a credit bureau, the Benefits Administrator must 
notify the debtor in writing that--
    (1) The payment is overdue;
    (2) The Benefits Administrator intends, after 60 days, to make a 
report as described in paragraph (b) of this section to a credit 
bureau;
    (3) The debtor's right to dispute the liability has been exhausted 
under Sec. 29.512 through Sec. 29.514; and
    (4) The debtor may avoid having the Benefits Administrator report 
the debtor to a credit bureau by paying the debt in one lump sum or 
making payments current under a repayment schedule.
    (b) Report. If, after being sent the notice described in paragraph 
(a) of this section, the debtor does not pay the overpayment debt or 
make payments current under a repayment schedule or fails to respond to 
the notice, and 60 days have elapsed since the notice was mailed, the 
Benefits Administrator will report to a credit bureau that the debtor 
is responsible for an unpaid debt and provide the following 
information:
    (1) The debtor's name, address, taxpayer identification number, and 
any other information necessary to establish the identity of the 
individual;
    (2) The amount, status, and history of the debt; and
    (3) The fact that the debt arose in connection with the 
administration of Federal Benefit Payments under a District Retirement 
Fund.
    (c) Subsequent reports. The Benefits Administrator must update its 
report to the credit bureau whenever it has knowledge of events that 
substantially change the status or the amount of the liability.
    (d) Other reporting of delinquent debts. Pursuant to 31 CFR 901.4, 
delinquent overpayment debts should be reported to the Department of 
Housing and Urban Development's Credit Alert Interactive Voice Response 
System (CAIVRS).
    (e) Privacy Act considerations. A delinquent debt may not be 
reported under this section unless a notice issued pursuant to the 
Privacy Act, 5 U.S.C. 552a(e)(4), authorizes the disclosure of 
information about the debtor to a credit bureau or CAIVRS.


Sec. 29.519  Referral to a collection agency.

    (a) The Department retains the responsibility for resolving 
disputes, compromising debts, referring overpayment debts for 
litigation, and suspending or terminating collection action.
    (b) The Department may not refer overpayment debts to commercial 
collection agencies until all procedures required by or requested under 
Sec. 29.511 through Sec. 29.514 have been completed.


Sec. 29.520  Referral for litigation.

    The Department may refer to the Justice Department for litigation 
overpayment debts which cannot be compromised or waived, or on which 
collection activity cannot be suspended or terminated, and which the 
Department has been unable to recover pursuant to the collection 
activity described in Sec. 29.511 through Sec. 29.519. (See 31 CFR part 
904.) Such debts

[[Page 36710]]

should be referred to the Justice Department as early as possible, but 
at least within 1 year of the date such debts last became delinquent. 
In the case of overpayments arising from fraud, misrepresentation, or 
the presentation of a false claim, referral should be made to the 
Justice Department immediately. (See 31 CFR 900.3(a).) Referral of a 
debt to the Justice Department will suspend processing under 
Sec. 29.511 through Sec. 29.519 of this subpart.

Standards for Waiver of Overpayments


Sec. 29.521  Conditions for waiver and other adjustments.

    (a) General. Overpayments made from the Retirement Funds will be 
recovered unless there is substantial evidence that the individual from 
whom recovery is to be made is eligible for waiver.
    (b) Waiver. The Department may waive an overpayment from the 
Retirement Funds (provided there is no indication of fraud, 
misrepresentation, or lack of good faith on the part of the debtor) 
under sections 11021(3) or 11251(c)(2)(B) of the Act when it is 
established by substantial evidence that the individual from whom 
recovery is to be made--
    (1) Is not at fault in causing or contributing to the overpayment, 
and
    (2) Recovery would be against equity and good conscience.
    (c) Adjustment in the installment schedule. (1)(i) An overpayment 
will not be waived because of financial hardship if a reasonable 
installment schedule can be established for repayment of the debt by 
adjusting the installment schedule originally established.
    (ii) For example, if the Department finds that the original 
installment schedule--24 installments at $125 each--causes the debtor 
financial hardship, but that repayment in 60 installments at $50 each 
does not, it may adjust the installments and recover the debt in full.
    (2) Where it has been determined that an individual is ineligible 
for a waiver, but the individual has shown that collection action 
pursuant to the original installment schedule would cause him or her 
financial hardship, the Department may--
    (i) Adjust the installment schedule if the individual shows that it 
would cause him or her financial hardship to make payments at the rate 
initially scheduled by the Department; or
    (ii) Terminate the collection action under 31 CFR 903.3 if the 
costs of collecting the debt are anticipated to exceed the amount 
recoverable.


Sec. 29.522  Fault.

    (a) General rule. A debtor is considered to be at fault if he or 
she, or any other person having an interest in obtaining a waiver of 
the claim, caused or contributed to the accrual of the overpayment. The 
Department considers a debtor or any other person having an interest in 
obtaining a waiver of the claim to have caused or contributed to the 
accrual of an overpayment if--
    (1) Payment resulted from the individual's incorrect but not 
fraudulent statement, which the individual knew or should have known to 
be incorrect; or
    (2) Payment resulted from the individual's failure to disclose 
facts in his or her possession which the individual knew or should have 
known were material, when the Department has identified that the 
individual has a duty to report and has clearly notified the individual 
of this reporting requirement.
    (3) The following factors may affect the decision as to whether the 
debtor is or is not at fault where the debtor submitted an incorrect 
statement, or the debtor failed to disclose material facts in his or 
her possession--
    (i) The debtor's age;
    (ii) The debtor's physical and/or mental condition; and
    (iii) The availability and nature of the information provided to 
the debtor by the Department.
    (b) Knowledge of an overpayment. (1) Individuals who are aware that 
they are not entitled to a payment or are aware that a payment is 
higher than the payment to which they are entitled are not considered 
to have contributed to the overpayment if they promptly contact the 
Benefits Administrator and question the correctness of the payment and 
take no further action in reliance of the overpayment.
    (2) Any contact made with the Benefits Administrator concerning the 
overpayment within 60 days of receipt (if the overpayment is a 
recurring payment, contact must be made within 60 days of the initial 
payment) will satisfy the prompt notification requirement.
    (c) Reasonable person standard. The Department will use a 
reasonable person standard to determine whether an individual should 
have known that a statement was incorrect or that material facts in the 
individual's possession should have been disclosed. The reasonable 
person standard will take into account the objective factors set forth 
is paragraph (a)(3) of this section.


Sec. 29.523  Equity and good conscience.

    Recovery is against equity and good conscience when there is 
substantial evidence that--
    (a) It would cause financial hardship to the person from whom it is 
sought no matter what the amount and length of the proposed 
installment;
    (b) The recipient of the overpayment can show (regardless of his or 
her financial circumstances) that due to the notice that such payment 
would be made or because of the incorrect payment he or she either has 
relinquished a valuable right or has changed positions for the worse; 
or
    (c) Recovery would be unconscionable under the circumstances.


Sec. 29.524  Financial hardship.

    Financial hardship may be deemed to exist when the debtor needs 
substantially all of his or her current and anticipated income and 
liquid assets to meet current and anticipated ordinary and necessary 
living expenses during the projected period of collection. Financial 
hardship will not be found to exist when the debtor merely establishes 
that the repayment causes a financial burden, i.e., when it is 
inconvenient to repay the debt. If there are anticipated changes in 
income or expenses that would allow for the recovery of the overpayment 
at a later date, the Department may suspend collection action until a 
future date.
    (a) Considerations. Pertinent considerations in determining whether 
recovery would cause financial hardship include the following:
    (1) The debtor's financial ability to pay at the time collection is 
scheduled to be made, and
    (2) Income to other family member(s), if such member's ordinary and 
necessary living expenses are included in expenses reported by the 
debtor.


Sec. 29.525  Ordinary and necessary living expenses.

    An individual's ordinary and necessary living expenses include 
rent, mortgage payments, utilities, maintenance, transportation, food, 
clothing, insurance (life, health, and accident), taxes, installment 
payments for which the individual is already liable, medical expenses, 
support expenses for which the individual is legally responsible, and 
other miscellaneous expenses that the individual can establish as being 
ordinary and necessary.


Sec. 29.526  Waiver precluded.

    Waivers will not be offered or granted when--

[[Page 36711]]

    (1) The overpayment was obtained by fraud, misrepresentation, or by 
improper negotiation of checks or withdrawal of electronic fund 
transfer payments after the death of the payee; or
    (2) The overpayment was made to an estate and a timely demand for 
repayment is made prior to the final disbursement by the administrator 
or executor of the estate.

[FR Doc. 01-17545 Filed 7-12-01; 8:45 am]
BILLING CODE 4810-25-P