[Federal Register Volume 68, Number 246 (Tuesday, December 23, 2003)]
[Rules and Regulations]
[Pages 74177-74187]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31493]


=======================================================================
-----------------------------------------------------------------------

SOCIAL SECURITY ADMINISTRATION

20 CFR Parts 404, 416 and 422

RIN 0960-AE92


Federal Old-Age, Survivors, and Disability Insurance and 
Supplemental Security Income; Collection of Overdue Program and 
Administrative Debts Using Administrative Wage Garnishment

AGENCY: Social Security Administration (SSA).

ACTION: Final rules.

-----------------------------------------------------------------------

SUMMARY: We are modifying our regulations dealing with the collection 
of program overpayment debts that arise under titles II and XVI of the 
Social Security Act (the Act) and administrative debts owed to us. 
Specifically, we are making some changes and establishing new 
regulations on the use of administrative wage garnishment (AWG) to 
collect such debts when they are past due. AWG is a process whereby we 
order the debtor's employer to withhold and pay to us up to 15 percent 
of the debtor's disposable pay every payday until the debt is repaid. 
The employer is required by law to comply with our AWG order.

EFFECTIVE DATE: These final rules are effective on January 22, 2004.
    Electronic Version: The electronic file of this document is 
available on the date of publication in the Federal Register at http://www.gpoaccess.gov/fr/index.html. It is also available on the Internet 
Web site for SSA (i.e., Social Security Online): http://policy.ssa.gov/pnpublic.nsf/LawsRegs.

FOR FURTHER INFORMATION CONTACT: Robert J. Augustine, Social Insurance

[[Page 74178]]

Specialist, Office of Regulations, Social Security Administration, Room 
100, Altmeyer Building, 6401 Security Boulevard, Baltimore, Maryland 
21235-6401, (410) 965-0020 or TTY (410) 966-5609. For information on 
eligibility or filing for benefits: Call our national toll-free number, 
1-800-772-1213 or TTY 1-800-325-0778 or visit our Internet Web site, 
Social Security Online, at http://www.socialsecurity.gov.

SUPPLEMENTARY INFORMATION: Section 31001(o)(1) of Pub. L. 104-134 
amended Chapter 37, subchapter II, of title 31, United States Code, by 
adding section 3720D to permit Federal agencies to use AWG to recover 
past due debts. We are pursuing AWG to collect past due program 
overpayment debts incurred under title II and title XVI of the Act and 
past due administrative debts (see 20 CFR 422.306(a) for examples of 
administrative debts). The final regulations discussed below will 
implement 31 U.S.C. 3720D under the guidance provided by the Department 
of the Treasury at 31 CFR 285.11.

Explanation of Changes to Regulations

    We are creating a new subpart E in part 422 of our regulations 
containing the rules we will use to collect both title II and title XVI 
program overpayments and administrative debts by AWG. Subpart E will 
include the following sections that explain the conditions for our use 
of AWG, the rights of the debtor and the responsibilities of the 
employer.
    In Sec.  422.401, we describe the scope of this subpart--our use of 
AWG under 31 U.S.C. 3720D to recover past due debts that you owe.
    Section 422.402 contains definitions of several terms used in the 
new subpart, including:
    [sbull] Paragraph (a), defining ``administrative wage garnishment'' 
as the process whereby we order your employer to withhold from your 
disposable pay and send the amount withheld to us;
    [sbull] Paragraph (b), defining the term ``debt'' to mean any 
amount of money or property that we determine is owed to the United 
States government and that arises from a program that we administer or 
an activity that we perform;
    [sbull] Paragraph (c), defining the term ``disposable pay'' to mean 
the amount equal to your total compensation from an employer 
(including, among other things, wages or salary, bonuses, commissions 
and vacation pay) after deduction of health insurance premiums and 
amounts withheld as required by law other than amounts withheld under 
court order.
    Section 422.403 provides that, subject to certain exceptions and 
conditions, we will use AWG to collect any debt that is past due. We 
may use AWG concurrently with other practices, such as, tax refund 
offset and other administrative offset conducted by the Department of 
the Treasury and referral of information about the debt to consumer 
reporting agencies. See paragraph (a). We will not use AWG to collect a 
debt from salary or wages paid by the United States Government. If you 
have been separated involuntarily from employment, we will not use AWG 
against you until you have been re-employed continuously for at least 
12 months. We will not use AWG to recover your debt while:
    [sbull] Your title II disability benefits are stopped during the 
reentitlement period, under 20 CFR 404.1592a(a)(2) of this chapter.
    [sbull] Your Medicare entitlement is continued because you are 
deemed to be entitled to title II disability benefits under section 
226(b) of the Social Security Act, or
    [sbull] You are participating in the Ticket to Work and Self-
Sufficiency Program and your ticket is in use as described in 20 CFR 
411.170 through 411.255. See paragraph (b).
    In paragraphs (c) and (d) of Sec.  422.403, we describe the 
conditions under which we may apply AWG to recover title II and title 
XVI program overpayment debts, respectively. We may apply AWG if all of 
the following conditions are met.
    [sbull] You are not receiving benefits under the program under 
which the overpayment occurred.
    [sbull] For an overpayment under title XVI, we are not collecting 
the debt by reducing your title II benefits.
    [sbull] We have completed our billing sequence (i.e., we have sent 
an overpayment notice, reminder notice and past-due notice) or we have 
terminated or suspended collection activity.
    [sbull] We have no installment payment arrangement with you, or you 
failed to make payment under such an arrangement for two consecutive 
months.
    [sbull] You have not requested that we waive collection of the 
overpayment, or you requested waiver but we determined that we would 
not waive collection.
    [sbull] You have not requested reconsideration of the initial 
overpayment determination, or you requested reconsideration but we 
affirmed the initial determination in whole or in part.
    [sbull] We cannot recover the overpayment by adjustment of benefits 
payable to someone other than you.
    According to 31 U.S.C. 3720D(b), we must send you written notice at 
least 30 days prior to taking AWG action. We will send the notice at 
least 60 days before we will take AWG action. Section 422.405 describes 
the information we will include in that notice:
    [sbull] The payment of your debt is past due;
    [sbull] The nature and amount of your debt;
    [sbull] Our intention to collect the debt by AWG;
    [sbull] The amount that could be withheld from your disposable pay 
(the payment schedule) under AWG;
    [sbull] You may inspect and copy our records about the debt;
    [sbull] You may ask us to review the debt (i.e., whether you owe 
the amount stated in the notice) or the payment schedule stated in the 
notice;
    [sbull] You may request an installment payment plan.
    The notice will also explain that at the expiration of 60 calendar 
days from the date of the notice we will order your employer to begin 
withholding from your disposable pay, unless within that 60-day period 
you pay us the full amount of the debt, request review of the debt or 
the payment schedule or request to arrange to pay us by installments. 
We will keep an electronic record of the notice, showing the date we 
mailed it and the amount of the debt.
    Section 422.410 explains the actions we will take after we send the 
notice. We will not send an AWG order to your employer before the 
expiration of 60 calendar days from the date of the notice. If within 
that 60-day period you request that we review the debt (see Sec.  
422.425) or the payment schedule (see Sec.  422.415) stated in the 
notice or request an installment payment arrangement, we will not take 
further action until we send you a written notice of our decision. If 
within that 60-day period you do not pay the full balance of the debt, 
request review, or request an installment payment arrangement, we may 
send the AWG order to your employer without further delay. If your 
request for review is late, we will still perform the review even 
though we may send the AWG order to your employer. However, if you had 
good cause for failing to request review of the debt or the payment 
schedule on time, we will treat your request as if we received it 
within the 60-day period and delay further action until we send you our 
decision. Paragraph (b) of Sec.  422.410 describes the circumstances 
that show good cause for your failure and gives

[[Page 74179]]

examples. If we arrange an installment payment plan with you after we 
send you the AWG notice and you fail to make the installment payments 
for two consecutive months, we may send your employer an AWG order 
without further delay.
    As explained below in the discussion of PUBLIC COMMENTS, we revised 
paragraph (a)(3) of Sec.  422.410 to ensure that the regulation is 
consistent with the regulation of the Department of the Treasury on 
suspending an AWG order pending our decision on a request for review. 
We also clarified the language of paragraph (b)(3) of that section 
regarding suspension of an AWG order when you have good cause for 
failing to request review on time.
    Under 31 U.S.C. 3720D(b)(3) and (5) and (c), we must give you the 
opportunity to inspect and copy our records relating to the debt and 
the opportunity for a hearing on the existence and amount of the debt 
and the terms of the repayment schedule. We address these requirements 
in Sec. Sec.  422.415, 422.420 and 422.425.
    Section 422.415 provides that, upon your request, we will review 
the amount that your employer will withhold from your disposable pay 
(the payment schedule) and, when we find that withholding a particular 
amount would cause financial hardship, we will reduce that amount. We 
will not reduce the amount to be withheld every payday below $10.00. We 
will find financial hardship when evidence submitted by you shows that 
withholding a particular amount from your disposable pay will deprive 
you of income necessary to meet ordinary and necessary living expenses. 
Such expenses include, among other things, the cost of food, clothing, 
housing, medical care, insurance, and support of others for whom you 
are legally responsible. We will not reduce the amount the employer 
will withhold for financial hardship if the debt was caused by your 
intentional false statement or willful concealment of or failure to 
furnish material information.
    Section 422.420 explains that we will arrange to make our records 
relating to the debt available for your inspection and copying if you 
notify us of your intention to inspect and copy them.
    Section 422.425 describes the hearing process, the process by which 
we will review the debt at your request. Essentially, this is the same 
process that we employ to review the debt upon your request before we 
refer information to the Department of the Treasury for collection by 
administrative offset or refer information about the debt to consumer 
reporting agencies. See 20 CFR 422.317. To exercise your right to this 
review, you must request review and give us evidence that you do not 
owe all or part of the debt described in the notice or that we do not 
have the right to collect it. If you do not request review and give us 
the evidence before the expiration of 60 calendar days from the date of 
the notice, we may issue the AWG order without further delay. If you 
request review and give us the evidence within that 60-day period, or 
if you had good cause for failing to request review and give us the 
evidence on time, we will not take further AWG action unless and until 
we consider all of the evidence (including our own records) and send 
you our written findings that all or part of the debt is past due and 
we have the right to collect it. Our findings will include supporting 
rationale and will be our final decision on your request. If we find 
that you do not owe the debt, or the debt is not overdue, or we do not 
have the right to collect it, we will not send your employer an AWG 
order.
    Section 422.430 states that, if we determine that you do not owe 
the debt or we do not have the right to collect it, we will cancel any 
AWG order that we issued and refund promptly any amount withheld from 
your pay under that order. Refunds will not bear interest unless 
Federal law or contract requires interest.
    In Sec.  422.435, we describe the AWG order, the factors that 
determine the amount your employer must withhold and the information 
that your employer must send us. Paragraph (a) describes the 
information that will appear in the AWG order (your name, address and 
social security number; the amount of the debt; information about the 
amount that the employer must withhold; and where to send the withheld 
amount). We will maintain an electronic record of the order showing the 
date that we mailed the order. See paragraph (b). We will require the 
employer to certify within 20 days of receipt of the AWG order your 
employment status and the amount of disposable pay available for 
withholding. See paragraph (c).
    Paragraph (d) of Sec.  422.435 explains how the employer will 
calculate the actual amount to withhold from your disposable pay on 
each payday and remit to us. This section implements 31 U.S.C. 
3720D(b)(1) and 31 CFR 285.11(i). Usually, the amount to be withheld 
under the AWG order will be the lesser of the amount indicated in the 
order (up to 15% of disposable pay) or the amount by which disposable 
pay exceeds thirty times the minimum wage.
    Paragraph (e) of Sec.  422.435 discusses our rules that apply if 
your disposable pay is subject to more than one garnishment order. A 
withholding order for family support always has priority over our AWG 
order. Our AWG order has priority over other types of orders served 
after our AWG order unless Federal law provides otherwise. When your 
disposable pay is already subject to one or more withholding orders 
with higher or equal priority with our AWG order, the amount that your 
employer must withhold and remit to us will not be more than an amount 
calculated by subtracting the amount(s) withheld under the other 
withholding order(s) from 25% of your disposable pay. Under paragraph 
(f), we will have your employer withhold more than the amount 
calculated under these rules if you request in writing the higher rate 
of withholding. Moreover, as noted above, we will reduce the amount 
that your employer will withhold if we find under Sec.  422.415(b) that 
withholding at that amount will cause you financial hardship.
    In paragraphs (a) through (e) of Sec.  422.440, we discuss the 
responsibilities of your employer under the AWG order. The rules 
require your employer to begin withholding the appropriate amount on 
the first payday following receipt of the AWG order, or on the first or 
second payday after such receipt if the employer received the AWG order 
within 10 days before the first payday. The rules require your employer 
to continue to withhold and promptly pay the withheld amount to us 
every payday until we have recovered the debt and any interest, 
penalties and administrative costs that we may charge you under 
applicable law. Your employer need not alter its normal pay and 
disbursement cycles. However, your employer cannot honor any allotment 
or assignment of pay by you (other than arrangements made to satisfy a 
family support judgement or order) to the extent that such assignment 
or allotment interferes with or prevents withholding under the AWG 
order.
    In paragraph (f) of Sec.  422.440, we explain that Federal law 
prohibits your employer from using an AWG order as the basis for 
firing, refusing to employ or disciplining you. You may file a civil 
action in Federal or State court against an employer who violates the 
prohibition. See 31 U.S.C. 3720D(e).
    In Sec.  422.445, we explain that we may file a civil action in 
Federal court against the employer for any amounts that it fails to 
withhold in compliance with our AWG order issued under proposed Sec.  
422.435, and the employer may also be liable for our attorney fees and 
other associated costs and damages. See 31 U.S.C. 3720D(f). We will not

[[Page 74180]]

bring a civil action against your employer until we terminate 
collection action against you in accordance with applicable Federal 
standards, unless earlier filing is necessary to avoid the expiration 
of any applicable statute of limitations period. We will deem 
collection to be terminated if we receive no payment on the debt for 
one year.

Other Changes

    We are amending 20 CFR 404.527 and 416.590 to mention that we may 
recover title II and title XVI overpayments, respectively, under the 
rules in subpart E of part 422.
    We are adding to 20 CFR 404.903 a new paragraph (v) to include in 
the list of administrative actions that are not initial determinations 
our determination to use AWG to collect an overpayment made under title 
II of the Act. We are adding to 20 CFR 416.1403(a) a new paragraph (20) 
to include in the list of administrative actions that are not initial 
determinations our determination to use AWG to collect an overpayment 
made under title XVI of the Act. As a result of these two revisions, 
the administrative review procedures in 20 CFR part 404, subpart J, and 
part 416, subpart N, will not apply to the determination to use AWG. 
Moreover, that determination is not subject to judicial review under 42 
U.S.C. 405(g) or 1383(c)(3).
    In addition, we corrected an obsolete reference in 20 CFR 
404.527(b)(1) to the provisions of the Federal Claims Collection 
Standards on termination and suspension of collection activity.

Public Comments

    On November 15, 2002, we published proposed rules in the Federal 
Register at 67 FR 69164 and provided a 60-day period for interested 
parties to comment. We received comments from 5 organizations and 3 
individuals. Because some of the comments received were quite detailed, 
we have condensed, summarized or paraphrased them in the discussion 
below. We address all of the issues raised by the commenters that are 
within the scope of the proposed rules.
    Comment: Four organizations recommended that we provide an 
opportunity for an oral hearing when the individual requests review of 
the debt or the repayment schedule. These organizations claimed that 
Sec.  422.425 is not consistent with the AWG statute and the 
implementing regulation of the Department of the Treasury at 31 CFR 
285.11. One organization stated that our regulation overlooks the need 
for interactive discussion between SSA and the debtor when paper review 
is inadequate. Another mentioned that the oral hearing should be 
conducted by an administrative law judge.
    Response: The statute on AWG requires that, before an agency issues 
a garnishment order to an individual's employer, the agency must 
provide the individual with an opportunity for a ``hearing'' on the 
existence and amount of the debt and the terms of the repayment 
schedule stated in the agency's notice of proposed garnishment. See 31 
U.S.C. 3720D(b)(5) and (c). The statute does not describe the type of 
hearing that the agency must provide. This matter is addressed in the 
regulation of the Department of the Treasury established under the 
authority of 31 U.S.C. 3720D(h). The Treasury regulation on AWG states 
at 31 CFR 285.11(f)(2) that, when requested by the debtor, the agency 
``shall provide a hearing, which at the agency's option may be oral or 
written * * *'' The agency must provide the debtor with ``a reasonable 
opportunity for an oral hearing when the agency determines that the 
issues in dispute cannot be resolved by review of the documentary 
evidence, for example, when the validity of the claim turns on the 
issue of credibility or veracity.'' 31 CFR 285.11(f)(3)(i). When an 
oral hearing is not required, the agency must afford the debtor a 
``paper hearing'' and ``decide the issues in dispute based upon a 
review of the written record.'' 31 CFR 285.11(f)(3)(iii). Moreover, the 
Treasury regulation provides that ``[n]othing in this section requires 
agencies to duplicate notices or administrative proceedings required by 
contract or other laws or regulations.'' 31 CFR 285.11(b)(6).
    Thus, the Treasury regulation leaves to the agency's judgement the 
decision whether the circumstances warrant providing the opportunity 
for an oral hearing before taking garnishment action. Also, that 
regulation does not require the agency to afford the debtor an oral 
hearing in connection with the AWG process regarding matters on which 
the opportunity for an oral hearing has previously been provided under 
other applicable laws and regulations. We believe that the process for 
review provided under Sec.  422.425 of our AWG regulation combined with 
the process established in other SSA regulations for review of SSA's 
overpayment and waiver determinations fully complies with the 
requirements of the statute and Treasury regulations at 31 CFR 285.11.
    Well before we would send the notice to a debtor of our intention 
to collect a program overpayment debt by AWG, we would have sent the 
debtor notice of the overpayment determination that explained the 
overpayment and offered the debtor the opportunity to appeal that 
determination, to request waiver of recovery of the overpayment, and to 
make arrangements to repay the debt. The administrative processes 
provided in 20 CFR part 404, subparts F and J, and 20 CFR part 416, 
subparts E and N, including the informal conference with an adjudicator 
and the oral hearing before an administrative law judge, are available 
at that time.
    By the time that we would send the notice of intent to garnish, the 
issues on which the debtor has not had the opportunity to challenge the 
agency can be adequately resolved by documentary evidence. Examples of 
these issues are whether the overpayment balance stated in the notice 
is accurate (reflects all payments made by the debtor), whether 
collection of the overpayment was waived previously by SSA, and whether 
the debt was discharged by (or SSA must suspend collection efforts) an 
order of a bankruptcy court. Under Sec.  422.425, we will conduct the 
review (hearing) by examining SSA records related to the debt and any 
evidence submitted by the individual. When the debtor requests review 
on time or has good cause for a late request, we will not order the 
debtor's employer to withhold from the debtor's disposable pay until we 
issue our decision.
    Some of the commenters indicated that they had concerns about the 
underlying overpayment determinations and overpayment notices, and had 
concerns that the procedures provided in Sec.  422.425 would not be 
adequate to ensure a meaningful opportunity for a hearing on these 
matters before we would send a garnishment order. We believe that the 
procedures provided in current regulations at 20 CFR parts 404 and 416 
are adequate to resolve these matters. If the debtor indicates in 
responding to the notice of intent to garnish that he or she wants us 
to review the overpayment determination, we would invoke those 
procedures when consistent with those regulations (e.g., when the 
debtor shows good cause for extending the time to request 
reconsideration, a hearing before an administrative law judge, or 
review by the Appeals Council on the overpayment determination). See 20 
CFR 404.909, 404.911, 404.933(c), 404.968(b), 416.1409, 416.1411, 
416.1433(c) and 416.1468(b). Moreover, if the debtor cannot show good 
cause for an extension of time to review the overpayment determination, 
other regulations allow us to reopen and revise that determination 
under certain conditions. See 20 CFR 404.987-404.996 and 416.1487-
416.1494. We

[[Page 74181]]

have concluded that these long-standing procedures adequately provide 
for the resolution of issues concerning the overpayment determination.
    Finally, our procedures for implementing AWG would not preclude an 
individual from interactive discussions and exchange of information 
with SSA representatives about the overpayment, the garnishment 
process, or the options available to the individual to obtain an 
explanation or review of the debt, waiver of collection, etc. Like 
other notices that we issue regarding overpayments, the notice 
described in Sec.  422.405 will contain standard language inviting the 
individual to contact SSA in writing, by telephone, or by visiting a 
local SSA office to ask questions or obtain further explanation of the 
debt. The notice will include telephone numbers and the address of the 
SSA field office located closest to the individual's address. Thus, the 
individual will have an opportunity for interactive discussion with SSA 
representatives. During that discussion, he or she may provide and 
receive explanations and information concerning the case. In conducting 
the review described in Sec.  422.425, we will consider our records on 
the case and any information, explanations (oral or written) or 
documents furnished by the individual.
    Comment: Three organizations said that our AWG notice to 
individuals should fully explain the right to request a reduction of 
the withholding based on financial hardship, and should clearly state 
that the request can be made at any time.
    Response: We are committed to providing a full and clear written 
explanation of an individual's rights regarding AWG. The explanation 
recommended by the three organizations will appear in the notice to the 
debtors. Specifically, our notice informing individuals about 
garnishment will include an explanation of the right to request a 
reduction of the amount to be withheld from disposable pay based on 
financial hardship. Our notice will also explain that the individual 
can make this request at any time. If the individual shows us that the 
withholding schedule in question would cause financial hardship, we 
will lower the amount we would collect from that person's pay. We will 
find hardship if the withholding schedule would keep the individual 
from meeting the ordinary and necessary living expenses of the 
individual and his family.
    Comment: Two organizations said that we should remain consistent 
with Treasury's regulations by providing a time limit for issuing our 
decision on the person's requests for review.
    Response: Treasury's regulation, 31 CFR 285.11(f)(10), provides 
that an agency shall issue a written decision as soon as practicable, 
but no later than 60 days after the date on which a request for hearing 
was received by the agency. Further, the regulation provides that if 
the agency cannot issue the decision in that 60-day timeframe, then the 
agency may not issue a garnishment order (and must suspend an order 
that it issued) until the agency holds the hearing and renders its 
decision. We have revised Sec.  422.410(a) to ensure that our policy is 
consistent with the Treasury regulation.
    We will strive to issue a written decision on a person's request 
for review as soon as possible. In a case where a person requests 
review within the 60-day period from the date of the notice of our 
intent to garnish, we will not take further action to initiate 
garnishment until we send that person a written notice of our decision. 
If the person has good cause for requesting review after that 60-day 
period, we will not take further action, and we will suspend any AWG 
action already taken, until we send the decision notice. We revised 
Sec.  422.410(a)(3) to provide that, if an individual requests review 
late without ``good cause'' and we do not make our decision on the 
request within 60 calendar days from the date that we received the 
request, we will suspend any AWG order already issued. AWG will not 
resume before we conduct the review and issue the notice of our 
decision.
    Comment: One organization said we should make the following two 
changes to Sec.  422.405 of the proposed regulations: (1) Provide that 
our written notice to individuals proposing garnishment will inform 
people they can request waiver; and (2) explain the differences between 
waiver and review. In addition, one organization said we should not 
initiate garnishment proceedings while the request for waiver is 
pending.
    Response: We are not adopting the recommended changes to Sec.  
422.405. Our regulations on administrative wage garnishment implement 
31 U.S.C. 3720D under the guidance of Treasury's regulation at 31 CFR 
285.11. Neither of these provisions cover waiver of collection. We 
will, however, follow our usual practice and include detailed language 
describing the right to request waiver in our notice to the debtor 
about garnishment. We will also explain the difference between waiver 
and review of the debt in that same notice. While a waiver request is 
pending, we will not initiate garnishment. Effective on the date we 
receive a request, we will suspend any garnishment action that began 
before we received the request.
    Comment: One organization stated that our decision to use AWG 
should be an initial determination subject to our administrative appeal 
process and further judicial appeal.
    Response: Consistent with our regulations regarding the decision to 
use other practices (such as, reporting debts to consumer reporting 
agencies and collection through administrative offset against Federal 
payments) authorized by 31 U.S.C. chapter 37, we will not include the 
decision to use AWG among the actions listed as initial determinations 
in 20 CFR 404.902 and 416.1402. Those sections of our regulations 
contain lists of SSA determinations that affect the rights of 
individuals under the Social Security and Supplemental Security Income 
programs (among other things, entitlement to, eligibility for and 
amount of benefit payments). Initial determinations are subject to the 
administrative appeal process described in 20 CFR part 404, subpart J, 
and part 416, subpart N. When an individual exhausts the administrative 
remedies provided in those regulations, the individual may obtain 
further review in Federal court under sections 205(g) and 1631(c) of 
the Act. Because our decision to use AWG does not affect rights under 
these programs, it is not the type of determination described in 20 CFR 
404.902 and 416.1402. Thus, in these final rules, we include the 
decision to use AWG among those decisions listed in 20 CFR 404.903 and 
416.1403 that are not initial determinations.
    We note that waiver of collection of an overpayment is a right 
granted by sections 204(b) and 1631(b)(1)(B) of the Act to individuals 
who meet the conditions prescribed in those laws. An individual 
notified under Sec.  422.405 regarding AWG will have the opportunity to 
request waiver of collection of the overpayment before we will issue a 
garnishment order. An individual may request waiver of collection of 
the overpayment at any time. Our determination on a request for waiver 
is an initial determination subject to the appeal process described in 
subpart J of part 404 or subpart N of part 416. See 20 CFR 404.902(k) 
and 416.1402(c).
    Comment: One organization stated that the 60-day period to submit 
documentary evidence will not be adequate for individuals to obtain 
necessary records in many cases. The organization recommended that SSA 
provide in Sec.  422.425 for extension of time to obtain such evidence 
where the individual shows good cause.

[[Page 74182]]

    Response: We are not changing the regulation to specifically 
provide for an extension of the 60-day period to submit documentary 
evidence. However, we will cover this matter in staff instructions on 
the procedures for conducting AWG. The regulation established by these 
final rules allows us, but does not require us, to issue the 
garnishment order immediately after the 60-day period expires if the 
individual does not give us the evidence within that period. See Sec.  
422.425(a). We will give an individual a reasonable amount of extra 
time to secure documentary evidence if we find that the 60-day period 
established in the regulation is inadequate in a particular case. The 
reasonable amount of extra time will depend on the individual's 
specific circumstances and the type of documentary evidence the 
individual is trying to obtain. In addition, if a person has good cause 
for requesting review of the debt after the 60-day period expires and 
also needs more time to obtain documentary evidence, we will allow that 
person a reasonable amount of time according to the circumstances of 
the case.
    Comment: One organization commented that AWG should not be 
initiated while an individual is engaged in work activities with a 
Ticket to Work, or is in an extended period of eligibility. The 
organization expressed concern that the financial condition and long-
term work prospects of such an individual are uncertain.
    Response: We agree with the organization. We added paragraphs 
(b)(3), (4) and (5) to Sec.  422.403 of the final regulations to 
provide that we will not apply AWG in the situations described in the 
comment. One of our strategic goals is to deliver high-quality, 
citizen-centered service. In pursuit of this goal, we are committed to 
encouraging and supporting the work activity of individuals with 
disabilities. To that end, our programs, including the Ticket to Work 
and Self-Sufficiency program, provide incentives and services to 
promote return to work. Also, title II disability beneficiaries can be 
provided an extended period of eligibility (the reentitlement period) 
and extended Medicare coverage while they attempt to work. Another of 
our strategic goals is to ensure superior stewardship of our programs 
and resources. One of the steps we are taking to achieve this goal is 
the improvement of debt management practices, and the implementation of 
AWG serves this objective. In pursuing both of these goals, we must 
find the proper balance between these activities and objectives.
    Imposing AWG on individuals who are not receiving cash benefits 
during the reentitlement period because they are working, or during the 
period in which they are entitled to extended Medicare coverage 
following termination of their cash benefits due to work activity, or 
during the period in which they are participating in the Ticket to Work 
and Self-Sufficiency Program and have a ticket in use, could discourage 
them from continuing to work and, thus, could act counter to the 
purposes of the work incentive programs. The exclusion from AWG would 
be temporary if they continue to work at a substantial level. The 
possible negative effects on our work incentive programs would outweigh 
the benefits of any additional overpayment recovery that we might gain 
from imposing AWG on individuals during their early attempts to work.
    Comment: One organization commented that we should deliver our 
notice of planned garnishment action in formats other than written 
notices for people who need special accommodations.
    Response: We have a tradition of helping people who need special 
accommodations in their dealings with the Agency. This includes people 
with visual and hearing impairments, people with physical and mental 
disabilities and people who speak languages other than English. 
Depending upon the individual's needs, we will try to take special 
action to help the person. For example, we give all people applying for 
or receiving Social Security payments by reason of blindness the 
opportunity to choose how they want to receive SSA notices. Such people 
can elect to be notified by SSA in a telephone call, by certified mail 
and by first class mail. They can change their election at any time, 
and we will honor that change. At this time, however, due to a lack of 
contractor support for the production of Braille notices, we cannot 
offer that option.
    In addition, our regulations on the use of AWG will provide some 
accommodation for people who have physical, mental, educational or 
linguistic limitations which prevent them from requesting review on 
time or from understanding the need to make a request on time. Section 
422.410(b) provides that when a person has good cause for a late 
request, SSA will treat the request for review as if we received it on 
time; i.e., we would not pursue garnishment (or we would stop it if it 
has begun) until we notify the person about our decision. In 
determining whether there is good cause for a late request we will take 
into consideration the person's physical, mental, educational or 
linguistic limitations.
    Comment: One organization recommended that we include with our 
notices lists of the names and addresses of local legal aid 
organizations and other advocacy groups who could assist individuals 
who are subject to AWG.
    Response: As required by law, we provide on notices of adverse 
determinations, covered by 20 CFR part 404, subpart J, and part 416, 
subpart N, information on the options for obtaining legal 
representation to assist individuals in their dealings with us. See 
sections 206(c) and 1631(d)(2)(B) of the Act and 20 CFR 404.1706 and 
416.1506. We are not required by law to provide this information in our 
AWG notices.
    When we send the initial notice of overpayment to an individual and 
also when we notify a person about an adverse determination regarding 
his or her benefits, we include the information about options available 
to the person to obtain legal representation or assistance. We inform 
the person that he can have a friend, lawyer or someone else help. We 
also tell the person that any local Social Security office can provide 
a list of groups that can help. In the notice of garnishment to the 
individual, we will include the address of the local Social Security 
office that services the person's area, as well as a toll-free 
telephone number the person can call with any questions. We believe 
that the information that the individual would receive in certain 
notices prior to receiving the notice about AWG, and the availability 
of the information about legal aid organizations and other advocacy 
groups in our local offices, are adequate to help a person obtain 
independent advice and assistance. Consequently, we do not plan to 
include names and addresses of local legal aid organizations and other 
advocacy groups in the notice of garnishment to individuals.
    Comment: We received three comments from individuals. Two of the 
comments were not specific to the regulation and will therefore not be 
addressed. The third comment questioned why Federal employees are 
exempt from AWG under Sec.  422.403(b)(1).
    Response: Federal employees who owe debts to the Federal Government 
are subject to Federal salary offset under 5 U.S.C. 5514, rather than 
AWG under 31 U.S.C. 3720D. The regulation of the Department of the 
Treasury regarding AWG under 31 U.S.C. 3720D does not cover Federal 
salary offset. See 31 CFR Sec.  285.11(b)(5). Thus, Federal salary 
offset is not covered under our regulations on AWG. However, we are

[[Page 74183]]

developing a Federal salary offset program.

Regulatory Procedures

Executive Order (E.O.) 12866

    The Office of Management and Budget (OMB) has reviewed these final 
rules in accordance with E.O. 12866, as amended by E.O. 13258.

Regulatory Flexibility Act

    We certify that these final regulations will not have a significant 
impact on a substantial number of small entities. Therefore, a 
regulatory flexibility analysis, as provided in the Regulatory 
Flexibility Act, as amended, is not required.
    Some entities, as employers of some individuals who owe debts to 
us, will be subjected to these final regulations and to the 
certification requirement in proposed Sec.  422.435(c). However, any 
particular small employer is not likely to receive wage garnishment 
orders from us concerning a significant number of employees. Under 
Sec.  422.435(c), employers of delinquent debtors must certify certain 
information about the debtor's status such as the debtor's employment 
status and earnings. This information is contained in the employer's 
payroll records. Therefore, it will not take a significant amount of 
time or result in a significant cost for an employer to complete the 
certification form. Even if an employer receives withholding orders 
from us on several employees over the course of a year, the cost 
imposed on the employer to complete the certifications, withhold from 
disposable pay, and remit those amounts to us will not have a 
significant economic impact on that entity. Employers will not be 
required to vary their normal pay cycles to comply with a withholding 
order that is issued under these final rules.

Federalism

    We have reviewed these final rules under the threshold criteria of 
E.O. 13132, ``Federalism,'' and determined that they will not have 
substantial direct effects on the States, on the relationship between 
the national government and the States, or the distribution of power 
and responsibilities among the various levels of government.
    Although States and local governments, as employers of some 
individuals who owe debts to us, are subject to these final regulations 
and to the certification requirement in Sec.  422.435(c), there will be 
a relatively small number of debtors who will meet the criteria for 
selection who are employed by the States and local governments. Any 
particular State or local government is not likely to receive AWG 
orders from us concerning a significant number of employees. Under 
Sec.  422.435(c), States and local governments that employ delinquent 
debtors must certify certain information about the debtors' status such 
as the debtors' employment status and earnings. This information is 
contained in the States' or local governments' payroll records. 
Therefore, it will not take a significant amount of time or result in a 
significant cost for a State or local government to complete the 
certification form. Even if a State or local government receives AWG 
orders from us on several employees over the course of a year, the cost 
imposed on the State or local government to complete the 
certifications, withhold from disposable pay, and remit those amounts 
to us will not have a significant economic impact on that entity. 
States or local governments are not required to vary their normal pay 
cycles to comply with AWG orders that will be issued under these final 
rules.

Paperwork Reduction Act

    The final rules in new subpart E of part 422 contain information 
collection activities at Sec. Sec.  422.415, 422.425 and 422.435. 
However, the activities are exempt as administrative actions under 44 
U.S.C. 3518(c)(1)(B)(ii) from the clearance requirements of 44 U.S.C. 
3507 as amended by section 2 of Pub. L. 104-13 (May 22, 1995), the 
Paperwork Reduction Act of 1995.

(Catalog of Federal Domestic Assistance Program Nos. 96.001, Social 
Security--Disability Insurance; 96.002 Social Security--Retirement 
Insurance; 96.003 Social Security--Special Benefits for Persons Aged 
72 and Over; 96.004, Social Security--Survivors Insurance; 96.006, 
Supplemental Security Income)

List of Subjects

20 CFR Part 404

    Administrative practice and procedure; Death benefits; Blind, 
Disability benefits; Old-Age, Survivors and Disability Insurance; 
Reporting and recordkeeping requirements, Social Security.

20 CFR Part 416

    Administrative practice and procedure; Aged, Blind, Disability 
benefits; Public assistance programs, Reporting and recordkeeping 
requirements, Supplemental Security Income (SSI).

20 CFR Part 422

    Administrative practice and procedure, Organization and functions 
(Government agencies), Social Security.

    Dated: November 10, 2003.
Jo Anne B. Barnhart,
Commissioner of Social Security.

0
For the reasons set out in the preamble, we are amending parts 404, 416 
and 422 of Title 20 of the Code of Federal Regulations as follows:

PART 404--[AMENDED]

0
1. The authority citation for subpart F of part 404 continues to read 
as follows:

    Authority: Secs. 204, 205(a), and 702(a)(5) of the Social 
Security Act (42 U.S.C. 404, 405(a) and 902(a)); 31 U.S.C. 3720A.


0
2. Paragraph (a), introductory text, of Sec.  404.527 is revised and 
paragraph (b)(1) is amended by removing ``4 CFR 104.2 or 104.3.'' at 
the end of the paragraph and adding in its place ``31 CFR 903.2 or 
903.3.''.
    The revised text reads as follows:


Sec.  404.527  Additional methods for recovery of title II benefit 
overpayments.

    (a) General. In addition to the methods specified in Sec. Sec.  
404.502 and 404.520, an overpayment under title II of the Act is also 
subject to recovery under the rules in subparts D and E of part 422 of 
this chapter. Subpart D of part 422 of this chapter applies only under 
the following conditions:
* * * * *

0
3. The authority citation for subpart J of part 404 is revised to read 
as follows:

    Authority: Secs. 201(j), 204(f), 205(a), (b), (d)-(h), and (j), 
221, 225, and 702(a)(5) of the Social Security Act (42 U.S.C. 
401(j), 404(f), 405(a), (b), (d)-(h), and (j), 421, 425, and 
902(a)(5)); sec. 5, Pub. L. 97-455, 96 Stat. 2500 (42 U.S.C. 405 
note); secs. 5, 6(c)-(e), and 15, Pub. L. 98-460, 98 Stat. 1802 (42 
U.S.C. 421 note).


0
4. Section 404.903 is amended by removing the word ``and'' at the end 
of paragraph (t), replacing the period at the end of paragraph (u) with 
``; and'', and adding paragraph (v) to read as follows:


Sec.  404.903  Administrative actions that are not initial 
determinations.

* * * * *
    (v) Determining whether we will order your employer to withhold 
from your disposable pay to collect an overpayment you received under 
title II of the Social Security Act (see part 422, subpart E, of this 
chapter).

PART 416--[AMENDED]

0
5. The authority citation for subpart E of part 416 continues to read 
as follows:


[[Page 74184]]


    Authority: Secs. 702(a)(5), 1147, 1601, 1602, 1611(c) and (e), 
and 1631(a)-(d) and (g) of the Social Security Act (42 U.S.C. 
902(a)(5), 1320b-17, 1381, 1381a, 1382(c) and (e), and 1383(a)-(d) 
and (g)); 31 U.S.C. 3720A.


0
6. Paragraph (a), introductory text, of Sec.  416.590 is revised to 
read as follows:


Sec.  416.590  Are there additional methods for recovery of title XVI 
benefit overpayments?

    (a) General. In addition to the methods specified in Sec. Sec.  
416.560, 416.570, 416.572 and 416.580, we may recover an overpayment 
under title XVI of the Act from you under the rules in subparts D and E 
of part 422 of this chapter. Subpart D of part 422 of this chapter 
applies only under the following conditions:
* * * * *

0
7. The authority citation for subpart N of part 416 continues to read 
as follows:

    Authority: Secs. 702(a)(5), 1631, and 1633 of the Social 
Security Act (42 U.S.C. 902(a)(5), 1383, and 1383b).


0
8. Section 416.1403 is amended by removing the word ``and'' at the end 
of paragraph (a)(18), replacing the period at the end of paragraph 
(a)(19) with ``; and'', and adding paragraph (a)(20) to read as 
follows:


Sec.  416.1403  Administrative actions that are not initial 
determinations.

    (a) * * *
    (20) Determining whether we will order your employer to withhold 
from your disposable pay to collect an overpayment you received under 
title XVI of the Social Security Act (see part 422, subpart E, of this 
chapter).

PART 422--[AMENDED]

0
9. Subpart E is added to read as follows:

Subpart E--Collection of Debts by Administrative Wage Garnishment

Sec.
422.401 What is the scope of this subpart?
422.402 What special definitions apply to this subpart?
422.403 When may we use administrative wage garnishment?
422.405 What notice will we send you about administrative wage 
garnishment?
422.410 What actions will we take after we send you the notice?
422.415 Will we reduce the amount that your employer must withhold 
from your pay when withholding that amount causes financial 
hardship?
422.420 May you inspect and copy our records related to the debt?
422.425 How will we conduct our review of the debt?
422.430 When will we refund amounts of your pay withheld by 
administrative wage garnishment?
422.435 What happens when we decide to send an administrative wage 
garnishment order to your employer?
422.440 What are your employer's responsibilities under an 
administrative wage garnishment order?
422.445 May we bring a civil action against your employer for 
failure to comply with our administrative wage garnishment order?

Subpart E--Collection of Debts by Administrative Wage Garnishment

    Authority: Secs. 205(a), 702(a)(5) and 1631(d)(1) of the Social 
Security Act (42 U.S.C. 405(a), 902(a)(5) and 1383(d)(1)) and 31 
U.S.C. 3720D.


Sec.  422.401  What is the scope of this subpart?

    This subpart describes the procedures relating to our use of 
administrative wage garnishment under 31 U.S.C. 3720D to recover past 
due debts that you owe.


Sec.  422.402  What special definitions apply to this subpart?

    (a) Administrative wage garnishment is a process whereby we order 
your employer to withhold a certain amount from your disposable pay and 
send the withheld amount to us. The law requires your employer to 
comply with our garnishment order.
    (b) Debt means any amount of money or property that we determine is 
owed to the United States and that arises from a program that we 
administer or an activity that we perform. These debts include program 
overpayments made under title II or title XVI of the Social Security 
Act and any other debt that meets the definition of ``claim'' or 
``debt'' at 31 U.S.C. 3701(b).
    (c) Disposable pay means that part of your total compensation 
(including, but not limited to, salary or wages, bonuses, commissions, 
and vacation pay) from your employer after deduction of health 
insurance premiums and amounts withheld as required by law. Amounts 
withheld as required by law include such things as Federal, State and 
local taxes but do not include amounts withheld under court order.
    (d) We, our, or us means the Social Security Administration.
    (e) You means an individual who owes a debt to the United States 
within the scope of this subpart.


Sec.  422.403  When may we use administrative wage garnishment?

    (a) General. Subject to the exceptions described in paragraph (b) 
of this section and the conditions described in paragraphs (c) and (d) 
of this section, we may use administrative wage garnishment to collect 
any debt that is past due. We may use administrative wage garnishment 
while we are taking other action regarding the debt, such as, using tax 
refund offset under Sec. Sec.  404.520-404.526 and 416.580-416.586 of 
this chapter and taking action under subpart D of this part.
    (b) Exceptions. (1) We will not use this subpart to collect a debt 
from salary or wages paid by the United States Government.
    (2) If you have been separated involuntarily from employment, we 
will not order your employer to withhold amounts from your disposable 
pay until you have been reemployed continuously for at least 12 months. 
You have the burden of informing us about an involuntary separation 
from employment.
    (3) We will not use this subpart to collect a debt while your 
disability benefits are stopped during the reentitlement period, under 
Sec.  404.1592a(a)(2) of this chapter, because you are engaging in 
substantial gainful activity.
    (4) We will not use this subpart to collect a debt while your 
Medicare entitlement is continued because you are deemed to be entitled 
to disability benefits under section 226(b) of the Social Security Act 
(42 U.S.C. 426(b)).
    (5) We will not use this subpart to collect a debt if you have 
decided to participate in the Ticket to Work and Self-Sufficiency 
Program and your ticket is in use as described in Sec. Sec.  411.170 
through 411.225 of this chapter.
    (c) Overpayments under title II of the Social Security Act. This 
subpart applies to overpayments under title II of the Social Security 
Act if all of the following conditions are met:
    (1) You are not receiving title II benefits.
    (2) We have completed our billing system sequence (i.e., we have 
sent you an initial notice of the overpayment, a reminder notice, and a 
past-due notice) or we have suspended or terminated collection activity 
in accordance with applicable rules, such as, the Federal Claims 
Collection Standards in 31 CFR 903.2 or 31 CFR 903.3.
    (3) We have not made an installment payment arrangement with you 
or, if we have made such an arrangement, you have failed to make any 
payment for two consecutive months.
    (4) You have not requested waiver pursuant to Sec.  404.506 or 
Sec.  404.522 of this chapter or, after a review conducted pursuant to 
those sections, we have determined that we will not waive collection of 
the overpayment.
    (5) You have not requested reconsideration of the initial 
overpayment determination pursuant to

[[Page 74185]]

Sec. Sec.  404.907 and 404.909 of this chapter or, after a review 
conducted pursuant to Sec.  404.913 of this chapter, we have affirmed 
all or part of the initial overpayment determination.
    (6) We cannot recover your overpayment pursuant to Sec.  404.502 of 
this chapter by adjustment of benefits payable to any individual other 
than you. For purposes of this paragraph, an overpayment will be deemed 
to be unrecoverable from any individual who was living in a separate 
household from yours at the time of the overpayment and who did not 
receive the overpayment.
    (d) Overpayments under title XVI of the Social Security Act. This 
subpart applies to overpayments under title XVI of the Social Security 
Act if all of the following conditions are met:
    (1) You are not receiving benefits under title XVI of the Social 
Security Act.
    (2) We are not collecting your title XVI overpayment by reducing 
title II benefits payable to you.
    (3) We have completed our billing system sequence (i.e., we have 
sent you an initial notice of the overpayment, a reminder notice, and a 
past-due notice) or we have suspended or terminated collection activity 
under applicable rules, such as, the Federal Claims Collection 
Standards in 31 CFR 903.2 or 31 CFR 903.3.
    (4) We have not made an installment payment arrangement with you 
or, if we have made such an arrangement, you have failed to make any 
payment for two consecutive months.
    (5) You have not requested waiver pursuant to Sec.  416.550 or 
Sec.  416.582 of this chapter or, after a review conducted pursuant to 
those sections, we have determined that we will not waive collection of 
the overpayment.
    (6) You have not requested reconsideration of the initial 
overpayment determination pursuant to Sec. Sec.  416.1407 and 416.1409 
of this chapter or, after a review conducted pursuant to Sec.  416.1413 
of this chapter, we have affirmed all or part of the initial 
overpayment determination.
    (7) We cannot recover your overpayment pursuant to Sec.  416.570 of 
this chapter by adjustment of benefits payable to any individual other 
than you. For purposes of this paragraph, if you are a member of an 
eligible couple that is legally separated and/or living apart, we will 
deem unrecoverable from the other person that part of your overpayment 
which he or she did not receive.


Sec.  422.405  What notice will we send you about administrative wage 
garnishment?

    (a) General. Before we order your employer to collect a debt by 
deduction from your disposable pay, we will send you written notice of 
our intention to do so.
    (b) Contents of the notice. The notice will contain the following 
information:
    (1) We have determined that payment of the debt is past due;
    (2) The nature and amount of the debt;
    (3) Information about the amount that your employer could withhold 
from your disposable pay each payday (the payment schedule);
    (4) No sooner than 60 calendar days after the date of the notice, 
we will order your employer to withhold the debt from your disposable 
pay unless, within that 60-day period, you pay the full amount of the 
debt or take either of the actions described in paragraphs (b)(6) or 
(7) of this section;
    (5) You may inspect and copy our records about the debt (see Sec.  
422.420);
    (6) You may request a review of the debt (see Sec.  422.425) or the 
payment schedule stated in the notice (see Sec.  422.415); and
    (7) You may request to pay the debt by monthly installment payments 
to us.
    (c) Mailing address. We will send the notice to the most current 
mailing address that we have for you in our records.
    (d) Electronic record of the notice. We will keep an electronic 
record of the notice that shows the date we mailed the notice to you 
and the amount of your debt.


Sec.  422.410  What actions will we take after we send you the notice?

    (a) General. (1) We will not send an administrative wage 
garnishment order to your employer before 60 calendar days elapse from 
the date of the notice described in Sec.  422.405.
    (2) If paragraph (b) of this section does not apply and you do not 
pay the debt in full or do not take either of the actions described in 
Sec.  422.405(b)(6) or (7) within 60 calendar days from the date of the 
notice described in Sec.  422.405, we may order your employer to 
withhold and send us part of your disposable pay each payday until your 
debt is paid.
    (3) If you request review of the debt or the payment schedule after 
the end of the 60 calendar day period described in paragraph (a)(2) of 
this section and paragraph (b) of this section does not apply, we will 
conduct the review. However, we may send the administrative wage 
garnishment order to your employer without further delay. If we sent 
the administrative wage garnishment order to your employer and we do 
not make our decision on your request within 60 calendar days from the 
date that we received your request, we will tell your employer to stop 
withholding from your disposable pay. Withholding will not resume 
before we conduct the review and notify you of our decision.
    (4) We may send an administrative wage garnishment order to your 
employer without further delay if:
    (i) You request an installment payment plan after receiving the 
notice described in Sec.  422.405, and
    (ii) We arrange such a plan with you, and
    (iii) You fail to make payments in accordance with that arrangement 
for two consecutive months.
    (b) Good cause for failing to request review on time. If we decide 
that you had good cause for failing to request review within the 60-day 
period mentioned in paragraph (a)(2) of this section, we will treat 
your request for review as if we received it within that 60-day period.
    (1) Determining good cause. In determining whether you had good 
cause, we will consider--
    (i) Any circumstances that kept you from making the request on 
time;
    (ii) Whether our action misled you;
    (iii) Whether you had any physical, mental, educational, or 
linguistic limitations (including any lack of facility with the English 
language) which prevented you from making a request on time or from 
understanding the need to make a request on time.
    (2) Examples of good cause. Examples of facts supporting good cause 
include, but are not limited to, the following.
    (i) Your serious illness prevented you from contacting us yourself 
or through another person.
    (ii) There was a death or serious illness in your family.
    (iii) Fire or other accidental cause destroyed important records.
    (iv) You did not receive the notice described in Sec.  422.405.
    (v) In good faith, you sent the request to another government 
agency within the 60-day period, and we received the request after the 
end of that period.
    (3) If we issued the administrative wage garnishment order. If we 
determine that you had good cause under paragraph (b) of this section 
and we already had sent an administrative wage garnishment order to 
your employer, we will tell your employer to stop withholding from your 
disposable pay. Withholding will not resume until we conduct the review 
and notify you of our decision.

[[Page 74186]]

Sec.  422.415  Will we reduce the amount that your employer must 
withhold from your pay when withholding that amount causes financial 
hardship?

    (a) General. Unless paragraph (d) of this section applies, we will 
reduce the amount that your employer must withhold from your pay when 
you request the reduction and we find financial hardship. In any event, 
we will not reduce the amount your employer must withhold each payday 
below $10. When we decide to reduce the amount that your employer 
withholds, we will give you and your employer written notice.
    (1) You may ask us at any time to reduce the amount due to 
financial hardship.
    (2) If you request review of the payment schedule stated in the 
notice described in Sec.  422.405 within the 60-day period stated in 
the notice, we will not issue a garnishment order to your employer 
until we notify you of our decision.
    (b) Financial hardship. We will find financial hardship when you 
show that withholding a particular amount from your pay would deprive 
you of income necessary to meet your ordinary and necessary living 
expenses. You must give us evidence of your financial resources and 
expenses.
    (c) Ordinary and necessary living expenses. Ordinary and necessary 
living expenses include:
    (1) Fixed expenses such as food, clothing, housing, utilities, 
maintenance, insurance, tax payments;
    (2) Medical, hospitalization and similar expenses;
    (3) Expenses for the support of others for whom you are legally 
responsible; and
    (4) Other reasonable and necessary miscellaneous expenses which are 
part of your standard of living.
    (d) Fraud and willful concealment or failure to furnish 
information. (1) We will not reduce the amount that your employer 
withholds from your disposable pay if your debt was caused by:
    (i) Your intentional false statement, or
    (ii) Your willful concealment of, or failure to furnish, material 
information.
    (2) ``Willful concealment'' means an intentional, knowing and 
purposeful delay in providing, or failure to reveal, material 
information.


Sec.  422.420  May you inspect and copy our records related to the 
debt?

    You may inspect and copy our records related to the debt. You must 
notify us of your intention to review our records. After you notify us, 
we will arrange with you the place and time the records will be 
available to you. At our discretion, we may send copies of the records 
to you.


Sec.  422.425  How will we conduct our review of the debt?

    (a) You must request review and present evidence. If you receive a 
notice described in Sec.  422.405, you have the right to have us review 
the debt. To exercise this right, you must request review and give us 
evidence that you do not owe all or part of the debt or that we do not 
have the right to collect it. If you do not request review and give us 
this evidence within 60 calendar days from the date of our notice, we 
may issue the garnishment order to your employer without further delay. 
If you request review of the debt and present evidence within that 60 
calendar-day period, we will not send a garnishment order to your 
employer unless and until we consider all of the evidence and send you 
our findings that all or part of the debt is overdue and we have the 
right to collect it.
    (b) Review of the evidence. If you request review of the debt, we 
will review our records related to the debt and any evidence that you 
present.
    (c) Our findings. Following our review of all of the evidence, we 
will send you written findings, including the supporting rationale for 
the findings. Issuance of these findings will be our final action on 
your request for review. If we find that you do not owe the debt, or 
the debt is not overdue, or we do not have the right to collect it, we 
will not send a garnishment order to your employer.


Sec.  422.430  When will we refund amounts of your pay withheld by 
administrative wage garnishment?

    If we find that you do not owe the debt or that we have no right to 
collect it, we will promptly refund to you any amount withheld from 
your disposable pay under this subpart that we received and cancel any 
administrative wage garnishment order that we issued. Refunds under 
this section will not bear interest unless Federal law or contract 
requires interest.


Sec.  422.435  What happens when we decide to send an administrative 
wage garnishment order to your employer?

    (a) The wage garnishment order. The wage garnishment order that we 
send to your employer will contain only the information necessary for 
the employer to comply with the order. This information includes:
    (1) Your name, address, and social security number,
    (2) The amount of the debt,
    (3) Information about the amount to be withheld, and
    (4) Information about where to send the withheld amount.
    (b) Electronic record of the garnishment order. We will keep an 
electronic record of the garnishment order that shows the date we 
mailed the order to your employer.
    (c) Employer certification. Along with the garnishment order, we 
will send your employer a certification form to complete about your 
employment status and the amount of your disposable pay available for 
withholding. Your employer must complete the certification and return 
it to us within 20 days of receipt.
    (d) Amounts to be withheld from your disposable pay. After receipt 
of the garnishment order issued under this section, your employer must 
begin withholding from your disposable pay each payday the lesser of:
    (1) The amount indicated on the order (up to 15% of your disposable 
pay); or
    (2) The amount by which your disposable pay exceeds thirty times 
the minimum wage as provided in 15 U.S.C. 1673(a)(2).
    (e) Multiple withholding orders. If your disposable pay is subject 
to more than one withholding order, we apply the following rules to 
determine the amount that your employer will withhold from your 
disposable pay:
    (1) Unless otherwise provided by Federal law or paragraph (e)(2) of 
this section, a garnishment order issued under this section has 
priority over other withholding orders served later in time.
    (2) Withholding orders for family support have priority over 
garnishment orders issued under this section.
    (3) If at the time we issue a garnishment order to your employer 
amounts are already being withheld from your pay under another 
withholding order, or if a withholding order for family support is 
served on your employer at any time, the amounts to be withheld under 
this section will be the lesser of:
    (i) The amount calculated under paragraph (d) of this section; or
    (ii) The amount calculated by subtracting the amount(s) withheld 
under the withholding order(s) with priority from 25% of your 
disposable pay.
    (4) If you owe more than one debt to us, we may issue multiple 
garnishment orders. If we issue more than one garnishment order, the 
total amount to be withheld from your disposable pay under such orders 
will not exceed the amount set forth in paragraph (d) or (e)(3) of this 
section, as appropriate.

[[Page 74187]]

    (f) You may request that your employer withhold more. If you 
request in writing that your employer withhold more than the amount 
determined under paragraphs (d) or (e) of this section, we will order 
your employer to withhold the amount that you request.


Sec.  422.440  What are your employer's responsibilities under an 
administrative wage garnishment order?

    (a) When withholding must begin. Your employer must withhold the 
appropriate amount from your disposable pay on each payday beginning on 
the first payday after receiving the garnishment order issued under 
this section. If the first payday is within 10 days after your employer 
receives the order, then your employer must begin withholding on the 
first or second payday after your employer receives the order. 
Withholding must continue until we notify your employer to stop 
withholding.
    (b) Payment of amounts withheld. Your employer must promptly pay to 
us all amounts withheld under this section.
    (c) Other assignments or allotments of pay. Your employer cannot 
honor an assignment or allotment of your pay to the extent that it 
would interfere with or prevent withholding under this section, unless 
the assignment or allotment is made under a family support judgement or 
order.
    (d) Effect of withholding on employer pay and disbursement cycles. 
Your employer will not be required to vary its normal pay and 
disbursement cycles in order to comply with the garnishment order.
    (e) When withholding ends. When we have fully recovered the amounts 
you owe, including interest, penalties, and administrative costs that 
we charge you as allowed by law, we will tell your employer to stop 
withholding from your disposable pay. As an added precaution, we will 
review our debtors' accounts at least annually to ensure that 
withholding has been terminated for accounts paid in full.
    (f) Certain actions by an employer against you are prohibited. 
Federal law prohibits an employer from using a garnishment order issued 
under this section as the basis for discharging you from employment, 
refusing to employ you, or taking disciplinary action against you. If 
your employer violates this prohibition, you may file a civil action 
against your employer in a Federal or State court of competent 
jurisdiction.


Sec.  422.445  May we bring a civil action against your employer for 
failure to comply with our administrative wage garnishment order?

    (a) We may bring a civil action against your employer for any 
amount that the employer fails to withhold from your disposable pay in 
accordance with Sec.  422.435(d), (e) and (f). Your employer may also 
be liable for attorney fees, costs of the lawsuit and (in the court's 
discretion) punitive damages.
    (b) We will not file a civil action against your employer before we 
terminate collection action against you, unless earlier filing is 
necessary to avoid expiration of any applicable statute of limitations 
period. For purposes of this section, ``terminate collection action'' 
means that we have terminated collection action in accordance with the 
Federal Claims Collection Standards (31 CFR 903.3) or other applicable 
standards. In any event, we will consider that collection action has 
been terminated if we have not received any payments to satisfy the 
debt for a period of one year.

[FR Doc. 03-31493 Filed 12-22-03; 8:45 am]
BILLING CODE 4191-02-P