[Federal Register Volume 69, Number 133 (Tuesday, July 13, 2004)]
[Proposed Rules]
[Pages 42022-42029]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-15692]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of the Secretary

45 CFR Part 33

RIN 0991-AB19


Salary Offset

AGENCY: Department of Health and Human Services.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Department of Health and Human Services (HHS) proposes to 
add specific rules concerning involuntary salary offset by adding a new 
part 33 to title 45 CFR. The proposed rule implements 5 U.S.C. 5514, as 
amended by the salary offset provisions of the Debt Collection 
Improvement Act of 1996 (DCIA), as implemented by the Office of 
Personnel Management at 5 CFR part 550, subpart K. Involuntary salary 
offset was previously included in the Department's more general claims 
collection regulations at 45 CFR part 30.

DATES: Submit comments on or before September 13, 2004.

ADDRESSES: Comments concerning this proposed rule can be mailed to: 
Jeffrey

[[Page 42023]]

Davis, Acting Associate General Counsel, General Law Division, Office 
of the General Counsel, Department of Health and Human Services, Room 
4760 Cohen Building, 330 Independence Avenue SW., Washington, DC 20201.

FOR FURTHER INFORMATION CONTACT: Jeffrey Davis, Associate General 
Counsel, 202-619-0153.

SUPPLEMENTARY INFORMATION:

Background

    Current HHS regulations at 45 CFR part 30 provide standards and 
procedures for the collection and disposition of debts owed the United 
States, including collection by administrative offset. Standards and 
procedures for collection of debts from the current pay of federal 
employees by involuntary salary offset has been included in the 
administrative offset provisions of part 30. These current HHS 
regulations are based on the Debt Collection Act of 1982 (DCA), Pub. L. 
No. 97-365, which was implemented on a government-wide basis by the 
Federal Claims Collection Standards (FCCS), set forth at 4 CFR part 101 
issued by the Department of Justice and the General Accounting Office 
on March 9, 1984 (49 FR 8889 (1984)), and the salary offset regulations 
set forth at 5 CFR part 550, subpart K issued by the Office of 
Personnel Management on July 3, 1984 (49 FR 27472). The current HHS 
rules are in the process of being amended to comply with the Debt 
Collection Improvement Act of 1996 (DCIA) Pub. L. 104-134, as 
implemented by the Department of Treasury and the Department of Justice 
at 31 CFR 900-904. Since there are very specific rules that apply to 
salary offset that go beyond those applicable to administrative offset 
generally, and because salary offset has a separate statutory basis, 
the Department wants to take this opportunity to segregate the 
provisions and provide separate guidance to specifically address the 
standards and procedures applicable to salary offset.

Basic Provisions

    This proposed rule prescribes the Department's standards and 
procedures for the collection of debts owed by federal employees to the 
United States through involuntary salary offset, including changes made 
by the DCIA. Briefly, such changes provide for centralized computer 
matching through the Department of Treasury, an exclusion from the 
prior notice and hearing requirements for certain pay adjustments, and 
a priority for federal tax levies.

Authority 5 U.S.C. 5514

Request for Comments

    Comments are requested and must be received at the above address, 
by the above date.

Reporting and Recordkeeping Requirements

    For purposes of the Paperwork Reduction Act, 44 U.S.C. chapter 35, 
this proposed rule will impose no new reporting or record-keeping 
requirements on any member of the public.

Economic Impact

    We have examined the impact of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), as 
amended by Executive Order 13258 (February 2002, Amending Executive 
Order 12866 on Regulatory Planning and Review); the Regulatory 
Flexibility Act (RFA) (September 19, 1980; Pub. L. 96-354); the 
Unfunded Mandated Reform Act of 1995 (UMRA, Pub. L. 104-4); and 
Executive Order 13132 (August 1999, Federalism). Executive Order 12866 
(the Order), as amended by Executive Order 13258, directs agencies to 
assess all costs and benefits of available regulatory alternatives and, 
if regulation is necessary, to select regulatory approaches that 
maximize the benefits (including potential economic, environmental, 
public health and safety effects, distributive impacts, and equity). A 
regulatory impact analysis must be prepared for major rules with 
economically significant effects ($100 million or more in 1 year). We 
have determined that the proposed rule is consistent with the 
principals set forth in the Order, and we find that the proposed rule 
would not have an effect on the economy that exceeds $100 million in 
any one year. In addition, this rule is not a major rule as defined at 
5 U.S.C. 804(2). In accordance with the provisions of the Order, the 
proposed rule will be reviewed by the Office of Management and Budget.
    Under the RFA, 5 U.S.C. 605(b), if a rule has a significant impact 
on a substantial number of small entities, an agency must analyze 
regulatory options that would minimize any significant impact of the 
rule on small entities. The agency has considered the effect that this 
rule would have on small entities. I hereby certify, under 5 U.S.C. 
605(b), that the proposed rule will not have a significant economic 
impact on a substantial number of small entities, including small 
businesses, small organizations and small local governments. Therefore, 
a regulatory flexibility analysis is not required by 5 U.S.C. 603.
    Section 202 of the UMRA also requires that agencies assess 
anticipated costs and benefits before issuing any rule that may result 
in expenditure in any one year by State, local, or tribunal 
governments, in the aggregate, or by the private sector, of $100 
million. As noted above, we find that the proposed rule would not have 
an effect of this magnitude on the economy. Therefore, no further 
analysis is required under the UMRA.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. We have reviewed the proposed rule under the threshold 
criteria of Executive Order 13132 and have determined that this 
proposed rule would not have substantial direct impact on States, or on 
the distribution of power and responsibilities among the various levels 
of government. As there are no federalism implications, a federalism 
impact statement is not required.

Alternatives Considered

    Title 5 CFR part 550, subpart K, provides the standards to be used 
by Federal agencies to prepare regulations implementing 5 U.S.C. 5514. 
There is little room for us to consider alternatives, but where the 
Department has discretion (i.e., in Sec.  33.1, specifying that the 
regulations cover Government-wide collections and in Sec.  33.6, 
specifying that if the petition for hearing is untimely, the Secretary 
may grant the request if the employee can establish that the delay was 
the result of circumstances beyond the employee's control, or that the 
employee failed to receive actual notice of the filing deadline), we 
drafted the proposed rule to be as strong as possible to maximize the 
Department's debt collection ability and so that the process is fair as 
possible to debtors.
    These regulations will be submitted to the Office of Personnel 
Management for review prior to publication of the final rule, as 
required by 5 CFR part 550, subpart K.

List of Subjects in 45 CFR Part 33

    Administrative practice and procedure, Claims, Debts, Claims, Debt 
collection, Hearings, Wages, Salary offset and Government employees.

    For the reasons set forth in the preamble, HHS proposes to add 45 
CFR part 33 as follows:

[[Page 42024]]

PART 33--SALARY OFFSET

Sec.
33.1 Purpose, authority and scope.
33.2 Definitions.
33.3 General rule.
33.4 Notice requirements before offset.
33.5 Review of department records relating to the debt.
33.6 Hearings.
33.7 Obtaining the services of a hearing official.
33.8 Voluntary repayment agreement in lieu of salary offset.
33.9 Special review.
33.10 Procedures for salary offset.
33.11 Salary offset when the Department is the creditor agency but 
not the paying agency.
33.12 Salary offset when the Department is the paying agency but not 
the creditor agency.
33.13 Interest, penalties, and administrative costs.
33.14 Non-waiver of rights.
33.15 Refunds.
33.16 Additional administrative collection action.

    Authority: 5 U.S.C. 5514; 5 CFR Part 550, Subpart K.


Sec.  33.1  Purpose, authority and scope.

    (a) Purpose. This part prescribes the Department's standards and 
procedures for the collection of debts owed by federal employees to the 
United States through involuntary salary offset.
    (b) Authority. 5 U.S.C. 5514; 5 CFR Part 550, subpart K;
    (c) Scope. (1) This part applies to internal and Government-wide 
collections of debts owed by Federal employees by administrative offset 
from the current pay account of the debtor without his or her consent.
    (2) The procedures contained in this part do not apply to any case 
where an employee consents to collection through deduction(s) from the 
employee's pay account, or to debts arising under the Internal Revenue 
Code or the tariff laws of the United States, or where another statute 
explicitly provides for, or prohibits, collection of a debt by salary 
offset (e.g., travel advances in 5 U.S.C. 5705 and employee training 
expenses in 5 U.S.C. 4108).
    (3) This part does not preclude an employee from requesting waiver 
of an erroneous payment under 5 U.S.C. 5584, 10 U.S.C. 2774, or 32 
U.S.C. 716, or in any way questioning the amount or validity of a debt, 
in the manner prescribed by the Secretary. Similarly, this part does 
not preclude an employee from requesting waiver of the collection of a 
debt under any other applicable statutory authority.
    (4) Nothing in this part precludes the compromise of the debt, or 
the suspension or termination of collection actions, in accordance with 
part 30 of this title.


Sec.  33.2  Definitions.

    In this part--
    Administrative offset means withholding funds payable by the United 
States to, or held by the United States for, a person to satisfy a debt 
owed by the payee.
    Agency means an executive department or agency; a military 
department; the United States Postal Service; the Postal Rate 
Commission; the United States Senate; the United States House of 
Representatives; and court, court administrative office, or 
instrumentality in the judicial or legislative branches of the 
Government; or a Government Corporation.
    Creditor agency means the agency to which the debt is owed, 
including a debt collection center when acting on behalf of a creditor 
agency in matters pertaining to the collection of a debt.
    Day means calendar day. For purposes of computation, the last day 
of the period will be included unless it is a Saturday, Sunday, or a 
Federal legal holiday, in which case the next business day will be 
considered the last day of the period.
    Debt means an amount determined by an appropriate official to be 
owed to the United States from sources which include loans insured or 
guaranteed by the United States and all other amounts due the United 
States from fees, leases, rents, royalties, services, sales of real or 
personal property, overpayments, penalties, damages, interest, fines 
and forfeitures (except those arising under the Uniform Code of 
Military Justice), and all other similar sources.
    Debt collection center means the Department of the Treasury or 
other Government agency or division designated by the Secretary of the 
Treasury with authority to collect debts on behalf of creditor agencies 
in accordance with 31 U.S.C. 3711 (g).
    Debtor means a federal employee who owes a debt to the United 
States.
    Delinquent debt means a debt which the debtor does not pay or 
otherwise resolve by the date specified in the initial demand for 
payment, or in an applicable written repayment agreement or other 
instrument, including a post-delinquency repayment agreement.
    Department means the Department of Health and Human Services, its 
Staff Divisions, Operating Divisions, and Regional Offices.
    Disposable pay means that part of the debtor's current basic, 
special, incentive, retired, and retainer pay, or other authorized pay, 
remaining after deduction of amounts required by law to be withheld. 
For purposes of calculating disposable pay, legally required deductions 
that must be applied first include: tax levies pursuant to the Internal 
Revenue Code (title 26, United States Code); properly withheld taxes, 
FICA, Medicare; health and life insurance premiums; and retirement 
contributions. Amounts deducted under garnishment orders, including 
child support garnishment orders, are not legally required deductions 
for calculating disposable pay.
    Employee means any individual currently employed by an agency, as 
defined in this section, including seasonal and temporary employees and 
current members of the Armed Forces or a Reserve of the Armed Forces 
(Reserves).
    Evidence of service means information retained by the Department 
indicating the nature of the document to which it pertains, the date of 
mailing the document, and the address and name of the debtor to whom it 
is being sent. A copy of the dated and signed written notice of intent 
to offset provided to the debtor pursuant to this part may be 
considered evidence of service for purposes of this part. Evidence of 
service may be retained electronically so long as the manner of 
retention is sufficient for evidentiary purposes.
    Hearing means a review of the documentary evidence to confirm the 
existence or amount of a debt or the terms of a repayment schedule. If 
the Secretary determines that the issues in dispute cannot be resolved 
by such a review, such as when the validity of the claim turns on the 
issue of credibility or veracity, the Secretary may provide an oral 
hearing.
    Hearing official means a Departmental Appeals Board administrative 
law judge or appropriate alternate as outlined in Sec.  33.7(a)(2).
    Paying agency means the agency employing the individual and 
authorizing the payment of his or her current pay.
    Salary offset means an administrative offset to collect a debt 
under 5 U.S.C. 5514 owed by a federal employee through deductions at 
one or more officially established pay intervals from the current pay 
account of the employee without his or her consent.
    Secretary means the Secretary of Health and Human Services, or the 
Secretary's designee within any Staff Division, Operating Division or 
Regional Office.
    Waiver means the cancellation, remission, forgiveness, or non-
recovery of a debt owed by an employee to this Department or another 
agency as

[[Page 42025]]

required or permitted by 5 U.S.C. 5584, 8346 (b), 10 U.S.C. 2774, 32 
U.S.C. 716, or any other law.


Sec.  33.3  General rule.

    (a) Whenever a delinquent debt is owed to the Department by an 
employee, the Secretary may, subject to paragraphs (b) through (d) of 
this section, involuntarily offset the amount of the debt from the 
employee's disposable pay.
    (b) Unless provided by another statute pertaining to a particular 
type of debt (i.e. 42 U.S.C. 292r, Health professionals education, 42 
U.S.C. 297c, Nurse education), the Department may not initiate salary 
offset to collect a debt more than 10 years after the Government's 
right to collect the debt first accrued, unless facts material to the 
Government's right to collect the debt were not known and could not 
reasonably have been known by the official or officials of the 
Government who were charged with the responsibility to discover and 
collect such debts.
    (c) Except as provided in paragraph (d) of this section, prior to 
initiating collection through salary offset under this part, the 
Secretary must first provide the employee with the following:
    (1) Written notice of intent to offset as described in Sec.  33.4; 
and
    (2) An opportunity to petition for a hearing, and, if a hearing is 
provided, to receive a written decision from the hearing official 
within 60 days on the following issues:
    (i) The determination of the Department concerning the existence or 
amount of the debt; and
    (ii) The repayment schedule, unless it was established by written 
agreement between the employee and Department.
    (d) The provisions of paragraph (c) of this section do not apply 
to:
    (1) Any adjustment to pay arising out of an employee's election of 
coverage or a change in coverage under a federal benefits program 
requiring periodic deduction from pay, if the amount to be recovered 
was accumulated over four pay periods or less;
    (2) A routine intra-agency adjustment of pay that is made to 
correct an overpayment of pay attributable to clerical or 
administrative errors or delays in processing pay documents, if the 
overpayment occurred within the four pay periods preceding the 
adjustment and, at the time of such adjustment, or as soon thereafter 
as practical, the individual is provided written notice of the nature 
and the amount of the adjustment and point of contact for contesting 
such adjustment; or
    (3) Any adjustment to collect a debt amounting to $50 or less, if, 
at the time of such adjustment, or as soon thereafter as practical, the 
individual is provided written notice of the nature and the amount of 
the adjustment and a point of contact for contesting such adjustment.


Sec.  33.4  Notice requirements before offset.

    (a) At least 30 days before the initiation of salary offset under 
this part, the Secretary shall mail, by first class mail, to the 
employee's last known address, a written notice informing the debtor of 
the following:
    (1) The Secretary has reviewed the records relating to the debt and 
has determined that a debt is owed, the amount of the debt, and the 
facts giving rise to the debt;
    (2) The Secretary's intention to collect the debt by means of 
deduction from the employee's current disposable pay account until the 
debt and all accumulated interest, penalties, and administrative costs 
are paid in full;
    (3) The amount, stated either as a fixed dollar amount or as a 
percentage of pay not to exceed 15 percent of disposable pay, the 
frequency, the commencement date, and the duration of the intended 
deductions;
    (4) An explanation of the Department's policies concerning the 
assessment of interest, penalties, and administrative costs, stating 
that such assessments must be made unless waived in accordance with 31 
CFR 901.9 and Sec.  30.18 of this title;
    (5) The employee's right to inspect and copy all records of the 
Department pertaining to the debt, or if the employee or the employee's 
representative cannot personally inspect the records, to request and 
receive copies of such records;
    (6) If not previously provided, the opportunity to establish a 
schedule for the voluntary repayment of the debt through offset, or to 
enter into an agreement to establish a schedule for repayment of the 
debt in lieu of offset, provided the agreement is in writing, signed by 
both the employee and the Department, and documented in the 
Department's files;
    (7) The right to a hearing conducted by an impartial hearing 
official with respect to the existence and amount of the debt, or the 
repayment schedule, so long as a petition is filed by the employee as 
prescribed in Sec.  33.6;
    (8) Time limitations and other procedures or conditions for 
inspecting Department records pertaining to the debt, establishing an 
alternative repayment agreement, and requesting a hearing;
    (9) The name, address, and telephone number of the person or office 
within the Department who may be contacted concerning the procedures 
for inspecting Department records, establishing an alternative 
repayment agreement and requesting a hearing;
    (10) The name and address of the office within the Department to 
which the petition for a hearing should be sent, which generally will 
be the Operating Division or Staff Division responsible for collecting 
the debt;
    (11) A timely and properly filed petition for a hearing will stay 
the commencement of the collection proceeding;
    (12) The Department will initiate action to effect salary offset 
not less than 30 days from the date of mailing the notice of intent, 
unless the employee properly files a timely petition for a hearing,
    (13) A final decision on a hearing, if one is requested, will be 
issued at the earliest practical date, but not later than 60 days after 
the filing of the petition requesting the hearing unless the employee 
requests and the hearing official grants a delay in the proceeding;
    (14) Knowingly false or frivolous statements, representations or 
evidence may subject the employee to:
    (i) Disciplinary procedures appropriate under chapter 75 of title 
5, United States Code; part 752 of title 5, Code of Federal 
Regulations; or any other applicable statutes or regulations;
    (ii) Penalties under the False Claims Act, 31 U.S.C. 3729-3731, or 
under any other applicable statutory authority; and
    (iii) Criminal penalties under 18 U.S.C. 286, 287, 1001, and 1002, 
or under any other applicable statutory authority;
    (15) Any other rights and remedies available to the employee under 
statutes or regulations governing the program for which the collection 
is being made;
    (16) Unless there are applicable contractual or statutory 
provisions to the contrary, amounts paid on or deducted for the debt, 
which are later waived or found not owed to the United States, will be 
promptly refunded to the employee; and
    (17) Proceedings with respect to such debt are governed by 5 U.S.C. 
5514.
    (b) The Secretary will retain evidence of service indicating the 
date of mailing of the notice.


Sec.  33.5  Review of department records relating to the debt.

    (a) To inspect or copy Department records relating to the debt, the 
employee must send a written request to

[[Page 42026]]

the Department official or office designated in the notice of intent to 
offset stating his or her intention. The written request must be 
received by the Department within 15 days from the employee's receipt 
of the notice.
    (b) In response to a timely request as described in paragraph (a) 
of this section, the designated Department official shall notify the 
employee of the location and time when the employee may inspect and 
copy such records. If the employee or employee's representative is 
unable to personally inspect such records as the result of geographical 
or other constraints, the Department shall arrange to send copies of 
such records to the employee.


Sec.  33.6  Hearings.

    (a)(1) Petitions for hearing. To request a hearing concerning the 
existence or amount of the debt or the offset schedule established by 
the Department, the employee must send a written petition to the office 
designated in the notice of intent to offset, see Sec.  33.4(a)(10), 
within 15 days of receipt of the notice.
    (2) The petition must:
    (i) Be signed by the employee;
    (ii) Fully identify and explain with reasonable specificity all the 
facts, evidence, and witnesses, if any, that the employee believes 
support his or her position; and
    (iii) Specify whether an oral or paper hearing is requested. If an 
oral hearing is requested, the request should explain why the matter 
cannot be resolved by review of the documentary evidence alone.
    (3) The timely filing of a petition for hearing shall stay any 
further collection proceedings.
    (b) Failure to timely request. (1) If the petition for hearing is 
filed after the 15-day period provided for in paragraph (a)(1) of this 
section, the Secretary may grant the request if the employee can 
establish that the delay was the result of circumstances beyond the 
employee's control, or that the employee failed to receive actual 
notice of the filing deadline.
    (2) An employee waives the right to a hearing, and will have his or 
her disposable pay offset in accordance with the offset schedule 
established by the Department, if the employee:
    (i) Fails to file a timely request for a hearing unless such 
failure is excused; or
    (ii) Fails to appear at an oral hearing, of which the employee was 
notified, unless the hearing official determines that the failure to 
appear was due to circumstances beyond the employee's control.
    (c) Form of hearings. (1) General. After the employee requests a 
hearing, the hearing official shall notify the employee of the form of 
the hearing to be provided. If the hearing will be oral, the notice 
shall set forth the date, time, and location of the hearing. If the 
hearing will be a review of the written record, the employee shall be 
notified that he or she should submit evidence and arguments in writing 
to the hearing official by a specified date, after which the record 
shall be closed. The date specified shall give the employee reasonable 
time to submit documentation.
    (2) Oral hearing. An employee who requests an oral hearing shall be 
provided an oral hearing if the hearing official determines that the 
matter cannot be resolved by review of documentary evidence alone 
because an issue of credibility or veracity is involved. Where an oral 
hearing is appropriate, the hearing is not an adversarial adjudication 
and need not take the form of an evidentiary hearing, i.e., the rules 
of evidence need not apply. Oral hearings may take the form of, but are 
not limited to:
    (i) Informal conferences with the hearing official in which the 
employee and agency representative will be given full opportunity to 
present evidence, witnesses, and arguments;
    (ii) Informal meetings in which the hearing official interviews the 
employee; or
    (iii) Formal written submissions with an opportunity for oral 
presentations.
    (3) Paper hearing. If the hearing official determines that an oral 
hearing is not necessary, the hearing official will make the 
determination based upon an review of the available written record.
    (4) Record. The hearing official shall maintain a summary record of 
any hearing conducted under this part. Witnesses who testify in oral 
hearings will do so under oath or affirmation.
    (d) Written decision. (1) Date of decision. The hearing officer 
shall issue a written opinion stating his or her decision, based upon 
documentary evidence and information developed at the hearing, as soon 
as practicable after the hearing, but not later than sixty (60) days 
after the date on which the hearing petition was received by the 
creditor agency, unless the employee requested a delay in the 
proceedings, in which case the 60-day decision period shall be extended 
by the number of days by which the hearing was postponed. The recipient 
of an employee's request for a hearing must forward the request 
expeditiously to the Departmental Appeals Board so as to not jeopardize 
the Boards's ability to issue a decision within this 60 day period.
    (2) Content of decision. The written decision shall include:
    (i) A statement of the facts presented to support the origin, 
nature, and amount of the debt;
    (ii) The hearing official's findings, analysis, and conclusions, 
including a determination whether the employee's petition for hearing 
was baseless and resulted from an intent to delay creditor agency 
collection activity; and
    (iii) The terms of any repayment schedule, if applicable.
    (e) Failure to appear. In the absence of good cause shown, an 
employee who fails to appear at a hearing shall be deemed, for the 
purpose of this part, to admit the existence and amount of the debt as 
described in the notice of intent. If the representative of the 
creditor agency fails to appear, the hearing official shall proceed 
with the hearing as scheduled and make a determination based upon oral 
testimony presented and the documentary evidence submitted by both 
parties. With the agreement of both parties, the hearing official shall 
schedule a new hearing date, and both parties shall be given reasonable 
notice of the time and place of the new hearing.


Sec.  33.7  Obtaining the services of a hearing official.

    (a)(1) When the Department is the creditor agency, the office 
designated in Sec.  33.4 (a)(10) shall schedule a hearing, if one is 
requested by an employee, before a hearing official.
    (2) When the Department cannot provide a prompt and appropriate 
hearing before an administrative law judge or a hearing official 
furnished pursuant to another lawful arrangement, the office designated 
in Sec.  33.4 (a)(10) may:
    (i) When the debtor is not an employee of the Department, contact 
an agent of the employee's paying agency designated in 5 CFR part 581, 
Appendix A, to arrange for a hearing official; or
    (ii) When the debtor is an employee of the Department, contact an 
agent of any agency designated in 5 CFR part 581, Appendix A, to 
arrange for a hearing official.
    (b)(1) When another agency is the creditor agency, it is the 
responsibility of that agency to arrange for a hearing if one is 
requested. The Department will provide a hearing official upon the 
request of a creditor agency when the debtor is employed by the 
Department and the creditor agency cannot provide a prompt and 
appropriate hearing before a hearing official furnished pursuant to 
another lawful arrangement.

[[Page 42027]]

    (2) Services rendered to a creditor agency under paragraph (b)(1) 
of this section will be provided on a fully reimbursable basis pursuant 
to the Economy Act of 1932, as amended, 31 U.S.C. 1535.
    (c) The determination of a hearing official designated under this 
section is considered to be an official certification regarding the 
existence and amount of the debt for purposes of executing salary 
offset under 5 U.S.C. 5514 and this part. A creditor agency may make a 
certification to the Secretary of the Treasury under 5 CFR 550.1108 or 
a paying agency under 5 CFR 550.1109 regarding the existence and amount 
of the debt based on the certification of a hearing official. If a 
hearing official determines that a debt may not be collected via salary 
offset, but the creditor agency finds that the debt is still valid, the 
creditor agency may still seek collection of the debt through other 
means, such as offset of other Federal payments or litigation.


Sec.  33.8  Voluntary repayment agreement in lieu of salary offset.

    (a)(1) In response to the notice of intent to offset, the employee 
may propose to establish an alternative schedule for the voluntary 
repayment of the debt by submitting a written request to the Department 
official designated in the notice of intent to offset. An employee who 
wishes to repay the debt without salary offset shall also submit a 
proposed written repayment agreement. The proposal shall admit the 
existence of the debt, and the agreement must be in such form that it 
is legally enforceable. The agreement must:
    (i) Be in writing;
    (ii) Be signed by both the employee and the Department;
    (iii) Specify all the terms of the arrangement for payment; and
    (iv) Contain a provision accelerating the debt in the event of 
default by the employee, but such an increase may not result in a 
deduction that exceeds 15 percent of the employee's disposable pay 
unless the employee has agreed in writing to deduction of a greater 
amount.
    (2) Any proposal under paragraph (a) (1) of this section must be 
received by the Department within 30 days of the date of the notice of 
intent to offset.
    (b) In response to a timely request as described in paragraph (a) 
of this section, the designated Department official shall notify the 
employee whether the proposed repayment schedule is acceptable. It is 
within the Secretary's discretion to accept a proposed alternative 
repayment schedule, and to set the necessary terms of a voluntary 
repayment agreement.
    (c) No voluntary repayment agreement will be binding on the 
Secretary unless it is in writing and signed by both the Secretary and 
the employee.


Sec.  33.9  Special review.

    (a) A Department employee subject to salary offset or a voluntary 
repayment agreement may, at any time, request a special review by the 
Secretary of the amount of the salary offset or voluntary repayment 
installments, based on materially changed circumstances, such as, but 
not limited to, catastrophic illness, divorce, death, or disability.
    (b)(1) In determining whether an offset would prevent the employee 
from meeting essential subsistence expenses, i.e., food, housing, 
clothing, transportation, and medical care, the employee shall submit a 
detailed statement and supporting documents for the employee, his or 
her spouse, and dependents indicating:
    (i) Income from all sources;
    (ii) Assets and liabilities;
    (iii) Number of dependents;
    (iv) Food, housing, clothing, transportation, and medical expenses; 
and
    (v) Exceptional and unusual expenses, if any.
    (2) When requesting a special review under this section, the 
employee shall file an alternative proposed offset or payment schedule 
and a statement, with supporting documents as described in paragraph 
(b)(1) of this section, stating why the current salary offset or 
payments result in an extreme financial hardship to the employee.
    (c)(1) The Secretary shall evaluate the statement and supporting 
documents, and determine whether the original offset or repayment 
schedule imposes extreme financial hardship on the employee.
    (2) Within 30 calendar days of the receipt of the request and 
supporting documents, the Secretary shall notify the employee in 
writing of such determination, including, if appropriate, a revised 
offset or repayment schedule.
    (d) If the special review results in a revised offset or repayment 
schedule, the Secretary shall provide a new certification to the paying 
agency.


Sec.  33.10  Procedures for salary offset.

    (a) Method and source of deductions. Unless the employee and the 
Secretary have agreed to an alternative repayment arrangement under 
Sec.  33.8, a debt shall be collected in lump sum or by installment 
deductions at officially established pay intervals from an employee's 
current pay account.
    (b) Limitation on amount of deduction. Ordinarily, the size of 
installment deductions must bear a reasonable relationship to the size 
of the debt and the employee's ability to pay. However, the amount 
deducted for any pay period must not exceed 15 percent of the 
disposable pay from which the deduction is made, unless the employee 
has agreed in writing to the deduction of a greater amount.
    (c) Duration of deductions. (1) Lump sum. If the amount of the debt 
is equal to or less than 15 percent of the employee's disposable pay, 
the debt generally will be collected in one lump-sum deduction.
    (2) If the employee is financially unable to pay in one lump-sum or 
the amount of the debt exceeds 15 percent of the employee's disposable 
pay for an officially established pay interval, the debt shall be 
collected in installments. Except as provided in paragraphs (e) and (f) 
of this section, installment deductions must be made over a period not 
greater than the anticipated period of active duty or employment.
    (d) When deductions may begin. (1) Deductions will begin on the 
date stated in the notice of intent, unless an alternative repayment 
agreement under Sec.  33.8 has been accepted or the employee has filed 
a timely request for a hearing.
    (2) If the employee files a timely petition for hearing as provided 
in Sec.  33.6, deductions will begin after the hearing official has 
provided the employee with a hearing and a final written decision has 
been rendered in favor of the Department.
    (e) Liquidation from final check. If an employee retires, resigns, 
or the period of employment ends before collection of the debt is 
completed, the remainder of the debt will be offset under to 31 U.S.C. 
3716 from subsequent payments of any nature (e.g., final salary payment 
or lump-sum leave) due the employee from the paying agency as of the 
date of separation.
    (f) Recovery from other payments due a separated employee. If the 
debt cannot be satisfied by offset from any final payment due the 
employee on the date of separation, the Secretary will liquidate the 
debt, where appropriate, by administrative offset under 31 U.S.C. 3716 
from later payments of any kind due the former employee (e.g., lump sum 
leave payment).


Sec.  33.11  Salary offset when the Department is the creditor agency 
but not the paying agency.

    (a) Centralized administrative offset. (1) Under 31 U.S.C. 3716, 
the Department shall notify the Secretary of

[[Page 42028]]

the Treasury of all past-due, legally enforceable debts which are 180 
days delinquent for purposes of collection by centralized 
administrative offset. This includes debts which the Department seeks 
to recover from the pay account of an employee of another agency via 
salary offset. The Secretary of the Treasury and other Federal 
disbursing officials will match payments, including Federal salary 
payments, against these debts. Where a match occurs, and all the 
requirements for offset have been met, the payments will be offset to 
collect the debt.
    (2) Prior to offset of the pay account of an employee, the 
Department must comply with the requirements of 5 U.S.C. 5514; 5 CFR 
part 550, subpart K, and this part. Specific procedures for notifying 
the Secretary of the Treasury of a debt for purposes of collection by 
administrative offset, including salary offset, are contained in 31 CFR 
parts 285 and 901 and part 30 of this title.
    (b) Non-centralized administrative offset. When salary offset 
through centralized administrative offset under paragraph (a) of this 
section is not possible, the Department may attempt to collect a debt 
through non-centralized administrative offset in accordance with part 
30 of this title.
    (1) Format of the request. Upon completion of the procedures 
established in this part and pursuant to 5 U.S.C. 5514, the Department 
shall:
    (i) Certify in writing to the paying agency that the employee owes 
the debt, the amount and basis of the debt, the date on which 
payment(s) is due, the date the Government's right to collect the debt 
first accrued, and that the Departmental regulations implementing 5 
U.S.C. 5514 have been approved by the Office of Personnel Management.
    (ii) If the collection is to be made in installments, advise the 
paying agency of the number of installments to be collected, the amount 
or percentage of disposable pay to be collected in each installment, 
and the commencement date of the installments, if a date other than the 
next officially established pay period is required.
    (iii) Unless the employee has consented in writing to the salary 
deductions or signed a statement acknowledging receipt of the required 
procedures and this written consent or statement is forwarded to the 
paying agency, advise the paying agency of the action(s) taken under 5 
U.S.C. 5514 and this part, and give the date(s) the action(s) was 
taken.
    (2) Requesting recovery from current paying agency. (i) Except as 
otherwise provided in this paragraph, the Department shall submit a 
certified debt claim containing the information specified in paragraph 
(a) of this section, and an installment agreement, or other instruction 
on the payment schedule, if applicable, to the employee's paying 
agency.
    (ii) If the employee is in the process of separating from the 
Federal government, the Department shall submit the certified debt 
claim to the employee's paying agency for collection as provided in 
Sec.  33.10(e). The paying agency must certify the total amount of its 
collection on the debt and send a copy of the certification to the 
employee and another copy to the Department. If the paying agency's 
collection does not fully satisfy the debt, and the paying agency is 
aware that the employee is entitled to payments from the Civil Service 
Retirement and Disability Fund, or other similar payments that may be 
due the employee from other Federal Government sources, the paying 
agency will provide written notification of the outstanding debt to the 
agency responsible for making such payments to the employee, stating 
the employee owes a debt, the amount of the debt, and that the 
provisions of this section have been fully complied with. The 
Department must submit a properly certified claim to the agency 
responsible for making such payments before the collection can be made.
    (iii) If the employee is already separated and all payments due 
from the employee's former paying agency have been paid, the Department 
may request, unless otherwise prohibited, that money due and payable to 
the employee from the Civil Service Retirement and Disability Fund (5 
CFR 831.1801 or 5 CFR 845.401) or other similar funds, be 
administratively offset to collect the debt. See 31 U.S.C. 3716 and 31 
CFR 901.3.
    (iv) If the employee transfers to another paying agency, the 
Department must submit a properly certified debt claim to the new 
paying agency before collection can be resumed; however, the Department 
need not repeat the due process procedures described in 5 U.S.C. 5514 
and this part. The Department shall review the debt to ensure that 
collection is resumed by the new paying agency.


Sec.  33.12  Salary offset when the Department is the paying agency but 
not the creditor agency.

    (a) Format of the request. (1) When the Department is the paying 
agency and another agency is the creditor agency, the creditor agency 
must certify, in writing, to the Department that the employee owes the 
debt, the amount and basis of the debt, the date on which payment(s) is 
due, the date the Government's right to collect the debt first accrued, 
and that the creditor agency's regulations implementing 5 U.S.C. 5514 
have been approved by the Office of Personnel Management.
    (2) If the collection is to be made in installments, the creditor 
agency must also advise the Department of the number of installments to 
be collected, the amount or percentage of disposable pay to be 
collected in each installment, and the commencement date of the 
installments, if a date other than the next officially established pay 
period is required.
    (3) Unless the employee has consented in writing to the salary 
deductions or signed a statement acknowledging receipt of the required 
procedures and the written consent or statement is forwarded to the 
Department, the creditor agency must advise the Department of the 
action(s) taken under 5 U.S.C. 5514, and give the date(s) the action(s) 
was taken.
    (b) Requests for recovery. (1) Complete claim. When the Department 
receives a properly certified debt claim from a creditor agency, 
deductions should be scheduled to begin prospectively at the next 
officially established pay interval. The employee must receive written 
notice as described in Sec.  33.10 that the Department has received a 
certified debt claim from the creditor agency, including the amount, 
and written notice of the date deductions from salary will commence and 
the amount of such deductions.
    (2) Incomplete claim. When the Department receives an incomplete 
debt claim from a creditor agency, the Secretary shall return the debt 
claim with a notice that procedures under 5 U.S.C. 5514 and 5 CFR part 
550, subpart K, must be provided and a properly certified debt claim 
received before action will be taken to collect from the employee's 
current pay account.
    (c) Review. The Secretary is not required or authorized to review 
the merits of the determination with respect to the amount or validity 
of the debt certified by the creditor agency.
    (d) Employees separating. If an employee begins separation action 
before the Department collects the total debt due the creditor agency, 
the following actions will be taken:
    (1) To the extent possible, the balance owed the creditor agency 
will be liquidated from a final salary check, or other final payments 
of any nature due the employee from the Department;
    (2) The Secretary will certify the total amount of the Department's 
collection on the debt and send a copy of the

[[Page 42029]]

certification to the employee and another copy to the creditor agency; 
and
    (3) If the Department's collection does not fully satisfy the debt, 
and the Secretary is aware that the employee is entitled to payments 
from the Civil Service Retirement and Disability Fund, or other similar 
payments that may be due the employee from other Federal Government 
sources, the Secretary will provide written notification of the 
outstanding debt to the agency responsible for making such payments to 
the employee. The written notification shall state that the employee 
owes a debt, the amount of the debt, and that the provisions of this 
section have been fully complied with. The Department shall furnish a 
copy of this written notification to the creditor agency so that it can 
file a properly certified debt claim with the agency responsible for 
making such payments.
    (e) Employees who transfer to another paying agency. If, after the 
creditor agency has submitted a debt claim to the Department, the 
employee transfers from the Department to a different paying agency 
before the debt is collected in full, the Secretary shall:
    (1) Certify the total amount of the collection made on the debt; 
and
    (2) Furnish a copy of the certification to the employee and another 
copy to the creditor agency along with notice of the employee's 
transfer.


Sec.  33.13  Interest, penalties, and administrative costs.

    Debts owed to the Department shall be assessed interest, penalties 
and administrative costs in accordance with 45 CFR 30.18.


Sec.  33.14  Non-waiver of rights.

    An employee's involuntary payment of all or any portion of a debt 
collected under this part shall not be construed as a waiver of any 
rights which the employee may have under 5 U.S.C. 5514 or any other 
provision of law or contract, unless there are statutory or contractual 
provisions to the contrary.


Sec.  33.15  Refunds.

    (a) The Secretary shall promptly refund any amounts paid or 
deducted under this part when:
    (1) A debt is waived or otherwise found not owing to the United 
States; or
    (2) The employee's paying agency is directed by administrative or 
judicial order to refund amount deducted from the employee's current 
pay.
    (b) Unless required or permitted by law or contract, refunds shall 
not bear interest.


Sec.  33.16  Additional administrative collection action.

    Nothing contained in this part is intended to preclude the use of 
any other appropriate administrative remedy.

    Dated: April 1, 2004.
Tommy G. Thompson,
Secretary.
[FR Doc. 04-15692 Filed 7-12-04; 8:45 am]
BILLING CODE 4150-26-P