I-2-8-80.Federal Salary Offset Procedures

Last Update: 10/7/15 (Transmittal I-2-154)

A. Authority

Section 31001(z)(2) of the Debt Collection Improvement Act of 1996 (Public Law 104-134), amended section 204(f) of the Social Security Act to allow the Social Security Administration (SSA) to use Federal Salary Offset (FSO) to collect delinquent title II overpayment debts under 5 U.S.C. 5514. Section 203 of the Foster Care Independence Act of 1999 (Public Law 106-169) authorized the use of FSO to collect title XVI delinquent overpayment debts owed to SSA. See also Program Operations Manual System (POMS) GN 02201.043.

B. Description of FSO

As explained in POMS GN 02201.043, FSO is the process whereby a Federal agency withholds amounts each pay period from an employee of the Federal government who owes a delinquent debt to a Federal agency. The amount withheld is used to reduce the overpayment of the debtor. Under FSO, an agency may withhold the wages of a debtor without first obtaining a court order, and when FSO is applicable, the debtor's Federal employer is required to withhold up to 15 percent of the debtor's disposable pay each pay period.

A detailed description of the procedures SSA uses when a Federal employee owes a debt to SSA and is delinquent in repaying the debt is set forth in POMS GN 02201.043 and GN 02201.044.

C. Office of Hearings Operations (OHO) Responsibility in FSO Actions

As explained in POMS GN 02201.043, when SSA intends to take an FSO action, it sends the debtor a written notice explaining that FSO will begin 30 days after the date of the notice unless the debtor contacts the agency to pay the balance in full, makes an installment payment agreement, or requests review or waiver of collection. In the notice, SSA informs the debtor that he or she has the right to request review of the existence and amount of the debt and terms of repayment or to ask SSA to lower the amount it would withhold from his or her Federal pay because it would cause hardship.

If the debtor requests review of the debt or asks to lower the amount of withholding based on hardship, OHO's Office of the Chief Administrative Law Judge (OCALJ) has the responsibility to conduct the review. For more information about how the debtor must submit the request and how SSA handles requests that the debtor does not submit within 30 days, see POMS GN 02201.043A.6.

NOTE:

If the debtor is not a Federal employee, FSO does not apply. OCALJ has no authority to conduct a review relating to administrative wage garnishment (AWG) of non-Federal employees. If an AWG case is erroneously sent to OCALJ, it will return the case to the servicing field office (FO) for processing pursuant to POMS GN 02201.040.

The reviewing official in OCALJ will review SSA's records and any documents, written statements, or other evidence submitted by the debtor and issue written findings in accordance with 20 CFR 422.317(e). OCALJ will complete the review within 60 calendar days of receiving the request and the debtor's evidence.

NOTE:

Completing review within 60 days is very important. If the reviewing official does not complete the review within the 60-day period and the debt was referred to the Department of the Treasury for FSO, SSA must notify the Department of the Treasury to suspend FSO.

D. OCALJ Instructions for Processing FSO Cases

1. Reviewing the Existence or Amount of Debt

The FO or the Mid America Program Service Center-Debt Management Section (MAMPSC-DMS) is responsible for collecting all evidence and documentation submitted by the debtor and for sending the information to OCALJ for adjudication. Upon receipt of the file, OCALJ staff will first ensure that the file is complete. POMS GN 02201.044 B.4.a. outlines the information that must be in the file in order for OCALJ to adjudicate the case. If any required information is missing from the file, OCALJ will contact the FO or MAMPSC-DMS by email to request the missing information.

As explained in POMS GN 02201.043A.6.a., OCALJ's review of the existence or amount of a debt is very limited in its scope. If evidence is not in the record, the debtor must present evidence that he or she does not owe all or part of the debt, does not owe the debt in the amount claimed by SSA, or that SSA is precluded from collecting the debt (e.g., the debt is subject to a bankruptcy petition or discharge). After evaluating all the evidence and statements provided by the debtor, a designated reviewing official in OCALJ will issue a formal written decision setting forth the nature and origin of the debt, an analysis of the facts, and the reviewing official's findings and conclusions regarding the amount and validity of the debt (as applicable). When OCALJ issues the findings decision, it is the final action on the debtor's request for review. No further appeal rights exist.

MAMPSC-DMS is responsible for follow up on adjudication of FSO reviews. Therefore, once the reviewing official has approved the decision, OCALJ staff will fax a copy of the decision to the MAMPSC-DMS at 877-311-8738.

2. Reviewing Requested Reduction in FSO Due to Financial Hardship

If a debtor's request for a lower withholding based on hardship can be granted immediately, the FO or payment center will immediately process the request without the involvement of OHO or the Office of Analytics, Review, and Oversight (OARO). For more information about hardship requests that can be immediately approved, see POMS GN 02201.044B.5. However, if SSA cannot immediately grant the debtor's request for a lower withholding based on hardship, OCALJ has the responsibility to review the request.

NOTE:

If OCALJ mistakenly receives a hardship request that can be immediately approved, it will return the case to the forwarding component, citing POMS GN 02201.044.

When a hardship reduction request cannot be immediately approved, the FO or MAMPSC-DMS is responsible for collecting all evidence and documentation submitted by the debtor and for sending the information to OCALJ for adjudication. Upon receipt of the file, OCALJ staff will first ensure that the file is complete. POMS GN 02201.044B.7.b. outlines the information that must be in the file in order for OCALJ to adjudicate the case. If any required information is missing from the file, OCALJ will contact the FO or MAMPSC-DMS by email to request the missing information, noting the file must be returned for further development if the information is not provided.

On receipt of a complete file, OCALJ will evaluate whether to reduce the amount or percentage of FSO withholding based on financial hardship. The OCALJ reviewing official will consider the following factors in making a decision:

  • Financial hardship exists when the debtor shows that withholding a particular amount from his or her pay would deprive him or her of income necessary to meet ordinary and necessary living expenses. “Ordinary and necessary living expenses” include fixed expenses such as food, clothing, housing, utilities, maintenance, insurance, tax payments, medical, hospitalization and similar expenses, expenses for the support of others for whom the debtor is legally responsible, and other reasonable and necessary miscellaneous expenses that are part of the debtor's standard of living.

  • Allegations of financial hardship are insufficient. The debtor must provide tangible evidence to document his or her financial resources and expenses.

  • SSA cannot reduce withholding to less than $10 per pay period.

  • SSA will not reduce the amount of FSO withholding if the debt was caused by the debtor's intentional false statement or willful concealment of or failure to furnish material information. See POMS GN 02201.044B.5. Willful concealment means an intentional, knowing, and purposeful delay in providing or failure to furnish material information. For more information, see POMS GN 02201.050 and GN 02201.055.

After evaluating all the evidence and statements provided by the debtor, the reviewing official will issue a decision setting forth the nature and origin of the debt, an analysis of the facts, and the reviewing official's findings and conclusions regarding the amount and validity of the debt, specifically explaining whether the request for reduction in FSO withholding is approved or denied based on financial hardship. If the reviewing official finds the evidence supports a finding of financial hardship and reduction in the withholding amount, he or she will also set forth in the decision the new withholding amount and repayment schedule. When OCALJ issues the findings decision, it is the final action on the debtor's request for review. No further appeal rights exist. For more information, see POMS GN 02201.043A.5.-6.

MAMPSC-DMS is responsible for follow up on adjudication of FSO reviews. Therefore, once the reviewing official has approved the decision, OCALJ staff will fax a copy of the decision to MAMPSC-DMS at 877-311-8738.