Statement of Dale W. Sopper,
Acting Deputy Commissioner for Finance, Assessment, and Management,
Social Security Administration
before the House Committee on Government Reform and Oversight
Subcommittee on Government Management, Information, and Technology

November 12, 1997

Mr. Chairman and Members of the Subcomminee:
Thank you for the opporrunity to come here today to discuss the Social Security Administration's (SSA) ongoing efforts to improve its debt management program. We have a long-standing commitment to debt management and are continually engaged in projects that improve our performance.

The success of our debt management program is critical to SSA's mission and to our goal to make SSA's program management the best in business. Our debt management program consists of three interrelated pieces: prevention, detection, and resolution. We limit the amount of overpaid benefits through our debt prevention initiatives; we pursue the debts that do occur; and we maximize the return to the trust funds and the U.S. Treasury.

In 1997 alone we collected more than $2 billion, returning $1.5 billion to the Old Age, Survivors, and Disability Insurance (OASDI) trust funds, $437 million to Treasury's general revenues representing Supplemental Security Income (SSI) recoveries, and $74 million to the states representing recoveries of the state supplement to SSI payments.

The Current Debt Recovery Process

Before I discuss our strategies for implementing new debt collection authorities, I would like to describe our current general process for debt recovery under which we collect debt owed to us.

When an overpayment is detected in either the OASDI program or the SSI program, a notice is sent to the individual describing the reason for the overpayment, indicating how the overpayment can be repaid, and advising the individual of his or her due process rights.

If the individual is on the benefit rolls, the lener indicates that if the overpayment is nor paid, recovery will be carried out through the offset of ongoing OASDI or SSI benefit payments, although only within the same program, i.e., we cannot enforce offset of an SSI debt by withholding an OASDI payment or vice versa. Because of the effectiveness of the benefit offset process, we can readily collect debts owed SSA when the debtor continues to be a beneficiary. In the OASDI program the rate of offset against benefits is 100 percent until recovery is completed. In the SSI program the rate of recovery against current benefits is limited to an amount equal to ten percent of the individual's monthly countable income, including the SSI benefit (the 10 percent rate that is established by statute). Both of these recovery rates are negotiable if they would create a financial hardship. The subcommittee should be aware that some SSI beneficiaries leave the rolls, and debt collection becomes much more difficult in those situations.

If the individual is not on the benefit rolls, no offset is possible. The overpayment letter, requesting repayment of the overpaid amount, indicates that the debtor should contact SSA if unable to repay in full. In this circumstance we will negotiate an installment arrangement. For those who enter into an installment arrangement we send a monthly bill for the amount due. If the individual fails to respond to the initial notice, or does not remit a monthly payment, our billing system issues a reminder notice and then a past due notice.

If these notices do not result in recovery, SSA's debt collectors attempt telephone contact. At this point, an OASDI delinquent debtor will be considered for tax refund offset. If he or she meets the criteria, SSA will send a notice advising the individual that any income tax refund due could be used to recover the overpayment, and providing an opportunity for the debtor to protest.

In general, at any point in this process, if the individual exercises his or her due process rights, we suspend recovery efforts until the matter is adjudicated.

Improvement Initiatives

I should point out that SSA has, for many years, lacked the authority to use debt collection tools available to other agencies. SSA is working diligently to make in a short time the same improvements the other agencies have had years to achieve.

In discussing SSA's plans for implementing debt collection improvement, I would like to first provide a history of debt collection legislation and its relationship to SSA's debt.

The Debt Collection Act of 1982 (DCA) authorized Federal agencies to use aggressive debt collection tools to improve performance. The collection tools authorized by this act were administrative offset of the debt against most Federal payments due, notifying credit bureaus of the individual's indebtedness, offsetting the debt against the individual's Federal salary, charging interest on the debt, and using collection agencies. This act, however , exempted SSA, both the OASDI and SSI programs, from the provisions authorizing use of these collection tools.

The Deficit Reduction Act of 1984 included a provision which authorized the Tax Refund Offset program. This legislation precluded use of this collection tool to recover any debts under the OASDI programs.

In 1990, the Omnibus Budget Reconciliation Act of 1990 (OBRA) was passed which authorized SSA to use Tax Refund Offset to collect OASDI delinquent debts. SSA implemented Tax Refund Offset in 1992.

The Domestic Employment Reform Act (DERA), passed in 1994 gave SSA limited authority to use three of the collection tools that were originally contained in DCA. These tools were credit bureau reporting, administrative offset, and use of collection agencies. The authority was limited, however, to OASDI debts where the overpaid amount was paid to the individual after the individual turned age 18, and the debt was determined to be unrecoverable under regulations issued by the Commissioner of Social Security.

Last year, the Debt Collection Improvement Act of 1996 (DCIA) provided SSA with the remaining two authorities contained in DCA with the same restrictions as set forth in DERA. That is, SSA is authorized to charge interest on overpayments and offset against Federal salaries in cases in which an OASDI overpayment was made to an individual over the age of 18 at the time the overpayment occurred, and the overpayment has been determined to be otherwise unrecoverable.

I would like to emphasize that, because we lacked for many years the statutory authority to use these collection tools, SSA is now attempting to get on an equal footing with other Government agencies.

With the authority given SSA by OBRA 1990, SSA implemented tax refund offset to recover OASDI debts beginning with the 1992 tax refund year. In subsequent years SSA made refinements to the program. Since the initial implementation in 1992, Tax Refund Offset has provided SSA with more than $140 million in collections of past due OASDI debts.

Beginning in January 1998, SSA will participate in the Treasury Offset Program, which will offset an individual's OASDI debt against most payments issued by the Treasury Department. Also in January 1998, SSA will begin referring information about debtors' delinquencies to consumer credit reporting agencies. SSA will send a notice to the individual indicating that the debt will be referred to the Treasury Department for offset against Federal payments under the Treasury Offset Program, and also advising the individual that we will report the delinquency to a credit reporting agency. The notice will also inform the debtor of their prote st rights.

These new authorities. administrative offset and credit bureau referrals, will be used only to recover OASDI debts, since there is no statutory authority to do so for SSI debts. We plan to improve collection of SSI debts by expanding the use of the Tax Refund Offset program, for which there is no statutory exclusion. On an annual basis, we recover more than $20 million through the Tax Refund Offset program. We anticipate that the combination of these new collection tool s will increase SSA's debt collections by an estimated $10 to $20 million, $6 million of which we expect to come from the expansion of tax refund offset to SSI.

Because of the differences in the statutory authorities governing how we can utilize the different debt collection authorities, we will refer 356,713 qualified cases worth $575 million for tax refund offset only. Of the tax refund offset-only cases, 277,518 cases worth $452 million are SSI cases and the remaining 79,195 cases worth $123 million are OASDI cases. Some of the OASDI cases were previously submitted for the 1997 tax refund offset program and some are being submitted for the first time.

When we implement Treasury's Offset Program for offset against Federal payments, in January 1998, we will initially refer 55,509 OASDI cases worth $282 million in overpayments. We will at the same time be referring these cases to the Internal Revenue Service (IRS) for inclusion in the 1998 tax refund offset program.

Once we have completed implementation of these current projects, we will begin efforts to implement the remaining statutory debt collection authorities available to us, namely , federal salary offs et, use of collection agencies, and interest charging. We expect to begin these efforts in the next few months.

Regulations

In your invitation to testify you requested information on the status of regulations necessary to implement the Debt Collection Improvement Act. As I mentioned earlier, SSA is diligently implementing authorities other agencies have had for many years. We are about to publish regulations that will govern the use of administrative offset and the use of consumer reporting agencies for OASDI debts, along with the definition of unrecoverable debt as required by statute. We will also issue revised regulations for the OASDI tax refund offset program that address the conversion of the program from the IRS to the Financial Management Service.

Specific provisions of the Debt Collection Improvement Act of 1996 allow for the offset of OASDI payments to recover debts owed to other Federal agencies. We are working with the Treasury Department to implement this provision and are in the process of reviewing the draft regulations that will put this provision into effect. We are working with Treasury to ensure effective data exchange between agencies so that we are able to respond to inquiries that result from offset.

Treasury Cross Servicing

Another provision of DCIA calls for referral of debts to the Treasury Department for cross servicing; that is, the Treasury Department acts as a debt collector for the agency. Debts are exempt from this provision if the debts have been referred to a debt collection center. We have submitted an application to the Secretary of the Treasury to be designated as a debt collection center for the purpose of collecting our own debts. We based this application on the existing debt collection centers that we have in place for recouping the debt that cannot be recovered through benefit offset. These centers use all of the techniques available to us. Therefore, at this point we have not referred any debts for cross servicing.

Pending Legislation

In your letter of invitation you asked that we comment on legislation pending before the subcomntittee, specifically H.R. 2063, the "Debt Collection Wage Information Act of 1997" and H.R. 2347, the "Federal Benefit Verification and Integrity Act." The Administration is studying the merits of these bills but is not prepared to take a formal position at this time. The Administration is willing to work with this committee on legislation for the purpose of creating management tools needed to ensure program integrity, effective debt collection and the protection of individual privacy rights.

Conclusion

In conclusion, I would like to restate SSA's commitment to debt management and the implementation of the relevant provisions of the Debt Collection Improvement Act of 1996. We have been conscientiously collecting Social Security-related debt since the beginning of the program. Since SSA was first authorized to participate in the tax refund offset program for OASDI, we have continuously been expanding and enhancing the use of authorized debt collection tools as they have become available to us. We will continue to implement the debt collection authorities available to us, so that we will be on an equal footing with other agencies. Thank you for the opportunity to testify before you today.