B-209421 L/M, DEC 30, 1982, OFFICE OF GENERAL COUNSEL

B-209421 L/M, DEC 30, 1982, OFFICE OF GENERAL COUNSEL

PRECIS-UNAVAILABLE

RICHARD A. WROBEL, OFFICE OF THE SECRETARY:

WE REFER TO YOUR LETTER OF SEPTEMBER 27, 1982, REGARDING THE LEGALITY OF OFFSETTING INTEREST OWED FROM AN EMPLOYEE'S SALARY.

DECISIONS OF THIS OFFICE ARE GRANTED TO CERTIFYING OFFICERS ON A QUESTION OF LAW INVOLVED IN PAYMENT OF A VOUCHER PRESENTED FOR CERTIFICATION. SEE 31 U.S.C. SEC. 3529, AS CODIFIED BY PUB.L. NO. 97-258, 96 STAT. 877 (1982) (FORMERLY 31 U.S.C. SEC. 82D). SINCE WE UNDERSTAND THAT IS NOT THE CASE HERE, WE WILL NOT ISSUE A DECISION AT THIS TIME. HOWEVER, THE FOLLOWING IS PROVIDED FOR YOUR INFORMATION.

YOUR REQUEST STEMS FROM OUR DECISION IN PHILIP A. JARMACK, B-206258, JUNE 16, 1982. IN THE JARMACK CASE, WE HELD THAT AN INDEBTED EMPLOYEE MAY BE PERMITTED AN EXTENDED PAY BACK PERIOD NOT TO EXCEED THREE YEARS, AND THAT INTEREST CHARGES SHOULD BE APPLIED TO THE DEBT. THE JARMACK CASE, HOWEVER, DID NOT DISCUSS WHETHER INTEREST CHARGES COULD BE OFFSET AGAINST AN EMPLOYEE'S SALARY.

SINCE THE JARMACK DECISION WAS ISSUED, CONGRESS PASSED THE DEBT COLLECTION ACT OF 1982, PUB.L. NO. 97-365, 96 STAT. 1749 (1982), WHICH ADDRESSES THE SETOFF ISSUE. THE ACT WAS DESIGNED TO FACILITATE AND IMPROVE GOVERNMENT COLLECTION PROCEDURES. SPECIFICALLY, THE ACT REQUIRES THE ASSESSMENT OF INTEREST ON DEBTS NOT PAID TO THE GOVERNMENT WITHIN 30 DAYS, AND AUTHORIZES THE OFFSETTING OF SUCH ASSESSED INTEREST AGAINST AN EMPLOYEE'S SALARY. SEE SECTION 5 OF THE ACT AMENDING 5 U.S.C. SEC. 5514.

SECTION 11 OF THE ACT AMENDS THE FEDERAL CLAIMS COLLECTION ACT OF 1966, 31 U.S.C. SEC. 3711 AS CODIFIED BY PUB.L. NO. 97-258, CITED ABOVE, (FORMERLY 31 U.S.C. SEC. 952), BY ADDING A NEW SUBSECTION REQUIRING THE HEAD OF AN AGENCY TO:

"*** CHARGE A MINIMUM ANNUAL RATE OF INTEREST ON OUTSTANDING DEBTS ON CLAIMS OWED BY PERSONS THAT IS EQUAL TO THE AVERAGE INVESTMENT RATE FOR THE TREASURY TAX AND LOAN ACCOUNTS FOR THE TWELVE-MONTH PERIOD ENDING ON SEPTEMBER 30 OF EACH YEAR ***."

UNDER THIS SECTION, THE INTEREST CHARGED ACCRUES:

"*** FROM THE DATE ON WHICH NOTIFICATION OF THE AMOUNT DUE ON THE CLAIM IS FIRST MAILED TO THE DEBTOR *** OR *** IF SUCH NOTIFICATION WAS FIRST MAILED BEFORE THE DATE OF THE ENACTMENT OF THE DEBT COLLECTION ACT OF 1982, FROM THE DATE ON WHICH SUCH NOTIFICATION IS FIRST MAILED AFTER SUCH DATE OF ENACTMENT."

THE PROVISION FURTHER STATES, HOWEVER, THAT:

"INTEREST *** SHALL NOT BE CHARGED IF THE AMOUNT DUE ON THE CLAIM IS PAID WITHIN THIRTY DAYS AFTER THE DATE FROM WHICH INTEREST ACCRUES ***."

THUS, AN AGENCY IS NOW REQUIRED BY STATUTE TO ASSESS INTEREST ON ANY DEBT NOT PAID WITHIN THIRTY DAYS AFTER INTEREST ACCRUES. INTEREST ACCRUES UPON NOTIFICATION TO THE INDIVIDUAL OF THE AMOUNT OF HIS INDEBTEDNESS TO THE GOVERNMENT. FURTHERMORE, THE ACT PROVIDES THAT THE GOVERNMENT'S CLAIM AGAINST THE EMPLOYEE INCLUDES NOT ONLY THE UNDERLYING DEBTS BUT ANY INTEREST OWED AS WELL. SEE SECTION 13 OF THE ACT.

PRIOR TO THE ACT, THE GOVERNMENT COULD NOT WITHHOLD ANY PORTION OF AN EMPLOYEE'S SALARY TO SATISFY GENERAL DEBTS OWED TO THE GOVERNMENT WITHOUT THE EMPLOYEE'S CONSENT. BEN L. ZANE, B-194159, OCTOBER 30, 1979. AGENCIES ONLY HAD STATUTORY AUTHORITY TO USE SETOFF PROCEDURES TO COLLECT DEBT ARISING FROM "ERRONEOUS PAYMENTS" MADE TO THE EMPLOYEE. 5 U.S.C. SEC. 5514 (1976). THE DEBT COLLECTION ACT OF 1982, HOWEVER, GREATLY EXPANDS THE GOVERNMENT'S RIGHT TO USE THE SETOFF MECHANISM. SECTION 5 OF THE ACT STATES:

"*** WHEN THE HEAD OF AN AGENCY *** DETERMINES THAT AN EMPLOYEE *** IS INDEBTED TO THE UNITED STATES FOR DEBTS TO WHICH THE UNITED STATES IS ENTITLED TO BE REPAID AT THE TIME OF THE DETERMINATION BY THE HEAD OF THE AGENCY *** THE AMOUNT OF INDEBTEDNESS MAY BE COLLECTED IN MONTHLY INSTALLMENTS, OR AT OFFICIALLY ESTABLISHED PAY INTERVALS, BY DEDUCTION FROM THE CURRENT PAY ACCOUNT OF THE INDIVIDUAL ***."

THUS, AGENCIES ARE NOW AUTHORIZED TO OFFSET AGAINST AN EMPLOYEE'S CURRENT SALARY TO SATISFY HIS/HER GENERAL DEBT. MOREOVER, SINCE INTEREST CHARGES ARE REQUIRED BY THE ACT, THE GOVERNMENT'S CLAIM AGAINST THE INDIVIDUAL WOULD INCLUDE BOTH THE PRINCIPAL DEBT AND THE INTEREST ASSESSED. CONSEQUENTLY, UNDER THE DEBT COLLECTION ACT, THE INTEREST CHARGES ARE PART OF THE EMPLOYEE'S GENERAL INDEBTEDNESS TO THE GOVERNMENT, AND, THEREFORE ARE SUBJECT TO SETOFF PROCEDURES.

WE TRUST THAT THE PRECEDING INFORMATION WILL BE OF SOME ASSISTANCE TO YOU.