Collection of Debts: Statute of Limitations on Administrative Setoff

An opinion was requested as to whether the statute of limitations restricts an agency's authority to use the setoff procedure to collect on claims against money held for an individual. GAO contends that the Government has the right to collect the indebtedness of its employees by setoff against monies owed to the employee even if direct action to collect the debt would be barred by the statute of limitations. A memorandum opinion from the Assistant Attorney General of the Department of Justice (DOJ) opposed this view by stating that if there is no possibility of obtaining a judgment on the debt, administrative offset could not be used as a "prejudgment attachment device." DOJ was of the opinion that the statute of limitations was intended to allow repose to stale debts except where the debtor initiates and prevails in a claim against the United States, and that allowing administrative setoff of time-barred debts where the debtor has not filed a claim would render the statute ineffective. Furthermore, DOJ held that where a person seeks to dispute an offset, his action does not constitute a claim against the United States. GAO disagreed, holding that a debtor's action in challenging an offset does constitute a claim against the Government. Based upon common-law right long recognized by the courts, the Government has the administrative right to setoff for employee indebtedness against annuity payments or refund of retirement contribution. However, the Government may not withhold current salary to satisfy general debts owed by the employee and may not setoff against the employee's retirement account until the employee withdraws the contribution or claims the annuity.