The Office of Legislative
and Public Affairs

Fact Sheets

Benefit Payment Offset Program

Updated February 4, 2002

The Financial Management Service (FMS) is a bureau of the Department of the Treasury and part of its mission is to provide centralized debt collection services to most federal agencies. FMS has begun implementing two Congressionally mandated federal debt collection programs. One is designed to collect delinquent non-tax debt by adding additional payment streams and the other to collect delinquent tax debt from individuals who receive certain federal payments. This paper provides background and details on the delinquent non-tax debt collection program.

Statutory Authority: The Debt Collection Improvement Act of 1996 (DCIA) (31 USC 3716) requires the federal government to withhold or reduce certain federal payments to satisfy delinquent non-tax debts owed to the United States by payment recipients.

Rulemaking: On August 21, 1998, FMS published a notice in the Federal Register of proposed rulemaking and an interim rule concerning the reduction (“offset”) of federal benefit payments issued under the Social Security Act (other than Supplemental Security Income), part B of the Black Lung Benefits Act (governing claims for benefits filed before December 31, 1973), and any law administered by the Railroad Retirement Board (other than tier 2 payments - the portion of the annuity based exclusively on railroad service). The final rule, which was published in the Federal Register on December 23, 1998, became effective January 22, 1999. It was developed in consultation with the Social Security Administration, the Railroad Retirement Board, the Department of Labor, and the Office of Management and Budget. FMS requested comments on the rule, but none were received.

In Context: The Treasury Offset Program (TOP) is one tool used by FMS to collect delinquent debts owed to federal agencies and states including past-due child support. Currently, FMS collects non-tax debts through the offset of federal retirement payments, federal income tax refunds, vendor payments, and some federal salary payments. In addition to Social Security benefit payments, FMS will also be adding the remaining federal salary and non-Treasury disbursed payments to its offset program. With respect to Social Security benefit payments, it is to be noted that the offset of these payments is limited to satisfying federal debts, and the offset amount may not be applied to an overdue child support payment or other state debts.

Offset Process: The TOP database maintained by FMS includes delinquent debtor information submitted and updated by federal agencies that are either owed debts or are collecting debts on behalf of other federal agencies. Before a federal payment is made, FMS compares the information on the recipient with debtor information in the TOP database. If the recipient’s name and taxpayer identification number (TIN) match the name and TIN of a debtor, the payment is offset. To the extent legally allowed, the payment may be offset in whole or in part to satisfy the debt.

Implementation: As of October 1, 2001, the offset process for Social Security benefit payments was fully implemented. Before a federal agency refers a debt to FMS for collection, the federal agency provides the debtor with a notice of the intent to offset and an opportunity to review the basis for the debt. Subsequently, FMS notifies the debtor twice (at 60-day and 30-day intervals) in writing of the anticipated offset. The letters include the name of the agency to which offset amounts will be paid, and a contact within the agency who will answer questions regarding the delinquent debt. To coincide with the timing of the payment, FMS also sends the debtor an offset notice that includes the same information provided in the 60-day and 30-day warning letters as well as the amount and date of the offset. The offset remains legal even if the debtor does not receive the notices and will continue until the debt is paid.

The offset process for 44446 implemented in the following order: (1) recipients who receive an electronic funds transfer (EFT) benefit payment on a cycle basis (on the second, third, or fourth Wednesday of the month); (2) recipients who receive a benefit check payment on a cycle basis; (3) recipients who receive an EFT benefit payment on the third day of the month; and (4) recipients who receive a benefit check payment on the third day of the month.

Offset: FMS offsets only those Social Security benefit payments which individually exceed the $750 per month threshold as established under the DCIA. The amount of the offset of the Social Security benefit payment is the lesser of: the amount of the debt; an amount equal to 15% of the monthly benefit payment; or the amount, if any, by which the monthly benefit payment exceeds $750. 15% is the maximum amount that is offset from an individual’s benefit payment.

Examples:

(1) A debtor receives a monthly benefit payment of $850. The amount that is offset is the lesser of $127.50 (15% of $850) or $100 (the amount by which $850 exceeds $750). In this example, the amount that is offset is $100 (assuming the debt is $100 or more).

(2) A debtor receives a monthly benefit payment of $1,250. The amount that is offset is the lesser of $187.50 (15% of $1,250) or $500 (the amount by which $1,250 exceeds $750). In this example, the amount offset is $187.50 (assuming the debt is $187.50 or more).

(3) A debtor receives a monthly benefit payment of $650. No amount will be offset, as $650 is less than $750.

Non-tax Debt Profile: In the TOP system, the following federal agencies refer the largest dollar amount of non-tax debt to FMS for collection: the Department of Education (student loans); the Department of Agriculture (Farm Service Agency and Rural Development Agency loans and Food Stamp benefit overpayments); and the Department of Veterans Affairs (medical center services).

Outreach: FMS briefed select House and Senate subcommittees with jurisdiction over Department of the Treasury and SSA programs. This includes appropriations, oversight, and tax-writing panels. A guide for use by congressional caseworkers was prepared and distributed to all House and Senate offices. Additionally, FMS has shared program information with senior citizen organizations such as the American Association of Retired Persons, the American Association of Agencies on Aging, the National Council on Senior Citizens, as well as other ethnic and faith-based organizations.

Collections To Date: As of July 30, for calendar year 2003, there were 329,258 offsets for $35,566,579 for benefit payment offsets, a 15.9 percent increase in collections over the same time in calendar year 2002. As of July 30, there were 321,187 levies of SSA benefit payments for $42,327,567, a 52.6 percent increase in collections over calendar year 2002.