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LRPs for NIH Employees - Intramural Programs
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Breach of Contract
In accordance with 42 USC 254o, which addresses enforcement of the National Health Service Corps LRP contract
(legislation establishing the NIH LRPs stipulates that certain provisions of the NHSC LRP are applicable to the
NIH LRPs), any participant who fails to complete the minimum 2-year (or 3-year for General Research LRP)
service obligation required under the terms of their initial contract will
be considered to have breached such contract. If you have breached your NIH LRP contract you are not eligible to apply again to the program.
Contracts Starting Prior to October 1, 2003
The NIH is entitled to recover from participants who have breached their LRP contract the sum of:
- Amounts paid by the NIH to the participant or the participant's lenders on their behalf, and
- The product of the number of months of obligated service not completed multiplied by $1,000; unless the date of breach is prior to completion of one year of service, in which case the number of months in the full period of obligated service is multiplied by $1,000.
Additionally, the NIH shall recover from the Department of the Treasury the total of Federal tax payments made by the NIH for credit of the participant's tax account at the IRS in the same calendar year as the breach of contract, unless Form 1099-G “Certain Government Payments” for such calendar year had been transmitted to the IRS.
Any amount the NIH is entitled to recover shall be paid within the one-year period beginning on the date of the breach of contract.
The following examples apply to each of the LRPs (intramural 42 USC 288-1 and 42 USC 288-3; extramural 42 USC 288-2, 42 USC 288-5, 42 USC 288-5a, and 42 USC 288-6):
Example 1: Dr. Jones' repayable debt was $123,000 at the beginning of her two-year LRP contract and her quarterly payment amount was set at $7,687.50. She decides to leave the program after 10½ months, during which time NIH had made three equal quarterly loan payments on her behalf. The NIH determines there is a breach of contract with an unserved obligation penalty. Dr. Jones is liable for the $23,062.50 repayment benefit she received plus a $24,000 penalty ($1,000 * 24 months) for a total of $47,062.50. Additionally, the NIH would recover any Federal tax payments made during the calendar year of the breach from the Department of the Treasury.
Example 2: Dr. Jones' repayable debt was $165,000 at the beginning of her two-year LRP contract and her quarterly payment amount was set at $8,750. She decides to leave the program after completing her 15th month of research service, during which time NIH had made five equal quarterly payments. The NIH determines there is a breach of contract with an unserved obligation penalty. Four of the payments went to her lenders and one was to Dr. Jones to partially reimburse payments she made to her lenders during her LRP contract. Dr. Jones is liable for the $43,750 repayment benefit she received plus a $9,000 penalty ($1,000 * 9 months) for a total of $52,750. Additionally, the NIH would recover any Federal tax payments made during the calendar year of the breach from the Department of the Treasury.
A participant's breach of contract liability to the NIH may be released by a discharge in bankruptcy under Title 11 of the United States Code only if such discharge is granted after the expiration of the 5-year period beginning on the first date that payment of such damages is required, and only if the bankruptcy court finds that nondischarge of the obligation would be unconscionable.
Damages Payable in One Year
Any amount which the United States is entitled to recover due to a breach of contract must be paid within one year from the date of the breach, unless a longer period is specifically authorized by the Secretary.
Effects of Delinquency in Paying Damages
Collection agencies may be utilized when payment of damages in excess of $100 is delinquent by more than 60 days.
Discharge in Bankruptcy
Any obligation of the participant for payment of damages may be released by a discharge in bankruptcy under Title 11 of the United States Code only if such discharge is granted after expiration of the five-year period beginning on the first date that payment of such damages is required, and only if the bankruptcy court finds that non-discharge of the obligation would be unconscionable.
Waiver of Service Obligation or Penalties
A partial or total waiver of the service obligation, the payment obligation, or recovery of damages may be granted by the Secretary when compliance by the participant is impossible; would involve extreme hardship; or where enforcement with respect to the individual would be unconscionable.
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