Treasury Offset Program for Unemployment Insurance Compensation Debts

Transcription

1 2012 National UI Directors Conference and IT/Legal Issues Forum October 25, 2012 Treasury Offset Program for Unemployment Insurance Compensation Debts Thomas Kobielus Manager Treasury Offset Division-TOP Relations Branch Debt Management Services

2 Treasury Offset Program TOP is a centralized offset process that intercepts Federal and State payments of payees who owe delinquent debts to Federal agencies and States that have submitted their debt information to FMS Offset is withholding funds payable by the United States to a person to satisfy a debt owed to the United States or to a state Centralized offset is the offset of payments disbursed by FMS and other Federal disbursing agencies through the TOP 2

3 What is the Treasury Offset Program (TOP)? TOP is one of the largest and most effective tools in collecting delinquent debts for Federal and State agencies: Debts owed to the United States (tax & non-tax) Child support obligations enforced by state agencies State income tax debts DOL Unemployment Insurance Compensation Debts Other State debts through the State Reciprocal Program 3

4 How Does the Treasury Offset Program Work? Federal and state agencies submit eligible debts to TOP and certify that debts are valid, delinquent, and legally enforceable, and that all due process prerequisites have been met The required amount of due process depends on the payment being offset and the debt being collected. Due process prerequisites include: 60-day prior notice to debtor Opportunity to dispute the debt Dear Debtor You owe $$$ 4

5 How Does the Treasury Offset Program Work? Cont. TOP compares payee names and Taxpayer Identification numbers (TINs) on Federal payment certification vouchers to names and TINs of debtors in TOP s debtor database A TIN is a individual s Social Security Number or a business Federal Employer Identification Number When a match occurs on both, TOP intercepts, or offsets, all or part of a payee s eligible Federal or State payment FMS notifies the debtor/payee with a notice of offset letter. FMS notifies the creditor agency/state via batch collection file and/or on-line client report. 5

6 Treasury Offset Program Legal Authorities 6

7 Laws, Regulations and Guidance that Apply to Debt Collection The Debt Collection Authority Hierarchy STATUTES Agency Statutes Federal Claims Collection Act Debt Collection Act of 1982 Deficit Reduction Act of 1984 Debt Collection Improvement Act of 1996 REGULATIONS Agency Regulations Treasury Regulations (31 CFR part 285) OPM Salary Offset Regulations (5 CFR part 550) Federal Claims Collection Standards (31 CFR parts ) GUIDANCE OMB Circular No. A-129 Managing Federal Receivables Agency Policies Guide to the Federal Credit Bureau Program 7

8 Government-wide Regulatory References Offset Tax Refund Offset/Federal Debt FMS Regulations (31 CFR 285.2) Administrative Offset/Federal Debt FMS Regulations (31 CFR 285.5) Tax Refund Offset/Child Support FMS Regulations (31 CFR 285.3) Administrative Offset/Child Support FMS Regulations (31 CFR 285.1) 8

9 Government-wide Regulatory References Offset (Cont d) Tax Refund Offset (TRO) / State Income Tax Debt FMS Regulations (31 CFR 285.8) State Reciprocal Offset FMS Regulations (31 CFR 285.6) TRO / DOL Unemployment Compensation Debts FMS Regulations (31 CFR Part 285.8) 9

10 TOP Legal Authorities Various statutes govern the TOP process depending upon the type of payment offset and the type of debt collected 10

11 Treasury Offset Program- Legal Authorities Type of Payment Offset/Levy Type of Debt Collected Statutory Authority Regulatory Authority Amount Deducted Federal tax refund Federal non-tax debts 26 U.S.C. 6402(d) 31 U.S. C. 3720A 31 CFR Creditor agency regulations 100% Federal tax refund Child support debts 26 U.S.C. 6402(c) 42 U.S.C CFR CFR HHS procedures 100% Federal tax refund State income tax debts 26 U.S.C. 6402(e) 31 CFR % Federal tax refund Unemployment compensation debts 26 U.S.C. 6402(f) 31 CFR % Social Security, Black Lung, & Railroad Retirement (benefit payments) Federal non-tax debts (may not be offset to collect child support or other debts owed to States) 31 U.S.C CFR Lesser of 15%, or amount over $750 Federal salary payments Federal non-tax debts 5 U.S.C U.S.C CFR CFR Creditor agency regulations 15% Federal salary payments Child support debts 31 U.S.C. 3716(h) 31 CFR State law & regulations HHS procedures 50%-65% Federal non-tax non-salary non-benefit (includes civil service retirement, travel, vendor, etc.) Federal non-tax debts 31 U.S.C Federal Claims Collection Standards (31 CFR Parts ) 31 CFR Creditor agency regulations 100%, except as otherwise provided by law (25% for retirement) Federal non-tax non-salary non-benefit (includes civil service retirement, travel, vendor, etc.) Child support debts 31 U.S.C. 3716(h) 31 CFR State law & regulations HHS procedures Exec. Order %, except as otherwise provided by law (25% for retirement) Federal non-tax, non-benefit State debts 31 U.S.C. 3716(h) 31 CFR %, except as otherwise provided by law Tax levy of non-tax Federal payments Federal tax debts 26 U.S.C. 6331(h) 26 CFR et seq % 100% for certain vendor payments

12 Treasury Offset Program Debts 12

13 Priority of Debts in TOP Order of Offset IRS Income Tax Debts Child Support Debts Federal Non-Tax Debts State Debts When more than one debt is submitted for the same debtor, TOP applies funds collected in accordance with priorities set by statute and policy If a debtor has two or more debts of the same priority, TOP applies funds to the oldest debt first 13

14 General Rules For All Debts Submitted to TOP (31 CFR Part 285, Subpart A) Debts must be: Delinquent & legally enforceable $25 or more, except for salary offset purposes, where the debt must be at least $100 State Debts must be less than 10 years old (except UIC Debts). 14

15 General Rules For All Debts Submitted to TOP Creditor agency must submit certification with debts Accomplished electronically if agency signs annual agreement to certify debts Certified for the life of the debt; agency responsible for inactivating debts if they become ineligible for TOP (bankruptcy, debt paid in full) Certification states that debt meets eligibility requirements and that all due process prerequisites, including state law prerequisites, have been met TOP sends notice of any offset to the debtor Notice includes date and amount of offset, creditor agency to which offset money was sent, and contact point within the creditor agency 15

16 Unemployment Compensation Debt Offset Program 16

17 Highlights Regulations for the offset of tax refund payments to collect unemployment compensation debts owed to States was published Friday, January 28, 2011, in the Federal Register. On February 14, 2011, FMS began accepting the referral of unemployment compensation debt from states. As of the beginning of September 2012, 16 states and the District of Columbia are participating, with more than $158 million in tax refund offsets collected. 17

18 SSI Extension for Elderly and Disabled Refugees Act (PL ) Original legislation allowed states to refer delinquent unemployment compensation debts due to fraud to TOP for offset against Federal tax refund payments only. 18

19 Claims Resolution Act of 2010 (H.R. 4783) Expanded program to allow states to recover: Non-fraud overpayments Uncollected contributions Associated penalties/interest if the Unemployment Compensation (UC) debt is due to failure to report earnings or delinquent contributions 19

20 Claims Resolution Act of 2010 (H.R. 4783) There is no longer a statute of limitations on the use of TOP for recovering UIC debts older than 10 years The address on the individual s income tax return does NOT need to be within the state seeking the offset The state does NOT need to send the due process notice to the debtor by certified mail return receipt requested 20

21 Program Requirements States must have an approved Safeguard Procedures Report (SPR) before they can begin the program in TOP. States must send 60-day notice to debtors. States must complete the following FMS forms: Certification Agreement Agency Profile Input Form Security Access Request Form ACH Vendor/Miscellaneous Payment Enrollment form 21

22 Safeguard Procedures Report When ready to begin SPR, send meeting request to For SPR approval by January 2013, SPR must have been submitted by September 2012 State cannot implement program without written approval of SPR by IRS 22

23 Managing UIC Debts in TOP Batch Processing Record Type 1 (Debt/Debtor Information) Record Type 2 (Debtor Address Information) Record Type 4 (Alias Name Information) Record Type 6 (Bypass Indicators / Overrides) Collection File TOP Web Client 23

24 Managing UIC Debts Transferring Batch Files Connect:Direct (C:D) Connect:Enterprise (C:E) Cyberfusion (CF) 24

25 TOP Fee Treasury charges a fee for all tax refund offsets and administrative offsets. For FY 2013, the fee for both will be $17.00 per offset for UIC debts. 25

26 Accounting Each state must provide an accounting contact to FMS Determine if reversals are to be sent as debit or netted from credit amount Authorization Agreement for Preauthorized Payments form (Automatic Bank Debit) to set up a preauthorized debits Contact FMS 30 days prior to implementation to perform preliminary test to ensure no issues with funds transfer Complete ACH Vendor/Miscellaneous Payment Enrollment form for FMS 26

27 Lessons Learned Work project streams concurrently for faster implementation. Determine mode of file transfer early in development stage to begin approval process Connect:Direct Connect:Enterprise Cyberfusion Web Client Allow 30 days to receive security FOBs. Consult state legal counsel when preparing 60-day notice letter. 27

28 TOP program will reduce the Debt Balance upon offset States do NOT need to adjust balances in TOP to account for offset Allow for proper time for programming at State level For batch testing, use file produced by state system and not manually created file Submit FMS forms 30 days in advance. Lessons Learned Agency profile ACH form Security Access Requests and TOP Rules of Behavior File transfer forms (C:D, C:E, CF) Debt Certification (last form to send) Take advantage of ACH testing with FMS. 28

29 Contacts IRS SPR: Barbara Graham Department of Labor: Paul Bankes FMS Program Lead: Sheila Moss FMS Technical Lead: Becky Park FMS Testing Manager: Sahki Xaba

30 Questions????? 30