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Division of Federal Employees' Compensation (DFEC)

Procedure Manual

FECA Part 6 - Debt Management

LIST of CHAPTERS

Chapter

Subject

6-0100

Introduction

6-0200

Identifying and Calculating an Overpayment

6-0300

Initial Determinations in an Overpayment

6-0400

Final Overpayment Determinations

6-0500

Debt Liquidation

 

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Chapter 6-0100, Introduction

Paragraph and Subject

Date

Trans. No.

Table of Contents

09/18

18-04

1. Purpose and Scope

09/18

18-04

2. Legislative Authority and Regulatory Provisions

09/18

18-04

3. Basic Chronology of an Overpayment

09/18

18-04

1. Purpose and Scope.This chapter provides a summary of the overpayment process in general terms and the instructions fundamental to implementing the provisions of 5 U.S.C. § 8129 of the Federal Employees’ Compensation Act (FECA) as well as debt collection and management arising in connection with the FECA.

Detailed information pertaining to Identifying and Calculating an overpayment can be found in PM 6-0200. Initial Overpayment Actions can be found in PM 6-0300. Specific information regarding Final Overpayment Determinations is outlined in PM 6-0400. PM 6-0500 details procedures for Debt Liquidation.

An overpayment occurs when a claimant or beneficiary receives more compensation than that to which he or she is entitled. The Claims Examiner (CE) is responsible for properly identifying and calculating the overpayment, making initial determinations including administrative termination and fault findings, issuing Preliminary and Final Overpayment Determinations, and liquidating the debt, if applicable.

Debts may also be created when an entity such as a medical provider receives a duplicate payment in excess of the amount authorized under the fee schedule or payment that the Secretary determines is not appropriate under the FECA. Such debts are also subject to collection by the Office of Workers’ Compensation Programs (OWCP). The fiscal handling of such debts can be found in Part 5, Benefit Payments, as well as in FECA Bulletin 17-05 (May 8, 2017), OWCP ADMINISTRATIVE PROCESS TO COLLECT IMPROPER BILLINGS THROUGH THE DEBT COLLECTION ACT.

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2. Legislative Authority and Regulatory Provisions. The instructions in this chapter and the other chapters of Part 6 are derived from the following regulations and authorities:

a. 5 U.S.C. § 8129 authorizes the Secretary of Labor to recover overpayments because of an error of fact or law, except when an incorrect payment has been made to an individual who is without fault and the adjustment or recovery would defeat the purpose of the Act or would be against equity and good conscience. With respect to recovery, the FECA authorizes the OWCP (as designee of the Secretary of Labor) to collect overpayments from accrued compensation and continuing benefit payments.

b. Public Law 89-508, Federal Claims Collection Act of 1966 (80 Stat. 308), amended by Public Law 101-552 (1990), 31 U.S.C. § 3711(g)(1), assigns the Secretary responsibility for the collection of debts arising from the activities of the Department. It also provides the authority to compromise, terminate, or suspend collection action on debts not in excess of $100,000. In such cases, there must be no indication of fraud, and it must appear that no person liable for the claim has the present or prospective financial ability to pay any significant amount of the debt, or that the cost of collection is likely to exceed the amount of recovery. The Departmental Manual at 924(d) provides that debt collection and settlement functions are delegated to agencies with accounting and settlement procedures that are consistent with the standards outlined in PM 5-700, the Department's Manual of Administration, and procedures that are approved by the Assistant Secretary for Administration and Management.

c. Public Law 97-365, Debt Collection Act of 1982, amended several statutes, including the Federal Claims Collection Act of 1966. The Debt Collection Act authorizes Federal agencies to collect certain charges on outstanding debts, to use salary offset or administrative offset to collect claims and to use the services of private collection agencies. (Note: The Federal Claims Collection Act of 1966, as amended by the Debt Collection Act of 1982, has been codified as 31 U.S.C. 3711-3720.)

d. Public Law 104-134, Debt Collection Improvement Act of 1996, also amended several statutes, including the Debt Collection Act of 1982. See 31 U.S.C. 3711(g)(1). The Debt Collection Improvement Act provides that any non-tax debt or claim owed to the United States that has been delinquent for a period of 180 days shall be turned over to the Secretary of the Treasury, who will determine whether to collect or terminate collection actions on the debt or claim. The ‘Digital Accountability and Transparency Act of 2014’ (DATA Act) now requires federal government agencies to refer debts within 120 days. PUBLIC LAW 113–101. See 31 U.S.C. § 3716 (c)(6)(A).

e. 31 CFR Part 900-904 (Federal Claims Collection Standards) describes standards for the collection and compromise of debts, termination of agency collection, and referral of civil claims to the Department of Justice. In particular, 31 CFR 903.1(b) provides that the authority to suspend or terminate uncollectible claims in excess of $100,000, exclusive of interest, penalties and administrative costs "rests solely with the Department of Justice." Consequently, even if the OWCP believes that suspension or termination of recovery of such a debt is appropriate, the matter must be referred to the Department of Justice for determination.

f. In 29 CFR Part 20, Subparts A through D include the regulations governing credit reporting, administrative offset against funds owed to a debtor by the United States (other than salary), the FECA assessment and collection of charges, and salary offset when the debtor is a current employee of the United States. Although the Department of Labor's salary offset regulations may be applied to debts resulting from FECA overpayments, it is preferable to refer such debts to the Department of the Treasury through the National Office for resolution.

g. 20 CFR §§10.430-441 includes the regulations applicable to overpayments of compensation.

h. 31 CFR Part 285 includes the provisions for transferring delinquent debt to the Department of the Treasury for cross-servicing. Additional information is also available on the Treasury website.

i. In a case involving criminal fraud on the part of the debtor or any other party having an interest in the claim, instructions regarding compromise or termination do not apply. As provided by 31 CFR 900.3(a), only the Department of Justice has authority to compromise or terminate collection action on such claims.

j. In cases referred to the Office of Inspector General (OIG) or the U.S. Attorney for reasons other than collection of the debt, the OIG should be advised before collection action is initiated in order to evaluate whether collection action would jeopardize an ongoing investigation or a legal action in progress.

k. The Supreme Court ruling in the case of Califano v. Yamasaki, 442 U.S. 682 (1979) required that the Social Security Administration defer any measures to recover an overpaid benefit until the claimant had been notified of the overpayment, told of the right to seek reconsideration, and given an opportunity for an oral hearing on the issues of fault and waiver. Because the wording of the Social Security Administration waiver provision is similar to that in the FECA, the OWCP also provides the right to a pre-recoupment hearing to compensation claimants under the FECA. Dorothy F. Ellis, 41 ECAB 296 (1989) (OWCP determined that the holding of the Supreme Court in Califano v. Yamasaki was applicable to the recovery of overpayments under the FECA).

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3. Basic Chronology of an Overpayment. The following is a typical sequence of events when an overpayment occurs:

a. The Overpayment is Identified. Once it has been determined that a claimant or beneficiary has received more compensation than that to which he or she was entitled, an overpayment is identified and a CE is assigned the debt for proper handling. An overpayment can be identified by District Office staff upon review of the compensation history or case file, or from information received from outside parties, such as the claimant, employing agency, the Office of Personnel Management (OPM), the Department of Veterans Affairs (VA), the Social Security Administration (SSA), etc.

b. The Overpayment is Calculated. After the overpayment is identified, the CE will calculate the difference between what the individual was paid and what the individual should have been paid to determine the final overpayment amount. Any worksheets or calculations that are used as the basis for the overpayment should be placed in the case file and attached (and explained) with any overpayment decision. For additional guidance, see PM 6-0200.

c. Administrative Termination of Debt Collection.

(1) Less than $300. Debt collection actions on overpayments of less than $300 may be administratively terminated at any time after the overpayment has been identified, with no requirement to complete any of the "due process" actions described elsewhere in this chapter or the other chapters of Part 6, if the cost of further collection action would exceed the recovery expected. This action may be applied to any type of debt except those not covered by 5 U.S.C. 8129, which include:

(a) Refunds due OWCP under 5 U.S.C. § 8132 as a result of a third party settlement.

(b) Money owed OWCP as a result of a beneficiary's election of OPM retirement benefits in lieu of previously paid compensation, where the debt can be recovered from the retroactive portion of the annuity held by OPM.

If the administrative termination is in posture, the CE should prepare a memorandum to the file explaining its basis. See PM 6-0300.3 for more detailed information.

(2) Between $300 and $1,000. If the overpayment calculates to an amount less than $1,000 (but more than $300), the CE should determine whether it can be administratively terminated. This can only be done after a formal Preliminary Overpayment Determination has been issued, a decision has been made that the costs of collection are likely to exceed the amount recoverable and the overpaid individual has not requested a pre-recoupment hearing. If an administrative termination is in posture, the CE should prepare a memorandum to the file explaining its basis. See PM 6-0300.3 for more detailed information.

d. Preliminary Overpayment Determinations. Overpayments greater than $300 (and overpayments under $300 not covered by paragraph (c)(1) above) should be formally declared and a preliminary finding of overpayment issued shortly following declaration.

(1) The Preliminary Overpayment Determination includes a finding as to whether the overpaid individual was with fault or without fault in the creation of the overpayment. It should clearly explain how the overpayment was calculated, the reason the overpayment occurred and the basis for the fault finding.

(2) The Preliminary Overpayment Determination should be released using Form CA-2201 (with fault), Form CA-2202 (without fault), or equivalents.

(3) The Preliminary Overpayment Determination affords the overpaid individual 30 days to either request that the District Office issue a final decision based on the evidence of record or request a pre-recoupment hearing with the Branch of Hearings and Review (H&R). If the overpaid individual requests a pre-recoupment hearing, a Final Overpayment Determination will be issued by H&R rather than the District Office CE. The preliminary determination also provides an option to pay the overpayment in full or, if unable to pay in full, completion of Form OWCP-20, or equivalent, so that a fair repayment method can be determined. Further guidance on Preliminary Overpayment Determinations can be found in PM 6-0300.5.

e. Final Overpayment Determinations. Once 30 days have passed since the issuance of the Preliminary Overpayment Determination, in order to determine the next course of action, the CE should review the case file and debt management system to see if payment has been made towards the debt or if the overpaid individual has submitted a response to the preliminary determination.

(1) The CE should consider all information submitted since the release of the preliminary determination.

(a) If the overpaid individual repaid the debt in full, the CE should issue a letter advising the individual that the debt is closed. No Final Overpayment Determination is necessary.

(b) If the overpaid individual has submitted less than a full payment or has submitted no payment at all and has not requested a pre-recoupment hearing, the CE should issue a Final Overpayment Determination considering waiver, compromise and collection. Any administrative termination is based upon the initial balance of the debt, not any subsequent balance following a partial payment. As such, a final decision should be issued even if the individual submits partial payment resulting in a remaining debt balance of $1,000 or less.

(2) A Final Overpayment Determination carries the right to appeal to the Employees’ Compensation Appeals Board (ECAB). If the decision determines that a collectible overpayment exists, it should advise that a referral to the Department of the Treasury may occur. The decision should explain the due process requirements as outlined by the Department of the Treasury. Detailed information concerning Final Overpayment Determinations can be found in PM 6-0400.5.

(3) The Final Overpayment Determination should be released using Form CA-2223/4, Form CA-2225, Form CA-2226, Form CA-2227, or equivalents.

(a) Where the decision is made to collect the overpayment, the Final Overpayment Determination is also the first demand for payment.

(b) A second demand letter (Form CA-9001 or equivalent) should be issued after the 30th day following the Final Overpayment Determination, unless the debt has been resolved or is being collected under an established repayment schedule.

(c) If proper resolution of the debt is not achieved, a third demand letter (Form CA-9002 or equivalent) should be issued after the 30th day following the second demand letter.

(d) All of the demand letters should include the appropriate due process language required by the Department of the Treasury to avoid delays in the referral of the debt to the Department of the Treasury and to facilitate collection of the debt.

(e) Further information regarding debt liquidation can be found in PM 6-0500.

(4) After the 30th day following the third demand letter, if the debt has not been resolved, the debt should generally be evaluated for the possibility of implementing OPM offset, compromise or referral to the Department of the Treasury.

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Chapter 6-0200, Identifying and Calculating an Overpayment

Paragraph and Subject

Date

Trans. No.

Table of Contents

09/18

18-04

1. Identifying an Overpayment

09/18

18-04

2. Calculating an Overpayment

09/18

18-04

3. System Coding

09/18

18-04

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1. Identifying an Overpayment. When information is received which establishes that benefits have been overpaid, the OWCP is responsible for ensuring that an overpayment exists, that it is formally identified, and that compensation is adjusted accordingly (if applicable). Some of the most common reasons that an overpayment occurs include, but are not limited to:

a. Return to work with no wage loss or partial wage loss. The claimant is in receipt of compensation on the periodic roll and the District Office receives notification after the cutoff date that he/she returned to work with no/partial wage loss. J.V., Docket No. 15-0140 (issued November 25, 2015) (“As he received full-time wages for an eight-hour position job for the period August 6 to 23, 2014, he was not entitled to disability compensation from OWCP for this same period. Therefore, appellant received an overpayment of compensation.”) The CE will usually receive notification through correspondence or by phone from the claimant, the employing agency (such as by Form CA-3), and/or the Field Nurse or the Vocational Rehabilitation Counselor. Once confirmed, the CE should delete the claimant from the periodic roll and enter the return to work date (first date of non-entitlement). The overpayment will then be automatically calculated.

(1) If only partial wage loss exists, the CE should not rely on the automatically generated amount for determination of the overpayment amount. Rather, the CE should calculate the difference between what was paid and what should have been paid given partial wage loss in order to determine the final overpayment amount.

b. Incorrect pay rate. A compensation payment(s) was made using a higher pay rate than the claimant was entitled to receive. The CE will usually identify this type of overpayment upon review of case file documents, the compensation history, or upon receipt of updated pay rate information from the employing agency. J.S., Docket No. 14-977 (issued September 24, 2014)(ECAB affirmed fact and amount of overpayment as the record reflected that OWCP paid the incorrect recurrence pay rate when it calculated appellant’s schedule award).

c. Improper deductions or no deductions for health benefits insurance (HB) or life insurance (LI). The CE will usually identify this type of overpayment upon review of case file documents, notification from the claimant or the employing agency, or receipt of correspondence from OPM. N.G., Docket No. 15-48 (issued May 22, 2015) (an overpayment occurred as his health and life insurance payments were not recovered when appellant's compensation was reinstated). In some instances, the CE may determine that there is conflicting information in the case file regarding the proper HB or LI deductions to take. Clarification to resolve the conflicting information should be sought prior to declaring the overpayment.

(1) The most common reasons for overpayments to occur due to improper HB or LI deductions are as follows:

(a) Incorrect code or no code. Where premium deductions were made for the wrong HB/LI code, and the correct HB/LI code carries higher premiums than the premiums previously deducted, or if no HB/LI code was entered but should have been.

(b) Incorrect deduction dates. Where HB/LI premiums were not deducted for the appropriate dates of total disability.

(c) Changes in marital or family status resulting in attainment of a family health insurance plan or an increased life insurance policy which results in higher premiums than previously deducted.

(d) Open season change as notified by fiscal personnel. Each year OPM announces changes in rates and coverage in health benefit plans. Claimants may change plans which may result in higher premiums than those previously deducted.

(e) OPM Form RI 76-10 reports a higher annual salary for life insurance than the pay rate salary resulting in higher premiums than those previously deducted.

d. Payment of augmented compensation (75 percent). The claimant was paid at the augmented 75 percent rate but lost a sole eligible spouse due to death, divorce, etc.; or lost eligible dependency status due to a sole dependent child’s change in student status, age, marriage, etc. In these situations, compensation has to be retroactively adjusted to the 66 2/3 percent rate to which the claimant was entitled for the same period. The CE will usually identify this type of overpayment upon receipt of a death certificate or marriage license, the student dependency form, Form CA-1032, or by correspondence/phone call from the claimant. L.J., Docket No. 15-695 (issued May 26, 2015) (ECAB affirmed OWCP’s determination on the fact of overpayment as appellant's grandson is not an eligible dependent for purpose of determining entitlement to augmented (¾) disability compensation). See J.K., Docket No. 17-142 (issued December 1, 2017) (Overpayment occurred as daughter properly found no longer a student under FECA once she completed four years of education beyond the high school level).

e. Improper compensation period. Compensation has been paid for a period in which there was no entitlement. The CE will usually identify this type of overpayment upon receipt of a Form CA-7 or documentation/information received from the claimant or the employing agency.

(1) The most common reasons for an overpayment to occur due to payment for an improper compensation period include:

(a) The CA-7/CA-7a and/or leave analysis form(s) reported wage loss for date(s)/hour(s) previously paid for which no wage loss actually exists.

(b) The CE incorrectly entered date(s)/hour(s) of wage loss to which the claimant was not entitled.

(c) Wage loss compensation was paid for less than 14 days, but waiting days were not withheld.

(d) The claimant was paid sick/annual leave by the employing agency for the same date(s)/hour(s) that wage loss compensation was paid.

(e) The claimant has more than one claim and was paid wage loss compensation under each claim for the same date(s)/hour(s).

(f) The claimant received separation pay and under 5 U.S.C. 8116 and 20 CFR 10.421 (c), the claimant is not entitled to receive disability compensation and separation pay concurrently.

f. Incorrect Schedule Award. A schedule award may have been issued improperly. M.G., Docket No. 14-252 (issued May 20, 2014) (OWCP issued a schedule award for five percent binaural hearing loss. It later found that the schedule award was issued in error, as a claimant is only entitled to a schedule award for tinnitus if there is also a ratable hearing loss. As appellant did not have a ratable hearing loss, he was not entitled to a schedule award for tinnitus. ECAB held that OWCP correctly determined that appellant was not entitled to a schedule award, and that the entire amount of the schedule award constituted an overpayment of compensation.). The CE will usually identify this type of overpayment upon review of case file documents, the compensation record, notification from fiscal personnel, notification from the claimant, or correspondence received from the VA.

(1) Overpayments due to improper schedule award payments usually occur for one or more of the following reasons:

(a) Incorrect pay rate or effective pay rate date. Where an incorrect pay rate or effective pay rate date was used to pay the award, an overpayment may exist between the schedule award paid and the schedule award that should have been paid using the proper pay rate or effective pay rate date.

(b) Incorrect MMI date. Where an improper MMI date was used to process the schedule award, and CPI’s were applied when they should not have been, an overpayment exists between the schedule award paid using an incorrect MMI date and what should have been paid using the correct MMI date.

(c) Incorrect percentage of impairment. Where the percentage of permanent partial impairment paid is greater than that to which the claimant is entitled, an overpayment exists between the schedule award paid at a higher percentage of impairment and the lower percentage of the actual impairment entitlement. This may occur if the actual percentage of impairment was erroneously entered at the time of the initial award or if new evidence is subsequently received demonstrating improvement in the claimant’s condition (resulting in a lesser percentage of impairment than previously paid). L.F., Docket No. 15-489 (issued May 11, 2015) (ECAB affirmed OWCP’s decision on the issues of fact and amount of overpayment and the issue of (without) fault where a schedule award decision establishes a lesser impairment after a greater award has been paid).

(d) Incorrect part of the body. The body part determined to be permanently partially impaired dictates the number of weeks/days compensation is paid, as outlined in the schedule table. (See PM 2-0808 Exhibit 1). Where payment was made based upon an incorrect body part which resulted in a higher schedule award than that to which the clamant is entitled, an overpayment exists between the number of weeks/days of compensation paid and the number of weeks/days of compensation that should have been paid.

(e) Incorrect compensation rate. Where the claimant was incorrectly paid at the augmented 75 percent rate, an overpayment exists between erroneous schedule award entitlement at the 75 percent rate versus the actual entitlement at the 66 2/3 percent rate.

(f) Prior impairment was not subtracted. Where a new schedule award is being issued for the same/similar body part as previously awarded, the percentage that was already paid should be subtracted from the total percentage of impairment. See PM 2-0808.7.a(1)(a). If this was not done, an overpayment exists.

(g) If a lump sum payment of the schedule award was issued and payments for temporary total disability were paid during the period covered by the lump sum, an overpayment exists.

(h) VA benefits were paid for the same injury. Where the VA has already paid the claimant for a previous impairment to the same member, an election will be required if the VA has awarded or increased the percentage payable due to the injury in civilian employment. See PM 2-808.7.a(1)(b).

(i) Where the OWCP has paid a schedule award as a result of an injury sustained in civilian employment, and the VA has paid an award due to military service for disability to which the civilian employment/injury caused or contributed, and no election was made, an overpayment exists.

(ii) Similarly, where an increase in the veteran’s service-connected disability was brought about by an injury sustained in civilian duty, an overpayment exists if no election was made between the VA percentage increase (related to the civilian employment/injury) and the OWCP schedule award benefits (to which the claimant is entitled to as a result of the accepted civilian employment/injury alone).

(i) Schedule award payments continued after the expiration date. Where the claimant receives compensation for a schedule award beyond the award’s expiration date, an overpayment exists for the dates paid beyond entitlement.

g. OPM/VA Election. The claimant has elected OPM or VA benefits in lieu of FECA benefits, but compensation was paid beyond the election date. N.P., Docket No. 15-1799 (issued January 11, 2016) (“As appellant elected FERS retirement benefits retroactive to a period already covered by FECA compensation payments, the Board finds that she did in fact receive an overpayment of compensation for the entire amount. Her election of retirement annuity benefits from OPM, retroactive to May 20, 2013, created a prohibited dual benefit under section 8116 of FECA.”). The overpayment is between what was paid by the OWCP and what should have been paid by OPM or the VA. The CE will usually identify this type of overpayment upon receipt of correspondence from OPM or the VA, or by notification from the claimant or employing agency. Upon confirmation, the CE will enter the election date (first date of non-entitlement) into the compensation system and the overpayment will be automatically calculated.

h. FERS/SSA offset. Compensation was not reduced by the FERS/FECA offset amount. Since the SSA will not report an offset amount until after SSA benefits are received, an overpayment will almost always occur and will need to be calculated for each period in which the offset was not withheld from compensation. The CE will usually identify this type of overpayment upon receipt of documentation from the SSA or upon review of the Form CA-1032. R.B., Docket No. 15-0192 (issued August 6, 2015) (The portion of SSA benefits he earned as a federal employee as part of his FERS retirement package and the receipt of benefits under FECA and FERS benefits concurrently is a prohibited dual benefit. SSA provided information regarding appellant's applicable SSA rates and their effective dates. ECAB reviewed OWCP's calculations of the dual benefits appellant received and found that OWCP properly determined the overpayment.). See also S.C. Docket No. 17-1567 (December 22, 2017) (Overpayment of $47,003.18 created when claimant received both compensation for total disability and SSA retirement benefits attributable to federal service).

i. A surviving spouse under age 55 remarried without advising the OWCP, and compensation due as a result of the previous spouse’s death continued to be paid after the date of remarriage. The CE will usually identify this type of overpayment upon receipt of Form CA-12. Under Section 8135(b), if a lump sum payment was made to a spouse who remarried before reaching age 55 (or 60, depending on the date of remarriage), an overpayment of the entire lump sum award can occur if the remarriage later proves to be void or voidable. See PM 2-0700.7b.

j. Forfeiture. A claimant knowingly failed to report earnings or underreported earnings under § 8106(b) of the FECA, and a forfeiture decision has been issued. The amount forfeited is an overpayment. The CE will usually identify this type of overpayment upon receipt of an Investigative Memorandum.

k. Death of claimant or survivor. When a claimant or survivor dies, compensation paid after the date of death is not considered an overpayment but is still a debt to the Government. The CE will usually identify this type of debt upon receipt of a death certificate or notification from the claimant/survivor’s family or the employing agency. See PM 6-0500.16 for guidance on the routine handling of these types of debts.

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2. Calculating the Overpayment. Once an overpayment has been identified, and information or documentation is received that corrects the improper data element(s), the CE may need to determine the difference between what was paid and what should have been paid in order to calculate the final overpayment amount. This comparison should be documented in the case file.

In some instances, no comparison is necessary because the claimant is entitled to zero compensation. For example, if the claimant returned to full-time work with no wage loss, zero compensation is payable from the date of the return to work forward. Similarly, if the claimant elected OPM benefits, there is zero entitlement from the date of the election forward. In these situations, the entire amount paid during the non-entitled period is the final overpayment amount.

In other instances, a comparison is necessary:

a. Example 1 – Return to Part-Time Work. The claimant was paid on the daily roll for temporary total disability (TTD) in the amount of $1047.43 (after benefit deductions) for 15 days.  On day 3, the claimant returned to part-time work, which reduced the amount of wage loss incurred.

The employing agency advised that the claimant worked 4 hours each day for 13 of the 15 days.  Compensation for the period of disability is calculated using the Shadrick formula. For the purposes of this example, assume the Shadrick calculation determines that the claimant was entitled to $579.15 for those 13 days. No HB or LI premiums should have been deducted from compensation for the days that the claimant worked since deductions were taken by the employing agency. A calculation for two days of TTD reveals that the claimant was entitled to $139.66 ([$1047.43/15] x 2).  Therefore, the final overpayment amount is $328.62 ($1047.43 - $579.15 - $139.66).

b. Example 2 – HB/LI change. The claimant had a self only HB plan with premium deductions of $175.64 each 28 days (e.g. the periodic roll period). The claimant got married and changed to a family HB plan with premium deductions of $409.96 each 28 days. This plan became effective on the 22nd day of the 28 day payment period. Therefore, 7 days of the 28 day period were under-deducted for health benefits resulting in an overpayment.

For the purposes of this example, assume that the premiums that should have been deducted were $409.96/28 = $14.64 per day x 7 days = $102.48 for the family plan. However, only $43.89 was deducted for the self only plan ($175.64/28 = $6.27 per day x 7 days). Since only $43.89 was deducted, HB premiums were under-deducted by $58.59 ($102.48 - $43.89), which is the final overpayment amount. Since this amount is less than $250, the overpayment should be administratively terminated per PM 6-0100.3c and PM 6-0300.3.

c. Example 3 – FERS/SSA Offset. The SSA reported that the claimant was in receipt of their benefits for 2 years, but no offset for old age or death had occurred under 5 U.S.C. 8116 (d)(2). The first year, the 28 day FERS offset was $206.49 or $7.37 each day and the second year, it was $211.29, or $7.55 each day.

Since there are 365 days in a year, the first year the overpayment calculates to 365 x $7.37 = $2,690.05 and the second year it calculates to 365 x $7.55 = $2,755.75 for a final overpayment amount of $5445.80 ($2,690.05 + $2,755.75).

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3. System Coding. When an overpayment is identified, a debt record should exist in order to monitor and track the debt. In some instances, such as when a claimant’s receipt of compensation on the periodic roll is terminated, the system will automatically create the debt record. In other instances, the CE will have to create the debt record.

a. The date that the debt record is created is the date it is automatically generated in the debt application or the date that the CE opens the debt record.

b. The date of the overpayment identification is the date the District Office was notified of the event that caused the overpayment (e.g. the date of the phone call from the employing agency advising that the claimant returned to work, the date the claimant advised that his or her spouse died, etc.).

c. Other items to record in the debt record include the name of the debtor (usually the claimant), the debt amount, the debt period, the debt type, the primary debt reason and the assigned debt CE.

d. When an adjustment to the debt record is needed, updates will most likely be made to: the debt identification date, debt amount, debt period, debt type, and/or the primary debt reason. This will usually be necessary when the overpayment was automatically created, but may be necessary at other times as well. The most common reasons that a debt may need to be adjusted are as follows:

(1) The termination date of the periodic roll was entered incorrectly.

(2) The claimant did not return to full-time work with no wage loss, but rather sustained partial wage loss, reducing the amount of the overpayment.

(3) The claimant returned to full-time work, but still sustained wage loss due to loss of premium pay or lost time due to medical treatment.

(4) The Branch of Hearings and Review (H&R) or the Employees’ Compensation Appeals Board (ECAB) rules that the overpayment amount should be changed.

(5) The claimant made a partial payment towards the overpayment prior to the Final Overpayment Determination, thus reducing the amount.

e. Voiding the debt. On rare occasions, a debt may need to be voided. This may occur, for example, if a debt record was created, but it was later determined that no debt exists. The primary debt reason, the amount of the debt, and the reason(s) for voiding the debt should be recorded in the debt application. A debt should only be voided by a Supervisory Claims Examiner or higher.

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6-0300, Initial Determinations in an Overpayment

Paragraph and Subject

Date

Trans. No.

Table of Contents

09/18

18-04

1. Purpose and Scope

09/18

18-04

2. Regulatory Provisions

09/18

18-04

3. Administrative Termination of Debt Collection

09/18

18-04

4. Fault Determinations

09/18

18-04

5. Preliminary Overpayment Determinations

09/18

18-04

6. System Coding

09/18

18-04

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1. Purpose and Scope. This chapter explains the procedures for making initial determinations in an overpayment after it has been identified and calculated, including assessment for administrative termination, making rationalized fault determinations and issuing Preliminary Overpayment Determinations.

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2. Regulatory Provisions.

a. 20 CFR §10.430 addresses how the Office of Workers’ Compensation Programs (OWCP) notifies an individual of payments that are made:

(1) In addition to providing narrative descriptions to recipients of benefits paid or payable, the OWCP includes on each periodic roll check a clear indication of the period for which payment is being made.   A form is sent to the recipient with each supplemental check which states the date and amount of the payment and the period for which payment is being made. For payments sent by electronic funds transfer (EFT), a notification of the date and amount of payment appears on the statement from the recipient's financial institution.

(2) By these means, the OWCP puts the recipient on notice that a payment was made and the amount of the payment. If the amount received differs from the amount indicated on the written notice or bank statement, the recipient is responsible for notifying the OWCP of the difference. Absent affirmative evidence to the contrary, the beneficiary will be presumed to have received the notice of payment, whether mailed or transmitted electronically. For EFT payments, the OWCP is entitled to presume receipt and acceptance of that payment once a recipient has had an opportunity to receive a statement from their financial institution.

b. 20 CFR §10.431 provides the basic rules for what the OWCP does when an overpayment is identified where administrative termination is not in posture. Before seeking to recover an overpayment or adjust benefits, the OWCP will advise the beneficiary in writing that:

(1) The overpayment exists and the amount of overpayment;

(2) A preliminary determination shows either that the individual was or was not at fault in the creation of the overpayment;

(3) He or she has the right to inspect and copy Government records relating to the overpayment; and

(4) He or she has the right to present evidence which challenges the fact or the amount of the overpayment, and/or challenges the preliminary finding that he or she was at fault in the creation of the overpayment. He or she may also request that recovery of the overpayment be waived.

c. 20 CFR §10.435 provides the basic guidelines for whether an individual is responsible for an overpayment that resulted from an error made by the OWCP or another Government agency:

(1) The fact that the OWCP may have erred in making the overpayment, or that the overpayment may have resulted from an error by another Government agency, does not by itself relieve the individual who received the overpayment from liability for repayment especially if the individual also was at fault in accepting the overpayment.

(2) However, the OWCP may find that the individual was not at fault if failure to report an event affecting compensation benefits, or acceptance of an incorrect payment, occurred because the individual relied on misinformation given in writing by the OWCP (or by another Government agency which he or she had reason to believe was connected with the administration of benefits) as to the interpretation of a pertinent provision of the FECA or its regulations.

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3. Administrative Termination of Debt Collection

The Federal Claims Collection Standards (FCCS), 31 CFR §902.2(a)(3) states that a claim may be compromised if the "cost of collecting the debt does not justify the enforced collection of the full amount." 31 CFR §903.3(a)(3) states that agencies may terminate collection activity when the "costs of collection are anticipated to exceed the amounts recoverable."

In a decision issued on September 29, 1986, the Comptroller General concluded that these standards extend to the collection of debts from Federal employees, and that agencies may establish "minimum debt amounts" and realistic "points of diminishing returns" in their debt collection activities. The term "minimum debt amounts" refers to the designation of categorical thresholds beneath which collection action need not be initiated, because the amount of the debts in that class are so small in relation to the costs of attempting collection efforts.

"Diminishing returns" refers to an agency's designation of debt collection efforts the agency initiated, but will discontinue, when it appears that the costs of additional collection actions would exceed the amounts likely to be recovered. Termination of collection by District Offices usually occurs only as directed by the Department of the Treasury, the Department of Justice, or the Solicitor’s Office when it has been determined that collection of the debt is unlikely. Further, the Comptroller General instructed that agencies may, on a case-by-case basis, take the anticipated costs of required administrative hearings into consideration when determining whether to compromise or terminate collection action.

Although the General Accounting Office's role in collecting debts owed to the United States has been redefined, current Department of the Treasury guidelines continue to follow the September 29, 1986 opinion of the Comptroller General.

a. Less Than $300. Debt collection actions on overpayments less than $300 should be administratively terminated after the overpayment has been identified with no requirement to complete any of the "due process" actions described in paragraph 2 of this chapter. This is because the cost of further collection action would exceed the recovery expected. The only exceptions to this rule are noted in subparagraph (1) below.

(1) This action may be applied to any type of debt except those not covered by 5 U.S.C. §8129, which include:

(a) Refunds due to the OWCP under 5 U.S.C. § 8132 as a result of a third party recovery.

(b) Money owed to the OWCP as a result of a beneficiary's election of Office of Personnel Management (OPM) retirement benefits in lieu of previously paid compensation, where the debt can be recovered from the retroactive portion of the annuity held by OPM.

(2) For each administrative termination of debt collection action, the CE must prepare a brief memorandum to the file. The memorandum should:

(a) Identify the amount of the overpayment.

(b) Describe the reason(s) that the overpayment occurred.

(c) State that the debt is not covered by 5 U.S.C. § 8129.

(d) Discuss the reasons for terminating collection action, advising that the anticipated costs of collection would exceed the expected recovery.

(3) Once the memorandum to the file is complete, the existing debt record should be terminated. No notice of the overpayment to the overpaid individual is required.

b. Between $300 and $1,000.  For overpayments of this amount, a Preliminary Overpayment Determination must be issued. See paragraph 5 below. In follow up to such a finding for a debt greater than or equal to $300 and less than $1,000, the CE will consider on a case-by-case basis whether the debt can be administratively terminated.

(1) When considering administrative termination, the CE will evaluate the following:

(a) The potential costs of pursuing collection and whether those costs will likely exceed the amount owed.  

(b) Whether the debtor can be located.

(c) The likelihood of collection based upon knowledge of the individual overpaid, i.e. financial status, ability to pay, etc.

(d) The outcome of any previous overpayment the individual had. Amounts still owed from previous overpayments should be considered in the decision. However, separate overpayment occurrences involving the same beneficiary, if due to differing circumstances and potentially requiring expenditure of differing costs to pursue, may be considered separately.

(e) The circumstances that resulted in the creation of the overpayment or the overpaid individual’s actions, such as willful attempts to mislead or engage in obvious avoidance of the reporting responsibilities.

(2) If the overpaid individual requests waiver on a debt less than $1,000, a formal decision must be made on the waiver and notification sent. 

(a) The debt record should then be updated with the waiver transaction before the debt is administratively terminated. See PM 6-0300.6 for more detailed information.

(3) If the overpaid individual requests a hearing with the Branch of Hearings and Review (H&R) on a debt less than $1,000, the debt must be referred to H&R for handling.

(a) The debt record should reflect a suspended status upon learning that the claimant has requested a pre-recoupment hearing.

(b) The H&R Representative will apply the factors detailed in
PM 6-0300.4, as well as conduct a routine analysis of overpaid cases, and consider whether to terminate recovery.

(c) If the H&R Representative elects to terminate the overpayment, the parties will be so advised and the case will be returned to the District Office with a detailed discussion of the basis for compromise or termination of the debt.

(d) The District Office will follow up with any necessary actions commensurate with the hearing decision.

(4) The status of an overpaid individual on Federal compensation or retirement rolls, or in current employment with the Federal government, shall not preclude OWCP from considering administrative termination. However, if a claimant is being paid compensation on the periodic roll or an annuity from OPM, or is due accrued benefits from either the OWCP or OPM, and does not respond to the Preliminary Overpayment Determination, a final decision should be issued and the debt should be recovered from such benefits as quickly as possible. Proper regard to due process requirements should be given before actually commencing the offset of ongoing benefits.

(5) When terminating collection of a debt under $1,000, the case file should contain:

(a) a brief memorandum to the file on behalf of the District Director that outlines the reasons for termination including stating that the debt is not covered by 5 U.S.C. 8129, and that the cost of the collection action would exceed the expected recovery. 

(b) a letter to the claimant and the employing agency advising that the debt has been terminated and stating the reasons for termination.

(6) Once the debt is terminated, the CE should update the debt record to show that the debt has been administratively terminated.

(7) Administrative terminations of debts less than $1,000 do not necessarily forgive these debts, as they can be collected from future compensation paid, if proper due process is afforded with a Preliminary and Final Overpayment Determination.

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4. Fault Findings. If a debt is $300 or more (or is less than $300 but not eligible for administrative termination), a Preliminary Overpayment Determination should be issued. In this decision, the CE assigned to the debt is responsible for making a finding as to whether the overpaid individual was with fault or without fault in the creation of the overpayment.

a. Each overpayment should be handled separately in relation to the fault finding. When there is more than one overpayment identified in the same claim, the CE should consider each overpayment separately because in terms of fault finding, the circumstances that led to the creation of one overpayment may be different than the circumstances that led to another, possibly resulting in a different fault finding for each. William D. Beard, Docket No. 05-221 (issued December 20, 2005) (ECAB remanded the case to OWCP for the separate handling of the two overpayments: “The Office should issue new preliminary determinations for each overpayment that address how the overpayments were calculated, whether appellant was at fault in the creation of the overpayment and if so, the reasons for the finding of fault.”).

b. Fault applies only to the individual who has received a payment in his or her name or on behalf of a beneficiary. Although the OWCP may have erred in creating the overpayment, this does not relieve the beneficiary of making a refund. B.G., Docket No. 14-850 (issued September 17, 2014) (On appeal, appellant noted that the overpayment was the result of a mistake by OWCP. ECAB held that although OWCP may have erred, this does not relieve the overpaid individual of the obligation to repay the overpayment if he or she was at fault in accepting the overpayment).

c. The CE should carefully consider all variables in the case when making a fault finding. Generally, if the evidence shows either a lack of good faith or failure to exercise a reasonable degree of care in reporting changes in circumstances that may affect either entitlement or the amount of benefits awarded, an individual may be found with fault. However, in situations where an equally valid argument can be made for both "without fault" and "with fault," a finding of without fault should usually be made.

d. When evaluating the degree of responsibility expected of an individual, the OWCP should consider both the complexity of the circumstances surrounding the overpayment and the capacity of the particular individual to realize that he or she was being overpaid. Reference: Neill D. Dewald, 57 ECAB 451 (2006); Ralph P. Beachum, Sr., 55 ECAB 442 (2004) (reasonable person test).

(1) In considering the complexity of the circumstances surrounding the overpayment, the following factors should be evaluated with regard to the overpaid individual:

(a) Understanding of reporting requirements;

(b) Any agreement to report events affecting payments;

(c) Knowledge of events that should have been reported;

(d) Efforts to comply with the reporting requirements;

(e) Opportunities to comply with the reporting requirements;

(f) Understanding of the obligation to return payments to which he or she was not entitled; and

(g) Ability to comply with reporting requirements.

(2) In considering the capacity of the particular individual to realize that he or she was being overpaid, the OWCP should apply the reasonable person test, considering such factors as:

(a) Age;

(b) Intelligence and/or comprehension;

(c) Education;

(d) Demonstrated degree of familiarity with the compensation system;

(e) Consistency of actions;

(f) Physical and mental condition(s); and

(g) Clarity of correspondence and/or telephone advice received from the OWCP or the employing agency.

e. With Fault. An individual is found to be with fault if the overpayment resulted from:

(1) An incorrect statement as to a material fact made by the beneficiary that he or she knew, or should have known, to be incorrect;

(2) Failure of the recipient to furnish information that he or she should have known to be material; or

(3)Acceptance of payment(s) that the overpaid individual either knew, or should have known, was incorrect. See 20 CFR §10.433(a).

f. Without fault. An individual is found to be without fault if failure to report an event affecting compensation benefits or acceptance of an incorrect payment occurred because of one or both of the following:

(1) The individual relied on misinformation given in writing by the OWCP (or by another Government agency which he or she had reason to believe was connected with the administration of benefits) as to the interpretation of a pertinent provision of the FECA or its regulations. See:Andy Wdowiak, Docket No. 01-622 (issued July 23, 2002)(ECAB affirmed the finding of fault holding that although appellant indicated that he talked to someone at the OWCP about the matter, there was no evidence that appellant relied on misinformation given in writing).

(a) The case file should contain documentation to substantiate that this misinformation was actually communicated to the overpaid individual.

(b) There should be no evidence in the case file that demonstrates that the individual knew, or should have known, the proper course of action to be followed.

(2) The OWCP erred in calculating cost-of-living increases, schedule award length and/or percentage of impairment, pay rate(s), loss of wage-earning capacity, and/or improperly deducted health benefit or life insurance premiums. An exception would occur when it is shown that the individual had actual knowledge of the calculation error.

g. The following are some common circumstances and corresponding appropriate fault findings:

(1) Return to work: Overpayments most commonly occur because a claimant returns to work and receives wages concurrently with compensation for temporary total disability (TTD). In such cases, a reasonable person should know that both cannot be received simultaneously.

Both the initial acceptance letter and the periodic roll placement letter advise that the OWCP expects the claimant to monitor statements from his or her financial institution and if EFT deposits were made for any periods that the claimant also worked, to advise the OWCP so that the overpayment can be collected.

The letters also advise that if compensation is issued via paper check and the claimant worked any portion of the period indicated on the check, payment should be returned to the OWCP. Reference: D.E., Docket No. 09-240 (issued July 23, 2009) (ECAB found that appellant was with fault in the creation of the overpayment. She returned to full-time work on July 6, 2008 and OWCP continued to pay compensation for total disability through August 2, 2008. Fact of overpayment is established. Appellant received a letter outlining the conditions under which she would receive compensation which advised her to notify them “immediately” when she went back to work and to return any payment if she worked any portion of the period covered thereby. Appellant did not notify OWCP that she returned to work for over three weeks: “Appellant did not exercise a high degree of care in reporting events which affected her entitlement to or the amount of benefits. Therefore, under the circumstances, the Office properly found her to be at fault.”). See K.M., Docket No. 16-0802 (issued November 23, 2016) (overpayment was created where claimant continued to receive benefits after they were terminated: “The fact that OWCP may have been negligent in issuing the payments does not mitigate this finding.”)

Examples:

(a) A paper check has been received. Since the check prints the period of payment and the amount paid, the claimant should reasonably know that the payment is incorrect because the dates overlap with a period he or she worked. All situations involving paper checks should result in a “with fault” finding unless extenuating circumstances exist.

In the case of Wanda G. Berdyck, Docket No. 89-391 (Mar. 31, 1989), an overpayment occurred when the claimant returned to duty on April 27, 1987, but was paid compensation for total disability until July 4, 1987. The OWCP noted that the claimant had received Form CA-1049 advising her to "Return to us any compensation check received after you return to work." Also, the OWCP noted that the compensation checks issued to the claimant showed, on the face of the checks, the dates being paid. Accordingly, the claimant was found to be with fault in creating the overpayment. In upholding the decision of the OWCP, the Employees’ Compensation Appeals Board (ECAB) concluded that under this circumstance the claimant knew, or should have known, that she was not entitled to the checks she received after returning to work. R.A., Docket No. 14-539 (issued June 24, 2014) (ECAB stated “OWCP includes on each periodic check a clear listing of the period for which payment is being made. OWCP places the recipient on notice that a payment was made and the amount of the payment. This, together with the strongly worded November 8, 2012 OWCP letter, establishes that appellant should have known that he was not entitled to accept wage-loss compensation for total disability for any period after he returned to work.”).

(b) The deposit was by EFT and over 30 days has elapsed between the EFT deposit and the date the Preliminary Overpayment Determination is issued, allowing ample time for the claimant to receive and review a statement from his or her financial institution that outlines the details of the improper payment. Such situations should result in a “with fault” finding unless extenuating circumstances exist.

The ECAB has focused on EFT transfers in making fault determinations, differentiating between checks and EFTs, and has found that awareness of an incorrect EFT can be established either through documentation such as a bank statement or notification from the OWCP or where a reasonable period of time has passed during which a claimant could have reviewed independent confirmation of the incorrect payment, such as several incorrect payments. In A.H., Docket No. 07-1036 (issued August 14, 2007), the ECAB found the claimant to be with fault because he received compensation checks through direct deposit which involved a series of payments over several months with clear knowledge that the payments were incorrect. S.R., Docket No. 13-1788 (issued May 28, 2014)(ECAB held that in cases involving a series of incorrect payments, knowledge is established by documentation from OWCP or simply with the passage of time and opportunity for discovery and the claimant will be at fault for accepting the payments subsequently deposited. In this case, ECAB found “that at the time of the second payment dated January 12, 2013 appellant knew or should have known that the continued payment of compensation was incorrect. Appellant had returned to work on December 8, 2012 and could have taken further steps to prevent issuance of further payments. The Board will affirm the finding of fault for the remaining January 12 to May 4, 2013 period of overpayment.”).

(c) The claimant was given specific notice in advance of the EFT deposit that (1) the forthcoming payment is incorrect, (2) the requisite action that must be taken and (3) over 14 days have elapsed between the EFT deposit and the date the Preliminary Overpayment Determination is issued (such that the claimant is afforded an opportunity to take action). Such situations should result in a “with fault” finding unless extenuating circumstances exist.

(d) If the claimant notifies the District Office of a return to work in advance, specific notice must still be provided to the claimant of the improper EFT forthcoming and the requisite action that should be taken as noted in paragraph (c) above. If the file is so documented, the claimant should be found with fault if over 14 days have elapsed between the EFT deposit and the date the Preliminary Overpayment Determination is issued. If the claimant is not formally notified, then he or she should be found without fault as good faith and exercise of reasonable care were exercised in reporting a change in circumstance that affects benefit entitlement.

(2) Where the claimant’s compensation rate changes from 75 percent to 66 2/3 percent due to the death of a spouse, divorce, change in eligible dependency status, etc., and the claimant promptly notifies the District Office of such a change, he or she should be found without fault. However, if notice is not provided within 90 days of such a change, the claimant is with fault because he or she has knowingly continued to receive compensation at the augmented compensation rate when he or she had no eligible dependents.

However, the CE should review the case file for any extenuating circumstances.

In the case of Marcia L. Wright, 37 ECAB 435 (issued March 28, 1986), a married claimant received compensation on the periodic roll at the augmented rate. For several years she reported her spouse as a dependent on Form CA-1032. In July 1985, she returned a Form CA-1032 and reported that she had no dependent. When asked for additional information by the OWCP, the claimant replied that she had been recently divorced. The claimant was overpaid from the date of her divorce until the date that the OWCP adjusted her compensation. The claimant stated that Form CA-1032 correctly indicated that she no longer had dependents and that it had been sent within 15 days of her divorce becoming final. She said that she would have sent the notification sooner, but she was hospitalized for surgery two days after the divorce. The OWCP found that she was with fault because she knew, or reasonably should have known, that she was to immediately report any change in her dependency status. ECAB found that given the extenuating circumstances, the claimant's actions in reporting her change in status were both timely and reasonable and concluded that the claimant should be found without fault.

(3) Incorrect pay rate. In cases where the claimant’s pay rate was incorrect, the claimant should be found without fault unless the evidence of record clearly establishes that they should have known that the weekly pay rate used by the District Office was incorrect. For example, if a claimant with a salary of $1,000 per week receives notification via Form CA-1049 (or equivalent) that his or her pay rate was established at $3,000 per week, he or she should reasonably know that the forthcoming compensation payment is incorrect.

(4) Dual Benefits

(a) The claimant receives benefits from the Social Security Administration (SSA) as part of an annuity under the Federal Employees’ Retirement System concurrently with disability/wage loss compensation. See 5 U.S.C. 8116 (d) (2). In such cases, the claimant should be found without fault unless there is evidence on file that the claimant was aware that the receipt of full SSA benefits concurrent with disability/wage loss compensation was prohibited.

(b) The claimant receives an inappropriate dual benefit from OPM.

(i) If the claimant elects OPM benefits and the District Office is unable or otherwise fails to stop compensation benefits timely, the same rules as referenced for return to work in subparagraph (1) above apply.

(ii) If the claimant begins receiving OPM benefits without obtaining an election and this is later discovered by the District Office, a finding of with fault may only be made if there is evidence on file that the claimant was aware, or should have been aware, that the receipt of OPM benefits concurrent with disability/wage loss compensation was prohibited.

(iii) Where the claimant elects OPM benefits for a date in the past and has received OWCP disability/wage loss compensation beyond the election date, the claimant is without fault because he or she was entitled to FECA benefits at the time he or she accepted the payments (which was prior to his or her retroactive election of OPM benefits). Because there is no evidence to support that the claimant should have known that the FECA compensation payment was improper when he or she accepted the payment, a without fault finding should be made. D.M., Docket No. 14-548 (issued on February 20, 2015) (reversing a finding of fault as the claimant was entitled to FECA benefits at the time she accepted the payments prior to her retroactive election of OPM benefits); M.R., Docket No. 14-844 (issued November 21, 2014) (as there was no evidence that the claimant should have known that the September 21, 2013 compensation payment was incorrect when he accepted that payment, the Board found that the record did not support OWCP's finding of fault). However, reference L.S., Docket No. 14-1690 (issued December 5, 2014) (a claimant who makes an election of benefits between FECA and OPM may be charged with knowledge that subsequent dual payments are incorrect).

(iv) During the period of exhaustion of the third party surplus, the beneficiary is not considered to be in receipt of compensation; consequently, an election of OPM benefits while the surplus is being exhausted does not constitute a prohibited dual benefit. See Chapter 2-1100.10(b)(1).

(5) The claimant was advised through OWCP correspondence that a lump-sum payment pursuant to the schedule award would represent the only compensation he or she would receive for the period covered by the award even if he or she sustained a recurrence of total disability. However, compensation for wage loss was paid for the same period. In such situations, a finding of with fault is appropriate.

In K.O., Docket No. 07-816 (July 13, 2007), the claimant signed a statement that he understood and agreed that the lump sum payment represented full and final settlement of his schedule award for the period in question and that he was not entitled to any further compensation for the duration of his schedule award. He subsequently claimed and accepted periodic payments for wage loss after he had received a lump-sum settlement under the schedule award. The ECAB found the claimant with fault in the creation of the overpayment as he received wage loss compensation payments after receiving the lump sum payment of $58,784.19 which he should have known was incorrect.

(6) Schedule Awards. Where the office neglected to terminate a schedule award upon its expiration, and no recent (less than a year) notification of expiration (Form CA-1051 or equivalent) of the period of the award stating the end date (Form CA-181) had been provided, the claimant is without fault because it would not be established that the claimant should have been aware of the date the award would expire and that any date subsequent to that expiration date was incorrectly paid. However, if Form CA-1051 (or equivalent) was sent, or if the claimant was recently advised as to the length of the schedule award (on Form CA-181 or equivalent) it can be concluded that the claimant should have been aware of the expiration date and should be found with fault.

Overpayments as the result of improper pay elements when computing a schedule award generally result in findings of without fault unless extenuating circumstances apply.

(7) Cost-of-Living Adjustments. It is unrealistic to expect a claimant to know the effective date of a cost-of-living increase, whether this increase should be applied, or even the amount of such an increase. As such, resulting overpayments are generally without fault unless extenuating circumstances apply.

(8) Insurance Deductions. It is unrealistic to expect a claimant to know the specific premium deduction made during an OWCP payment cycle (or benefit coding that corresponds to their type and level of coverage). As such, resulting overpayments are generally without fault unless extenuating circumstances apply.

(9) Rescissions. Where the original acceptance of a claim is rescinded and all compensation paid is declared an overpayment, the claimant is generally found without fault unless it can be proven that he or she was aware that the acceptance of the claim was erroneous. C.B., Docket No. 12-1849 (issued January 13, 2014) (ECAB found that OWCP met its burden of proof in rescinding appellant's claim on the ground that she was not injured in the performance of duty. ECAB further found that OWCP properly found an overpayment of compensation, and that appellant was without fault. ECAB further found that OWCP properly denied waiver of recovery of the overpayment); and Troy D. Watts, Docket No. 05-184 (issued on July 27, 2006).

(10) Exhaustion of Surplus. An overpayment may occur where a FECA beneficiary who has paid the required refund from a third party recovery receives FECA compensation while a surplus is being absorbed. Claimants are typically informed that a surplus exists and the effect of that surplus, so they know or should know that they should not be receiving benefits. As such, claimants should generally be found with fault absent extenuating circumstances.

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5. Preliminary Overpayment Determinations. Where the debt is $300 or more (or not eligible for administrative termination), a Preliminary Overpayment Determination should be issued within 30 days of debt identification. If the overpaid individual is determined to be with fault, Form CA-2201 or equivalent should be issued. If the overpaid individual is determined to be without fault, Form CA-2202 or equivalent should be issued.

Each decision should contain a memorandum outlining the specific circumstances of the case and the existence of the overpayment.

a. The content of the memorandum should:

(1) state the period and the amount of the benefit overpaid and whether or not the claimant was with or without fault in its creation;

(2) describe the reason(s) that the overpayment occurred;

(3) specifically detail how the overpayment was calculated so that it is clear to the overpaid individual how the final overpayment amount was determined; and

(4) state whether the overpaid individual is with or without fault in the creation of the overpayment and explain how the fault determination was made. To support the position, excerpts from decisions from the ECAB may be referenced.

b. Actions the overpaid individual may take in response to the Preliminary Overpayment Determination should also be outlined and include:

(1) Repayment of the full overpaid amount if in agreement with the debt.

(2) The right to request waiver of recovery of the overpayment if the overpaid individual is found without fault.

(3) The right to inspect and copy case file documents with respect to the debt and to dispute any information contained in those records.

(4) The right to contest the overpayment and to submit any evidence or argument that he or she believes will affect the preliminary findings.

(5) The right to request that the District Office issue a final decision based on the written evidence only.

(6) The right to request a pre-recoupment hearing with the Branch of Hearings and Review.

c. Form OWCP-20, Overpayment Recovery Questionnaire, or equivalent, should be attached to the decision for completion in order to properly address fault and/or waiver or to determine a reasonable method for collection, if applicable.

d. The overpaid individual is afforded 30 days to submit a response to the Preliminary Overpayment Determination.

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6. System Coding. When a Preliminary Overpayment Determination is issued, or an administrative termination memorandum is completed, the debt record should be updated with the action taken. In most instances, the debt record should have already been created, but if not it will need to be.

a. Administrative Terminations. At the time an administrative termination is processed, the debt record should usually be in a pending status. The CE should modify the debt record to document that the action taken was termination of the debt. Once the record is properly saved, the debt will be terminated.

b. Preliminary Overpayment Determinations. At the time a Preliminary Overpayment Determination is issued, the debt record should usually be in a pending status. The CE should modify the debt record to establish a preliminary record and to document the fault finding made. Once the record is properly saved, the status should show that the debt is in its preliminary stages.

c. Any updates needed to the debt identification date, debt amount, debt period, debt type, and/or the primary debt reason should also be made at this time.

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6-0400, Final Overpayment Determinations

Paragraph and Subject

Date

Trans. No.

Table of Contents

09/18

18-04

1. Purpose and Scope

09/18

18-04

2. Legislative Authority and Regulatory Provisions

09/18

18-04

3. Actions Following the Preliminary Overpayment Determination

09/18

18-04

4. Waiver

09/18

18-04

5. Final Overpayment Determinations

09/18

18-04

6. System Coding

09/18

18-04

Exhibit I – Waiver of Charges Worksheet

09/18

18-04

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1. Purpose and Scope. This chapter explains the procedures for making a final determination in an overpayment following the issuance of the Preliminary Overpayment Determination. This includes situations where payment towards the debt is received; the overpaid individual provides a response to the Preliminary Overpayment Determination; and/or the overpaid individual fails to provide a response to the Preliminary Overpayment Determination. This chapter also discusses evaluating a debt for waiver and issuing a Final Overpayment Determination.

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2. Regulatory Provisions:

a. 20 CFR §10.432 explains how an individual can present evidence to the Office of Workers’ Compensation Programs (OWCP) in response to a Preliminary Overpayment Determination.

The individual may present this evidence to the OWCP in writing or at a pre-recoupment hearing. The evidence must be presented, or the hearing requested, within 30 days of the date of the written notice of overpayment. Failure to request the hearing within this 30-day time period shall constitute a waiver of that right.

b. 20 CFR §10.433 outlines the circumstances under which the OWCP can waive recovery of an overpayment.

(1) The OWCP may consider waiving an overpayment only if the overpaid individual was not at fault in accepting or creating the overpayment. Each recipient of compensation benefits is responsible for taking all reasonable measures to ensure that payment(s) he or she receives from the OWCP are proper. The recipient must show good faith and exercise a high degree of care in regard to receipt of their benefits. Such care includes reporting events which may affect entitlement to (or the amount of) benefits, including reviewing their bank accounts and related statements (including electronic statements and records from their financial institutions involving EFT payments). A recipient who has done any of the following will be found to be at fault with respect to creating an overpayment:

(a) Made an incorrect statement as to a material fact which he or she knew, or should have known, to be incorrect; or

(b) Failed to provide information which he or she knew, or should have known, to be material; or

(c) Accepted a payment which the recipient knew, or should have known, to be incorrect. (This provision applies only to the overpaid individual.)

(2) Whether or not the OWCP determines that an overpaid individual was at fault with respect to the creation of an overpayment depends on the circumstances surrounding the overpayment. The degree of care expected may vary with the complexity of those circumstances and the individual's capacity to realize that he or she was being overpaid.

c. 20 CFR §10.434 details what criteria is used to decide whether to waive recovery of the overpayment if the OWCP finds that the recipient was not at fault.

(1) If the OWCP finds that the recipient of an overpayment was not at fault, repayment will still be required unless:

(a) Adjustment or recovery of the overpayment would defeat the purpose of the Federal Employees’ Compensation Act (FECA); or

(b) Adjustment or recovery of the overpayment would be against equity and good conscience.

d. 20 CFR §10.437 defines the circumstances under which recovery of an overpayment would be against equity and good conscience.

(1) Recovery of an overpayment is considered to be against equity and good conscience when any overpaid individual would experience severe financial hardship in attempting to repay the debt.

(2) Recovery of an overpayment is also considered to be against equity and good conscience when any overpaid individual, in reliance on such payments or on notice that such payments would be made, gives up a valuable right or changes his or her position for the worse. In making such a decision, the OWCP does not consider the individual's current ability to repay the overpayment.

(a) To establish that a valuable right has been relinquished, it must be shown that the right was in fact valuable, that it cannot be regained, and that the action was based chiefly or solely in reliance on the payment(s) or on the notice of payment(s). Donations to charitable causes or gratuitous transfers of funds to other individuals are not considered relinquishments of valuable rights.

(b) To establish that an individual's position has changed for the worse, it must be shown that the decision made would not otherwise have been made but for the receipt of benefits, and that this decision resulted in a loss. B.R., Docket No. 15-1247 (issued October 26, 2015) (ECAB held that appellant “submitted no evidence to show that she gave up a valuable right or changed her position for the worse in reliance on anticipated compensation payments. Thus, she has not shown that if required to repay the overpayment, she would be in a worse position after repayment than if she had never received the overpayment at all. OWCP properly found that appellant was not entitled to waiver on the grounds that recovery would be against equity and good conscience.”)

e. 20 CFR §10.438 outlines the requirements of the overpaid individual to submit additional financial information.

(1) The individual who received the overpayment is responsible for providing information about income, expenses and assets as specified by the OWCP. This information is needed to determine whether or not recovery of an overpayment would defeat the purpose of the FECA, or be against equity and good conscience. This information will also be used to determine the repayment schedule, if necessary.

(2) Failure to submit the requested information within 30 days of the request shall result in denial of waiver, and no further request for waiver shall be considered until the requested information is furnished. P.C., Docket No. 14-860 (issued August 18, 2014) (Appellant requested waiver but did not return the questionnaire or otherwise provide any financial information. ECAB stated: “Under the implementing regulations, OWCP could not determine whether recovery of the overpayment would defeat the purpose of FECA or be against equity and good conscience. As appellant failed to submit the requested information, as required by section 10.438 of its regulations, she is not entitled to waiver. The Board finds that OWCP properly denied waiver of recovery of the overpayment of compensation.”)

f. 20 CFR §10.439 advises what is addressed at a pre-recoupment hearing. At a pre-recoupment hearing, the OWCP representative will consider all issues in the claim on which a formal decision has been issued. Such a hearing will thus fulfill OWCP's obligation to provide pre-recoupment rights and a hearing under 5 U.S.C. §8124(b). Pre-recoupment hearings shall be conducted in exactly the same manner as provided in 20 CFR §§10.615 through 10.622.

g. 20 CFR §10.440 details how the OWCP communicates its final decision concerning recovery of an overpayment, and the appeal rights that accompany it.

(1) The OWCP will send a copy of the Final Overpayment Determination to the individual from whom recovery is sought; his or her representative, if any; and the employing agency.

(2) The only review/appeal of a Final Overpayment Determination is via the Employees' Compensation Appeals Board (ECAB). The provisions of 5 U.S.C. §8124(b) (concerning hearings) and 5 U.S.C. §8128(a) (concerning reconsiderations) do not apply to such a decision. The pendency of an appeal with ECAB has no effect on the finality of the order being appealed; in the event ECAB reverses the Final Overpayment Determination, any monies collected will be restored to the beneficiary.

Note: Although no reconsideration is available as a matter of right, in the event of a changed circumstance (such as a life event that would affect the beneficiary’s ability to repay the overpayment once finalized - such as the death of a spouse whose income was included in assessing the beneficiary’s ability to repay), the beneficiary can submit evidence of the changed circumstance and request that the Director reopen the case on his/her own motion.

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3. Actions following the Preliminary Overpayment Determination. Once 30 days have passed following the issuance of the Preliminary Overpayment Determination, the CE assigned to the debt should review the case to determine the next appropriate action.

a. If no response is received.

(1) If no response to the Preliminary Overpayment Determination is received, and the overpaid individual is not receiving compensation benefits, the CE should proceed with a Final Overpayment Determination that pursues collection in full.

(2)  If no response to the Preliminary Overpayment Determination is received, and the overpaid individual is receiving disability/wage loss compensation benefits on the periodic roll, the CE should proceed with a Final Overpayment Determination that sets the rate of repayment at 25% of the 28 day net compensation amount until the balance of the overpayment is paid in full. 

(3) If no response to the Preliminary Overpayment Determination is received, and the overpaid individual is due disability/wage loss compensation on the daily roll (either immediately or in the near future), the CE should proceed with a Final Overpayment Determination that either pursues collection in full or sets the rate of repayment at 25% of the net compensation amount, depending on the amount of compensation payable in the case.

b. If payment is submitted towards the debt, the action taken will depend on whether full payment or partial payment was made. The case file should contain documentation that the payment(s) was received.

(1) Where full payment has been made and there is evidence that the payment has been received, the CE should issue a letter to the overpaid individual (with a copy to the employing agency and representative, if applicable) advising that the debt has been paid in full and is considered closed. The CE should also update the debt record to a final status and indicate that payment has been made in full.

(2) Where partial payment has been made, the CE will need to thoroughly evaluate the documentation in the case file to determine whether a repayment plan is necessary or whether payment should be requested in full. The CE should request payment in full unless evidence substantiates that the overpaid individual is financially unable to do so. To make this determination:

(a) The CE should review the responses on the Form OWCP-20 and the overpaid individual’s income, assets, and ordinary and necessary living expenses, in a manner similar to the waiver considerations as described in paragraph 4, below. If the evidence supports that the overpaid individual’s income and assets are insufficient to repay the overpayment in full, the highest reasonable rate of repayment should be established to collect the debt as quickly as possible while minimizing any hardship on the overpaid individual.

(b) As each case is unique, the specific financial circumstances of the overpaid individual should be evaluated when devising a repayment plan to ensure that the rate of repayment is reasonable. See PM 6-0500 for further details.

c. Request for a Hearing. If the overpaid individual requests a pre-recoupment hearing from the Branch of Hearings and Review (H&R), no Final Overpayment Determination will be issued by the District Office. Rather, the case will be transferred to H&R and the H&R Representative assigned to the case will schedule and conduct the hearing, accept any evidence submitted, and closely evaluate the testimony provided.

(1) Upon careful consideration of the facts:

(a) If the H&R Representative determines that the amount of the debt is significantly larger than that outlined in the Preliminary Overpayment Determination, the case should be returned to the District Office for a new Preliminary Overpayment Determination, which will then give the overpaid individual full appeal rights concerning the increased debt amount.

(b) Otherwise, the H&R Representative will prepare a Final Overpayment Determination either affirming or modifying the amount of the overpayment and/or the District Office’s preliminary finding of fault.

(c) If the overpaid individual is found to be without fault, the H&R Representative will also address the question of waiver in the Final Overpayment Determination.

(2) When a hearing has been requested, the CE should suspend the debt record until the H&R Representative issues the Final Overpayment Determination. When the case is returned to the District Office, the CE should then update the debt record to reflect that a final determination has been made, as indicated.

d. The CE determines that a conference is needed. The CE has the sole discretion to conduct a conference following the Preliminary Overpayment Determination if he or she determines that it is beneficial for resolving an outstanding issue. Examples of situations where a CE may decide to conference a case include where the financial data in the file is not adequate for a decision on waiver or repayment, where fault is in question, or where no possible offset for recovery exists and compromise is possible.

e. Request that the District Office issue a Final Overpayment Determination. If the overpaid individual requests that the District Office issue a decision based on the written evidence only, the CE should ensure that a completed Form OWCP-20 and supporting evidence or documents are on file. The CE should then thoroughly review and consider all pertinent evidence and issue a Final Overpayment Determination. See paragraph 5 below for additional details.

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4. Waiver of Recovery.

If the overpaid individual is without fault in the creation of the overpayment, and adjustment or recovery would defeat the purpose of the FECA or would be against equity and good conscience, collection of the overpayment will be waived in whole, or in part, depending on the financial circumstances of the case. T.S., Docket No. 08-1604 (issued March 13, 2009)(“a finding that appellant was without fault does not automatically result in waiver of the overpayment.”). A partial waiver may be granted if total recovery would impose a financial hardship, but partial recovery would not. However, a fault finding must be made in every overpayment before waiver may be considered. If the overpaid individual is found to be with fault in the creation of the overpayment, adjustment or recovery may not be waived. Waiver can only be considered when the overpaid individual is found to be without fault. W.Z., Docket No. 15-1526 (issued October 28, 2015) (ECAB held that the overpayment recovery questionnaire was irrelevant to the issues on appeal, because appellant was at fault, and therefore she was not eligible for consideration of waiver: “OWCP and the Board therefore have no occasion to review whether adjustment or recovery of the overpayment would defeat the purpose of FECA or whether adjustment or recovery of the overpayment would be against equity and good conscience.”); Ehrman S. Eldridge, 49 ECAB 263, 266 (issued January 5, 1998)(“no waiver of an overpayment is possible if the claimant is with fault in helping to create the overpayment.”)

5 U.S.C. §8129(b) states "Adjustment or recovery by the United States may not be made when incorrect payment has been made to an individual who is without fault and when adjustment or recovery would defeat the purpose of this subchapter or would be against equity and good conscience." The clause "defeat the purpose of this subchapter" means defeat the purpose of benefits under the FECA. The purpose of the FECA is to provide at least a subsistence income for beneficiaries. See 20 CFR §10.436. The test is whether the individual has income or financial resources sufficient for more than ordinary needs or is largely or solely dependent upon current benefit payments for the necessities of life. R.O., Docket No. 14-1329 (issued September. 1, 2015)(“According to his overpayment recovery questionnaire, appellant had over $500 in discretionary monthly income and assets that exceeded the established resource base. Either one of these, standing alone, is sufficient to find that recovery will not defeat the purpose of the FECA.”); E.C., Docket No. 14-1467 (issued July 2, 2015) (ECAB held that appellant had not established that recovery of the overpayment would defeat the purpose of the FECA because she has not shown both that she needs substantially all of her current income to meet ordinary and necessary living expenses and that her assets do not exceed the allowable resource base).This clause applies only to claimants/beneficiaries who are, or were, entitled to benefits. If an individual was never entitled to benefits, the overpaid individual’s financial condition would be considered under the "against equity and good conscience" clause. For example, if a claim was accepted and compensation was awarded, but it is later determined that the claimant was not a civil employee, the “defeat the purpose of this subchapter” clause would not apply.

a. Financial Hardship Criteria. Recovery of an overpayment will "defeat the purpose of the FECA" if recovery would cause hardship by depriving a presently or formerly entitled claimant/beneficiary of income and resources needed for ordinary and necessary living expenses under the criteria set out in this section. Recovery will defeat the purpose of the FECA if:

(1) The overpaid individual from whom recovery is sought needs substantially all of his or her current net income (including FECA benefits) to meet current ordinary and necessary living expenses; and

(2) The overpaid individual's assets do not exceed the resource base of $6,200 for an individual or $10,300 for an individual with a spouse or one dependent, plus $1,200 for each additional dependent. This base includes all of the overpaid individual’s assets not exempted from recoupment in subparagraph b (3) below. The first $6,200 or more, depending on the number of the overpaid individual’s dependents, is also exempted from recoupment as a necessary emergency resource.

(3) An overpaid individual is deemed to need substantially all of his or her current net income to meet current ordinary and necessary living expenses if monthly income does not exceed monthly expenses by more than $50. Desiderio Martinez, 55 ECAB 245 (2004).Thus, the amount of monthly funds available for debt repayment is the difference between current income and adjusted living expenses (i.e. ordinary and necessary living expenses plus $50).

All of the conditions in (1), (2), and (3) above must be met to defeat the purpose of the FECA. If an overpaid individual has disposable current income or assets in excess of $50, a reasonable repayment schedule can be established over a reasonable, specified period of time. It is the overpaid individual's burden to submit evidence to show that recovery of the overpayment would cause the degree of financial hardship sufficient to justify waiver.

b. To determine whether financial hardship is met, the CE or H&R Representative should thoroughly review and analyze the overpaid individual’s income, expenses, and assets.

(1) Income. An individual's total income includes any funds which may reasonably be considered available for his or her use, regardless of the source. A spouse's income is considered available to the individual if the spouse was living in the household both at the time the overpayment was incurred and at the time waiver is considered. Income to be considered includes, but is not limited to:

(a) Government benefits, such as Black Lung, Social Security, Railroad Workers' Compensation, Department of Veterans Affairs, and Unemployment Compensation.

(b) Wages and self-employment income.

(c) Regular payments received, such as rent or pension.

(d) Investment income.

(e) Alimony or child support payments.

(2) Ordinary and Necessary Living Expenses. An individual's ordinary and necessary living expenses include:

(a) Fixed living expenses, such as food and clothing; furniture; household and personal hygiene supplies; rent; mortgage payments; utilities (including natural gas, water and sewer, electric, a basic, unadorned cell phone or landline telephone, basic cable, satellite, or television streaming service, and basic internet service); maintenance; burial plot or prepaid burial contract; taxes; vehicle insurance (one or two allowable); life, accident and health insurance; expenses for one or two vehicles (loan payments, gas and oil, maintenance); and commuting expenses not included under vehicle expenses.

(b) Medical, hospitalization and other similar expenses not reimbursed by insurance or other sources.

(c) Expenses for the support of others for whom the individual is responsible, such as dependent child day care, child support, elder care or alimony.

(d) Church and charitable contributions made on a regular basis. This does not include large one-time gifts made after receipt of the Preliminary Overpayment Determination.

(e) Miscellaneous expenses (i.e. haircuts) not to exceed $60 per month.

A finding that a type of expense is ordinary and necessary does not mean that the amount is ordinary and necessary. The burden is on the overpaid individual to show that the expenses are reasonable and needed for a legitimate purpose. If the CE or H&R Representative determines that the amount of certain expenses is not ordinary and necessary, he or she must state in writing the reasons for the determination. The determination should be supported by rationale, which may include utilizing statistics from the Bureau of Labor Statistics that show that the overpaid individual’s expenses exceed that of the range for the general population.

The CE or the H&R Representative should be careful to avoid counting an expense twice when totaling the overpaid individual's ordinary and necessary living expenses. For example, if the overpaid individual's credit card debt is already calculated as a fixed and miscellaneous living expense, the credit card expense(s) should not be added again as consumer debt expense. If the amount is added again, it would result in an excessive total for the overpaid individual’s ordinary and necessary living expenses, and would make the individual appear less able to repay his or her overpayment than would actually be the case.

Furthermore, the CE or the H&R Representative should ensure that the monthly expense used for each credit card reflects only the minimum payment required by the creditor. The minimum amount should be verified, if necessary, by requiring the overpaid individual to submit copies of his or her monthly billing statement(s).

(3) Assets. An individual's assets include:

(a) Liquid Assets, such as cash on hand, the value of stocks, bonds, savings accounts, mutual funds, certificates of deposit, etc.

(b) Non-Liquid Assets, such as the fair market value of an owner's equity in property such as a camper, boat, second home and furnishings/supplies, vehicle(s) above the two allowed per immediate family, retirement account balances (such as Thrift Savings Plan or 401 (k)), jewelry, artwork, etc.

(c) Assets do not include the value of household furnishings (primary residence), apparel, one or two vehicles, family burial plot or prepaid burial contract, a home which the person maintains as the principal family domicile, or income-producing property, if the income from such property has been included in comparing income and expenses.

Form OWCP-20 is designed to obtain this information and should be enclosed with Form CA-2201, Form CA-2202, or equivalents. Extensive documentation of assets and expenses in support of the statements made on the Form OWCP-20 is requested by both Forms CA-2201 and CA-2202. If adequate documentation is not supplied, the CE may elect to conference the case and/or request that additional documentation be submitted (or the H&R Representative should request additional documentation at the hearing).

Example 1 – The OWCP finds that an overpayment of $2,500 occurred due to an incorrect pay rate. The overpaid individual submits evidence to show that he has income of $2,000 per month consisting of his FECA benefits and benefits from the Social Security Administration, and assets consisting of an $800 bank account and $1,000 in a mutual fund. He also submits evidence showing that he has fixed monthly living expenses of $1,000 for rent, $300 for a vehicle loan, $250 for utilities, $300 for food, and a $75 minimum credit card payment. He also has $50 in miscellaneous expenses. Thus, the ordinary and necessary living expenses are determined to be $1,975 per month and his assets do not exceed the resource base of $6,200 for an individual.

An individual is deemed to need substantially all of his or her current net income to meet current ordinary and necessary living expenses if monthly income does not exceed monthly expenses by more than $50. The difference between the individual’s income of $2,000 and his ordinary and necessary living expenses of $1,975 is only $25. Recovery of the overpayment in this case would "defeat the purpose of the FECA" because recovery would cause hardship by depriving the overpaid individual of income and/or resources needed for his ordinary and necessary living expenses under the criteria set out in this section.

c. Against Equity and Good Conscience. If the overpaid individual is not entitled to waiver under the "defeat the purpose of this subchapter" clause, the "against equity and good conscience" clause should be considered. Even if the overpaid individual does not raise "equity and good conscience" reasons in the claim for waiver, the CE or H&R Representative must address the issue in the Final Overpayment Determination, stating whether or not this clause pertains to the specific circumstances of each case. Robert E. Wenholz, 38 ECAB 311, 315 (1986) (“In support of his request for waiver of the overpayment, appellant submitted cancelled checks to the Office which showed that he used the award money he received to repay personal loans, settle a property dispute with his ex-wife, and assist his daughter in the payment of school expenses. At the hearing appellant testified that he entered into these transactions relying upon the compensation that he received and that he was unable to repay the overpayment as a result. Accordingly, the case must be remanded to the Office for further development on this claim. On remand the Office should determine whether the evidence is sufficient to waive the overpayment under the “against equity and good conscience” clause of the Act.”) This clause is divided into three parts: financial hardship, lack of knowledge of the overpayment, and detrimental reliance.

(1) Financial Hardship. Recovery will be found to be "against equity and good conscience" when an overpaid individual would experience severe financial hardship in attempting to repay the debt. The factors to consider in making this hardship determination are the same as those considered under the “defeat the purpose of this subchapter” clause.

(2) Lack of Knowledge. Recovery will also be found to be "against equity and good conscience" when the overpaid individual derived no personal gain from the incorrect payment(s) and had no knowledge of the compensation benefits that were paid.

A case where an individual is not aware of an overpayment is rare, but when this occurs, since the individual had no knowledge of compensation paid to him/her, the overpayment is waived; there is no reason to consider finances.

For example, the Eighth Circuit Court of Appeals ruled in Groseclose v. Bowen, 809 F.2d 502 (8th Cir. 1987), that the Secretary of Health and Human Services had applied an "unreasonably narrow" definition of the "against equity and good conscience" test, because the Secretary failed to interpret this phrase in a manner reflecting its commonly-understood meaning. The appellant had been charged with a Social Security overpayment and waiver was denied by the Social Security Administration (SSA) when benefits were incorrectly paid directly to one of his minor children who was living in another state. The appellant was not even aware that his child was receiving benefits.

The Court of Appeals reversed the SSA and found that recoupment of the overpayment from appellant "would be against equity and good conscience as that phrase is commonly understood." The Court stated, "We find it difficult to imagine a more unfair or unjust situation than requiring a person who is without fault to repay overpaid benefits when that person had no knowledge of the overpayments." See R.L., Docket No. 10-2412 (Issued August 23, 2011) (ECAB found recovery would not “defeat the purpose of [FECA]” nor be against “equity and good conscience.” Retirement funds available for withdrawal may be considered for waiver determinations and the evidence of record indicated that appellant had significant assets in excess of the established limit. Appellant also cited Groseclose a case which involved Social Security benefits and an “equity and good conscience” clause where a claimant who was not aware that one of his minor children was receiving Social Security benefits in error and the Court of Appeals found recoupment of the overpayment would be against equity and good conscience. ECAB found Groseclose factually distinguishable and found OWCP properly denied waiver in this case.)

(3) Detrimental Reliance. Recovery is considered to be inequitable and against good conscience when a person, in reliance on such payment(s) or on notice that such payment(s) would be made, relinquished a valuable right or changed his or her position for the worse.

When the overpaid individual states that he or she has relinquished a valuable right, it must be demonstrated that:

(a) the right was, in fact, valuable;

(b) the individual is unable to get it back; and

(c) his or her action was based primarily or solely on reliance of such payment(s) or notice of payment(s).

When an overpaid individual has changed his or her position for the worse, it must be shown that:

(a) he or she made a decision that would not otherwise have been made, but for the receipt of benefits, and

(b) this decision resulted in a loss.

The overpaid individual must show that if required to repay the overpayment, he or she would be in a worse position after repayment than he or she would have been the case if the benefit(s) had never been received in the first place. Conversion of the overpayment into a different form, such as food, consumer goods, real estate, etc., from which the overpaid individual derived some benefit is not to be considered a loss. J.B., Docket No. 15-1043 (issued August 6, 2015)(ECAB stated: “the money appellant spent on a car, pistol, magazines, snow blower, and bathroom fixtures is not considered a loss. He did not change his position for the worse. Rather, appellant simply converted his assets from one form to another. He purchased tangible property from which he derived some benefit.” Converting the overpayment into a different form for the benefit of another person (such as a child or relative), however, may be considered as a loss if the overpaid individual retains no ownership interest in the proceeds and has no ability to reclaim the proceeds); G.W., Docket No. 12-1171 (issued October 25, 2012) (the claimant argued that he relied on the overpaid compensation to help relatives financially, to pay for his daughter's wedding, and to make purchases, such as a new car, a swimming pool, appliances, and electronics. ECAB found, however, that the claimant did not qualify for waiver under the principle of detrimental reliance because there was no evidence he gave up a valuable right or changed his position for the worse); Ronald L. Berente (claiming as son of John M. Berente), Docket No. 89-624 (issued September 19, 1989) (Appellant stated that he put the money into his daughter’s savings account. ECAB noted: “waiver of the overpayment might be considered if appellant had put the money in an account in which he had no ownership and had no call on the money. He commented, however, that recovery of the overpayment would result in a loss because he would have to take money out of his daughter's savings account. This statement shows that appellant is able to withdraw money from his daughter's savings account. He therefore has not relinquished any valuable rights which would lead to waiver of recovery of the overpayment on the ground that it would be against equity and good conscience.”)

If detrimental reliance occurred, the individual's present ability to repay the overpayment is not considered and the overpayment should be waived.

The following are examples of application of the detrimental reliance principle:

Example 1: A surviving spouse and a son were receiving death benefits. After the son dropped off the rolls in 2012 at age 18, the surviving spouse's benefits were recomputed. An error was made in the re-computation of cost-of-living adjustments, resulting in a difference in payment of $50 per month. When the error was detected in 2014, the surviving spouse applied for waiver of the overpayment, stating that she quit her job in 2012 based on the expectation of continuing compensation and was unable to regain her job. In this situation, it is likely that waiver would not be granted on grounds of detrimental reliance. The surviving spouse would have to show that she relied on the difference between benefits actually received and entitled benefits when deciding to retire, and that if she had been receiving correct benefits, she would not have retired. Proving this will be very difficult due to the small difference between benefits actually received and the correct benefits, i.e. $50 per month. Also, the surviving spouse would have to show that she cannot go back to work.

This outcome does not conflict with OWCP's responsibility to carefully investigate, evaluate, and make a determination on all of the overpaid individual’s contentions concerning waiver. Since the overpaid individual is in possession of the facts, she is in the best position to show that her assertions have merit, and the burden of setting forth the argument is generally on the party with the best access to the facts. OWCP must provide the individual with the opportunity to present additional argument and prove her assertions. Furthermore, OWCP must clearly explain to her the basis for waiver and what she would need in order to qualify.

If the benefit which is now declared an overpayment is a large one, the OWCP will compare the amount the overpaid individual was receiving against the amount she would have received without the overpaid benefit(s) to determine whether there may have been detrimental reliance. For example, if the surviving spouse's entire benefit was paid in error, the District Office would have to consider whether she might have given up her job if she were getting no FECA benefit(s) at all. Even in this case, she might have been entitled to an OPM annuity or other pension, sufficient to prompt her to resign.

Therefore, consideration must also include the financial hardship in the case. If detrimental reliance is not demonstrated, waiver might still be granted on financial hardship alone.

Example 2: A claimant received a large schedule award for her hearing loss. Later it was discovered that the claimant's hearing loss was not noise-induced and the entire award was declared to be an overpayment. The claimant contended that she had changed her position for the worse, as she used the entire award to make a down payment on a larger home. The claimant has not met her burden in showing that she changed her position for the worse, since she has not shown that she suffered any loss. She simply converted the money into a different form and did not lose it. Conversion of a liquid asset into real or personal property does not constitute a loss.

While the claimant may have made the expenditure in reliance upon the award, she must also establish a financial loss before it will be inequitable to recoup the overpayment. Of course, the CE must still compare the claimant's income and expenses under the second part of the "against equity and good conscience" test, i.e., financial hardship.

By contrast, if the surviving spouse relied on such benefits to pay her daughter's college tuition, this would not be a conversion of the money into anything for her own use. Therefore, she would be worse off if recoupment is made rather than if she never received the benefits.

Example 3: A claimant was notified that he was entitled to a $20,000 schedule award for his hearing loss. Upon receipt of the money, the claimant bought a farm with a $2,500 down payment and took a ten-year mortgage from the owner. The first payment was not due until six months after the down payment. Before the first payment was due, the claimant was notified that the entire award was an overpayment. As a result, the claimant put all of the remaining money into the bank, failed to make the first payment, and forfeited the down payment. Since the claimant would not have entered into the contract to purchase the farm but for his receipt of benefits, it would be inequitable to recoup the entire $20,000 overpayment, as the claimant clearly suffered a loss in the amount of $2,500.

This example indicates that partial waiver is a legitimate action. The claimant did not suffer a $20,000 loss, but merely a $2,500 loss. The claimant did not have the money to buy a farm and had no intention of doing so until he received his award. Thus, the claimant detrimentally relied upon the OWCP's action and it would be inequitable to recover the overpayment to the extent of his reliance (i.e. $2,500). It would not be inequitable, however, to recoup the part of the overpayment that the claimant deposited in the bank. If the claimant was faced with additional expenditures arising out of the forfeiture, those expenses should also be deducted from the overpayment.

d. Waiver of Interest Only. The Debt Collection Act of 1982 and the Federal Claims Collection Standards (31 CFR Part 900-904) provide that interest shall be assessed on all debts due the United States Government unless specifically exempted or waived under established regulations. When recovery of an overpayment is waived in full, the overpayment never becomes a "debt" and, therefore, interest is not applied.

However, whether or not waiver of recovery is requested, an overpaid individual may request that interest be waived. In an overpayment case where the overpaid individual specifically requests that interest be waived and waiver of recovery of the overpayment is not granted in full, the Final Overpayment Determination must address the request for waiver of interest. If waiver of interest is denied, the decision must include a discussion of the rationale as to why the circumstances in the case do not meet the criteria for waiving interest.

Interest may be waived after the Final Overpayment Determination is issued under the following circumstances:

(1) If the principal is repaid in full within 30 days of notification that charges are applicable. This may be extended for one additional 30-day period (for a total of 60 days) on a case-by-case basis for good cause shown. Acceptable reasons for the 30-day extension include, but are not limited to, situations where the overpaid individual needs the additional time to liquidate assets or arrange financing in order to pay the debt, or where the individual does not receive the Final Overpayment Determination in a timely manner (e.g., because of absence from home due to hospitalization).

(2) If the full amount of the principal is paid after charges have accrued and the additional cost of recovering the charges is greater than the amount of the accrued charges.

(3) Where the overpaid individual is without fault in the creation of the debt and a repayment agreement has been established, if the monthly payment is so small that it does not cover the interest, or there is so little left after interest that the debt will not be paid off within the lifetime of the overpaid individual (as determined by actuarial tables).

Waiver of interest is determined by using the Waiver/Compromise application to create a Waiver of Charges/Compromise of Principal Worksheet. See Exhibit I. When interest is waived under any of the three above criteria, the overpaid individual should be informed by letter. If waived pursuant to item (c), the letter should advise that charges will again be applied if the overpaid individual defaults on the debt.

In the case of Marie D. Sinnett, 40 ECAB 1009 (1989), the claimant agreed to repay an overpayment through deductions of $100 from her continuing compensation checks. While she did not request waiver, she did request that the assessment of interest be waived. The OWCP refused to waive the interest amount and the claimant appealed. The Board ruled that the case was not in posture for a decision on the issue of the OWCP's refusal to waive the imposition of interest on the overpayment debt because "...the Office hearing representative failed to specify the circumstances of the appellant's case which denies the Office authority to waive interest and he failed to explain why the agreed repayment schedule precludes waiver of interest under the applicable regulations.”

e. Waiver of additional charges, Administrative and/or penalty charges must be waived if the overpaid individual is without fault in the creation of the overpayment and the application of charges will extend the period of indebtedness beyond the individual’s life expectancy. The Waiver/Compromise application can be used to create a Waiver of Charges/Compromise of Principal Worksheet. See PM 6-0500.5 for additional information regarding additional charges.

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5. Final Overpayment Determinations. If the overpaid individual has not repaid the debt in full and has not requested a pre-recoupment hearing with H&R, a Final Overpayment Determination should be issued by the District Office using Forms CA-2223-2227 or equivalents. Correspondence Library contains shell letters to serve as a guide in writing the Final Overpayment Determination and should be tailored to the specific circumstances of the case. When any Final Overpayment Determination is issued, a copy should be sent to the employing agency and any authorized representative.

a. Entitlement issues that affect an overpayment should be addressed by the District Office before a Preliminary Overpayment Determination is issued, when possible. Entitlement decisions carry greater appeal rights than those afforded in a Final Overpayment Determination. In some instances, an entitlement issue will be raised after the Preliminary Overpayment Determination is issued. If raised and not previously addressed, the CE or the H&R Representative should issue an entitlement decision, with appropriate appeal rights, before the Final Overpayment Determination is issued. This difference may be especially important in the context of pre-recoupment review or hearing where the overpaid individual contests the fact of the overpayment and the CE or the H&R Representative must determine whether the overpaid individual’s objections actually involve an issue of entitlement. The CE or the H&R Representative should then take appropriate action with regard to the overpayment issues of fault, waiver and/or recovery, and issue a Final Overpayment Determination.

(1) For example, an overpayment is created as a result of the OWCP's decision that compensation had been paid at an incorrect pay rate. If the claimant presents evidence in support of the argument that the original pay rate used by OWCP was correct and that the decision changing the pay rate was improper, the issue of entitlement should be addressed and a formal decision with appropriate appeal rights should be issued prior to the Final Overpayment Determination.

(2) On the other hand, if the overpaid individual questions the amount of the overpayment based solely on the correctness of the OWCP's mathematical computations, no issue of entitlement is raised in connection with the overpayment and only a Final Overpayment Determination is necessary. The CE should discuss the evidence of record that supports modification, show how the amount was modified and include any recalculations with as much detail as done in a Preliminary Overpayment Determination. See FECA PM 6-0300.5.

b. Most Final Overpayment Determinations will not involve entitlement determinations, and therefore, may be issued after considering all evidence received in response to the Preliminary Overpayment Determination.

(1) No response to the Preliminary Overpayment Determination, With Fault.

(a) If the overpaid individual is found with fault and did not respond to the Preliminary Overpayment Determination, proper due process was afforded, and he or she is being paid compensation from the OWCP on the periodic roll (or is due accrued benefits from the OWCP or the OPM), a Final Overpayment Determination should be issued using Form CA-2223 or equivalent. If the overpaid individual is due accrued benefits from the OWCP or the OPM for past entitlement, the overpayment should be recovered in full by a single deduction from compensation, when possible. Where compensation is being paid on the periodic roll, the debt repayment rate should be set at 25% of the net compensation amount until the balance of the overpayment is paid in full.

(b) If there is no ongoing compensation or accrued benefits upon which to collect the debt, a Final Overpayment Determination should be issued using Form CA-2223 (or equivalent) and repayment of the debt demanded in full. If financial documentation is received at a later date reflecting the inability to repay the debt in full, a reasonable repayment plan can be appropriately determined at that time.

(2) Response to the Preliminary Overpayment Determination, With Fault.

(a) If the overpaid individual is found with fault and provided a response to the Preliminary Overpayment Determination, the response should be thoroughly reviewed along with any evidence submitted to determine if the overpaid individual remains to be found with fault in the overpayment.

(b) If the evidence received was irrelevant or insufficient to overturn the with fault finding, a Final Overpayment Determination should be issued using Form CA-2223 or equivalent. If no financial documentation is on file, the debt should be recovered in accordance with paragraph (1) (a) or (b) above.

(c) If the Preliminary Overpayment Determination’s finding of with fault is overturned and the overpaid individual is determined to be without fault in relation to the overpayment, the CE must decide if there is sufficient information on file to grant a waiver of recovery as described in paragraph 4 of this chapter.

(3) No response to the Preliminary Overpayment Determination, Without Fault.

(a) If the overpaid individual is found without fault, did not provide a response to the Preliminary Overpayment Determination, and proper due process has been afforded, a Final Overpayment Determination should be issued in accordance with paragraphs (1) (a) or (b) above. If the CE determines that a conference is necessary to actuate a fair and equitable repayment plan, it is at the sole discretion of the CE to arrange one.

(4) Response to the Preliminary Overpayment Determination, Without Fault.

(a) If the overpaid individual is found without fault and responded to the Preliminary Overpayment Determination and requested a waiver but did not request a hearing, the CE should thoroughly review the evidence submitted and make a determination regarding waiver of recovery in accordance with paragraph 4 of this chapter. If the CE determines that a conference is necessary to properly address waiver of recovery, it is at the sole discretion of the CE to arrange one.

(b) If full waiver of recovery is granted, the CE will issue a Final Overpayment Determination using Form CA-2227 or equivalent.

(c) If partial waiver of recovery is granted, the CE will issue a Final Overpayment Determination using a modified version of Form CA-2225 (or equivalent) and recover the debt in accordance with paragraph (1) (b).

(d) If no waiver of recovery is granted, the CE will issue a Final Overpayment Determination using Form CA-2225 (or equivalent) and determine a reasonable rate of repayment for debt recovery based on the financial documentation on file.

(5) If a retroactive schedule award is immediately payable or payable in the near future, and full waiver has not been granted, 100% of the award can be taken towards the balance of the overpayment (regardless of whether financial information has been received or not) and a Final Overpayment Determination should be issued fully explaining the recovery.

c. The Final Overpayment Determination should contain the following:

(1) Notification of due process that the delinquent debt may be referred to the Department of the Treasury, administrative costs may be assessed if this occurs, and it is reportable to credit bureaus.

(a) The Debt Collection Improvement Act of 1996 created a new Federal Debt Collection system for delinquent debts. Delinquent debts are cross-serviced by the Department of the Treasury and are required to be referred to them for collection action when the debts are more than 180 days delinquent.

(b) Notification of due process must be given at least 60 days prior to referral for cross-servicing. All final decisions that require repayment of a debt (Forms CA-2223 through CA-2225, or equivalents) contain the necessary due process language.

(2) Notification that the overpaid individual has a right to inspect and request copies of debt records, to enter into a mutually agreeable repayment plan, and to request a review of the debt determination.

(3) Notice of the right to appeal to the ECAB.

(4) A memorandum to the file that includes:

(a) The Issue under consideration, specifically that the Preliminary Overpayment Determination be finalized or overturned, and either the overpayment recovered or waived.

(b) The Background of the case, including the reason(s) the overpayment occurred, a summary of the findings made in the Preliminary Overpayment Determination and the evidence received in response.

(c) The Discussion, including the rationale for the final fault finding, regardless of whether or not it changed from that declared in the Preliminary Overpayment Determination; a summary of any conference held and conclusions drawn from it; consideration of waiver of recovery where the overpaid individual is found without fault; and, if the overpayment is recoverable, an appropriate collection plan.

(d) The Basis for the Decision, explaining the reason(s) for the final determination made on fault finding and waiver (if applicable).

(e) The Conclusion, finalizing the Issue and the action(s) to be taken.

d. Representative Payees. A representative payee may be held responsible for repaying an overpayment. Compensation payments are often sent to a representative payee, a party other than the individual on whose behalf the benefits are payable. The representative payee is legally obligated to use the funds for the advantage of the claimant/beneficiary. The representative payee may be a legally appointed guardian, a trustee, or other fiduciary.

This commonly occurs in death cases, where a surviving spouse or legally appointed guardian receives payments on behalf of the decedent's surviving children. It is less common in disability cases, occurring chiefly where claimants are unable to handle their financial affairs for various reasons, such as being declared legally incapable of handling financial matters or suffering from a grave illness.

A finding will be made regarding the representative payee’s fault in creation of the overpayment. If the representative payee is without fault, waiver of the overpayment will be considered using established standards. The issues of fault and waiver are determined individually for the claimant/beneficiary and for the representative payee. Therefore, either the representative payee or the claimant/beneficiary would be liable for an overpayment, or both could share the liability if neither met the standards for waiver. The regulatory authority for representative payees appears at 20 CFR §10.424.

(1) A representative payee has a fiduciary responsibility. Consequently, the fact that an overpayment for a claimant/beneficiary must be repaid from the representative’s funds is insufficient to justify waiver. If a representative payee is without fault, the waiver issue will be determined as it would be for a without fault claimant who received an overpayment on his or her own behalf (by applying the tests including equity and good conscience).

(2) The CE must provide representative payees with adequate written notification of the circumstances which may result in prohibited receipt of benefits and their responsibility in reporting requirements including the return of checks/funds received after an event that affects entitlement.

(3) Since a determination of fault depends heavily on whether the payee was informed of the reporting responsibility, both the representative payee and the claimant/beneficiary should be informed of this responsibility and asked to furnish information. Providing a claimant/beneficiary with copies of letters addressed to a representative payee is generally not sufficient to hold the claimant/beneficiary responsible for submitting information. A separate letter must be sent to each.

(4) Minors and those found legally incompetent to handle their own affairs, however, should not be asked to submit information. Requests for information and final decisions should be sent only to the representative payees.

(5) While a representative payee may do nothing more than endorse compensation checks to the claimant/beneficiary, this does not excuse the representative payee from liability or in any way diminish responsibility in the creation of an overpayment. An overpayment to a representative payee is handled according to regular overpayment procedures outlined in this chapter.

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6. System Coding. When a Final Overpayment Determination is issued, the debt record should be updated accordingly to reflect the action taken.

a. Full payment received. If full payment has been received towards the debt following the Preliminary Overpayment Determination, the debt record should be updated to reflect a zero balance and the record should be closed.

b. Partial payment received. If partial payment has been received towards the debt following the Preliminary Overpayment Determination, the debt record should be adjusted to reflect the new overpayment amount less the payment received. The debt record should also be changed from a preliminary status to a final status to reflect that a Final Overpayment Determination has been issued. The debt record should also reflect any repayment plan set forth in the Final Overpayment Determination.

c. No payment received. At the time the Final Overpayment Determination is issued, the debt record should be updated from a preliminary status to a final status. The debt record should also reflect any repayment plan set forth in the Final Overpayment Determination.

d. Change in fault finding. At the time the Final Overpayment Determination is issued, the debt record should be updated to reflect a change in the case status from preliminary to final. If the Preliminary Overpayment Determination determined that the claimant was with fault, but that has subsequently changed with the issuance of the Final Overpayment Determination, the debt record should properly reflect this change. If waiver was granted, it should also be reflected in the debt record.

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Exhibit I – Waiver of Charges Worksheet

 

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6-0500, Debt Liquidation

Paragraph and Subject

Date

Trans. No.

Table of Contents

09/18

18-04

1. Purpose and Scope

09/18

18-04

2. Legislative and Regulatory Provisions

09/18

18-04

3. Responsibility for the Collection and Settlement of Debts

09/18

18-04

4. Collection Strategies

09/18

18-04

5. Assessment of Charges

09/18

18-04

6. Compromise to Limit the Repayment Period

09/18

18-04

7. Compromise in Consideration of Debt Disposal

09/18

18-04

8. Recovery from Continuing OWCP Entitlement

09/18

18-04

9. Salary Offset

09/18

18-04

10. Administrative Offset from OPM Benefits

09/18

18-04

11. Recovery Where No Compensation, Salary Offset, or OPM Offset Available

09/18

18-04

12. Referral to the Department of the Treasury

09/18

18-04

13. Referral to the Department of Justice

09/18

18-04

14. Termination of Collection Action (Write-Off)

09/18

18-04

15. Recovery from a Deceased Debtor's Estate

09/18

18-04

16. Compensation Paid After Death

09/18

18-04

17. Bankruptcy

09/18

18-04

18. Third Party Liability Debts

09/18

18-04

19. Court Ordered Restitution in Fraud Cases

09/18

18-04

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1. Purpose and Scope. This chapter furnishes the information and instructions necessary to properly manage and liquidate debts by providing procedures for collection strategies, assessment of charges, compromise, and collection actions including recovery from the OWCP entitlement, various offset options, and termination (write-off) of collection efforts.

Debt referrals to the Departments of the Treasury and Justice are also addressed, as is the management of existing debts from a deceased debtor, compensation paid after death, and debts where a third party, fraud, or bankruptcy is involved.

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2. Legislative Authority and Regulatory Provisions:

a. 20 CFR §10.441 explains how overpayments are collected:

(1) When an overpayment has been made to an individual who is entitled to further payments, the individual shall refund to the OWCP the amount of the overpayment as soon as the error is discovered or his or her attention is called to the same. If no refund is made, the OWCP shall decrease later payments of compensation, taking into account the probable extent of future payments, the rate of compensation, the financial circumstances of the individual, and any other relevant factors, so as to minimize any hardship. Should the individual die before collection has been completed, collection shall be made by decreasing later payments, if any, payable under the FECA with respect to the individual's death. If no further benefits are payable with respect to the individual's death, the OWCP may also file a claim with the estate of the individual or seek repayment of the overpayment through other means including referral of the debt to the Department of the Treasury.

(2) When an overpayment has been made to an individual who is not entitled to further payments, the individual shall refund to the OWCP the amount of the overpayment as soon as the error is discovered or his or her attention is called to the same. The overpayment is subject to the provisions of the Federal Claims Collection Act of 1966 (as amended) and may be reported to the Internal Revenue Service as income. If the individual fails to make such refund, the OWCP may recover the same through any available means, including offset of salary, annuity benefits, or other Federal payments, including tax refunds as authorized by the Tax Refund Offset Program, or referral of the debt to a collection agency or to the Department of Justice.

b. Minimum Collection Guidelines. The Federal Claims Collection Standards, published jointly by the Department of the Treasury and the Department of Justice, (31 CFR Parts 900 through 904) state that Government claims should be collected in full. If an installment plan is accepted, the installments should be large enough to collect the debt promptly.

(1) In cases where there is no entitlement to waiver and the overpaid individual’s assets are insufficient to repay the overpayment in full, the CE or H&R Representative should evaluate the individual’s financial information to establish the highest reasonable rate of repayment which will collect the debt promptly and at the same time minimize any hardship on the overpaid individual.

(2) Where the overpaid individual's ordinary and necessary living expenses approximately equal his or her income, a repayment schedule must still be established. In such cases, the rate of repayment should be set so that any hardship is minimized. The appropriate recovery rate must be established based on the circumstances of each case, taking into account the requirement to minimize (not necessarily eliminate) hardship on the individual.

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3. Responsibility for the Collection and Settlement of Debts is delegated as follows:

a. The District Office is responsible for establishing and maintaining debt records, pursuing collection of the debt, and monitoring debt records to determine if and when referral to the Departments of the Treasury or Justice or termination of collection action may be appropriate.

b. Senior Claims Examiners or Journey-level CEs are authorized to compromise debts and to suspend or terminate collection action, subject to the approval of the District Director, on debts of $1 to $100,000, and to recommend referral of debts of more than $100,000 to the Director of Federal Employees’ Compensation for possible referral to the Department of Justice.

(1) If there is any indication of fraud on the part of the debtor or any other party having an interest in the claim, the authority of the CE is limited to debts less than $500. H&R Representatives have the same limitations with respect to compromising, suspending or terminating collection action on debt claims.

(2) A case involves fraud if an investigation is ongoing which is likely to lead to an indictment; if an indictment is pending; or if there has been a conviction in connection with the debt. Cases where the Department of Justice has declined to seek an indictment, where the criminal case has been dismissed, or where an acquittal has occurred, are not considered fraud cases.

c. The Director of Federal Employees' Compensation is authorized to compromise up to $100,000 on claims and suspend or terminate collection action on claims not in excess of $100,000, exclusive of interest, penalties, and administrative costs.

d. The authority to suspend or terminate collectible debts in excess of $100,000 rests solely with the Department of Justice. Therefore, even if the OWCP believes that suspension or termination of recovery of such a debt is appropriate, the matter must be referred to the Department of Justice for determination. See 31 CFR 904-03.1(b).

e. An overpayment of compensation does not become a debt and is not subject to recoupment (except for overpayments not covered by 5 U.S.C. 8129 as discussed in PM 6-0300.3) until established due process procedures have been provided and a Final Overpayment Determination has been issued. Until that time, the OWCP may accept payment against the overpayment but may not assess any charges, take any action to collect from compensation owed, or issue requests for offset by the Office of Personnel Management (OPM) or other Federal agencies.

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4. Collection Strategies Strategies for collection of a debt should generally be pursued in the following order:

a. Recovery of the entire debt from accrued compensation for which there is direct statutory authority under 5 U.S.C. §8129.

b. Voluntary prompt repayment of the debt in a lump sum;

c. Deduction of installment payments from periodic compensation;

d. Voluntary deduction of installment payments from retirement benefits;

e. Involuntary offset of retirement benefits or refund of retirement contributions;

f. Voluntary installment payments made directly by the debtor;

g. Referral to the Department of the Treasury (if the debt meets certain criteria);

h. Agreement to compromise in consideration of partial payment;

i. Salary Offset deducted by the Federal employer;

j. Referral to the Department of Justice (if the debt meets certain criteria);

k. Termination or suspension of collection action (write-off) after items a-j (above) have been exhausted.

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5. Assessment of Charges. The Debt Collection Act of 1982 authorizes the assessment of interest, administrative costs, and penalties on delinquent debts.

a. Charges are assessed on all debts where a final decision has been issued (except certain debts which are being repaid under a long-standing repayment agreement as noted in b. and c. below) beginning on the date the debtor was notified that charges may apply to the debt, or the date of the Final Overpayment Determination, whichever is later.

b. Charges are not assessed on any debt being repaid under a repayment agreement in effect prior to October 25, 1982. The repayment agreement may have been oral or written. If the OWCP notified the debtor and began collections prior to October 25, 1982, and voluntary payments or offset payments have continued more or less regularly since that time, it may be assumed that an agreement exists.

c. Charges are assessed on any debt being repaid under a repayment agreement which took effect between October 25, 1982 and March 26, 1986, unless the repayment agreement, as documented in the case file, stipulates that no charges will be assessed.

d. If the repayment agreement took effect after March 26, 1986, charges apply regardless of what is indicated in the repayment agreement.

e. In cases of court-ordered restitution, the Court Order takes precedence over the Debt Collection Act. Unless stipulated in the Court Order, charges may not be assessed on the part of the debt corresponding to the restitution amount set by the court. See PM 6-0500.19.

f. Interest is assessed at the rate in effect on the date of the Final Overpayment Determination (or the date the debtor was notified that charges may apply to the debt), unless the debtor has defaulted, in which case the interest rate in effect on the date of the new agreement is used. Changes in the interest rate will be announced by OWCP Notice and DFEC directive. See Exhibit 1.

g. Administrative costs are assessed when the debt is found to be delinquent. When a delinquent debt is referred to the Department of the Treasury for collection, a charge is added to the principal and interest as an administrative cost of collection.

h. Penalties. At present, penalties are not being assessed.

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6. Compromise to Limit the Repayment Period. Compromise is an administrative means of decreasing a debt by accepting a partial settlement after a debt has already been established. This is distinguished from full or partial waiver which is a formal decision that negates the overpayment, or the portion waived, before it becomes a debt. Additionally, the debtor has no legal right to settlement or compromise and need not be without fault for compromise to be considered.

Compromise is a contractual agreement on the part of the United States to be satisfied with partial repayment of the debt. Even if the debtor's circumstances change, such that the reasons for the compromise are no longer valid, the OWCP has officially forgiven the remainder of the debt and may not pursue additional repayment unless the debtor defaults on the repayment agreement. Only after the debtor's financial circumstances are known, should compromise be undertaken.

Compromise to limit the repayment period is considered to be due to hardship, as is compromise based on life expectancy.

The determination that the debt has been compromised does not carry the right to a hearing or to review by the Employees' Compensation Appeals Board.

a. Compromise of the principal reduces the principal amount of the debt where it is necessary to limit the repayment period so that it can be repaid within a reasonable time period.

b. Compromise of additional charges reduces the accrued charges applied in the debt to limit the repayment period at the time the repayment agreement (either initial or re-negotiated) is established.

c. A specific mathematical formula is used to determine whether compromise of accrued charges and/or principal is required.

(1) Three pieces of information are needed for the mathematical formula:

(a) the amount of the principal;

(b) the amount of the monthly payment; and

(c) the annual interest rate.

(2) To determine whether compromise is required, multiply the current principal balance plus any accrued charges by the monthly payment and multiply the result by the annual interest rate. If the result is less than 5.5 no compromise is necessary.

(3) If the result is 5.5 or greater, the Compromise of Principal Worksheet must be completed in order to determine the amount, if any, to be compromised. This worksheet can be found using the Waiver/Compromise application.

(4) If the formula calculation eliminates compromising the debt, the CE should complete a memorandum to the file that includes a discussion as to how, with an attachment of the Compromise of Principal Worksheet showing the figures.

(5) If the formula calculation results in a compromise, the Final Overpayment Determination should include a discussion as to how, with an attachment of the Compromise of Principal Worksheet showing the figures. See paragraph g. below.

d. Compromise of the principal and/or accrued charges must be considered if the application of charges will increase the period of indebtedness by more than 35%.

(1) Example: The current principal of the debt is $15,788.62. There are no accrued administrative, penalty, or interest charges. The annual interest rate is 1.00%. The monthly payment amount is $54.16 and the debtor’s current age is 60.

When inputting this information into the Waiver of Charges/Compromise of Principal application, the debt without charges would take 291.52 months to repay. 35% of this period is 102.03 months. Therefore, the debt with charges must be repaid within 393.55 months (291.52 + 102.03). So that the repayment period does not exceed the claimant’s life expectancy, the accrued charges and principal must be compromised in order to reduce the payment period to 393.55 months. The application reveals that $15,788.62 compromised by $3,852.66 results in a new debt principal balance of $11,935.96.

(2) The District Office may have some cases in which a modest repayment amount was set years ago without a thorough review of the debtor's resources. While the debtor is repaying, interest will extend the schedule by more than 35%. In such cases, the OWCP should not proceed to compromise based on the scheduled amount. The CE should instead contact the debtor to discuss the schedule, point out that the application of interest will extend the schedule, and ask the debtor to consider an accelerated repayment schedule in order to resolve the debt earlier and reduce the total interest paid. If the debtor can provide financial information which supports an inability to pay more, the OWCP may then apply the compromise rule above.

e. If the principal or accrued charges must be compromised, and the principal amount (before compromise) is not more than $100,000 where there is no indication of fraud, or not more than $500 where there is such an indication, then the Compromise of Principal Worksheet should be certified by a second individual at the Senior Claims Examiner level or higher and the compromise detailed in the Final Overpayment Determination.

(1) When a debt arises because of a third party recovery, any compromise may not result in a principal balance which is less than the amount of the Government's statutory right of reimbursement. (See paragraph 18 of this chapter.)

f. If the principal or accrued charges must be compromised, and the principal amount (before compromise) is more than $100,000, or more than $2,500 where there is an indication of fraud, then the Compromise of Principal Worksheet must be certified by a second individual at the Senior Claims Examiner level or higher and the case referred to the Director of Federal Employees’ Compensation or designee for further action regarding the compromise.

g. The Final Overpayment Determination should include a discussion of compromise as follows:

(1) The amounts specified for each component of the debt including principal, accrued administrative costs, accrued penalty, and accrued interest, as applicable;

(2) The rationale for the determination that the debt cannot be waived;

(3) The rationale for compromising the debt with a copy of the Compromise of Principal Worksheet attached;

(4) The amount to be accepted in full settlement of each component of the debt, with separate amounts specified for principal, accrued administrative costs, accrued penalty, and accrued interest, as applicable;

(5) The time and manner of payment;

(6) A statement that the debt is not compromised or settled until full payment of the specified amount has been made; and

(7) Notification that unless the compromise was for financial hardship, the compromised debt will be reported to the IRS as income because while the debtor does not actually receive money, compromise negates a debt that would have otherwise been paid, and the IRS considers this to have the same effect as receiving income. As such, the individual must pay taxes on it according to the proper income tax level.

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7. Compromise in Consideration of Debt Disposal. Regardless of whether compromise is required under the provisions of Paragraph 6 of this chapter, compromise may be further considered as a means of disposing of debts where collection would be extremely difficult or expensive.

a. The debtor may propose that the OWCP be satisfied with partial recovery on the debt, or the OWCP may propose a compromise of partial repayment to the debtor. This might occur if the debtor reported a liquid asset that exceeded the resource base, but was insufficient to cover the debt, and otherwise had only enough income to meet expenses. The compromise would provide for recovery of the amount available and forgiveness of the remainder.

(1) In judging whether repayment would cause hardship, the OWCP should assess the debtor's income and assets according to the criteria provided in paragraph 6.400.4. The debtor should be required to submit a current financial report (OWCP-20) with supportive documentation if one has not been provided within the past six months.

b. Compromise with partial recovery of the debt should be considered if the Government cannot collect the full amount because the debtor is unable to pay it within a reasonable time, or the debtor refuses to pay the claim in full and the Government is unable to enforce collection by court action within a reasonable time. The compromise limitations, as described in paragraph 6 of this chapter, also apply here. In determining inability to pay, the OWCP may consider:

(1) The age and health of the debtor;

(2) Present and potential income;

(3) Inheritance prospects;

(4) The possibility that assets have been concealed or transferred by the debtor to avoid recoupment; and

(5) The availability of assets or income for enforced collection.

c. If it is determined that compromise is warranted, the CE should prepare a memorandum to the file which describes the inability to pay, the proposed compromise, and the factors that led to the compromise recommendation.

d. A claim may also be compromised if the Solicitor notifies the District Office that significant doubt exists as to whether the Government could establish its claim in court, and the debtor has offered partial repayment. This may occur because of a dispute about the law or facts of the individual case. The District Office should not make a judgment about legal enforceability without the Solicitor's specific advice after review of the case.

e. Once a compromise decision is released, and the agreed upon portion of the debt has been refunded to the OWCP, the debt is fully resolved.

(1) The debt management system should be annotated to reflect resolution by compromise and the amount repaid.

(2) A letter should be sent to the debtor confirming that the debt has been discharged. Unless the compromise was for reasons of economic hardship, the letter sent to the debtor should also advise that the amount compromised will be reported as income to the IRS and may be subject to taxation under IRS rules. In cases where the debt has been compromised for reasons other than economic hardship, at the end of each year the National Office files IRS Form 1099G, and a copy of the form is forwarded to the debtor's case file.

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8. Recovery from Continuing OWCP Entitlement.

a. If compensation is owed to the overpaid individual, the debt should be recovered from compensation due after a Final Overpayment Determination has been issued. The payment of benefits due should not be delayed, since collection can be made from ongoing compensation.

(1) An exception to delay can occur if the delay will assist in collecting the debt. For example, if a schedule award is in posture to pay, and the debt should be recovered from the award but the Final Overpayment Determination has not yet been issued, payment of the award can be delayed until the Final Overpayment Determination has been issued in order to sufficiently recover the debt.

b. If a sufficiently large lump sum payment of compensation is payable to the overpaid individual for a single period of past entitlement or for a schedule award, the debt should be recovered in full by a single deduction from compensation owed. The CE should explain the recovery method in the Final Overpayment Determination. D.S., Docket No. 14-378 (issued June 11, 2014)(ECAB has held that OWCP may properly collect an overpayment from the amount of compensation owed a claimant through a schedule award).

c. If the beneficiary is receiving periodic payments, an appropriate payment amount should be deducted in order to recover the overpayment within three years. See 31 CFR § 901.8(b). Deductions can begin with the next periodic roll payment following the release of the Final Overpayment Determination, as long as the overpayment decision is released at least two weeks before the issuance of the first reduced compensation check. If the decision is not released at least two weeks before the next compensation check, the deduction should not be started until the following check cycle, to provide the claimant the required two week notice for reduction in net compensation.

(1) If no response to the Preliminary Overpayment Determination is received, the CE should set the rate of repayment at 25% of the 28 day net compensation amount until the balance of the overpayment is paid in full.  If a completed response to the Preliminary Determination is received within one year, the financial information should be thoroughly examined and if adjustment of the 25% is warranted, the CE should set a reasonable rate of repayment with intent to recover the overpayment within three years. A final decision should be issued with appeal rights to the ECAB. (This is distinguishable from situations where a change in financial circumstances is requested and a review on the Director’s motion is requested.)

(2) If a response to the Preliminary Overpayment Determination is received, the financial information received should be thoroughly examined and the CE should set a reasonable rate of repayment with intent to recover the overpayment within three years.

d. The debt record should be updated to reflect the debt recovery information, whether it be paid in full or payment installments arranged toward resolution of the debt.

e. The Final Overpayment Determination should advise the overpaid individual of the rate of offset and the date on which the debt will be liquidated.

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9. Salary Offset. The Debt Collection Act of 1982 and Department of Labor regulations (29 CFR §20.74 et seq.) provide that a Federal agency may recover a debt owed to the OWCP, upon request, by regular installments from the employee's pay. Generally, the DOL salary offset process will not be utilized as Treasury referrals take precedence. If a CE receives a request for salary offset from the claimant, the CE should contact the National Office.

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10. Administrative Offset from OPM benefits for retired debtors and debtors with contributions toward retirement.

a. The OWCP and the OPM have an agreement whereby offset may be made against amounts payable to retired debtors and debtors with contributions toward retirement from the Civil Service Retirement and Disability Fund. Generally, the OPM benefit offset process will not be utilized as Treasury referrals take precedence.

(1) The offset amount must be at least $50.

(2) If there are accrued benefits which have not yet been paid to the debtor, because of a retroactive election of benefits under the Civil Service Retirement Act (CSRA) or the Federal Employees Retirement System (FERS), the OPM will reimburse the OWCP up to the amount of accrued benefits without certification of notice to satisfy due process.

(3) If a debt is to be collected by offset from continuing OPM payments (i.e. no accrued benefits due), the OWCP must provide notice to satisfy due process, and must certify to the OPM that the due process requirements were provided before offset can occur. Due process consists of a Preliminary and Final Overpayment Determination.

b. The Federal Claims Collection Standards provide that before applying to the OPM for offset, the District Office must notify the debtor of the intention to proceed with collection by offset, offer the opportunity to review and copy records pertaining to the debt, and offer the debtor the opportunity to enter into a written agreement to repay the debt.

(1) Form CA-9003 (or equivalent) provides this notification and should be released to the debtor at least 30 days prior to actually requesting offset from the OPM. Failure to provide this 30-day notice will result in improper due process notification.

(2) The debtor can submit a written request to review and obtain copies of debt records. The debtor is entitled to the first copy of any case record material without charge, in accordance with the Privacy Act.

c. The OPM's regulations governing administrative offset are detailed in 5 CFR 550.1101-1110. If a person indebted to the OWCP is receiving or is entitled to OPM benefits, and the requirements for administrative offset have been met, the assigned fiscal personnel/CE should promptly complete and forward Form SF-2805 and OPM Form 1552, certifying that appropriate due process notice was offered and requesting offset.

(1) Where collection will be in installments, the amount requested must be specified as either a percentage of the net annuity or a specific dollar amount for each monthly installme

(2) Generally, the monthly installments should be at least 10% of the net benefit and should not be less than $50, unless a smaller amount is justifiable on financial hardship grounds or some other reasonable cause.

(3) The monthly installments may not be more than 50% of the net benefit, unless the debtor has consented in writing to collection of a larger amount.

(4) If possible, the installment amount should be large enough to liquidate the debt within three years.

(5) The OPM will continue deductions until the debt is resolved as long as an annuity is being paid. If interest accrues against the debt during this period, the CE should notify the OPM of the additional amount and of the additional period necessary to pay the interest well in advance of the last deduction that the OPM would make if paying off only the amount of the debt declared at the time the offset was requested. The OPM will not calculate the interest.

d. If the debtor is not receiving an annuity under the CSRA or FERS and has no accrued retirement contributions, the OPM will inform the District Office that no possibility for offset exists and the CE will need to pursue other means for debt recovery.

e. If the debtor is not receiving an annuity under CSRA or FERS but has accrued retirement contributions, the OPM will notify the District Office and retain the claim for future recovery. The CE should then pursue recovery through other means. If recovery is made through other means, the District Office must notify the OPM so that the claim against future CSRA or FERS entitlement can be removed.

(1) If the OPM subsequently receives an application for an annuity or for refund of contributions within one year of the claim for offset, it will offset the amount stated in the claim, unless the claim specifies that interest is being charged, in which case it will first contact the District Office to determine the current balance to be offset.

(2) If the application for an annuity or refund is received more than one year after the claim for offset, the OPM will contact the District Office to determine the current debt balance before collecting from the amount to be offset.

(3) If the debtor advises the OPM that due process procedures were not followed, the OPM will notify the District Office. The District Office must send a letter signed by the District Director (or designee) certifying that notice sufficient to satisfy due process was provided. Copies of the Preliminary and Final Overpayment Determinations should be attached.

(4) If the OWCP has made an incomplete claim for offset, and the OPM receives an application for refund of contributions to the retirement system, the OPM will withhold the amount of the debt from the refund for 120 days, which upon request, may be extended an additional 60 days for a total of 180 days. If the OPM has not received certification of sufficient notice to satisfy due process by the end of the 180 day period, full refund will be made to the debtor.

f. A ten year statute of limitations on debt collection by administrative offset used to exist. The Debt Collection Act of 1982 (as amended by the Debt Collection Improvement Act of 1996) was amended on June 11, 2009 to conform with an amendment made by the Food, Conservation, and Energy Act of 2008 under 31 U.S.C. 3716(e).

(1) Prior to this change, administrative offset to debt collection was only available if the debt was delinquent for a period of less than ten years. The changes to this rule conform to the statutory language by removing the ten-year time limitation on the collection of nontax debt by administrative offset, including centralized salary offset, by explicitly stating that no time limitation shall apply, and by explaining that by removing the time limitation, all debts, including debts that were ineligible for collection by offset prior to the removal of the time limitation, may now be collected by administrative offset and centralized salary offset.

(2) The amendment to the law applies to any debt outstanding on or after the date of the enactment of the Act.

(3) To avoid any undue hardship, a requirement applicable to debts that were previously ineligible for collection by offset because they had been outstanding for more than ten years has been added. For these debts, creditors must certify that the notice of intent to offset was sent to the debtor after the debt became ten years delinquent. This is intended to alert the debtor that his debt may now be collected by offset and allows the debtor additional opportunities to dispute the debt, enter into a repayment agreement, or otherwise avoid offset. This requirement applies even in a case where notice was sent prior to the debt becoming ten years delinquent. This requirement applies only with respect to debts that were previously ineligible for collection by offset because of the time limitation. Form CA-9003 (or equivalent) provides this notification.

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11. Recovery Where No Compensation or OPM Offset is Available. Where there are no compensation benefits, salary offset, or OPM offset benefits available to recover the debt from, the CE should outline the amount that the debtor needs to repay directly in the Final Overpayment Determination.

a. The debtor's resources for repayment should be evaluated at the time a Final Overpayment Determination is being issued. If detailed information on the debtor's financial status is not already in the case file, it may need to be obtained to negotiate an appropriate repayment plan with the debtor. This information may include:

(1) Form OWCP-20

(2) Overpayment Recovery Questionnaire

(3) The official transcript of any hearing

(4) Claim Form CA-7

(5) Form CA-1032

(6) Information provided by the Social Security Administration in response to Form CA-1036

b. The debt should be collected in one lump sum whenever possible. If the debtor is unable to pay the debt in full, payment may be accepted in regular installments. The size and frequency of installment payments should be determined by the size of the debt and the debtor's ability to repay.

c. When considering the amount of installment payments, the CE should evaluate the debtor’s financials to determine if there is appreciable income in order to recover the entire debt (including any interest or penalties) within three years, as recommended by the U.S. General Accounting Office (GAO). If so, the installment amount should be set so that the debt is paid in full in three years or less. If not, the installment amount should be set so that the debt is repaid as close to three years as possible.

d. If the debtor refuses to submit detailed financial information, or has not yet had time to reply to a request for such information due to extenuating circumstances, the District Office may accept voluntary installment payments in an amount determined by the debtor, or the District Office may determine a reasonable amount based on documentation in the case file, unless or until detailed financial information becomes available.

(1) If the debtor makes installment payments in an amount so small that the debt will never be repaid or will be repaid in an unreasonably long period (termed a "perpetual debtor"), and refuses to increase the payments or submit detailed financial information justifying the size of the payment, the District Office should consider involuntary offset, referral to the Department of the Treasury, or referral to the Justice Department.

e. The CE should not enter into a formal agreement with the debtor, and should not consider waiver of charges (See PM 6-0400.4) or compromise of principal (see PM 6-0500.6), unless and until the debtor provides detailed financial information and agrees to installment payments in an amount which reasonably represents the maximum payment he or she is able to afford.

f. If the debtor offers to repay on a set schedule or requests a change in a schedule already established, the proposed repayment plan should be evaluated for reasonableness on the basis of the debtor's financial resources as documented in the case file.

(1) If the repayment plan is reasonable, the CE should obtain a signed statement from the debtor which specifies the terms of repayment, and the statement will constitute a legally enforceable agreement.

(2) If the repayment plan proposed by the debtor is not reasonable, the CE should conduct a conference to discuss an accelerated plan and then obtain a signed statement from the debtor agreeing to the revised plan.

(3) If the debtor has not agreed to a repayment plan and/or is not making reasonable payments, the CE should conference the case to discuss an accelerated plan and follow up with a written repayment plan for the debtor to sign. If the debtor cannot be reached for conferencing, or refuses conferencing, referral to the Department of the Treasury may be in posture for pursuit of collection.

g. The Final Overpayment Determination is considered the first demand for payment. The CE should follow up after 30 days to determine whether the overpaid individual has paid the debt in full or made an installment payment towards the balance of the debt. After any necessary conferencing, if no payment has been made, or if an unreasonable payment has been made towards the debt, the CE should follow up with two more demand letters at 30-day intervals.

(1) Forms CA-9001 and CA-9002 (or equivalents) include the notice to satisfy due process in demand for debt recovery. Form CA-9001 is issued 30 days following the Final Overpayment Determination and Form CA-9002 is issued 30 days following Form CA-9001, if applicable.

(2) The letters should advise the debtor of the amount of money owed, the rate at which applicable interest and penalties will accrue, the possibility of salary or administrative offset, and the potential for referral to credit bureaus, the Department of the Treasury, or for litigation by the Department of Justice, if no good faith effort is demonstrated on the part of the debtor.

(3) In most cases, however, after the 30th day following the third demand letter (when the debt is between 90 and 120 days delinquent), if no payment is received, if regular payments are not received, or if the payment is unreasonable to reduce the debt timely, the CE should refer the debt to the Department of the Treasury for debt collection or termination. See paragraph 12 of this chapter.

(4) If letters are returned because of an insufficient address, the District Office should seek the correct address by contacting the employing agency, former employer, dependents, or the OPM; or by using the internet, telephone directories, city directories, Postmasters, motor vehicle records, credit agency skip reports, and/or credit bureaus. Depending on the nature and amount of the debt, if all efforts to locate the debtor are unsuccessful, further collection action should be terminated as provided in paragraph 14 of this chapter, or the debt should be referred to the National Office for possible litigation (as provided in paragraph 13 of this chapter).

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12. Referral to the Department of the Treasury. The Debt Collection Improvement Act (DCIA) of 1996 centralized the government-wide collection of delinquent debt and gave the Department of the Treasury new responsibilities.

When a non-tax debt is greater than 120 days delinquent the debt should be referred to the Department of the Treasury for collection or termination of collection actions as long as the debt is final and not covered by bankruptcy, already in private collection or in litigation, or with the Justice Department. The fact that a Final Overpayment Determination is on appeal to the ECAB does not affect the timing of referral—if the overpayment is reversed by the ECAB, the debt can be recalled from Treasury.

The Department of the Treasury oversees all collection activity on all referred debts. All debts related to the overpayment of benefits under the FECA will be referred for both the Treasury Offset Program (TOP) and Cross-Servicing.

The Financial Management System (FMS) is responsible for the implementation of the debt collection provisions of the DCIA. FMS sends demand letters to debtors on Treasury letterhead, and enters into repayment arrangements with debtors.

a. FMS uses the TOP to compare the names and taxpayer identifying numbers (TINs) of debtors with the names and TINs of recipients of Federal payments. If there is a match, the Federal payment is reduced, or "offset," to satisfy the overdue debt.

b. TOP has been expanded to incorporate other offset processes, particularly:

(1) the tax refund offset program, formerly operated by the Internal Revenue Service, was merged into TOP in January 1999;

(2) levies served by the IRS for the collection of delinquent tax debt in accordance with the Taxpayer Relief Act of 1997; and

(3) collection of state income tax debts by offset of Federal income tax refunds as mandated by the 1998 Internal Revenue Service Restructuring and Reform Act.

c. Cross-Servicing is the other primary debt collection tool operated by FMS. Cross-Servicing uses a variety of collection tools to encourage debtors to repay the Federal Government. Under the Debt Collection Act of 1982, debtors whose accounts become delinquent are subject to reporting to private credit reporting bureaus. FMS administers a contract with Private Collection Agencies who provide delinquent debt collection services and FMS refers debts to these Private Collection Agencies.

(1) The Department of the Treasury reports delinquent debtors to one or more credit bureaus. These bureaus maintain credit information on individuals and provide the information upon request to lenders. The possibility of credit reporting should be pointed out to individuals who refuse to cooperate in the debt collection process. This language is provided in Forms CA-9001 and 9002.

(2) If a debtor disputes the information in a credit bureau's file, the credit bureau will contact the Department of the Treasury to verify the information. The Department of the Treasury currently refers these inquiries to the Branch of Fiscal Operations in the DFEC National Office. A failure to respond to the Department of the Treasury within a given time limit (generally 30 days) will result in the credit bureau accepting the debtor's version of the facts.

(3) Since the Department of the Treasury reports debt to all the credit bureaus, referred debts end up being reflected on the debtor’s personal credit history report.  Once the debt is satisfied, it isn’t automatically removed from the debtor’s credit report.  The debtor must make a specific request to have it removed.

(4) Should a debtor contact the District Office with a request to have a satisfied debt removed from his or her credit report, pertinent information should be forwarded to the National Office. National Office will research the matter to make sure the debt has in fact been satisfied, and will then contact the Department of the Treasury directing them to remove the negative report. National Office will contact the debtor of the action taken, but it will be the debtor’s responsibility to periodically check his or her credit report to confirm that the update occurred.

d. At least 60 days prior to referral to the Department of the Treasury, a debtor must be given notice that the referral for collection action is a possibility. As outlined in PM 6-0100.3e(3) and PM 6-0500.11g, Forms CA-9001 and CA-9002 include appropriate language to serve this purpose, and both must be issued at 30-day intervals after the Final Overpayment Determination to provide adequate due process notice. The Department of the Treasury will not accept debts where such notice has not been given. The notice must also include specific advice that the debtor can:

(1) inspect and request copies of records about the debt;

(2) enter into a mutually agreeable written repayment agreement; and

(3) request review of the amount of the debt, its past-due status, and whether the debt is legally enforceable.

e. A referral to the Department of the Treasury should be made using established process. All documents pertaining to the debt (from calculation through the most recent demand letter) must be in the case file. The complete package should then sent to Fiscal Personnel in the National Office to confirm that referral to the Department of the Treasury is appropriate.

(1) Once the referral is received by the National Office, it will be reviewed to assure that all due process requirements have been met and that it is an appropriate debt for handling by the Department of the Treasury.

(2) The Debt Record should be updated to properly reflect that the debt was referred for treasury servicing.

(3) Once the referral is made, all questions regarding the debt should be referred to National Office until the debt is returned to the District Office.

f. The Department of the Treasury may return a debt for a number of reasons. The debt may have been paid in full, found to be uncollectable, covered by a bankruptcy filing, or compromise may have been reached. When the Department of the Treasury returns a debt, it will be returned to the custodial District Office for further action as noted.

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13. Referral to the Justice Department. When the District Office has exhausted all means to collect a debt, referral to the Justice Department for litigation should be considered. Department of Justice Nationwide Central Intake Facility (NCIF), P.O. Box 65720, Washington, D.C. 20035, is the central location at the U.S. Department of Justice (DOJ) where Federal agencies should refer civil debts for litigation and enforced collection.

a. Statutory time limitations exist for filing a civil action in the courts to enforce an administratively declared fine, penalty or forfeiture or to recoup overpayments.

(1) With respect to collection of debt resulting from a forfeiture determination, 28 U.S.C. 2462 provides a five-year limitation period to seek judicial enforcement of the forfeiture, starting from the date the OWCP issues its final decision on the forfeiture issue.

(2) With respect to filing suit to enforce collection of other debts, 28 U.S.C. §2415(a) provides that any such action shall be barred unless filed within six years after the right of action accrues or within one year after a final administrative decision has been rendered on the matter, whichever is later. The date the overpayment first occurred represents the date the "right of action accrues." However, 28 U.S.C. §2416(c) provides that as long as "facts material to the right of action are not known and reasonably could not be known by an official of the United States charged with the responsibility to act in the circumstances," the six-year period will be tolled.

The ECAB stated that the OWCP was not barred by the six-year period of limitations set forth in 28 U.S.C. §2415 from recovering an overpayment of compensation made more than six years before the District Office determined there was an overpayment. The ECAB found that section 2415(d) applies only when the Government seeks to recover an erroneous payment in a civil action in a court of competent jurisdiction and it has no application to section 8129 of the FECA. The Board found this interpretation consistent with language of section 2415(d), with the legislative history of the section, with the position of the Comptroller General, with subsection(I) of section 2145, and with court decisions on the application of section 2415. Earl C. Poppell, 39 ECAB 1455 (1988); see also, John F. Dunleavy, 45 ECAB 891, 893 (1994) (ECAB held: “Neither the Act nor the implementing regulations place a period of limitation on the adjustment authorized thereunder. Accordingly, the Board finds that the Office is not barred from recouping the full amount of the overpayment that occurred in this case.”)

b. If clear evidence exists for the potential recovery through litigation and the debt is greater than $500, the case should be referred to the National Office by signature of the District Director. Legal action will require evidence that the debtor has assets that may be attached or that family income is sufficient to repay.

c. Any case referred for legal action must contain the following information, if known:

(1) Debtor's full name and current address, or a listing of prior known addresses and steps taken to locate debtor;

(2) Debtor's date of birth and SSN;

(3) Military serial or other identifying number;

(4) Statement detailing circumstances of the debt and computations pertinent to the amount of debt;

(5) Actions taken to collect or compromise the debt, specifying whether or not referral to a private collection agency was made;

(6) Credit data obtained within the past six months which shows ability to recover from the debtor.

(a) Regulations specify that credit information must exist in one of the following forms: a commercial credit report; an agency investigative report showing assets, liabilities, income and expenses; or the debtor's own financial statement executed under penalty of perjury. The District Office may enlist an agency investigator to obtain this information.

(7) A Claims Collection Litigation Report (CCLR) prepared by the National Office, with assistance from the Office of the Solicitor (SOL);

(8) A Certificate of Indebtedness (COI) prepared by the National Office, with assistance from the SOL;

(9) Copies of correspondence with debtor;

(10) Any documents which establish the Government's position on issues raised by the debtor;

(11) Citations to applicable laws and regulations;

(12) Action taken toward recoupment through salary offset or OPM offset;

(13) Dates the debt first accrued and dates of partial payments, if any; and

(14) A description of the debtor's financial status.

If significant doubt exists about the financial hardship reported by a beneficiary, a Wage-Hour investigator may be asked to interview the beneficiary, verify unemployment, etc. The Department of Justice will also accept an OWCP-20 completed by the debtor.

d. If the credit information shows that the debtor has assets which may be recovered, the CE should prepare a memorandum recommending referral to the Director for Federal Employees' Compensation and forward it to the District Director (or designee) for certification.

(1) Upon receiving a referral recommendation, the District Director (or designee) should carefully review the file to verify that the finding of overpayment is supported, that due process rights were properly provided, and that the potential for enforced collection is documented in the file.

(2) The District Director (or designee) should consider the facts of the case including the pay rate used for compensation purposes and evidence regarding dependents.

(3) If the overpayment arose because the forfeiture provision in 5 U.S.C. §8106 was invoked, the reviewer should ensure that the only period at issue is the time period required by affidavit which was falsely provided and declared forfeit.

e. Upon receipt of a complete file, National Office staff will determine whether:

(1) The overpayment actions taken were correct;

(2) Due process rights were provided;

(3) All possible collection actions were taken by the District Office; and

(4) All necessary information is present, or thorough efforts to obtain the information are documented.

Cases which do not meet the above criteria, or where the file does not document persistent and substantial efforts toward recovery, will be returned to the District Office for further collection action or additional documentation.

f. At the time the referral is made, the debt record should be updated to properly reflect that the debt was referred to the Department of Justice.

g. Where the OWCP is collecting a debt under a Department of Justice agreement, the OWCP cannot charge interest or send billing notices.

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14. Termination of Collection Action (Write-off). If the OWCP is not successful in its attempts to collect from the debtor, collection action may be terminated/written off. The District Office may terminate collection activity on debts which do not exceed $100,000, exclusive of interest, and which do not involve fraud.

a. When assessing debt termination, the OWCP should consider whether:

(1) Any substantial amount can be collected;

(2) The debtor can be located;

(3) Assets exist which can be liquidated;

(4) The applicable statute of limitations has expired, so that litigation will be unsuccessful;

(5) Cost of further collection action will exceed recovery; and

(6) The agency's claim has legal merit, or can be substantiated by the evidence.

b. District Office management should periodically review debt management records to identify cases in which aggressive collection action has brought no result. Each case should be examined to determine whether litigation would lead to collection of the debt. Circumstances where collection is not likely to be successful should be terminated. Those circumstances include:

(1) where it appears that the debtor has no assets or income which could be attached by a court;

(2) if the debtor's financial circumstances are such that hardship would result from recoupment; and/or

(3) if the Solicitor or the U.S. Attorney states that the OWCP has a poor legal case against the debtor.

c. Where aggressive collection action has brought no result, a Termination of Collection Action memorandum to the file should be prepared by the CE. The memorandum should state:

(1) the nature and amount of the debt;

(2) the efforts made to collect the debt;

(3) the financial circumstances of the debtor; and

(4) an explanation why termination of collection action is warranted.

If the debt exceeds $100,000, or involves an indication of fraud, the memorandum should be signed by the District Director and referred to the National Office with documentation of collection action(s) and a recommendation.

Debts of $2,500 or less which cannot be collected by administrative means, including referral to the Department of the Treasury, must be written off, since the Department of Justice will not accept them.

d. Occasionally a debtor may ask that the debt be forgiven due to financial hardship.

(1) The OWCP may suspend collection action because of financial hardship, but reserves the right to resume collection action in the event of future claims or a change in the debtor's circumstances.

(2) If the debtor has failed to respond to requests or has refused to repay, the OWCP should place a memorandum in the file without corresponding with the debtor. If the debtor's circumstances change, or the OWCP receives different information at some later date, collection action may be resumed if no order compromising or forgiving the debt was issued.

e. When collection action is terminated, the debt record should be closed.

(1) Termination of collection action, or the "write-off" of a debt, is an administrative action which is different from waiver or compromise.

(2) Termination of collection action does not forgive the debt since the OWCP may collect the debt at a later date. However, generally, once a debt has been written off, collection action will not be resumed.

(3) At the end of each year the National Office files IRS Form 1099G for cases where the debt has been written off for other than economic hardship reasons, and a copy of the form is forwarded to the case file. Once Form 1099G has been filed, the debt record should be closed, and the OWCP may not collect the debt at a later date.

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15. Recovery of an Existing Debt from a Deceased Debtor's Estate. If the overpaid individual dies before an existing debt is completely recovered, the District Office must quickly and efficiently obtain pertinent information about the estate and devise further collection strategies. Prompt action is essential because creditors who have not properly asserted a claim before the estate is closed are generally precluded from any recovery.

Many state statutes provide that an unsecured debt may not be collected from an estate one year after the death of the decedent. As many states require publication of a notice to creditors, a written claim against an estate should generally be presented within four months from the date of death.

If it appears that the claimant's surviving spouse will be entitled to compensation for death benefits under 5 U.S.C. § 8133 (b) from which the remaining overpayment balance can be collected under 5 U.S.C. § 8129 within a reasonable time, or similarly, that the claimant's surviving spouse has clear entitlement to OPM retirement benefits subject to offset and where it appears clear the remaining overpayment balance can be feasibly collected from these sources, the CE may seek the permission of the District Director to omit the estate collection process described below. Such permission should be documented with a memorandum to the file and a letter to the claimant's surviving spouse should describe the collection process contemplated.

Otherwise, the CE should take swift action to collect the balance of the overpayment from the estate as follows:

a. If only a Preliminary Overpayment Determination has been issued to the claimant at the time of death, a new Preliminary Overpayment Determination should be issued to the estate, followed by a Final Overpayment Determination. Generally, estates should be found without fault.

b. Conversely, if a Final Overpayment Determination has already been issued at the time of death, no Preliminary and Final Overpayment Determinations will be issued to the estate due to the strict timeframes associated with making a claim against the estate. Rather the CE should proceed with making a claim against the estate using the procedures outlined in PM 6-0500.16.

c. Should FECA death benefits be determined payable, the claimant’s debt should be collected from any FECA benefits due to the deceased claimant’s surviving spouse in accordance with the explicit authority set forth in 5 U.S.C. 8129(a).

d. Should non-death FECA benefits be determined payable, the claimant’s debt should be credited with the amount entitled, reducing or eliminating the overpayment balance. In some instances, this may require delay in credit/payment of FECA benefits to ensure that proper overpayment due process has been afforded.

e. If the claimant recently passed away, the OWCP should refer the debt to FMS for offset of the deceased claimant's last Federal tax refund under the Treasury's Offset Program (TOP). 31 §CFR 285.2. The OWCP has a special profile with FMS under TOP for the collection of these specific estate debts. The CE should follow the referral procedures set forth in PM 6-0500.12, including sending the complete referral package to the National Office for final review and forwarding to the FMS.

f. Upon learning that a claimant with an existing overpayment has died, the District Office shall immediately contact the OPM to determine the availability of any OPM benefits payable at the time of death that may be administratively offset, e.g., basic employee death benefits, survivor annuity benefits, or lump sum refund of the deceased employee's retirement contributions (5 CFR §831.1805). If such OPM benefits are available for offset, the District Office should refer to procedures set forth in PM 6-0500.10.

g. To initiate action against an estate for debt recovery, the District Office should take the following steps:

(1) Immediately send a letter to the claimant’s estate, in care of the individual most likely to be named the personal representative or executor of the estate (i.e., Attention: Michael Smith, Personal Representative of the Estate of John Doe). This letter will also serve as a Preliminary Overpayment Determination on the debt to the estate.

(2) The letter must state that the OWCP is making a claim against the estate for the amount of the overpayment and full payment is due within 30 days. In addition, the letter should request the name of the personal representative or executor for the estate and the name of the court where a probate estate case would be opened.

(3) The OWCP should further inform the estate representative in the letter that the estate has the right to: inspect/copy OWCP records relating to the overpayment debt, request that the overpayment be waived, and request a pre-recoupment hearing.

(4) The estate representative will generally be found without fault in the creation of the overpayment. If the estate requests a waiver determination or otherwise asks to be excused from the debt, financial information should be requested from the estate and a waiver determination should be prepared. However, in most situations waiver will be denied and collection will proceed if the estate's resources, after liabilities are established, allows for repayment of the overpayment.

(5) The OWCP should enclose a copy of its previously issued Final Overpayment Determination and a debt history report.

(6) After 30 days, the CE should send a final overpayment letter to the estate. This constitutes the first demand for payment. In the letter, the OWCP shall warn the estate that unless full payment is made within 15 days and the requested information provided, SOL will take legal action against the estate. In the event that the estate representative requests a waiver determination following the request for legal action, any information garnered in the SOL process should be considered in the waiver determination.

(7) After 15 additional days, a last demand letter should be issued to the estate.

h. After the District Office sends the final overpayment letter to the estate and confirms that there are no OWCP or OPM benefits available for administrative offset, the debt should be referred to the Solicitor's Office of Federal Employees' and Energy Workers' Compensation Division (SOL/FEEWC), which will take the following actions:

(1) Determine whether a probate estate case is currently open and in which jurisdiction. Generally a probate estate is opened in the deceased claimant's county of legal residence or domicile. SOL/FEEWC will determine the appropriate county and contact its probate court. As a practical matter, if a claimant is married and holds assets jointly with a living spouse, an estate may not be opened where the assets are modest.

(2) If a probate estate case is open for the deceased claimant, SOL/FEEWC will file a claim against the estate for the amount of the outstanding debt.

(3) If a probate estate case is not open, SOL/FEEWC may file the preliminary and final overpayment letters and demand letter(s) with the probate court and request that the court open a case, appoint a personal representative, and provide an estate accounting report.

(3) If the overpayment is or becomes uncollectible, SOL/FEEWC will create a memorandum to the OWCP, recommending termination (write-off) of the debt in accordance with PM 6-0500.14. The OWCP will then terminate the debt record accordingly.

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16. Compensation Paid After Death. It is not unusual for one or more FECA compensation payments to be issued after the death of a claimant. Sometimes checks continue to be cashed by the debtor's surviving spouse or child or paid by Electronic Funds Transfer (EFT) into the deceased’s bank account shared jointly with a surviving spouse or child. Prompt action by the OWCP in identifying these continued payments after death is essential to any potential recovery.

a. Cashing checks or accepting money by EFT after the death of the debtor may constitute criminal conduct and cannot be considered overpayments. No waiver, hearing, or appeal rights are available to the individual in these cases and no Preliminary or Final Overpayment Determinations should be issued by the OWCP.

b. Even though compensation paid after death is not an overpayment, it is still a debt owed the Government and tracked via the debt management system.

c. Upon learning of the death of a debtor, the CE should take the following steps:

(1) Immediately send a letter to the surviving spouse, child or other individual who cashed the checks or to the joint holder of the bank account requesting that the payments be returned within 15 days.

(2) This initial letter is considered a final decision and a first demand for payment.

(3) The CE should ensure that compensation has been terminated in the case, and that a debt record is created and appropriately updated with each action taken.

d. After 30 days from the date of the initial letter, the CE should pursue reclamation. Reclamation is a procedure used by FMS to recover Government benefit payments made to a deceased beneficiary's checking and/or savings account at a financial institution.

(1) Per 31 CFR §§ 210.9-14 the OWCP must initiate reclamation with FMS within 120 calendar days after the date it has actual or constructive knowledge of the debtor's death. Due to the 120-day time period, it is imperative that the District Office act promptly in these cases. FMS will recoup the money from the financial institution that cashed the check or received the EFT and restore the funds to the OWCP.

(2) If no funds are received as a result of the initial letter, the CE should send a referral to the National Office Branch of Fiscal Operations requesting that reclamation be performed to recoup the money via the Department of the Treasury.

(3) In the case of EFT payments, only the full amount of the payment made after death can be reclaimed. This may result in funds being owed to the survivor(s) after a successful reclamation.

(4) In the case of reclaimed paper check payments, the actual amount owed can be reclaimed, avoiding any excessive recoupment. When requesting reclamation of funds paid by paper check, the CE should inform the National Office Branch of Fiscal Operations of the exact amount paid after death, to ensure that the correct amount is requested.

(5) The National Office Branch of Fiscal Operations will then submit the reclamation immediately to the Department of the Treasury using the on-line PACER application. Reclamations can take from 30 to 90 days to be processed by the Department of the Treasury, so it is important that they are requested promptly. Once notified by the Department of the Treasury, the National Office Branch of Fiscal Operations will then notify the CE of the reclamation results. The Notice of Reclamation (FMS-133) should be bronzed to the claimant’s case file.

(6) Should the reclamation result in the return of excess funds, the CE should closely monitor the case for receipt of payments then expeditiously process any payment due to the debtor's survivors or estate.

e. If the District Office receives notice of the debtor's death more than 120 days after the actual date of death, this is considered "late notice." When "late notice" occurs, the reclamation should be processed immediately, instead of waiting 30 days after the initial letter to the survivor(s) as noted above.

f. If monies were not received after the first payment demand, the District Office should send a second demand letter at the time the reclamation is issued. The debt record should be updated to reflect this status once the letter is released.

g. Depending on the results of the reclamation, the District Office should consider referring the case to any or all of the following agencies:

(1) SOL/FEEWC as described in PM 6-0500.15.

(2) FMS as described in PM 6-0500.12.

(3) OIG. If the facts of the case are sufficiently egregious, e.g., continued receipt of EFTs by a joint account holder for numerous months after the debtor's death, continued cashing of compensation checks of the deceased debtor, etc., the OWCP may refer the case to the deceased debtor's employing agency's Injury Compensation Specialist for investigation by its Office of Inspector General (OIG) into possible criminal conduct. The OWCP may also consider referral to DOL/OIG. Referral may lead to criminal charges and prosecution by the local U.S. Attorney's Office and/or State Attorney General's Office and the individual, if convicted, may be required to pay restitution to the OWCP.

h. If the compensation payments become uncollectible after one year from the date the OWCP has knowledge of the debtor's death, the OWCP may write-off the debt in accordance with PM 6-0500.14 and the debt record should be updated to reflect this status.

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17. Bankruptcy. The CE may discover that the debtor has filed bankruptcy when reviewing the case for a Preliminary or Final Overpayment Determination or when so notified by the debtor.

a. When the CE learns of the bankruptcy, the Regional Solicitor or SOL/FEEWC must be immediately contacted, the OWCP must immediately cease all collection efforts, and any automatic deductions from the debtor’s continuing compensation payments must be terminated. OWCP should not provide any legal or procedural advice to the FECA debtor regarding the bankruptcy.

Under the Bankruptcy Code, once the FECA debtor files a petition for bankruptcy relief, the recovery of an overpayment against the debtor for an overpayment that arose prior to the filing in bankruptcy is automatically stayed. See 11 U.S.C. §362. The stay applies regardless of whether the overpayment will or will not be discharged. Therefore, any deductions being made from the debtor's compensation benefits for the recovery of an overpayment must stop immediately upon receipt of the notice in bankruptcy. In addition, any deductions made after the petition for bankruptcy was filed must be expeditiously refunded directly to the debtor in a Chapter 13 case or to the trustee in a Chapter 7 case. In the event that notice of the bankruptcy is received after the debtor receives his/her discharge, any deductions made after the petition was filed must be expeditiously refunded directly to the debtor under either bankruptcy chapter. The refund should not be made to the debtor’s attorney or any other individual representing the debtor. Failure to stop deductions can subject the OWCP to damages and sanctions under the Bankruptcy Code even if the violation was not willful. See 11 U.S.C. §362. The date that the petition in bankruptcy is filed will appear on the notice and is the date that should be used to determine whether any refund must be made. The actual date that OWCP received the notice should not be used to calculate a refund.

Note that the automatic stay does not preclude the administrative redetermination of FECA benefits owed to the Debtor. See In re Howell, 4 B.R. 102 (M.D. TN 1980). The automatic stay precludes determinations regarding monies owed to the government. For example, the OWCP may not finalize a preliminary determination on an overpayment while the automatic stay in is effect.

b. If possible, the CE should request that any paperwork pertaining to the bankruptcy such as the bankruptcy petition, bankruptcy schedules and/or any order of the bankruptcy court in the case be submitted by fax from the debtor, as well as the location of the bankruptcy court involved (i.e. the bankruptcy court for the Southern District of Ohio), the bankruptcy case number and the name and contact information of the bankruptcy attorney representing the debtor.

c. In some instances, the bankruptcy court will request that a Proof of Claim form be completed. If such a request is received in the District Office, e-mail communication should immediately ensue with the Regional Solicitor or SOL/FEEWC and the Proof of Claim form faxed so that it can be completed and timely filed with the bankruptcy court and transmitted to the U.S. Attorney, if appropriate.

(1) There is usually a deadline appointed by the bankruptcy court for filing of the Proof of Claim, so prompt action is necessary. This deadline cannot be extended by the court and a Proof of Claim will be rejected by the court if it is filed after the deadline.

(2) The Proof of Claim form may need to be filed with the bankruptcy court before due process of the overpayment has been completed.

d. The Bankruptcy Code requires a debtor to file a schedule (list) of all assets and liabilities, listing all creditors and amounts due when seeking bankruptcy protection. See 11 U.S.C. 521(1). A debt is not generally discharged if:

(1) It was not listed in a Chapter 13 case.

(2) It arose after the date of the bankruptcy filing, after the date the debt was discharged or if the bankruptcy case was dismissed by the bankruptcy court. See 11 U.S.C. §362(c). In the event the bankruptcy case is dismissed, the automatic stay no longer applies. See 11 U.S.C. §362(c).

(3) The debtor committed fraud to obtain the payment originally, and a timely objection to dischargeability on this basis is filed with the court. See 11 U.S.C. §523. There is a deadline appointed by the bankruptcy court for filing the objection to dischargeability, so prompt action is necessary by the District Office. If such a case arises, e-mail communication should immediately ensue with the Regional Solicitor or SOL/FEEWC so that a lawsuit/objection to dischargeability can be commenced in a timely fashion. If the deadline to object to dischargeability has passed and no request for extension of time to file the objection is filed with the court, the objection will be rejected and the debt may nonetheless be subject to discharge.

e. A debt is nullified and cannot be recovered if the bankruptcy court has discharged the debt in a bankruptcy proceeding (Chapter 7 or Chapter 13).

(1) If a debtor’s obligation to repay an overpayment is forgiven by the bankruptcy court having discharged the debt in a bankruptcy proceeding, the debt is authorized for termination (write-off) in accordance with PM 6-0500.14.

(2) The CE should ensure that the debt record is properly terminated.

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18. Third Party Liability Debts. Effective July 1, 2013, all cases that are identified as having third party potential are to be referred to SOL/FEEWC, regardless of the employing agency or the amount of refundable disbursements. Thus, when a debt to the United States is established by SOL/FEEWC's approval of a Statement of Recovery (SOR), SOL/FEEWC has an obligation to collect the debt. See In re Dixon, 132 B.R. 16 (S.D. Ohio 1991) which held that for any payment made by a third party tortfeasor, the injured employee, after deducting the costs of suit and a reasonable attorney fee, is obligated to refund to the United States the amount it paid for compensation under the FECA.

a. Pursuant to 20 CFR 10.715, interest may be assessed on third party debts.

b. There are two types of third party debts:

(1) The first type occurs when a completed Form CA-1108 (Long Form Statement of Recovery) or CA-1122 (Short Form Statement of Recovery) is submitted but no payment is made, or only a partial payment is made, and a balance remains due the Government.

(2) The second type occurs when compensation is suspended or declared forfeit because the claimant has failed to comply with § 8131 of the FECA and its third party liability regulations.

b. The principal amount in third party debts may not be waived or compromised unless the debt arises from forfeiture of compensation under 5 U.S.C. 8131 for refusal to cooperate with the OWCP and the OWCP has sufficient information to determine the amount of the Government's statutory right of reimbursement. In such a case, the debt may be compromised down to (but not below) the amount of the Government's statutory right of reimbursement. The OWCP may negotiate a compromise of accrued charges, and may accept installment payments, but must not issue any compromise order or other document which excuses any part of the statutory right of reimbursement.

c. SOL/FEEWC may collect third party debts from attorneys who have not repaid the Government's statutory right of reimbursement, after satisfying the necessary due process requirements, through referral of the debt to the Department of the Treasury or Department of Justice. SOL/FEEWC may also collect third party debts from the debtor/beneficiary through referral of the debt to the Department of the Treasury or Department of Justice; in the alternative, SOL/FEEWC may recommend that the OWCP collect the debt through deductions from the beneficiary’s continuing compensation.

d. SOL/FEEWC must pursue collection efforts. FEEWC should advise the FECA beneficiary that a debt is owed to the United States, and make an initial demand for payment. If the beneficiary has an attorney FEEWC should advise the attorney that he or she is jointly and severally liable for the debt owed to the United States and make an initial demand for payment to the attorney and send a copy to the beneficiary. Demand letters must be mailed or hand-delivered on the same day of the date on the letter. The initial demand letter must notify the debtor:

(1) Of the basis for the debt and the amount;

(2) Of the applicable standards for imposing interest, penalties, and administrative costs;

(3) Of the date by which payment should be made;

(4) The name, address, and telephone number of a contact person or office within the agency;

(5) That he or she may enter into a mutually agreeable written repayment agreement;

(6) That he or she may make a written request for a review of the determinations regarding the amount of the debt, its past-due status, and its legal enforceability; and

(7) That, unless payment is received within 30 days, interest shall accrue, at the U.S. Treasury rate (Current Value of Funds), as of the date of the initial demand letter, but if payment is made within 30 days, interest will be waived.

e. If payment is not received within 30 days, a second demand letter should be released notifying the debtor that the debt remains unpaid, and that the attorney, firm, and client are subject to the provisions of 5 U.S.C. § 8132 which apply to any individual who disburses funds received from a third party recovery without satisfying, or assuring the satisfaction of, the interest of the United States.

f. If payment is not received within 30 days of the second demand letter, FEEWC should make a determination whether they are able to collect the debt, plus applicable interest, through any of the following options:

(1) Installment Payment Plan. FEEWC may enter into an agreement with the debtor if a debt can be collected through installment payments within three years.

(a) The agreement shall provide that payments be made directly to the OWCP.

(b) Once the agreement is signed, FEEWC will notify the OWCP of the terms of the agreement.

(c) The CE will then enter the debt into the debt management system and monitor incoming payments.

(2) Deduction from continuing compensation. In appropriate cases, FEEWC will prepare a memorandum to the CE recommending collection of the debt from continuing compensation entitlement. On receipt of the memorandum, the CE will:

(a) enter the debt into the debt management system;

(b) request financial information from the debtor; and

(c) make a determination as to the amount to be collected from each continuing compensation payment, if not determined already by FEEWC, and begin deductions.

(3) Suspension or forfeiture. Where FEEWC concludes that suspension or forfeiture is an appropriate response to nonpayment of the debt, FEEWC will prepare a memorandum to the CE recommending the action.

(a) The CE will then issue a formal decision with appropriate appeal rights.

(b) The CE will enter the appropriate information into the debt management system.

(4) Referral to the Department of the Treasury. Where payment is not received within 60 days of the date of the initial demand letter, and FEEWC concludes that referral to the Department of the Treasury is appropriate, FEEWC will send a third letter which notifies the debtor(s) of its intent to collect the debt by referral to Treasury. If previous letters have complied with due process requirements it is not necessary to restate them.

(a) FEEWC will also complete a Debt Information Sheet and the necessary background materials supporting the existence and amount of the debt, along with documentation of attempts to collect it to the OWCP's National Office requesting that the debt be referred to the Department of the Treasury for collection.

(b) The debt will remain on FEEWC's collection docket until SOL receives notice from the Department of the Treasury that the debt has been collected, or that they have ceased collection efforts. (d) Where the Department of the Treasury notifies FEEWC that it has ceased collection efforts, FEEWC should keep it on the collection docket until the statute of limitations has run or until it is otherwise uncollectible.

(f) Debts due from DOL employees will be collected or waived through internal procedures; thus, they should not be sent to Treasury for cross-servicing.

(5) Referral to the Department of Justice (DOJ). Where payment is not received within 60 days of the date of the initial demand letter, and FEEWC concludes that referral to the Department of Justice is appropriate, FEEWC will prepare a memorandum to the DOJ, and will submit a Claims Collection Litigation Report to the Department of Justice Nationwide Central Intake Facility (NCIF), P.O. Box 65720, Washington, D.C. 20035.

(a) 28 U.S.C. § 2415(a) provides that any suit to enforce collection of a debt must be filed within six years after the right of action accrues or within one year after a final administrative decision has been rendered on the matter, whichever is later;

(b) The debt will remain on the FEEWC collection docket until FEEWC receives notice from DOJ that the debt has been collected, or that DOJ has ceased litigation efforts.

(c) Where DOJ notifies FEEWC that it has ceased litigation efforts, FEEWC will make a determination whether to close the file and remove it from the collection docket.

(6) Salary offset. FEEWC may initiate salary offset proceedings, and must follow the Department of Labor Salary Offset regulations set forth in 29 CFR §§20.74 through 20.90.

g. If all collection efforts fail, including litigation where appropriate, the debt may be written off.

(1) Write-off is allowable when compromise is not, because write-off is an administrative action which may be reversed if circumstances change, whereas compromise is a formal agreement which is binding on the Office, provided that the debtor makes payments as promised.

(2) A memorandum should be placed in the case file noting the existence of the outstanding third party debt due the Government.

(3) The memo should warn that in the event further benefits are claimed, the debt record should be reopened and the debt satisfied before any additional payments are made.

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19. Court Ordered Restitution in Fraud Cases. When a debtor has been convicted in court of filing a false claim which resulted in a debt due the Government, the court often orders the defendant to make restitution to the United States as a condition of probation. The amount of restitution may or may not be the full amount of the debt owed to the OWCP.

a. If the Court Order states that the restitution amount will be in full satisfaction of the debt owed the United States, i.e., a "Global Settlement," the Court Order takes precedence over the Office's administrative debt collection process.

(1) If the restitution amount is less than the outstanding debt principal balance, the principal balance must be reduced to the restitution amount set by the court. However, if the probation period ends and the debtor fails to make full restitution of the amount ordered by the court, the OWCP may pursue collection of the full original debt amount. The OWCP may wish to request SOL assistance in contacting the Department of Justice to ascertain the status of the restitution.

(2) Interest may not be applied to the debt unless stipulated in the Court Order.

b. If the Court Order does not represent a "Global Settlement," the OWCP should continue to pursue collection of the full amount of the debt, taking credit for any restitution amounts received.

(1) Unless assessment of interest is stipulated in the Court Order, interest may not be applied to the restitution amount and any restitution payments received should be applied directly to the debt principal.

(2) In Joseph Popp, 48 ECAB 624, Docket No. 95-352 (August 14, 1997), ECAB held that the court order in question did not indicate that the recovery of $15,293 from appellant was meant to be in full satisfaction of the debt owed to the United States, i.e., that it was meant to constitute a global settlement. The OWCP was therefore not precluded from continuing to pursue full collection of appellant's debt in the amount of $25,628.75. See also, J.D., Docket No. 13-86 (issued June 3, 2013) where ECAB stated: “ it is well established that to constitute a global settlement a court order must clearly state that the restitution is meant to represent the full satisfaction of any debt owed to the United States.... The court order does not contain the explicit, essential language stating that the restitution ordered represented a ‘global settlement’ with respect to the debt owed to the United States.”; K.S., Docket No. 08-639 (issued April 22, 2009)(appellant's attorney argued that the court-ordered restitution of $20,056.80 constituted a global settlement. ECAB held that the court order “did not indicate that the recovery from appellant in restitution was meant to be in full satisfaction of the debt owed to the United States such that it would constitute a global settlement. Thus, the Office was not precluded from pursuing collection of the overpayment in compensation, with credit to be given to the restitution amount received.”)

c. Loss to the Government Calculations. In criminal FECA fraud cases, the OWCP is sometimes asked to assist the DOJ in calculating the loss to the Government and preparing a victim impact statement in accordance with Federal sentencing guidelines. This victim impact statement may result in return of funds to the FECA program. This may involve calculation using the Shadrick formula to determine how benefits would have been paid. All Loss to the Government cases should be referred to the National Office for review

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