CHAPTER 10. SALARY OFFSET FOR FEDERAL EMPLOYEES INDEBTED TO THE U.S.

10.01 AUTHORITY

a. If an employee of the Federal Government is indebted to the United States as a result of participation in a benefits program administered by VA or another Federal agency or as the result of the erroneous payment of pay or allowances or is indebted in any other manner as described in paragraph 10.02b, the employee's disposable pay may be offset in order to satisfy such an indebtedness under the procedures set forth in this chapter.

b. An offset against salary shall be carried out in accordance with this chapter and the standards established under 5 USC 55l4, 5 CFR Part 550, and 38 CFR l.980-l.994.

c. The procedures contained in this chapter do not apply to debts or claims arising under the IRS Code of l954, as amended, the Social Security Act, or the tariff laws of the United States, or to any case where collection of a debt by salary offset is explicitly provided for or prohibited by another statute (e.g., travel advances in 5 U.S.C. 5705 and employee training expenses in 5 U.S.C. 4l08).

d. This chapter does not preclude an employee from requesting waiver of an overpayment under 38 U.S.C. 3102, 5 U.S.C. 5584, or any other similar provision of law, or in any way questioning the amount or validity of a debt not involving benefits under laws administered by VA by submitting a subsequent claim to GAO in accordance with procedures prescribed by that office.

e. The procedures and requirements of this chapter do not apply to salary offset used to recoup a Federal employee's indebtedness where a judgment has been obtained against the employee for such a debt.

10.02 DEFINITIONS

a. "Agency" means (1) an Executive Agency as defined by section l05 of title 5 of the U.S. Code, including the U.S. Postal Service, and the U.S. Postal Rate Commission, (2) a Military Department as defined by section l02 of title 5 of the U.S. Code, (3) an agency or Court of the judicial branch, (4) an agency of the legislative branch, including the U.S. Senate and the U.S. House of Representatives, and (5) other independent establishments that are entities of the Federal Government.

b. "Debt" means an amount owed to the United States from sources which include loans insured or guaranteed by the United States, from fees, leases, rents, royalties, services, sales of real or personal property, overpayments, penalties, damages, interest, fines and forfeitures (except those arising under the Uniform Code of Military Justice), and all other similar sources.

c. "Disposable Pay" means that part of current basic pay, special pay, incentive pay, retired pay, retainer pay, or in the case of an employee not entitled to basic pay, other authorized pay remaining after the deduction of any amount required by law to be withheld in accordance with 5 CFR 581.105(b) and other deductions described in 5 CFR 58l.l05(c) through (f).

d. "Employee" means a current employee of the Federal Government.

e. "Salary Offset" means an attempt to collect a debt under 5 U.S.C. 55l4 by deduction(s) at one or more officially established pay intervals from the current pay account of any employee without his or her consent.

f. "Waiver" means the cancellation, remission, forgiveness, or nonrecovery of a debt owed by an employee to VA or another Federal agency in accordance with 5 U.S.C. 5584 or 38 U.S.C. 5302, or other similar statutes, 38 CFR l.955-l.970, and MP-4, part I, chapter 8.

10.03 OFFSET OF PAY

a. Installments. Debts shall be collected in one lump sum where possible. However, if the employee is unable to pay in one lump sum, collection shall be made in installments. An offset from pay shall be made at officially established pay intervals from the employee's current pay account. Such installment deductions must be made over a period not greater than the anticipated period of employment. The size and frequency of installment deductions will bear a reasonable relation to the size of the debt and the employee's ability to pay. However, the amount deducted for any period will not exceed 15 percent of the disposable pay unless the employee has agreed in writing to the deduction of a greater amount. If possible, the installment payment will be sufficient in size and frequency to liquidate the debt in 3 years. Installment payments of less than $25 per pay period or $50 a month will be acceptable only in unusual circumstances.

b. Maximum Offset. An offset from an employee's pay may not exceed l5 percent of the employee's disposable pay, unless the employee agrees in writing to a larger offset.

c. Effect of Termination of Employment on Installments. If an employee retires, resigns, or is discharged, or if his or her employment period ends, an offset may be made from subsequent payments of any nature due the debtor from the United States.

d. Exceptions. The procedural requirements of this chapter and 5 U.S.C. 55l4 shall not be applied to collections which are not considered debts, such as excess pay or allowances caused by:

(1) An employee's election of coverage or change in coverage under a Federal benefit program which requires periodic deduction from pay and which cannot be placed into effect immediately because of normal processing delays, in accordance with 38 CFR 1.980e; and

(2) Ministerial adjustments in pay rates or allowances which cannot be placed into effect because of normal processing delays.

e. Refunds. Unless there are applicable contractual, statutory, or other legal provisions to the contrary, amounts paid on or deducted for an indebtedness which is later waived or found not owed to the United States shall be promptly refunded to the employee, including any interest, administrative costs, penalties, or other charges, as appropriate, assessed because of the indebtedness.

10.04 DEBTS OWED TO VA BY FEDERAL EMPLOYEES

a. Benefit Debts

(1) If the employee has not previously appealed the amount or existence of the debt and time has not expired, VA shall notify the employee at least 30 calendar days before initiating salary offset in writing that:

(a) VA has determined that the employee is indebted to the U.S. as the result of participation in a program administered by VA specifying the amount and origin of the debt.

(b) VA intends to satisfy that indebtedness in full, including interest, administrative costs, and other charges as appropriate, by offsetting 15 percent of the employee's disposable pay, specifying frequency, proposed beginning date, and duration of intended deduction.

(c) The employee may appeal the amount and existence of the debt in accordance with the procedures set forth in 38 CFR 19.1 through 19.200.

(d) VA will charge interest, administrative costs, and other charges, as appropriate, on the indebtedness in accordance with 38 CFR 1.919, or other regulations, as applicable.

(e) The employee can establish a voluntary repayment schedule by written agreement with VA in lieu of involuntary offset.

(f) If the employee, within 20 days of the date of the notice described in this paragraph, requests in writing a hearing (oral or paper) regarding (1) reconsideration of the determination of the existence or amount of the debt; and/or (2) reconsideration of the amount to be offset because the offset will produce extreme financial hardship, then offset shall not commence until the dispute over the existence or amount of the debt is resolved or until a determination is made on the issue of the employee's financial hardship.

(g) Any knowingly false or frivolous statements, representations, or evidence may subject the employee to appropriate disciplinary procedures and civil and/or criminal penalties as specified in 38 CFR 1.983(b)(12).

(h) If appropriate, other rights and remedies are available to the employee under statutes or regulations governing the program for which the collection is being made.

(i) Unless there are applicable contractual or statutory provisions to the contrary, amounts paid on or deducted for the debt which are later waived or found not owed to the U.S. will be promptly refunded to the employee.

(2) If the employee previously appealed the amount or existence of the debt and BVA decided the appeal on the merits or if the employee failed to pursue an appeal within the time limit, VA shall notify the employee in writing that:

(a) The VA has determined that the employee is indebted to the U.S. as the result of participation in a program administered by VA specifying the amount and origin of the debt.

(b) The VA intends to satisfy that indebtedness in full, including interest, administrative costs, and other charges, as appropriate, by offsetting 15 percent of the employee's disposable pay, specifying frequency, proposed beginning date, and duration of intended deduction in accordance with 38 CFR 1.919, or other regulations, as applicable.

(c) The employee can establish a voluntary repayment schedule by written agreement with VA in lieu of involuntary offset.

(d) Any knowingly false or frivolous statements, representations, or evidence may subject the employee to appropriate disciplinary procedures and civil and/or criminal penalties as specified in 38 CFR 1.983(b)(12).

(e) If appropriate, other rights and remedies are available to the employee under statutes or regulations governing the program for which the collection is being made.

(f) Unless there are applicable contractual or statutory provisions to the contrary, amounts paid on or deducted for the debt which are later waived or found not owed to the U.S. will be promptly refunded to the employee.

(g) The employee's appeal of the existence or amount of the debt was determined on the merits or that the employee failed to pursue an appeal within the time provided and VA's decision is final except as otherwise provided in department regulations.

(h) The employee may request a waiver of the debt pursuant to 38 CFR 1.911a(c)(2)subject to the time limits of 38 U.S.C. 5302.

(i) The employee may request an oral or paper hearing on the offset schedule and receive a decision within 60 days of such request and that such a request will stay the commencement of salary offset.

(3) If the employee has appealed the existence or amount of the debt and the BVA has not decided the appeal on the merits, collection of the debt by salary offset will be suspended until the appeal is decided or the employee ceases to pursue the appeal.

b. Nonbenefit Debts or a Debt as a Result of an Erroneous Payment of Pay and Allowances

(1) For a debt not involving benefits under the laws administered by VA, VA will review the records relating to the debt to assure that it is owed prior to providing the employee with a notice of the debt. At least 30 calendar days before initiating salary offset, VA shall notify the employee in writing that:

(a) The VA has determined that the employee is indebted to the U.S., specifying the amount, nature, and origin of the debt.

(b) The VA intends to satisfy that indebtedness in full, including interest, administrative costs, penalties, and other charges, by offsetting l5 percent of the employee's disposable pay, specifying frequency, proposed beginning date, and duration of intended deduction in accordance with 38 CFR l.9l9, or other regulations, as applicable.

(c) The employee has the right to inspect or to request a copy of the record in the possession of VA relating to the debt.

(d) The employee (if not previously notified) can establish a voluntary repayment schedule by written agreement with VA in lieu of involuntary offset.

(e) If the employee, within 20 days of the date of the notice described in this paragraph, requests in writing a hearing (oral or paper) regarding 1. reconsideration of the determination of the existence or amount of the debt; and/or 2. reconsideration of the amount to be offset because the offset will produce extreme financial hardship, then offset shall not commence until the dispute over the existence or amount of the debt is resolved or until a determination is made on the issue of the employee's financial hardship.

(f) Any knowingly false or frivolous statements, representations, or evidence may subject the employee to appropriate disciplinary procedures and civil and/or criminal penalties, as specified in 38 CFR 1.983(b)(12).

(g) If appropriate, other rights and remedies are available to the employee under statutes or regulations governing the program for which the collection is being made.

(h) Unless there are applicable contractual or statutory provisions to the contrary, amounts paid on or deducted for the debt which are later waived or found not owed to the U.S. will be promptly refunded to the employee.

(2) A final decision after the hearing will be issued at the earliest practical date, but no later than 60 calendar days after the filing of the request for the hearing, unless the employee requests and the hearing officer grants a delay in the proceedings.

c. Supporting Statement (Nonbenefit Debts). If the employee requests reconsideration of the existence or amount of the debt or requests waiver of collection, the employee should submit a statement, with any supporting documents, indicating why the employee believes that he or she is not so indebted or is entitled to a waiver. The statement shall include a recitation of the facts on which the employee relies to support his or her belief and any legal arguments supporting that belief.

d. Reconsideration of Offset Schedule (Benefit and Nonbenefit Debts). If the employee requests reconsideration of the proposed offset schedule, the employee must file an alternative offset schedule and a statement, with any supporting documents, showing why the proposed schedule would produce an extreme financial hardship. The supporting documents should show, for the employee and his or her spouse and dependents, their - (1) income from all sources, (2) assets, (3) liabilities, (4) number of dependents, (5) expenses for food, housing, clothing, and transportation, and (6) medical expenses and exceptional expenses, if any.

e. Late Requests (Nonbenefit Debts). A request for a hearing concerning the existence or amount of the debt, waiver of collection of the debt, or reconsideration of the amount offset because of financial hardship, may be considered even if received by VA after the expiration of the 20-day time limit if the employee shows that the delay was because of circumstances beyond his or her control or because of failure to receive written notice of the filing deadline.

f. Need For Notice (Benefit Debts).

(1) Employees not Previously Notified. The notice described in subparagraph 10.04a and b of this paragraph shall be issued by VA only in those cases where the employee has not been previously provided such notice.

(2) Employees Previously Notified. If an employee has received previous notification of an indebtedness and has been advised of and exhausted available administrative remedies or failed to timely pursue an appeal, VA must still provide another notification prior to the initiation of salary offset. However, this notification need only inform the employee of the indebtedness, that the employee has been previously notified of both the debt and available administrative remedies before the BVA, and that VA intends to satisfy the indebtedness by offsetting l5 percent of the employee's disposable pay (reference subpar. a(2) above).

10.05 HEARING BEFORE BVA

a. In those cases involving debts arising out of the debtor's participation in a benefits program administered under authority of Title 38, U.S. Code, a hearing and determination on the issue of the validity or amount of the debt shall be conducted by the BVA in accordance with procedures found in 38 CFR l9.l-l9.200.

b. A hearing on a waiver request shall be conducted by a field station COWC in accordance with procedures found in MP-4, part I, paragraph 8A.12 and M21-l, paragraphs 18.17 and 18.18. (Also see VA Pamphlet 1-1).

10.06 PROCEDURES WHEN VA CONDUCTS HEARING FOR ANOTHER AGENCY

Except for a member of the BVA who is acting in accordance with 38 CFR l.982 and paragraph 10.05 of this chapter, a VA employee may be a hearing official only (1) when VA is not the creditor agency in the case and VA is either the employing or paying agency or (2) VA is requested to conduct a hearing by an agency which is both creditor and employer.

a. Notification of Hearing. The hearing official shall notify the employee of the time, date, and location of the hearing.

b. Employee and Creditor Agency Responsibilities. Not later than l0 days before the scheduled date of the hearing, an employee requesting a hearing and the creditor agency shall provide the hearing official with

(1) Statements and documents as described in paragraph 10.04c and d;

(2) A list of witnesses to be called at the hearing and a summary of their anticipated testimony; and

(3) A copy of records to be introduced at the hearing.

c. New Issues. The employee shall not raise any issues that he or she has previously raised concerning the existence, amount, or waiver of the debt, or the offset schedule if such issues were previously resolved by the appropriate authority; or any issue that he or she did not raise or failed to pursue to resolution before the appropriate authority within the time period prescribed by law or regulation.

d. Determination of Hearing Format. For any hearing conducted under the jurisdiction of this chapter, the designated hearing official shall have the exclusive authority to determine whether the hearing is to be conducted in person or by another method, such as telephone conference call, or on the record (i.e., a paper review).

e. Requirement for Oral Hearing. An oral hearing or an oral hearing by means of a telephone conference call is not required when the determination of the existence or amount of the debt does not involve issues of credibility or veracity, and a review of the written record is an adequate means to correct prior mistakes. Where an oral hearing is not required, but the debtor requests a hearing, a "paper hearing" may be provided. A "paper hearing" shall consist of a review of the written record. Such a review may be accomplished with or without the debtor physically present at the time of the review. A "paper hearing" requires a written statement of the outcome of the review. Such written statement should indicate the date and place of the review, whether the debtor was present, and the outcome of the review.

f. Place of Hearing. Hearings will be held in locations agreed upon by VA and the creditor agency and will be detailed in a Memorandum of Understanding.

g. Selection of Hearing Official. Hearings will be held before a hearing official authorized by the VBA Director, Debt Management Center (389/00).

h. Procedures. The following procedures shall be complied with when a hearing is requested:

(1) A record or transcript of the hearing shall be made.

(2) The hearing shall not be conducted in accordance with formal rules of evidence with regard to the admissibility of evidence or the use of evidence once admitted.

(3) The hearing official shall only permit the introduction of evidence contained in the prehearing submissions listed under paragraph 10.04c and d and only so much of that evidence which is relevant and material to the issues being considered and not unduly repetitious.

(4) The hearing official shall not require discovery except to the extent permitted in paragraph 10.04b(4).

(5) The hearing official shall maintain the decorum of the hearing proceedings and exclude from the hearing any persons whose behavior is disruptive of the proceedings.

(6) The employee and the creditor agency may introduce evidence and may call witnesses consistent with subparagraph b(2) above. Witnesses shall testify under oath or affirmation. Parties to a hearing shall be permitted to ask questions, including followup questions, of all witnesses, but cross-examination will not be permitted. The employee may arrange for voluntary appearance of any witness desired, but the hearing official has no authority to require the appearance of any person. The VA shall not be responsible for the payment of any expenses incident to attendance at the hearing which are incurred by either the employee, his/her representative or counsel, or witnesses.

i. Hearing Facilities. Hearings must be conducted in a proper atmosphere. A hearing room with furniture in good repair, adequate lighting, heating or air conditioning should be available. The furniture should be arranged so that everyone in the room can see and hear the witnesses. The United States flag should be appropriately displayed. The appearance and atmosphere of a formal trial or like proceedings are to be avoided.

j. Decorum of Hearing Official. Appropriate dress and conduct are required. Courteous treatment of the debtor and witnesses and attention to the proceedings are expected.

k. Arrival of the Debtor. Upon arrival, the debtor, witnesses and representative, if there is one, will be taken to the hearing room or other appropriate area. The hearing official will be immediately notified and will proceed to the hearing room without undue delay.

l. Initial Proceedings

(1) Introduction of Parties. The hearing official will introduce himself or herself to the debtor and to any witnesses. Care will be exercised to pronounce names correctly.

(2) Explanation of Proceeding. The purpose and nature of the hearing will be explained to the debtor and representative. The necessity for and use of recording equipment will be explained and the debtor informed that a copy of the transcript will be placed in the file and, if requested, a copy will be furnished to the debtor at cost. The debtor and witnesses will be informed that if they desire to "go off the record" to collect their thoughts or for clarification of any matter, they may so indicate and the recording will be temporarily stopped. The necessity of an oath or affirmation will be explained.

(3) Presence of an Attorney. If the debtor is represented by an attorney, the hearing official will explain the proceedings as indicated above. Emphasis should be placed on the informality of the hearing. The attorney will be told that rules of evidence do not apply and that leading questions are permissible.

(4) Administration of Oath or Affirmation. The hearing official will request the debtor and witnesses to stand and raise their right hands. An appropriate oath will be administered which in substance states, "Do you swear (or affirm) the testimony you are about to give will be the truth, and nothing but the truth?" The oath will be administered prior to commencement of recording of the hearing.

m. Conduct of Hearing

(l) Statement of Issues. Prior to commencing the taking of testimony, a statement of the issues, as shown by the evidence, should be made. The debtor and the representative will be asked if this is their understanding of the issues. If there is a misunderstanding of the issues, clarification should be made at that time. This statement will not be used to limit the scope of relevant issues or to indicate to the claimant that testimony is to be curtailed. If additional relevant issues are raised by the debtor or representative at this point or during the hearing, they are to be properly considered. If present, the representative or attorney will be asked if he/she desires to make an opening statement; otherwise, the debtor will be given this opportunity. The representative or attorney will be allowed to introduce the debtor's testimony and ask questions concerning the same.

(2) Opening Statement. Recording of the hearing will start with the hearing official's opening statement. This statement will include the fact that a hearing is being held, date and time of commencement of the hearing, authority before which the hearing is being held, name of the debtor, and that all parties have been duly sworn in. A brief statement of the issues will be made.

(3) General.

(a) Prior to the hearing, the hearing official should familiarize himself or herself with the evidence of record in the particular case. This will include a review of the issues and evidence. Tentative questions to be asked should be formed at this time. The hearing official should not wait until just prior to the hearing or during the hearing to review the file.

(b) Subject to subparagraph h(3) above, the debtor will be permitted to introduce into the record any evidence available to the debtor which he or she may consider material. This includes arguments and contentions with respect to the facts and applicable law which the debtor may consider pertinent.

(c) Whether the debtor or witnesses should be interrupted by questions or to suggest areas which should be further developed during the course of their testimony will depend upon the individual hearing. While pertinent questions may be asked during testimony, care and tact should be exercised in order to guard against disruption or unduly limiting the witnesses' testimony.

(4) VA Personnel Participation. Subsequent to the debtor's testimony, the hearing official should ask pertinent questions. While cross-examination is to be avoided, it is important that the debtor be questioned sufficiently to develop fully all contentions.

(5) Witnesses. After the debtor's testimony and questioning by the hearing official, the witnesses will be given an opportunity to testify. It is recognized that some representatives and attorneys may desire that the witnesses testify immediately after the debtor and prior to any questions by the hearing official. In such cases, the hearing official will question the debtor and witnesses after the completion of testimony by the witnesses. Prior to the questioning of the debtor by the hearing official, the debtor should be asked if there are any objections to any of the witnesses being present. If an objection is raised, the witness or witnesses should be excused.

(6) Summary. After completion of the testimony including discussion of any area raised by questions from the hearing official, the debtor or the debtor's representative will be given an opportunity to make a final statement. Prior to termination of the hearing, the hearing official will ask if there is anyone present who has additional comments or testimony before the hearing is completed. Upon completion of the hearing, the hearing official will note the time.

(7) Written Decision Following a Hearing. The hearing official must issue a written decision not later than 60 days after the employee files a request for the hearing. The decision will include:

(a) A statement of the facts presented to support the nature and origin of the alleged debt.

(b) The hearing official's analysis, findings, and conclusions concerning as applicable:

1. The employee's or the creditor agency's grounds,

2. The amount and validity of the alleged debt, and

3. The repayment schedule.

The decision in a case where a paper hearing was provided shall be based upon a review of the written record. The decision in a case where an oral hearing was provided shall be based upon the hearing and the written record. The decision will be rendered in favor of the creditor agency unless the employee demonstrates by preponderance of the evidence that the determination was erroneous.

10.07 HEARINGS CONDUCTED BY OFFICIALS OF ANOTHER GOVERNMENT AGENCY

A hearing on the issue of the validity or amount of all debts owed to VA other than those described in paragraph 10.05 or on the offset schedule of any debt, including VA benefit debts, shall be conducted by a hearing official who is not a VA employee or otherwise under the supervision or control of VA.

a. Hearings pertaining to debts owed to VA conducted for VA employees by hearing officials of another agency will normally be conducted in accordance with the established written hearing procedures of the other Federal agency, unless the written agreement between VA and the other Federal agency specifies otherwise.

b. Such an agreement with another Federal agency, in most instances, will require VA to reciprocate by conducting hearings requested by employees of the other Federal agency pertaining to debts owed to that agency. Hearings conducted by VA as part of an agreement with another Federal agency shall be in accordance with paragraph 10.06 and 38 CFR 1.985, unless otherwise specified in the agreement.

10.08 DECISION ON EMPLOYEE REQUESTS FOR ADMINISTRATIVE RELIEF

a. Dispute of Debt. If VA's determination regarding the existence or amount of the debt is contested, a decision will be rendered in favor of VA, unless it is found that the employee has demonstrated that VA's determination was erroneous by a preponderance of the evidence.

b. Erroneous Debt Amount. If it is found by a preponderance of the evidence that VA's determination of the amount of the debt was erroneous, the decision shall indicate the amount owed by the employee, if any.

c. Offset Schedule. If VA's offset schedule is contested, the schedule will be upheld unless the employee has demonstrated that the payments called for under the schedule will produce an extreme financial hardship for the employee (see par. 10.10).

d. Financial Hardship. If it is found that the payments called for under VA's offset schedule will produce an extreme financial hardship for the employee, the decision shall contain an offset schedule that will result in the repayment of the debt in the shortest period of time without producing an extreme financial burden for the employee.

e. Written Opinion. Except in a hearing under paragraph 10.05, where the hearing involves the existence or amount of the debt or the repayment schedule, the hearing official will review the hearing evidence and issue a written opinion containing the hearing official's analysis, findings, and conclusions, as applicable, as to (1) the employee's and/or the creditor agency's contentions, (2) the amount and validity of the alleged debt, and (3) the repayment schedule. The written opinion shall be issued at the earliest practicable date, but not later than 60 days after the filing of the petition requesting the hearing. Determinations by the BVA on the existence or amount of benefit debts will be prepared in accordance with 38 CFR part 19.

f. Applicable legal principles. The hearing official may not find that VA's determination of the existence or amount of the debt was erroneous by a preponderance of the evidence:

(1) If a judgment was obtained against an employee on the debt in a court of competent jurisdiction; or

(2) On the basis of Federal, State, or local statutes of limitations (38 U.S.C. 5314(c)).

10.09 REPRESENTATION

An employee may represent himself or herself or may be represented by another person, including an attorney, during any portion of any proceedings under this chapter. If a case is before BVA, representation must be in accordance with 38 CFR l9.l50, et seq.

10.10 STANDARDS FOR DETERMINING FINANCIAL HARDSHIP

a. An offset produces an extreme financial hardship for an employee if the offset prevents the employee from meeting the costs necessarily incurred for essential subsistence expenses of the employee and his or her spouse and dependents. These essential subsistence expenses include costs such as those incurred for food, housing, clothing, transportation and medical care.

b. In determining whether an offset would prevent the employee from meeting essential subsistence expenses, the following factors will be considered:

(1) The income from all sources of the employee and his or her spouse and dependents;

(2) The extent to which the assets of the employee and his or her spouse and dependents are available to meet the offset and essential subsistence expenses;

(3) Whether these essential subsistence expenses have been minimized to the greatest extent possible;

(4) The extent to which the employee and his or her spouse and dependents can borrow money to meet the offset and other essential expenses; and

(5) The extent to which the employee and his or her spouse and dependents have other exceptional expenses or liabilities that should be taken into account, and whether these expenses or liabilities have been minimized.

10.11 FURTHER EXPLANATION

Further explanation may be found for:

a. Appellate rights concerning the existence or amount of a benefit debt, in 38 CFR part l9.

b. Notification of decisions affecting the payment of benefits or granting relief, in 38 CFR 3.l03(e).

c. Revision or appeal of waiver decisions, in 38 CFR l.969.

d. Refund to successful waiver applicant of money already collected, in 38 CFR l.967.

e. The assessment of interest and administrative costs, in 38 CFR l.9l9.

10.12 NONWAIVER OF RIGHTS BY PAYMENT

An employee's payment, whether voluntary or involuntary, of all or any portion of an alleged debt being collected pursuant to this chapter shall not be construed as a waiver of any rights which the employee may have under any provision of law, except as otherwise provided by law.

10.13 EMPLOYEE SALARY OFFSET WHEN VA IS NOT THE CREDITOR AGENCY

a. Creditor Agency Responsibility. Upon submission of a request by a creditor agency for offset from a VA employee's salary, the creditor agency must comply with certain procedures established in accordance with 5 U.S.C. 5514 and 5 CFR 550.1108. The creditor agency must certify in writing to VA that the employee owes the debt, and the amount and basis of the debt, the date on which payment is due, the date the Government's right to collect the debt first accrued, and that the employee was provided with proper notice of this debt, the right to administrative relief and the opportunity for a hearing in accordance with 5 U.S.C. 55l4 and 5 CFR part 550 (VA may be requested by the creditor agency to conduct the hearing in accordance with 5 CFR 550.ll07(a)). The creditor agency must also indicate the actions taken subsequent to the notice (e.g., hearing before an administrative law judge) and the dates of such actions, unless the employee has consented to the salary offset in writing or signed a statement acknowledging receipt of the required procedures and the written consent or statement is forwarded to VA.

b. Installment Schedule. If collection must be made in installments, the creditor agency must also advise VA of the amount or percentage of disposable pay to be collected in each installment and, if the creditor agency wishes, the commencement date of the first installment (if a date other than the next officially established pay period is required) and the number of installments to be collected.

c. Limitation on Initiation of Offset. The VA may not initiate offset to collect a debt more than 10 years after the Government's right to collect the debt first accrued, in accordance with 4 CFR 102.3(b)(3).

d. Maximum Offset Amount. An offset from an employee's pay may not exceed 15 percent of the employee's disposable pay, unless the employee agrees in writing to a larger offset.

e. VA Responsibility. Once the requirements of subparagraph a above have been met by the creditor agency, VA will notify the employee that VA has received a certified debt claim from the creditor agency, the amount of the claim, that salary offset will commence within 30 days and the amount of the offset. If the employee contests either the existence or amount of the debt or the amount to be offset at each pay period, requests a waiver or hearing, or contests any other aspect of the debt or proposed offset procedures, VA will refer the entire matter immediately to the creditor agency for resolution, even if the creditor agency has complied with the requirements of subparagraphs a and b above. Except as provided in 5 CFR 550.1107(a) regarding provision of hearing officials, the only responsibility of this Agency in cases involving the indebtedness of a VA employee to another Federal agency is to initiate and continue offset from such employee's current disposable pay until the indebtedness is fully satisfied. The resolution of any issue pertaining to the debt or to any of the administrative rights of the employee is the sole responsibility of the creditor agency.

f. Separation or Transfer of Employee. The VA will immediately notify the creditor agency if the employee is preparing to separate or transfer from employment or has already separated or transferred. If the employee separates after VA has initiated offset collection, VA must certify the total amount of the collection made on the debt. One copy of the certification must be furnished to the employee, another to the creditor agency, along with notice of the employee's separation or transfer. The original request for salary offset, and any other data submitted by the creditor agency, must be inserted in the employee's official personnel folder, along with a copy of the certification of the total amount of the debt collected by VA. When an employee transfers to another paying agency, the creditor agency need not repeat the notice and hearing procedures described in 5 U.S.C. 5514. However, the creditor agency is responsible for reviewing the debt upon receipt of VA's notice of the employee's transfer to make sure the collection is resumed by the new paying agency and for submitting a properly certified claim to the new paying agency.

g. Other Funds Due Employee. If VA is aware that the separated employee is entitled to payments from either the Civil Service Retirement System (CSRS) or from the Federal Employees Retirement System (FERS), or from other similar sources, VA must provide written notification to the agency responsible for making such payments that the employee owes a debt (including the amount) and that the provisions of 5 CFR 550.1108 have been fully complied with. However, the creditor agency must submit a properly certified claim to the agency responsible for making the payments before the collection can be made. If the employee is already separated and all payments due from VA have been paid, the creditor agency may request, unless otherwise prohibited, that money due and payable to the employee from the CSRS, FERS, or other similar funds, be administratively offset to collect the debt.

10.14 VA AS CREDITOR AGENCY

The procedures described in paragraphs 10.13 for creditor agencies are to be complied with by VA when VA is the creditor agency and the indebted employee is employed at another Federal agency. Procedures on setoff from CSRS and FERS are described in VA Manual MP-4, part II, paragraph 5C.03c, and FPM Letter 831-90 dated April 10, 1987.