oversight

Audit of the Payroll Debt Management Process For Active And Separated Employees

Published by the Office of Personnel Management, Office of Inspector General on 2011-03-04.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                                        U.S. OFFICE OF PERSO.'\)\,"EL \1i\'\AGEME.'\T
                                                              OFFICE OF THE INSPECTOR GENERAL
                                                                                  OFFICE OF AUDITS




Final Audit Report
Subject:


      AUDIT OF THE PAYROLL DEBT MANAGElVIENET

         PROCESS FOR ACTIVE AND SEPARATED

                     EMPLOYEES



                                            Report :\"0. 4A-CF-OO-10-043


                                            Date:        I·larch 4.          2011




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                         UNITED STATES OFFICE OF PERSONNEL MANAGEMENT

                                           Washington, DC 204J5



   Office of the
fnspector General




                                        AUDIT REPORT





               AUDIT OF THE PAYROLL DEBT MANAGEMENT PROCESS

                    FOR ACTIVE AND SEPARATED EMPLOYEES





                      Report No. 4A-CF-OO-IO-043        Date:      3/4/2011




                                                                 ',' /~if:'/'c-'~!::-
                                                                ,<//1/
                                                                , Michael R. Esser
                                                                  Assistant Inspector General
                                                                    for Audits




        www,opm.gov                                                                      www.usajobs.gov
                            UNITED STATES OFFICE OF PERSONNEL MANAGEMENT

                                                   Washington. DC 20415



  Office of the
InspecrOf General




                                          EXECUTIVE SUMMARY



                  AUDIT OF THE PAYROLL DEBT MANAGEMENT PROCESS I
                       FOR ACTIVE AND SEPARATED EMPLOYEES
                                                                                                      I




                          Report No. 4A-CF-OO-IO-043            Date:      3/4/2011


       The Office of the Inspector General has completed a performance audit of the Payroll Debt
       Management Process for Active and Separated Employees. Our main objective was to determine
       if the Office of Personnel Management (OPM) is effectively managing payroll debts owed by
       active and separated employees.

       Our audit was conducted from July 12, 2010 through September 23,2010 at OPM headquarters
       in Washington, D.C. Our audit identified five areas requiring improvement.

       A.           Payroll Debt Management Process

                    1.   Establishment of Pavroll Debts                                              Procedural

                         OPM does not have controls in place to ensure that active and
                         separated employees' payroll debt is set up for collection in a timely
                         manner.

                    2.   Employee Notification of Debt Incurred                                     Procedural

                         OPM does not have controls in place to ensure that the General
                         Services Administration (GSA) is notifying active and separated
                         employees of payroll debt incurred.




        www.opm.gov                                                                               www.usajobs.go'l
3.   Payroll Debt Collections for Separated Emplovees                          $32,955

     OPM does not have effective controls in place to ensure that debts
     from separated employees are repaid, or that they are written off
     once all collection efforts have been exhausted.

4.   Debt Write-off Process                                                 Procedural

     OPM does not have effective controls in place to ensure that GSA is
     reviewing payroll debt for accounts that can be written off.

5.   Unpaid Health Benefits Insurance Premiums                              Procedural

     OPM lacks controls to mitigate the accrual of debt from intermittent
     employees with insufficient pay to cover health benefits premiums.




                                      11
                                     CONTENTS




       EXECUTIVE SUMMARy                                                   ..

  I.   INTRODUCTION AND BACKGROUND                                               I


 II.   OBJECTIVE, SCOPE, AND METHODOLOGy...........................              2


III.   AUDIT FINDINGS AND RECOMMENDATIONS                                        4


          Payroll Debt Management Process
          1. Establishment of Payroll Debts........                              4

          2. Employee Notification of Debt Incurred................              5

          3. Payroll Debt Collections for Separated Employees...............     6

          4. Debt Write-Off Process...                                           7

          5. Unpaid Health Benefits Insurance Premiums.............              8


IV.    MAJOR CONTRIBUTORS TO THIS REPORT........... ....... .......             10


       APPENDIX       (Chief Financial Officer and Human Resource Offices' response,
                        dated December 14,2010, to our draft report)
                         I. INTRODUCTION AND BACKGROUND


Introduction

This final audit report details the findings, conclusions, and recommendations resulting from our
perfonnance audit of the Payroll Debt Management Process for Active and Separated
Employees. The audit was perfonned by OPM's Office of the Inspector General (OIG) as
authorized by the Inspector General Act of 1978, as amended.

Background

OPM contracts with the General Services Administration (GSA) to process OPM payroll actions
for active and separated employees, manage the collection of payroll debts owed by active
employees, and review outstanding debt balances for possible write-off actions. GSA's policies
and procedures state that the client agency [OPM] is responsible for managing collections of debt
owed by separated employees.

The Chief Financial Officer (CFO) is responsible for the agency's daily financial management
function. Chapter 6 ofOPM's Financial Management Manual (FMM) states that the CFO is
responsible for managing OPM's financial systems, which account for the agency's financial
operations and resources, and ensuring that all OPM accounts receivable transactions are
properly accounted for, including inputting the receivables into the system.

OPM employees' payroll debts result from the processing of personnel actions through GSA's
Comprehensive Human Resources Integrated System] due to events such as:

    •	 Federal Employee Health Benefits premiums paid on an employee's behalf during
       periods of leave without pay (LWOP) or when pay is insufficient to cover those
       premiums;
    •	 Promotion adjustments due to excessive LWOP; and,
    •	 Amended Time and Attendance due to timekeeper errors.

In November 2000, the Office of Management and Budget wrote in Circular A-129, Policies for
Federal Credit Programs and Non-Tax Receivables, that Federal agencies must service and
collect debts in a manner that best protects the value of the assets, and mechanisms must be in
place to collect and record payments and provide accounting and management infonnation for
effective stewardship.




I GSA's Comprehensive Human Resources Integrated System is the automated tool used by GSA, and irs client agencies,

including OPM, to document employment history, such as changes in your salary. position or benefits.
                II. OBJECTIVE, SCOPE, AND METHODOLOGY


Objective

The objective of our audit was to determine if OPM is effectively managing payroll debts owed
by active and separated employees. The recommendations included in this final report address
this objective.

Scope and Methodology

We conducted this performance audit in accordance with generally accepted government
auditing standards as established by the Comptroller General of the United States. Those
standards required that we plan and perform the audit to obtain sufficient, appropriate evidence
to provide a reasonable basis for our findings and conclusions based on our audit objectives. We
believe that the evidence obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.

The scope of our audit covered payroll debt balances for active and separated employees,
totaling $596,529, as of April 10,2010, as well as external laws and regulations, and internal
policies and procedures used to manage payroll debts.

We performed this audit from July 12 through September 23, 2010 at OPM headquarters in
Washington, D.C.

To accomplish the audit objective noted above, we:

       •	 Sampled and tested active and separated employee debt files for compliance with
          OPM and GSA's procedures for debt management; and
       •	 Interviewed OPM program office and GSA representatives, as necessary.

In planning our work and gaining an understanding of the internal controls over payroll debts
owed by active and separated employees, we considered the internal control structure to the
extent necessary to develop our audit procedures. These procedures were mainly substantive in
nature, although we did gain an understanding of management procedures and controls to the
extent necessary to achieve our audit objectives. The purpose of our audit was not to provide an
opinion on internal controls but merely to evaluate controls over the processes included in the
scope of our audit. Our audit included such tests and analysis of OPM's active and separated
employee debt files and supporting documentation, OPM personnel files as they pertained to
establishment of debt (personnel actions), and other procedures as we considered necessary
under the circumstances. The results of our tests indicate that with respect to the items tested,
OPM has ineffective controls over its payroll debt management process.

In conducting our audit, we sampled documentation for review and testing on a random basis.
Using the payroll debt file as of April 10, 20 I0, we randomly selected a sample of 50 out of 414
active and separated debts for testing against OPM and GSA's debt management procedures.




                                                2

The sample of 50 included 25 active and 25 separated employee debts, with a total balance due
of $65,362. The results from our samples were not projected to the population.




                                               3

         III. AUDIT FINDINGS AND RECOMMENDATIONS

Payroll Debt Management Process

1.	 Establishment of Payroll Debts

   OPM does not have controls in place to ensure that active and separated employees' payroll
   debt is set up for collection by GSA in a timely manner. In addition, OPM has weak controls
   over its record keeping process for the management of employee debts. Specifically:

      •	 GSA took over 6 months to establish 16 active employee debt cases.

      •	 GSA took over one year to establish eight separated employee debt cases.

      •	 OPM could not support the date the debt occurred, the debt establishment date, or
         both for the remaining 9 active and 17 separated employee debt cases we reviewed.

      •	 OPM could not support that the debt infonnation was entered into its core financial
         system for all 50 active and separated employee cases we reviewed.

   GSA's procedures for processing client debts state that a payroll debt is nonnally established
   automatically through its Payroll Accounting and Reporting system as the result of payroll or
   personnel actions, including overpayments due to retroactive personnel actions, amended
   Time and Attendance cards, Federal Employee Health Benefits premium underpayments,
   payroll actions and other similar actions, and manually as the result of actions not part of the
   nonnal payroll or personnel cycles.

   Chapter 6 ofOPM's Financial Management Manual (FMM) states that the Chief Financial
   Officer is responsible for ensuring that all OPM accounts receivable transactions are properly
   accounted for in the core financial system and are reported in accordance with Federal laws,
   regulations, and standards.

   By not establishing payroll debts for collection in a timely manner, the risk of OPM not
   collecting and resolving recei vables is increased.

   Recommendation 1

   We recommend that OPM implement controls to ensure that debt establishment

   documentation is maintained.


   Recommendation 2

   We recommend that OPM establish controls to ensure that active and separated employee
   debts are set up for collection, including recording the debt in its core financial system,
   within a reasonable timeframe after the debt has occurred.

                                                4
   OPM's Response:

   The Agency concurs with the finding, and will develop work instructions to ensure that
   controls are in place and files maintained for active and separated employee debt. In
   addition, the Agency will ensure that work instructions include standard processing
   timeframes and debts are established in ems. The Agency will also request that, for active
   employees, GSA provide electronic files of debt notices sent to employees in addition to
   standard mail.

2. Employee Notification of Debt Incurred

   OPM does not have internal controls in place to ensure that GSA is notifying active and
   separated employees of payroll debts. Our review of outstanding debts owed to OPM
   showed that only I lout of 50 active and separated employees received notification of a debt
   incurred. In addition, OPM did not notify 13 active and separated employees who had repaid
   their debts in full that their debts had been satisfied.

   GSA's procedures for processing client debts state that GSA is responsible for sending an
   indebtedness letter to active and separated employees. In addition, GSA's procedures state
   that copies of the employee indebtedness letter and supporting documents will be retained.

   By not effectively managing the debt notification process, employees may not be notified of
   a debt incurred within a reasonable amount of time resulting in an increased risk of OPM not
   collecting debts owed by active and separated employees.

   Recommendation 3

   We recommend that OPM establish and implement oversight controls to ensure that the debt
   notification process, including final payment receipt notification, is effectively managed.

   Recommendation 4

   We recommend that OPM work with GSA to establish and implement controls to maintain
   debt notification documentation for its payroll debts.

   OPM's Response:

   The Agency concurs with this finding. The Agency will develop work instructions to ensure
   that controls are in place and files maintained for active and separated employee debts. OPM
   will work with GSA on the new work instructions, which will include reasonable timeframes
   for establishing debts. In addition, the Agency believes that the Image Now system
   implemented by GSA in July 2009 has significantly improved controls over employee debt
   documentation.



                                              5
   OIG Comment:

   While OPM states they concur with this finding, their response is essentially the same as for
   finding number one, which concerns OPM's recognition of an employee debt. This finding
   is related to OPM notifying the employee that a debt is owed. These are separate and distinct
   actions in the debt management process. For example, several employees' debts were set up
   late by OPM, including some over one year after the debt occurred, and no debt notification
   was provided.

3.	 Payroll Debt Collections for Separated Employees

   OPM does not have effective controls in place to ensure that debts from separated employees
   are repaid, or that they are written off once all collection efforts have been exhausted.
   Specifically, we found that from the sample of 25 separated employees reviewed, totaling
   $32,955, no collection action has been conducted for 11 cases, and the remaining 14 cases
   show limited collection action.

   Chapter 6 ofOPM's FMM states that the CFO is responsible for ensuring that a receivable is
   entered into OPM's core financial system for amounts to be paid, and setting up a schedule
   of payments for inactive or former employees. In addition, as part of its collection strategies,
   the CFO is responsible for preparing an aging schedule and evaluating debt collection
   strategies on an ongoing basis.

   GSA's debt collection processes include a procedure for referral of the outstanding debt for
   collection through the Department of the Treasury (Treasury). The procedures state the
   following:

     a.	 For separated employees, GSA will send delinquent nonfederal accounts to the U.S.
         Treasury Financial Management Service for cross-servicing collection action and
         participation in the Treasury Offset Program.

     b.	 Any debt delinquent for more than 180 days will be transferred to Treasury for
         collection.

   By not having effective controls in place to maximize the collection of payroll debts from
   separated employees, OPM's risk of not collecting the debts is increased and uncollectible
   debts continue to be carried on OPM's financial statements.

   Recommendation 5

   We recommend that OPM establish controls to ensure that the debt collection process is
   effectively managed.




                                                6

   Recommendation 6

   We recommend that OPM review all outstanding separated employee debts, including our
   sample totaling $32,955, to ensure that collection efforts are current. If the debts are deemed
   uncollectible, then OPM's write-off policy should be followed.

   OPM's Response:

   "The Agency concurs with this finding.

   The Agency notes that collecting debts from former employees is much more complicated
   than with active employees, and the Agency needs to balance the cost of collection with
   potential recoveries. Financial Systems (FS) staff will review its procedures as part of
   establishing debt collection work instructions and will review the cases selected by OIG to
   ensure that adequate collection efforts have been taken and to determine if the debts should
   be written off."

   OIG Comment:

   The difficulties in collecting debt from former employees do not relieve OPM of its
   obligation to attempt to recover its debts. If the cost of debt collection efforts exceeds the
   benefits, then OPM's write-off policy should be followed.

4. Debt Write-off Process

   OPM does not have effective controls in place to ensure that GSA is reviewing payroll debt
   for accounts that can be written off. Specifically, 4 ofthe 25 separated employee debt cases
   reviewed had balances under $100, were eligible for write-off, and were not written off.

   GSA's procedures state that for balances due under $100, the Payroll Debt Team will review
   the separated employee debt list and prepare a write-off authorization form for OPM' s
   review and approval. Once approved, GSA processes the write-off action.

   OPM's FMM, Chapter 6, states that accounts receivable are to be reduced, and a

   corresponding entry made, when authorization to write-off a debt is completed.


   By not having controls in place to ensure that the payroll debt write-off process is managed,
   OPM's risk of overstating accounts receivables owed by separated employees is increased.

   Recommendation 7

   We recommend that OPM establish controls to ensure that the debt write-off process is
   effectively managed.



                                                 7
   OPM's Response:

   The Agency concurs with this finding, and will review its procedures, as part of establishing
   debt collection work instructions, and the debts for separated employees to identify all debts,
   including those that are under $100 and eligible for write-off. In addition, the Agency will
   contact GSA to initiate the write-off process.

5. Unpaid Health Benefits Insurance Premiums

   OPM lacks controls to mitigate the accrual of debt from intermittent employees with
   insufficient pay to cover health benefits premiums. Specifically, we identified three debts
   from our sample in which the employees' work schedules changed to intermittent leaving
   OPM with the responsibility to pay the employees' portions of health benefits insurance
   premiums due to insufficient wages.

   OPM occasionally hires employees on an intermittent basis to meet its hiring needs. As an
   example, OPM hires test administrators (TAs) on an as needed basis, to administer civil
   service exams. The majority of TAs work an intermittent schedule; however, TAs can
   work full and part-time schedules depending on the needs of their duty location. Full and
   part-time TAs work a standard schedule, while intermittent TAs have no standard number of
   work hours.

   Under 5 CFR 890.102(c)(3), intermittent employees are not eligible for enrollment in the
   Federal Employees Health Benefits Program. However, 5 CFR 890.303(b) allows employees
   hired with eligibility for health benefits, who later change their work status resulting in an
   exclusion from eligibility for health benefits, as provided under 5 CFR 890.1 02(c)(3), to
   continue health benefits coverage.

   Eligible intermittent employees who elect to continue coverage and who do not earn
   sufficient income to cover their health benefits premiums may incur a debt. 5 CFR
   890.502(a) states that an employee incurs a debt to the United States in the amount of the
   employee withholding required for each pay period during which they are enrolled if the
   premium payments are not made.

   Without controls in place to provide oversight of the occurrence of health benefits premium
   debt, intermittent employees will continue to incur this debt, and the debt is likely to
   Increase.

   Recommendation 8

   We recommend that OPM establish and implement policies and procedures to review

   intermittent employee debts accruing from health benefits insurance premiums.





                                                8
DPM's Response:

"The Agency partially concurs with this finding.

Based on discussions with OPM Government wide policy experts, GSA Payroll and staff
within the HR office, the Agency has concluded that all procedural actions required by
existing regulations are currently being taken in situations where employees have insufficient
pay to cover their health insurance premiums...

Regulations at 5 CFR Part 890 specify the conditions under which employees may elect
health insurance coverage. Based on the Agency's review, it concluded that based on the
conditions of their employment, these individuals are indeed eligible under the regulations to
elect health benefit coverage, and there is no authority for the Agency to impose
requirements beyond the regulations that would exclude them from coverage....

As described above, current regulations limit our ability to fully address this issue. However,
the Agency has nonetheless taken the following actions:

     •	    The HR office met with the Govemmentwide Retirement and Benefits insurance
           policy officials, and obtained their concurrence that a change in existing
           regulation, would be needed to correct this problem. They indicated that they
           understand the situation, and will explore future modifications to the regulations
           that may help mitigate this situation. Until such time as the regulation changes,
           the Agency cannot correct this problem.
     •	    Since some of these cases pre-dated the selection of GSA as the payroll service
           provider, HR has verified that all OPM Test Examiners who currently owe a
           FEHB debt, were indeed provided a written notice. IfHR found no record that a
           notice was sent, they sent the notice out return receipt requested. In cases where a
           timely reply is not received, HR will terminate their coverage as authorized by
           regulations.
     •	    Since the work schedule determines whether a Test Examiner is entitled to elect
           health insurance, on an ongoing basis, HR works with hiring managers in the
           Nationwide Testing Program to ensure that work schedules for Test Examiners
           are consistent with definitions of 'part time' or 'intermittent' as specified in 5
           CFR340.
     •	    Prior to retirement, HR is strongly encouraging all Test Examiners who have an
           outstanding FEHB debt to pay it before leaving the Agency. Otherwise, it will be
           collected from their retirement checks and any other sources available within law
           and regulation."

DIG Comment:

The Agency states that it has taken corrective actions to address our recommendation.
However, no documentation was provided to support the Agency's response and close this
finding.

                                             9
         IV.    MAJOR CONTRIBUTORS TO THIS REPORT

Internal Audits Group

               Auditor-In-Charge

                 Lead Auditor

                   Auditor

               Senior Team Leader

                Jr., Chief





                                     10

                                                                                                                        Appendix



                         UNITED STATES OFFICE OF PERSONNEL MANAGEMENT

                                                      Washington, DC 20415


Employee Services                                                                            DEC I %2010

        MEMORANDUM FOR

                       Chief, Internal Audits Group
                       Office of the Inspector General


         FROM:                     STEPHEN AGOSTINI~~
                                   Chief Financial Officer ~

                                   MARK REINHOLD              ~\   '
                                   Deputy Associate Director, Human Resources
                                   Employee Services

         SUBJECT:                  Agency Comments regarding the OIG Draft Report - Audit of
                                   the Payroll Debt Management Process for Active and Separated
                                   Employees Report No. 4A-CF-OO-IO-043

        Thank you for the opportunity to comment on the Office of the Inspector General (OlG) Draft
        Report on the Audit of the Payroll Debt Management Process for Active and Separated
        Employees Report No. 4A-CF-OO-IO-043.

         The Agency reviewed the draft report, and offers the following comments to the fIndings and
         recommendations for improvement outlined in the draft report.

         Finding 1: Establishment of Payroll Debt
       . orG stated that OPM does not have controls in place to ensure that active and separated
         employees' payroll debt is set up for collection in a timely manner. orG recommended that:
            I.	     OPM implement controls to ensure that debt establishment documentation is
                    maintained.
            2.	     OPM establish controls to ensure that active and separated employee debts are set up
                    for collection, including recording the debt in its core fInancial system, within a
                    reasonable timeframe after the debt has occurred.

         Agency Comment:
         The Agency concurs with the fInding.

         The Agency will develop work instructions to ensure that controls are in place and fIles
         maintained for active and separated employee debt. In addition, the Agency will ensure that the
         work instructions include standard processing timeframes and that debts are established in CBIS.
         The Agency will also request that, for active employees, GSA provide electronic fIles of debt
         notices sent to employees in addition to standard mail.


        ,   .
        www.opni.gov      Recruit, Retain and Honor 9. World-Class Workforce to Serve the American People   www.usajobs.gov
The Agency points out that, in July 2009, General Service Administration (GSA), aPM's Payroll
Service Provider, implemented its Image Now system where all documents are scanned and
electronic tiles maintained-that will assist significantly with recordkeeping for both GSA and
aPM. This is a significant improvement in the employee debt collection process that was not
recognized in the draft report. If aIG had focused its review on active employee cases
established since the Image Now system was implemented, the documentation found would be
timely and much more complete.

Finding 2: Employee Notification of Debt Incurred
OIG stated that aPM does not have controls in place to ensure that GSA is notirying active and
separated employees of payroll debt incurred. OIG recommended that:
   1.	     aPM establish and implement oversight controls to ensure that the debt notification
           process, including final payment receipt notification, is effectively managed
   2.	     aPM work with GSA to establish and implement controls to maintain debt

           notification for its payroll debts.


Agency Comment:

The Agency concurs with the finding.


As stated under Finding 1., the Agency will develop work instructions to ensure that controls are

in place and tiles maintained for active and separated employee debt. The work instructions will

include reasonable timeframes for establishing debts and aPM will work with GSA to improve

procedures. The Agency believes that the Image Now system that GSA has implemented in

2009 significantly improved controls over the employee debt documentation.


Finding 3: Payroll Debt for Separated Employees

aIG stated that aPM does not have effective controls in place to ensure that debts from

separated employees are repaid or ...Titten off once all collection efforts have been exhausted.

OIG recommended that:

    1.	    aPM establish controls to ensure that the debt collection process is effectively
           managed.
   2.	     aPM review the outstanding separated employee debts from our sample totaling
           $65,362 to ensure that collection efforts are current. If debt is deemed uncollectible,
           then aPM's write-off policy should be followed.

Agency Comment:

The Agency concurs with the finding.


The Agency notes that collecting debts from separated employees is much more complicated

than with active employees, and the Agency needs to balance the cost of collection with potential

recoveries. Financial Systems (FS) staff will review its procedures as part of establishing debt

collection work instructions and will review the cases selected by aIG to ensure that adequate

collection efforts have been taken and to determine if the debts should be written off.





                                                 2

Finding 4: Debt-Write-offProcess

aIG stated that aPM does not have effective controls in place to ensure that GSA is reviewing

payroll debt for accounts that can be written-off. OIG recommended that aPM establish controls

to ensure that the debt write-off process is effectively managed.


Agency Comment:

The Agency concurs with the finding.


The Agency will review its procedures as part of establishing debt collection work instructions

and will review the debts for separated employees to identify all debts, including those that are

under $100, that are eligible for write off. The Agency will contact GSA to initiate the write off

process.


Finding 5: Unpaid Health Benefits Insurance Premiums

OIG stated that aPM lacks controls to mitigate the accrual of debt from intermittent employees

with insufficient pay to cover health insurance premiums. OIG recommended that aPM

establish and implement policies and procedures to prevent health benefits insurance premium

debt from continuing to accrue for intermittent employees.


Agency Comment:

The Agency partially concurs with the finding.


Based on discussions with aPM Govemment wide policy experts, GSA Payroll and staff

within the HR office, the Agency has concluded that all procedural actions required by

regulations are currently being taken in situations where employees have insufficient pay

to cover their health insurance premiums, as detailed below.


Regulations at SCFR Part 890 specify the conditions under which employees may elect

health insurance coverage. Based on the Agency's review, it concluded that based on the

conditions of their employment, these individuals are indeed eligible under the

regulations to elect health benefit coverage, and there is no authority for the Agency to

impose requirements beyond the regulations that would exclude them from coverage.


The HR office verified the current process with GSA payroll that procedures are being

followed. Specifically, when employees have insufficient pay to cover the health

insurance premium, GSA sends them a debt notice. In accordance with 5 CFR

890.s02(b), GSA payroll office provides these employees written notice in the mail, with

the following choices authorized in regulation: (1) terminate FEHB coverage; (2)

continue FEHB coverage and pay the FEHB premium directly; or (3) continue FEHB

coverage and pay the debt upon return to sufficient pay status. The employee's election

must be in writing and must be received by GSA payroll within 31 days of receipt.


5 CFR 890.S02(b)(3) states "If the employee does not return the signed form within the

time period prescribed, the employing office will terminate the emollment and notify the

employee in writing of the termination." Based on the HR office review, there were no

cases where the employee failed to return the form within the prescribed time period.




                                                  3
Some employees elect to direct pay the premium, and others elect to satisfy the debt
through future payroll deduction - in accordance with the choices they are provided
under regulation.

The Agency notes that the problem is occurring when some of the Test Examiners are
returning the notice, stating they want to continue FEHB coverage and will pay the debt
when pay becomes sufficient. HR is following the guidance in 5 CFR 890.502(b)(2)(ii),
which states "if the employee does not wish to pay the premium directly to the agency
and keep payments current, he or she may agree that upon pay becoming sufficient to
cover the premiums, the employing office will deduct, in addition to the current pay
period's premium, an amount equal to the premiums during which pay was not sufficient
to cover the premiums." HR is finding that in some of these cases, the pay never rises to
a level of sufficiency to cover the premium, and therefore a debt is accumulating. The
regulations further state that if the employing office cannot recover the debt in full from
salary, the employing oftke may recover the debt from whatever other sources it
normally has available for recovery of a debt - i.e., through established regulatory debt
collection procedures. The Agency has confirmed that GSA Payroll is following
authorized debt collection procedures in an attempt to recover the debt; these permissible
actions include:

    I.	 Upon retirement, GSA Payroll is noting the FEHB debt on the payroll records that
        are sent to OPM, Retirement so that the debt is noted in the retirement record.
        This allows the Agency to recover funds if the employee ever attempts to get a
        refund of the retirement deductions, or if the employee ever receives an annuity.

   2.	 GSA Payroll is collecting any/all debt from the Test Examiner's paycheck, in
       accordance with current debt collection regulations, as well as from lump-sum
       annual leave balances in cases where employees separate with an available leave
       balance.

As described above, current regulations limit our ability to fully address this issue.
However, the Agency has nonetheless taken the following actions:

       The HR office met with the Governmentwide Retirement and Benefits insurance
       policy officials, and obtained their concurrence that a change in existing
       regulation, would be needed to correct this problem. They indicated that they
       understand the situation, and will explore future modifications to the regulations
       that may help mitigate this situation. Until such time as the regulation changes,
       the Agency cannot correct this problem.

       Since some of these cases pre-dated the selection of GSA as the payroll service
       provider, HR has verified that all OPM Test Examiners who currently owe a
       FEHB debt, were indeed provided a written notice. If HR found no record that a
       notice was sent, they sent the notice out return receipt requested. In cases where a
       timely reply is not received, HR will terminate their coverage as authorized by
       regulations.



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        Since the work schedule detennines whether a Test Examiner is entitled to elect
        health insurance, on an ongoing basis, HR works with hiring managers in the
        Nationwide Testing Program to ensure that work schedules for Test Examiners
        are consistent with definitions of "part time" or "intermittent" as specified in 5
        CFR340.

        Prior to retirement, HR is strongly encouraging all Test Examiners who have an
        outstanding FEHB debt to pay it before leaving the Agency. Otherwise, it will be
        collected from their retirement checks and any other sources available within law
        and regulation.

 If you have any questions or require additional i n f oon
                                                        rm on Findin
                                                              a _ ·s 1-4, please contact
                   Associate CFO, Financial Services at              If you have any questions
 or require additional infonnation on Findin 5 lease contact Mark Reinhold, Deputy Associate
 Director for OPM Hwnan Resources a

 cc:
• • • • •JCbief, Boyers Hwnan Resources Services
              bief, GSA Payroll Office
             Sr. Analyst, Internal Oversight and Compliance




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