Accounts and Reports Setoff Program
State Agency
CRITERIA FOR SUBMITTING DEBTS FOR SETOFF
The setoff process begins with the referral of debts to the Setoff Program. Debts
submitted must meet the criteria established by K.S.A. 75-6201 et seq. and as agreed
to by the Director and with the state agency. A valid debt must exist and be due and
owing and considered to be delinquent, and at least three attempts should be made to
collect the debt prior to its submission. Further, the debt must be at least $25.
When the Creditor Agency is set up with Setoff, access to the web-based system (KDRS) is given to one or more system user(s) for the Creditor Agency. The Creditor Agency will be responsible in maintaining the debts for their respective agency. The system user(s) will have access to input debts, validate debt balances, request adjustments, and create miscellaneous reports. Using a social security number (SSN) or employer identification number (EIN) is the preferred method for submitting debts. However, if a SSN or EIN cannot be given, the debt must be entered manually in KDRS. All pertinent information about the debtor must be included in the reference box at the time of submitting the debt. Suggestions for additional pertinent information would be date of birth, Kansas driver’s license, address (service, forwarded, current, etc), name of spouse, spouse’s SSN, etc.
MATCHING AGAINST DIFFERENT TYPES OF PAYMENTS
The Setoff Program matches several payment sources against the debtor file containing
debts owed to state agencies. The types of payments we match against are:
Payroll
State employees became subject to setoff with the matching of the debtor file against
employee earnings which began in May 1981. This was the first payment source that the
Setoff Program started with. As you will see, a piecemeal approach was used in adding
payment sources to the program.
Wage garnishment laws define the wage amounts that may be set off against debts.
Twenty-five percent of disposable earnings (gross pay less federal and state income taxes,
social security tax, and KPERS retirement) may be set off against most debts, but 100
percent may be set off against State tax debts.
Many state employees who have had their debts matched against their wages elect wage
assignments. By agreeing to a wage assignment, the debtor (state employee) acknowledges
the debt and authorizes a specific amount to be deducted each payroll period. Setoff
Program policy requires that a wage assignment deduction be at least $25 per bi-weekly
payroll period. Obviously, if the debt amount owed is larger and depending on their
ability to pay, a higher amount will be negotiated.
Income Tax Refunds
The debtor file is provided weekly to the Department of Revenue to match against
individual income tax refunds in process. Set off of single individual income tax refunds
was implemented in July 1981, and set off of joint income tax refunds was added in
January 1982. One-hundred percent of single filers' income tax refunds can be set off
against debts owed. A portion of joint filer's income tax refund who is the debtor
is available for set off based on the ratio of each spouse's income contribution to
total income.
Homestead Property Tax and Food Sales Tax
Set off of homestead property tax and food sales tax refunds was implemented in
January 1983. One-hundred percent of the homestead and the debtor's proportionate share
of the food sales tax refund can be set off.
Miscellaneous Payments
Set off of miscellaneous payments was
implemented in December 1982. This includes payments to individuals and vendors, KPERS
withdrawals of accumulated contributions, and Kansas Lottery winnings. One-hundred percent
of most of these payments can be set off. Some miscellaneous payments, however, cannot be
set off due to federal and state restrictions (e.g., emergency disaster relief payments).
Unclaimed Property
The State Treasurer matches payments for
unclaimed property against the Setoff Program debtor file. This process was implemented in
August 1987. One-hundred percent of these payments can be set off.
KPERS Retirement Benefits
Set off of KPERS retirement benefits began in July 1990. KPERS matches its
retirant benefit file with the file of individuals submitted by the Department of Social
and Rehabilitation Services who are delinquent in payment of court-ordered child support
and support debts owed to the district court trustee.
Direct Payments
Many debtors may wish to enter into repayment agreements with state agencies once they
have been notified of a match by the Setoff Program. Payments can be processed through the
Setoff Program or through the state agency. After the debtor has been notified by the Setoff
Program, all payments received from the debtor must be reported as Setoff Program
collections.
STEPS IN COMPLETING SETOFF
The Setoff Program follows several steps in setting off debts:
- Substantially all state payments in process are matched against the debtor file on
social security numbers and employer identification numbers. Setoff Program personnel
review the listings of the matches to determine if the matches on both identification
numbers and names are the same. If the matches are valid, the payment is intercepted
for the setoff process.
- The debtor is notified by a letter of intent
to set off the payment in process against his/her debts. A copy is sent to the state
agency to alert them of the pending set off and to allow the opportunity to review the
account and inform the Setoff Program of any necessary adjustments.
- The debtor is given 15 days in which to request an administrative appeal. If no
appeal is requested, final set off is effected.
- The funds are collected by the Setoff Program and applied to the debtor's account
balance.
- A receipt of payment is provided to the debtor.
- Funds collected are transferred twice a month after withholding the collection
assistance fee.
DEBTOR APPEAL RIGHTS
To assure due process, Kansas law requires
that the debtor be given the opportunity to appeal the setoff procedure. The debtor
initially has the right to appeal within 15 days from the date of the letter of intent to
set off. If an appeal is received within 15 days, further setoff procedures are delayed
until the dispute is resolved. Even if the debtor does not appeal within the 15-day
period, the debtor still has the right to appeal within two years from the date final set
off was effected. If the appeal request is received after the initial 15-day period, set
off may have already occurred. However, a hearing will be held to determine if the set off
was proper. Most hearings are conducted by telephone conference. There have been a few
cases where the debtor did not make the 15-day appeal, but did appeal within the two-year
period and prevailed in his/her appeal. Moneys that have been erroneously set off are
refunded. It is the state agency's responsibility to issue a refund if an over collection
of a debt occurs providing the Setoff Program has already collected and transferred the
money to the state agency.
When the Setoff Program receives a hearing
request from the debtor, the Setoff Program will notify the state agency and request that
they try to resolve the dispute. If it cannot be resolved, the matter is scheduled for
hearing. At this hearing, the state agency is responsible for providing evidence to
establish the debt's validity.
MAINTAINING CONTROL OF SETOFF ACCOUNTS
The state agency will maintain control of setoff accounts and are involved in every step
of the setoff process. The debt is owed to the state agency and they maintain control of it.
The Setoff Program's role is to assist in collection on behalf of the state agency.
The Setoff Program will provide the state
agency a copy of all correspondence sent to the debtor and the state agency is responsible
for: meeting with debtors, providing documentation regarding the validity of the debts,
resolving disputes, and arranging payment plans. The state agency is also responsible for
updating debtor account balances which have been referred to the Setoff Program, including
the accounting for direct payments and adjustments to the debts.
A debt remains in the Setoff Program for as long as the referring state agency decides
to leave it there. Historically, debts are removed when: the debts are uncollectible; the
debts are no longer delinquent because payment has been made or because a deferment has
been filed; or the debts are discharged due to bankruptcy.
The Setoff Program remits collections of
setoff accounts twice a month after withholding the collection assistance fees.
However, for the Department of Social and Rehabilitation Services, collections
for child support debts are remitted daily. Included
with each remittance is the detail of all collections by debtor and amounts set off.
The Setoff Program is financed by the collection assistance fees charged to state agencies, municipalities, municipal courts, and district courts. The fee is charged only on the amount collected. Based upon the method of submitting debts, two different fee structures are used for municipalities: 1) 18.4% for debts submitted with the correct SSN or EIN; or 2) 23.4% for debts that require research. Monies collected, less the fees, are transferred to your agency twice a month. The Setoff Program fee is quite reasonable when compared to the fees charged by other collection firms and attorneys which generally range from 30 to 50 percent of the amounts they collect. The Setoff Program is self sufficient because of the fees we charge, thus the taxpayers do not pay for the operating cost of our program which is a refreshing concept in today’s governmental environment.
