P.S. Docket No. VA 17-222


February 5, 2018

In the Matter of the Debt Collection Act Petition

ERICA I. POWERS v. U.S. DEPARTMENT OF VETERANS AFFAIRS

P.S. Docket No. VA 17-222

APPEARANCE FOR PETITIONER:
Erica I. Powers

APPEARANCE FOR RESPONDENT:
Kelly J. Burns, Esq.
U.S. Department of Veterans Affairs

FINAL DECISION UNDER THE DEBT COLLECTION ACT OF 1982

The Department of Veterans Affairs (VA) assessed Erica I. Powers with a $775.32 debt for a salary overpayment.1  Ms. Powers challenges the assessment.  Notwithstanding numerous administrative errors by the VA and the Defense Finance and Accounting Service (DFAS), I deny the Petition and rule in favor of the VA.

FINDINGS OF FACT

  1. Ms. Powers worked for the VA from 2013 until January 10, 2015, as a contract administrator (Tr. 11, 91-92).
  2. Ms. Powers separated from the VA effective January 10, 2015, to accept a position with the Defense Contract Management Agency (part of the Department of Defense).  Instead of entering January 10, 2015, as Ms. Powers’ separation date, a VA human resources employee incorrectly entered “January 10, 2014.”  (Tr. 9, 11-12, 20, 98-99).
  3. The error was not caught until DFAS, the VA’s payroll center, processed the separation.  DFAS’s payroll system generates a debt when an employee is paid after she separated from the agency.  Because the incorrect year of separation was entered, DFAS generated a debt for $70,304.44 (basically all of Ms. Powers’ salary for 2014).  (AE 1; Tr.19-20, 22, 30, 52, 99).2
  4. The VA tried to correct its mistake by cancelling the $70,304.44 debt.  However, in trying to pay Ms. Powers for the pay period ending on January 10, 2015, the VA adjusted its payroll records for each pay period in 2014 because the error crossed from 2014 into 2015.  The total of the adjustments for each pay period resulted in the VA giving Ms. Powers credit for $12,849.12 in deductions in 2015; and, deducting $10,134.83 in gross earnings.  When combined, these numbers resulted in $2,714.29 being deposited into Ms. Powers’ bank account on January 16, 2015.  (AE 1 at 2; Pet. Exhs. at 149-2; Tr. 52-57).
  5. Of the $2,714.29 deposited into Ms. Powers’ bank account, $146.96 represented an amount for Medicare and $628.36 for Old Age, Survivor and Disability Insurance (referred to in the record as OASDI, Social Security Insurance, or SSI) (Tr. 57, 122).3  The two tax amounts total $775.32.
  6. Sometime in either 2014 or 2015, the VA also sent $775.32 for Medicare and OASDI taxes to the Department of Treasury on Ms. Powers’ behalf.  Those amounts were entered into her payroll records on April 4, 2015.  (Tr. 78).
  7. On January 27, 2015, Ms. Powers received two debt notices totaling $73,244.44 for a salary overpayment from January 25, 2014 through December 28, 2014 (Pet. Exhs. at 4).
  8. On January 30, 2015, the VA deposited $1,423.28 into Ms. Powers’ bank account representing compensation for the last pay period Ms. Powers worked for the VA (AE 1 at 3; Pet. Exhs. at 149-4; Tr. 25, 80).
  9. On February 13, 2015, the VA deposited $776.53 into Ms. Powers’ bank account representing a corrective adjustment for pay which she earned but which was not paid (AE 1 at 4; Pet. Exhs. at 150-2; Tr. 26, 125-26).
  10. On February 27, 2015, the VA deposited $1,127.54 into Ms. Powers’ bank account representing a corrective adjustment for overtime and an incentive award earned by Ms. Powers (AE 1 at 5; Pet. Exhs. at 150-3; Tr. 99).
  11. Throughout this time, Ms. Powers was in regular contact with the VA and DFAS trying to work out the problem.  On February 27, 2015, Ms. Powers received a letter from DFAS saying that her total debt of $70,304.44 had been cleared.  (Pet. Exhs. at 4-5, 14).
  12. By letter dated April 2, 2015, DFAS wrote Ms. Powers: 
    This is to inform you that you were overpaid for non-payment of medicare [sic] and OASDI deductions due to erroneous adjustments in the creation of a prior year debt on pay period ending January 10, 2015.4  The gross amount of your overpayment (including pay, all taxes, benefits and other deduction) is $775.32.
    While the letter advised her of her right to petition for a hearing, DFAS did not identify the address for filing such a petition.  (AE 3 at 1; Pet. Exhs. at 9).
  13. On April 6, 2015, the VA informed Ms. Powers that the matter was closed and DFAS’s April 2, 2015 letter was incorrect, the debt was cleared and no further action from Ms. Powers would be necessary (Pet. Exhs. at 5).
  14. Ms. Powers requested documents from the VA and DFAS which would explain the debt and the calculations.  A reasonable explanation was not provided.  (Pet. Exhs. at 5-6).
  15. On April 14, 2015, Ms. Powers called DFAS’s Customer Service Desk where she was informed that the VA had issued a request for debt collection (Pet. Exhs. at 15).
  16. On April 15, 2015, Ms. Powers asked for the contact information and the address to file a petition (Pet. Exhs. at 134).
  17. On May 1, 2015, Ms. Powers submitted her Petition requesting a hearing as provided in the Debt Collection Act, 5 U.S.C. § 5514 (Pet. Exhs. at 15).
  18. The VA confirmed receipt of the Petition on May 4, 2015 (Pet. Exhs. at 16-17).
  19. On May 5, 2015, Ms. Powers repeated her Petition for a hearing (Pet. Exhs. at 16).
  20. Notwithstanding the Petition requesting a hearing and assurance that the matter was resolved, DFAS collected $775.32 from Ms. Powers’ pay (Tr. 117-18, 126).5
  21. On July 7, 2015, a VA Payroll/Fiscal Administration Supervisor familiar with the previous administrative errors informed Ms. Powers that “the debt is not valid. . . .  I entered a remedy ticket to DFAS . . . .”  (Pet. Exhs. at 28).
  22. Ms. Powers complained sometime in June or July of 2015 about the illegal collection of the $775.32 after she had filed her Petition.  DFAS returned the $775.32.  (Tr. 117).
  23. Six months passed and the matter was not referred for hearing.  Without warning, DFAS collected the money again from Ms. Powers’ pay.  This time, the money was not returned to Ms. Powers.  (Tr. 117-18).
  24. She resubmitted the hearing request on May 15, 2017 (Pet. Exhs. at 1).
  25. Twenty-eight months after submitting her initial Petition requesting a hearing, the VA forwarded the Petition for hearing.  It was docketed as VA 17-222 on September 15, 2017 (the same day it was received by the Judicial Officer Department).6

DECISION

Pursuant to the Debt Collection Act of 1982, 5 U.S.C. § 5514, the VA seeks to collect a debt owed by Ms. Powers.  When the VA seeks to recover for a salary overpayment, it must prove that (1) it made the salary overpayment, (2) it properly calculated the amount of the overpayment, and (3) the employee was not entitled to the overpayment.  See, e.g., Eudy v. United States Postal Service, DCA 16-225, 2017 WL 5516572 (August 9, 2017); Herrin v. United States Dep’t of Veterans Affairs, VA 17-48, 2017 WL 5516590 (June 30, 2017).
After the end of a calendar year, an agency may recover from the employee taxes which it paid to the Department of Treasury on the employee’s behalf, but which it failed to withhold from the employee’s salary.  See Cuthbert v. United States Dep’t of Veterans Affairs, VA 15-237, 2015 WL 13647667 (November 24, 2015); Aaron Thorne, DCA 12-319, 2013 WL 12303256 (April 16, 2013) (decision on reconsideration).
The record shows that the VA deposited $775.32 into Ms. Powers’ bank account (Finding 5) and sent $775.32 to the Department of Treasury for taxes on Ms. Powers’ behalf (Finding 6).  The payment of taxes on Ms. Powers’ behalf without a corresponding withholding from her salary represents a salary overpayment.  The VA has thus met its initial burden of proof.
Ms. Powers requests that I grant the Petition because numerous administrative errors show that DFAS’s calculations are incorrect and cannot be trusted.7  I have heard Ms. Powers’ description of the numerous VA errors which both caused the debt and which occurred after the debt accrued, and I fully agree that they occurred.  However, I conclude that VA’s the calculations are correct.  I cannot rule in Ms. Powers’ favor based on our prior case law.
Ms. Powers also requests that I order the VA, and its pay agent DFAS, to issue her a new W-2 form for 2015 because DFAS added $10,134.83 of income to her 2015 W-2 that she never received.  Such an order is beyond the scope of my authority under the Debt Collection Act, and therefore, I cannot grant this request.

ORDER

The Petition is denied.  The VA may retain the $775.32 it has already collected.8

Peter F. Pontzer
Administrative Judge

1 Authority to hear the Petition is based on a Memorandum of Understanding between the United States Postal Service (USPS) and the VA.  The memorandum is on file with the USPS Judicial Officer, 2101 Wilson Blvd., Suite 600, Arlington, Virginia 22201.  The VA forwarded the Petition to the USPS, Judicial Officer Department, for hearing by an administrative judge or administrative law judge under the Debt Collection Act of 1982, 5 U.S.C. § 5514.  Procedural matters in this forum are governed by 39 C.F.R. Part 961.  To the extent applicable, regulations issued by the VA under the Debt Collection Act of 1982, 38 C.F.R. §§ 1.980 – 1.995, are cited herein.

2 The VA submitted nine agency exhibits identified as AE 1 through AE 9.  Ms. Powers submitted 153 pages of exhibits which are identified in this Decision as Pet. Exhs. at ___.

3 The Social Security rate is 6.2% and the Medicare rate is 1.45%.  https://www.ssa.gov/policy/docs/quickfacts/prog_highlights/RatesLimits2015.html  The calculations are as follows:  ($10,134.83 x 0.062) + ($10,134.83 x 0.0145) = $775.32.

4 While the lack of clarity in this language prolonged the dispute, it does not affect the outcome of this litigation.

5 “The timely filing of a petition for hearing shall stay the commencement of collection proceedings.” 
5 U.S.C. § 5514. 

6 Congress intended Debt Collection Act cases to be resolved quickly.  “The hearing official shall issue a final decision at the earliest practicable date, but not later than sixty days after the filing of the petition requesting the hearing.”  5 U.S.C. § 5514.

7 As another example, in “correcting” her W-2, Wage and Tax Statement, DFAS listed Ms. Powers as having worked in Alabama, even though she has never lived or worked in Alabama.  She lives and works in Wisconsin.  Based on the W-2, Alabama sought taxes from Ms. Powers.  DFAS then refused to correct the error until Ms. Powers got representatives from the IRS, Alabama, and her accountant on the telephone with a representative from DFAS.

8 In violation of the law, the VA collected $775.32 twice from Ms. Powers after she filed her Petition under the Debt Collection Act.  5 U.S.C. § 5514.  Because of the two and a half year delay in forwarding this matter for hearing, Ms. Powers requested that we go to hearing and not delay the proceedings further so that the VA, and DFAS, could return the money.  I granted Ms. Powers’ request and we proceeded to hearing.