P.S. Docket No. AWG 22-195

FINAL DECISION

This matter arises under our administrative wage garnishment procedures. In certain cases, the Postal Service may decide to send a nontax debt to the United States Department of the Treasury (“Treasury”) for collection. These debts may involve any indebtedness to the United States, but primarily involve former employees who owe money to the Postal Service. The procedures by which the Postal Service may transfer this debt are set forth in 31 C.F.R. § 285.11. Also, the Postal Service has a separate agreement with Treasury that governs these debts. See, e.g., CY2021 Agreement to Certify Federal Nontax Debts for the Centralized Receivables Service, the Cross-Servicing Program, and the Treasury Offset Program (“Treasury Certification Agreement”). 
If a debtor requests a hearing after receipt of a Notice of Intent to Initiate Administrative Wage Garnishment from Treasury, the matter is referred to the Judicial Officer for resolution. Our review of these debts is largely limited to two issues. The first is whether the Postal Service complied with due process provisions under the regulations, and its obligations under the Treasury Certification Agreement. This review consists of accepting evidence from the Postal Service that prior to its referral of the debt to Treasury, the Postal Service gave the debtor appropriate notice to the debtor’s “last known address.” 31 C.F.R. § 285.11(e)(1). The significance of the prior notice is that it offers the debtor an opportunity to resolve the debt with the agency prior to transfer to Treasury. This means that the debtor can avoid the sometimes-significant collection fees that Treasury adds to these debts. The second issue requires us to review whether the debt is valid. The Postal Service carries the burden of proof on both issues. If successful, the Postal Service may, with the assistance of Treasury pursuant to its Treasury Certification Agreement, collect both the debt and any related Treasury fees by administrative wage garnishment. 
The regulations governing administrative wage garnishment are found at 31 C.F.R. § 285.11. These regulations set forth the detailed process that federal agencies, including the Postal Service, must follow to permit nontax debts to be collected by wage garnishment through Treasury. Included among the requirements is that the agency provide, by first class mail, notice to the debtor at the debtor’s last known address. 31 C.F.R. § 285.11(e)(1). The notice requirements are a prerequisite to any initiation of wage garnishment. Should the agency improperly certify the debt to Treasury, the agency must recall the debt. See Treasury Certification Agreement, Section II.D.(d) and (e). The agency need not prove receipt of the notice, but it must establish that it sent the notice to the debtor’s “last known address.” 31 C.F.R. § 285.11(e)(1).

In the case of recovery of Federal Employee Health Benefits (FEHB) premiums, prior to the notice contemplated above, Postal Service regulations require that the Postal Service notify an employee in a nonpay status of their option to cancel their FEHB coverage. Form 3111 is available for this purpose. Employee and Labor Relations Manual (ELM) § 522.222. If an employee fails to respond to the notice, or otherwise fails to file the Form 3111, the Postal Service will continue to pay the employee’s FEHB premiums for 365 days. ELM § 522.222(e).
This case involves a debt that dates to 2013. Specifically, the debt is based on Invoice No. 702458725, which details a payroll-related debt resulting from a continuation of FEHB (Exh. 1). Petitioner was a Sales Service/Distribution Clerk for the Westport Post Office (Exh. 2, line 52). Ms. Hoffman’s last day in pay status was February 5, 2013 (Exh. 2, line 84). She continued to receive FEHB coverage until her separation date of July 31, 2013 (Exh. 3). Petitioner was sent a notice by the Human Resources Shared Service Center on May 13, 2013, regarding the continuation of her health benefits (Exh. 4).
Ms. Hoffman did not return an executed Form 3111, and the Postal Service appears to have proceeded to pay for her FEHB premiums (Exh. 1). However, the May 13, 2013 notice was not sent to Ms. Hoffman’s address of record. Rather, the notice was sent to a post office box that Ms. Hoffman, then a current USPS employee, no longer used (Tr. 49-51, 55). Further, both before and after this date, the Postal Service did send other notices to Ms. Hoffman’s address of record (Tr. 52-57). There was no explanation in the record why the May 2013 notice was sent to an out-of-date address.
Nevertheless, because the notice was not sent to Ms. Hoffman’s correct address, the notice itself is invalid. While the Postal Service is not always obligated to prove receipt of a notice, it is obligated to send the notice to the correct address or the most recent address of record. Not surprisingly, Ms. Hoffman credibly stated that if she received the Form 3111, she would have executed it and returned it, thereby avoiding the debt (Tr. 48). The burden was on the Postal Service to send the notice to the correct address, and it failed to do so.
Consequently, I need not reach the merits of this case, as the failure to give proper notice pursuant to the ELM is fatal to the Postal Service’s claim of debt. I find the debt is invalid until the Postal Service gives Ms. Hoffman proper notice, beginning with the opportunity to execute a Form 3111 to cancel her FEHB premiums. ELM § 522.222. If the Postal Service elects to proceed, the Postal Service shall process the Form 3111 as though timely received and shall cancel the existing debt.¹ In order for the Postal Service to collect the outstanding FEHB premiums, it must first recall the debt from Treasury, and begin the process anew. Likewise, any funds previously collected by Treasury specific to FEHB premiums must be refunded to Ms. Hoffman as directed in my Order below, as they were collected in violation of Postal Service regulations.
The Postal Service argued at trial that because all other debt-related notices were sent to the correct address, the failure to send the notice with the Form 3111 was harmless error (Tr. 52-57). I disagree. Of all the notices required by the regulations pertaining to debt collection and FEHB premiums, the critical notice is the one that contains the Form 3111 because that is the opportunity the employee has to avoid the debt in the first instance. ELM § 522.222. Here, a preponderance of the evidence establishes that the Postal Service did attempt to contact Ms. Hoffman, but mailed the critical notice containing the Form 3111 and Ms. Hoffman’s rights to terminate her FEHB coverage to the wrong address. That error not only resulted in the debt sought in this case, but also invalidates the debt until the Postal Service complies with its own regulations.

ORDER

The Petition is GRANTED.
The Postal Service, through the Treasury, MAY NOT collect the balance and associated fees by administrative wage garnishment until it complies with Postal Service regulations and federal law.
The Postal Service MUST RECALL any remaining FEHB-related debts pertaining to Ms. Hoffman’s AWOL status from Treasury.
The Postal Service MUST REFUND to Ms. Hoffman all funds previously offset by Treasury pertaining to FEHB premiums, including any associated Treasury fees, within thirty days of the date of this Order.
If the Postal Service seeks to collect the claim of debt in the future, it must first PROVIDE Ms. Hoffman with a Form 3111 in accordance with ELM § 522.222, allow her to decline coverage retroactive to her last date in a pay status, and process the form as though timely filed.