Accounts and Reports Setoff Program
MUNICIPALITY
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 municipality. A valid debt must exist and be due and owing and considered to be
delinquent, and at least three attempts must 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 municipalities. 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.
Direct Payments
Many debtors may wish to enter into
repayment agreements with municipalities once they have been notified of a match by the
Setoff Program. Payments can be processed through the Setoff Program or through the
municipality. 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
municipality 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 municipality'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 municipality.
When the Setoff Program receives a hearing
request from the debtor, the Setoff Program will notify the municipality and request that
they try to resolve the dispute. If it cannot be resolved, the matter is scheduled for
hearing. At this hearing, the municipality is responsible for providing evidence to
establish the debt's validity.
MAINTAINING CONTROL OF SETOFF ACCOUNTS
The municipality will maintain control of
setoff accounts and are involved in every step of the setoff process. The debt is owed to
the municipality and they maintain control of it. The Setoff Program's role is to assist
in collection on behalf of the municipality.
The Setoff Program will provide the
municipality a copy of all correspondence sent to the debtor and the municipality is
responsible for: meeting with debtors, providing documentation regarding the validity of
the debts, resolving disputes, and arranging payment plans. The municipality 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 municipality 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. 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.
