Federal Payment Levy Program

Background:

In July 2000, the Internal Revenue Service (IRS), in conjunction with the Department of the Treasury, Financial Management Service (FMS), started the Federal Payment Levy Program (FPLP) which is authorized by Internal Revenue Code Section 6331 (h), as prescribed by the Taxpayer Relief Act of 1997 Section 1024. Through this program, the IRS can collect overdue taxes through a continuous levy on certain Federal payments; this includes Medicare FFS payments. 

 Consistent with this authority, CMS may reduce federal payments subject to the levy by 15 percent, or the exact amount of the tax owed if it is less than 15 percent of the payment.  This levy is continuous until the overdue taxes are paid in full, or other arrangements are made to satisfy the debt.  
Section 189(a) and 189(B) of the Medicare Improvements for Patients and Providers Act (MIPPA) of 2008 requires that CMS fully implement FPLP for Medicare payments to include the non-tax debt levy against Medicare payments.  Similar to the tax debt FPLP withholding, the non-tax debt offsets will also be levied against the Medicare FFS payments to repay unpaid debts owed to other Federal agencies.

Consistent with this authority, CMS may reduce federal payments subject to the non-tax levy by 100 percent or the exact amount of the non-tax debt owed if it is less than 100 percent of the payment.  The levy is continuous until the non-tax debt is paid in full, or other arrangements are made to satisfy the debt. 

Key FPLP Legislation:

P.L. 105-34 – Taxpayer Relief Act of 1997 and Internal Revenue Code Section 6331 (h)

• Provides CMS authority to collect overdue taxes through a continuous levy on certain federal payments; this includes Medicare FFS payments

H.R. 6331 - The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA)

• MIPPA was enacted by Congress in July 2008 and requires CMS to take all necessary steps to fully participate in the FPLP including non-tax debts.
  Key Provisions of the Legislation
• Medicare Fee-For-Service (FFS) payments to providers will be offset by a maximum of 15% to satisfy payment of delinquent Federal Tax Debt and 100% to satisfy payment of Administrative Offsets for Federal Non-Tax Debt.

CMS Implementation:

CMS is supporting the FPLP through the Non-Treasury Disbursing Office (NTDO) method, which is used by Federal agencies that do not make payments through a Treasury FMS Disbursing Center.

• CMS Medicare Part A and Part B Fee-For-Service (FFS) payments disbursed by Medicare Administrative Contractors (MAC) are made through private banks.

The NTDO involves establishing interfaces between the disbursing MAC agency and the Treasury FMS to exchange payment, debtor, and collection data. The offset occurs at the disbursing MAC agency and any monies collected are remitted to the Treasury FMS.

FPLP Compliance and Status:

CMS began offsetting Medicare FFS payments to satisfy payment of delinquent Federal Tax Debts on October 6, 2008 and began offsetting Medicare FFS payments to satisfy payment of Administrative Offsets for Federal Non-Tax Debts on October 5, 2009.

As of February 15, 2013, we have realized a cumulative total of over $193 million in tax levy offsets and $80 million in non-tax levy offsets through HIGLAS, on behalf of FPLP.

Next Steps:

• Additional Medicare contractors will be rolled out in conjunction with future MAC transitions to HIGLAS.
• FPLP functionality will be expanded at a future date for recoupment of Administrative Offsets for Federal Non-Tax Debts as mandated by Section 189 of the MIPPA legislation.