Payroll Webinar: A to Z of Garnishments Part 1

©2019 The Payroll Advisor
1
The A to Z of Garnishments Part
I: Child Support
Presented on Tuesday, October 1, 2019

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Our Focus For Today
©2019 The Payroll Advisor 6
 Terms, Definitions and Priorities
 Laws and Regulations
 Handling Child Support in the Payroll
Office
 Doing the calculations
 Medical support orders

5 Steps for Child Support
1. Report new hires and respond to employment
verification requests.
2. Withhold income.
3. Enroll children
for medical insurance.
4. Disburse payments.
5. Report terminations.
Our focus today

Usual Suspects
 Child Support
 Federal Tax Levy
 Federal Agency Debt Collection
 State Tax Levy
 Creditor
 Student Loans*
 Bankruptcies*
9
*Not really sure where they fit in
until received

Exceptions on Priority
 Federal tax levy is received prior to child
support order
 Federal Agency Debt received prior to tax levy
but not child support
 Bankruptcy may include other levies and child
support and therefore goes first
 Student loans fall in with creditor
 State tax levy and creditor depend on state
requirements
10

The Laws
 Consumer Credit Protection Act (CCPA)
 Child Support Enforcement
Amendments of 1984
 Family Support Act of 1988
 Uniform Interstate Family Support Act
 Personal Responsibility and Work
Opportunity Reconciliation Act of 1996

Consumer Credit Protection Act
 Limits the amount that can
be deducted from
“disposable pay” for child
support and creditor
garnishments
 Limits apply if more than
one garnishment is in effect
 Watch out for lump sum
payments for child support

Limits on Child Support
 CCPA Limits:
50% of disposable earnings if
employee has second family
60% if does not
Add 5% if in arrears to both
 State may be lower
 50% is the common amount

Other General Child Support
Requirements or Provisions
 UIFSA is now in effect-out of
state orders must be obeyed
 Administrative fees may be
available-depends on the
state
 Notification of employee
termination is now required
 Section on withholding order
to use

Withholding and Paying Child
Support
 Uniform Notice to Withhold is now used
 Begin deducting within 14 days or earlier if
state requires
 Remit payment within 7 days or earlier if
state requires
 State disbursement units are set up in all
states-Except SC
 http://www.acf.hhs.gov/programs/css/resource/state-disbursement-
unit-sdu-contacts-and-program-information
May combine payments on one check
 EFT may be required or available

Definition of Income
Income is defined as “any periodic
form of payment due to an individual,
regardless of source, including wages
and salaries, commissions, bonuses,
workers’ compensation, disability,
payments pursuant to a pension or
retirement program, and interest.”

Disposable Earnings
Disposable income is the amount
of earnings remaining after
subtracting certain mandatory
deductions from an employee's
gross pay.

Disposable Earnings
 Mandatory deductions include federal, state
and local taxes; unemployment insurance;
workers' compensation insurance; state
employee retirement deductions; other
deductions determined by state law.
 Note that disposable income is not
necessarily the same as net pay. An
employee may have a deduction taken from
his pay that is not mandatory, such as union
dues or a car loan payment.

Item
Disposable
Income
Net Pay
Gross Pay $760.00 $760.00
Federal Income Tax (95.00) (95.00)
Social Security (45.57) (45.57)
Medicare (10.66) (10.66)
State (36.75) (36.75)
Local (6.08) (6.08)
Cafeteria plan deduction—
Pretax
(25.00)
Union dues (10.00)
Savings bond (25.00)
Union pension (30.00)
Credit union car loan (50.00)
Total mandated deductions (194.06)
Total payroll deductions (334.06)
Totals $565.94 $425.94

Allowable Disposable Income
Allowable disposable income is the maximum
available for child support withholding. In most
cases, the amount ordered to be withheld will
be less than the allowable disposable income
amount, and the ordered amount can be
withheld without any problem. Even if the
withholding order specifies a higher payment,
the allowable disposable income is the most
that may be withheld.

But It Will Be
A standardized form entitled
“Order/Notice to Withhold
Income for Child Support” (IWO)
is now required for use in all
states. This form includes
information about the case
(where the case is from, who the
persons in the case are, and case-
identifying information).

The IWO Form Includes…
 Names of the parties, including children;
 Original withholding order/notice information
 Whether to begin withholding, change the
amount being withheld, or terminate the
withholding;
 Whether to enroll the child(ren) in any
available health insurance coverage;

IWO Form Continued…
 How much to withhold for current support,
past-due support, medical support and other
specified amounts;
 How much to prorate for different pay
frequencies;
 Remittance information;
 Additional information about priority,
combining payments, reporting the withhold
date, multiple withholding for an employee,
termination notice, lump-sum payments,
liability, anti-discrimination, and withholding
limits.

Rejecting a Form
 Under the following circumstances, the IWO must be rejected and
returned to sender:
 IWO instructs the employer/income withholder to send a payment to
an entity other than a State Disbursement Unit (e.g., payable to the
custodial party, court, or attorney). Each State is required to operate a
State Disbursement Unit (SDU), which is a centralized facility for
collection and disbursement of child support payments. Exception: If
this IWO is issued by a Court, Attorney, or Private Individual/Entity and
the initial child support order was entered before January 1, 1994 or
the order was issued by a Tribal CSE agency, the employer/income
withholder must follow the payment instructions on the form.
 Form does not contain all information necessary for the employer to
comply with the withholding.
 Form is altered or contains invalid information.
 Amount to withhold is not a dollar amount.
 Sender has not used the OMB-approved form for the IWO (OMB 0970-
0154)
 A copy of the underlying order is required and not included.

What Laws Do I Follow?
 State law is where the employee is located for
some items
 Where the support order originates for others
 Need source on rules and regulations for states
you are located in
 Child Support State Income Withholding
Information:
http://www.acf.hhs.gov/css/resource/state-
income-withholding-contacts-and-program-
requirements
 Books, guides, internet are good sources

Generally Follow the Issuing
State For:
 Duration and amount of child support,
current and arrears,
 Medical support terms,
 Where to remit payments, and
 Payment of fees and costs charged (if any) by
the child support enforcement agency,
issuing court, or custodial party's attorney.

Follow the Principle Place of
Employment For:
 When to begin withholding,
 When to remit payments (1 to 7 days after
payday),
 Mandatory deductions,
 Maximum amount to be withheld (within
CCPA limits),
 How to allocate withholding across multiple
child support orders,
 Administrative fee that employer is permitted
to charge, and
 Other terms and conditions that may be set
by state law.

Setting It Up
 Always date stamp the garnishment
 Discuss security later
 Process on the same day as received
– Do not let sit in your in-box
 Determine pecking order if
employee has more than one child
support or garnishment
 Seek legal advice

Set It Up In Payroll
 Kept in separate files in payroll
 Each garnishment should have separate file
even if multiple for one employee
 Tracking system separate from payroll system
for reconciliations and questions
 Cross years, and even systems over the life of the withholding order
 They can last 18 to 20 years or more
 Line item on payroll pay stub for child support

Priority of Deduction for Child Support
Current
Child &
Spousal
Support
Medical
Support
Child
Support
Arrears

What If You Get Two for One
Child
 Continue to honor the first order received.
 Give your employee a copy of the second order.
 Contact the issuing agency that sent the second
withholding order and inform it that you are
already sending withheld payments for the same
child to another jurisdiction. Provide payment
information such as the amount of the
withholding and where the withholding is being
sent.
 Contact the issuing agency that sent the first
withholding order and inform it of the second
order.

Go Tell It To The Employee
 May be time limit
 Child support form includes
employee notification if the
order is from out of state
 Should include form letter from
payroll
 Should be done regardless if
garnishment requires

Payroll Form
Create template for each type of child
support situation you may encounter to
inform the employee as to:
 What you have received
 Payroll it will begin on
 Amount of deduction
 Contact information for deduction
questions
 Disclaimer on responsibility of
garnishment

Tracking System
40
 Basically an excel spreadsheet
 One for each child support order processed
 Use for life of IWO
 Include amounts and dates of payments
 Current balance due if arrears
 Of course, reconciliation spreadsheet for all
garnishments processed matches payroll totals

Paying It Out
 Different states have
different due dates
 Best to do by paydate to
make sure you comply with
all state requirements
 EFT may be required

42
State EFT Requirement
CA Required if must remit CA income tax or SUI payments electronically
FL 10 or more employees or if pay $20,000 or more annually in state taxes
IA 200 or more employees; 100 or more employees if using payroll processing
agent
IL 250 or more employees or >10 support orders in Dec of previous year
IN Withhold for more than one obligor or employer more than 50 employees
MA If remit for more than 5 employees or have history of remittance failures
ND More than 25 employees who have more than 4 IWOs
NE More than 50 employees
NV More than 50 employees
OH 50 or more employees
OR (1) 5/more employees w/1 IWO; (2)<5 employees but >1 IWO; (3) must make
federal tax payments by EFT; (4) have failure to pay history
PA >15 employees more than 1 IWO
TX 50 or more employees
VA 100 employees or more
WA >10 employee or required to pay taxes electronically
WV 50 or more employees

What if there is Not Enough
Money for all the Orders?
Sometimes an employee's earnings do not
stretch far enough to pay all his or her
obligations. If there is not enough allowable
disposable income, the allocation method of
the employee's principal state of employment
must be followed to determine how much to
pay to each order. Most states use one of two
methods to allocate withheld payments among
multiple withholding orders:

Methods
 Prorate by allocating a
percentage to each order
based on the total dollar
amount of current support
ordered, or
 Share equally by dividing
the allowable disposable
income by the total number
of orders.

Reconciling
 Make sure you
reconcile the G/L
account each month
 Spread sheet you
created for tracking
comes in handy now
 Reconcile spreadsheet
to payroll before
releasing payments

Security
 Confidentiality is a must form
has SSN on it
 Anything that may be a
garnishment should come to
payroll first
 Never discuss over the phone
 Only payroll has access
 Watch out for processing
through A/P—again SSNs are on
the form

Medical Support
National Medical Support Notice is a federal
form requiring enforcement of a medical
support order
Part A – Notice to Withhold Health Care
Coverage, Employer Response, and
Instructions to Employer
Part B – Medical Support Notice to Plan
Administrator, Plan Administrator
Response, and Instructions to Plan
Administrator

Sections 1-6

Employer NMSN Requirements
NMSN does not need to be filed with the court
Deliver copy of the NMSN to the employee
within 10 days of receipt
Begin coverage within 20 days of receipt of
NMSN by sending Part B to the plan
administrator
Current child support plus health insurance
coverage must not exceed 50% of the employee’s
disposable income. When this occurs, complete
the Employer Response Form and send to the
appropriate local child support agency within 20
days

NMSN Requirements Cont…
Provide written notification to the local child
support agency within 10 business days of
any change and/or lapse in health insurance
coverage for the minor child(ren). Include the
following information:
 Reason for the lapse
 Whether the lapse is temporary
 Date coverage is to resume

NMSN Requirements Cont…
 If coverage is not available,
complete and sign the
employer Response Form and
return to the appropriate
agency within 20 days
 There are penalties if the
employer does not comply

Lump Sum Payments
 If the child support enforcement agency
becomes aware that the noncustodial parent is
or may be entitled to a “lump-sum payment”
(bonus, severance pay, etc) a separate lump sum
transaction may be sent to the employer in order
to obtain part or all of the payment to apply to
the noncustodial parent’s support obligations.
 The latest version of the child support income
withholding order allows for an agency to
request child support be withheld. A “ONE TIME
ORDER/NOTICE—LUMP SUM PAYMENT” box is
now available on the order to handle these
requests.

Lump Sum Payments
 The question for payroll departments is what
rules govern lump sum payments as opposed to
ongoing deductions.
 Do the same limits apply?
 Does the state have any special rules that apply
only to lump sum payments?
 The answer is…depends on the state
 However, DOL has issued opinion letter
 https://www.dol.gov/whd/opinion/CCPA/2018/2
018_04_12_1NA_CPPA.pdf

Lump Sum Payments
 The Opinion Letter addresses 18 specific types of
lump sum payments and identifies which ones qualify
as earnings subject to the 50 percent to 65 percent
withholding limits under the CCPA. Of the 18 types
of payments, only three do not qualify as earnings:
 Buybacks of company shares
 Workers’ compensation for medical reimbursement
 Wrongful termination insurance settlements for
compensatory or punitive damages
 The remaining 15 types of lump sum payments are
subject to the CCPA limitations on child support
withholdings.

To Help With Lump Sum Payment Questions
the OCSE Offers A Chart That Gives
 Definition of lump sum payments
 Requirements for reporting lump sum payments
including citation of state laws
 Threshold amounts for lump sums to be reported if any
 Length of time employers must hold the lump sum
payment
 Whether or not the state uses the income withholding
order for lump sums
 CCPA limits that apply to lump sums
 https://ocsp.acf.hhs.gov/irg/irgpdf.pdf?geoType=OGP&
groupCode=EMP&addrType=SLS&addrClassType=EMP

Lump Sum Reporting Process
63
Employer:
 Provide information about employees who are eligible to
receive a lump sum payment using one of these methods:
 Enter information about each employee into the fields on
the Lump Sum Reporting screen
 Upload a Microsoft Excel spreadsheet (or similar format)
to report many employees at one time
 After providing pending lump sum payment information, you
will:
 Receive confirmation that the information was uploaded
 Be able to review errors if the information was not
uploaded
 Correct the errors and resubmit files
 View information you reported in the last 60 calendar days

Lump Sum Reporting Process
OCSE Portal:
 Validate the file upload
 Notify the employer if there are file errors
 Re-validate the file once the employer resubmits it
 Compare information provided by the employer to
individuals who owe child support
 Generate notification to the state(s) about the
pending lump sum payment
 Provide details about information submitted by
employers for 60 calendar days

Terminating Employees
 Upon termination, mail or fax a completed
"Termination Notification" form to the issuing
agency, OR some states will accept this
information over the telephone or online. The
employer should have the following information
available:
 Employee's name,
 Employee's case identifier,
 Last known home address,
 New employer's address (if known), and
 Date of separation.

eTerm
 Electronic Termination (eTerm) allows employers to report employee
terminations online. Registered employers provide information about
employee terminations (or that an individual has never worked for
them) either by uploading a file or entering information in the online
eTerm application.
 How Employers Can Participate
 Employers currently registered with the Lump Sum Reporting
application on OCSE’s Child Support Services Portal are automatically
enrolled in eTerm.
 Employers who are not registered for the Lump Sum Reporting
application should contact the Employer Services Team at
employerserviceswebapp@acf.hhs.gov for a brief demonstration of
the application. Once the demonstration is completed, employers can
register to use both the eTerm and Lump Sum Reporting applications
by completing the Employer Services Agreement and Profile form.

eTerm Process
Employer:
 Provides notification that the person is no longer or was never
employed by the employer
 Receives an acknowledgment indicating whether the file was
successfully uploaded to the Employer Services Web
Application
 Views report files, which are available for download for 60
days.
eTerm Application:
 Generates notification of the termination to the state either
through an e-IWO file (if the state participates with e-IWO) or
 Sends an email notification of the termination to the
appropriate state child support agency.

Map courtesy of the OCSE

Medical Support Order
States using the National Medical Support
Notice (NMSN) require that additional
information on medical support or insurance
be reported, primarily to avoid interruption
of medical coverage for the employee's child.

Rehired Employees
If the employee is temporarily laid off (i.e., due
to seasonal work), retain the income
withholding order that was being honored
prior to the termination. The amount of time
that an income withholding order is kept on
file following a termination varies from state to
state. For example, some states require that an
income withholding order be reactivated if the
employee is rehired within 90 days.

Rehired Employees
Upon re-hire, submit a new hire report if the
employee completes a new W-4 form and
reactivate the income-withholding order. If
possible, reactivate the medical support order
as well. This will depend on the requirements
of the health insurance plan.

Record Retention and IWO
 Must retain as long as IWO
and Medical Support Order
is in effect
 Must maintain as a record
under FLSA for deductions
 If employee terminates
must follow state law as to
retaining to reactivate if
employee returns

Retention by State Chart
79
State(s) How Long to Retain After Employee’s Termination
Alabama; Delaware; District of Columbia; Florida; Georgia; Illinois;
Indiana; Iowa; Kansas; Kentucky; Louisiana; Maryland;
Massachusetts; Minnesota; Nebraska; Nevada; New Hampshire;
New Jersey; New Mexico; North Carolina; Pennsylvania; South
Dakota; Tennessee; Texas; Vermont; Virginia; West Virginia;
Wyoming
No law or policy
Arizona At least 90 days
California 1 year after termination
Alaska 3 years after termination
Arkansas; Colorado; Hawaii; Idaho; Michigan; Missouri; Ohio;
Oregon; Utah; Wisconsin Until Notified
Maine; Montana; North Dakota; Rhode Island Until released by child support agency
Mississippi; New York Do not retain, return to agency
Connecticut; South Carolina; Washington No retention (unless employee may return at later date)
Oklahoma Orders to be kept on file indefinitely
Information courtesy of Office of Child Support Enforcement website
https://ocsp.acf.hhs.gov/irg/irgpdf.pdf?geoType=OGP&groupCode=EMP&addrType=EIW&addrClassType=EMP

When to Stop a Child Support
Order
Do not stop withholding for child support until
one of the following occurs:
 Official notification to stop withholding is
received from the issuing agency.
 The employee is terminated, for whatever
reason.
 Bankruptcy proceedings are underway and a
bankruptcy trustee takes over the
withholding.

If Your Employee is Called Up for
Active Duty!
For those reservists who owe child support, it would be
helpful if you would:
 Contact the child support agency that issued the income
withholding order
 Tell them that your employee-reservist has been called up
to military duty
 Provide the date of activation.
 The child support agency can then issue a new income
withholding order to the military service branch.
 By providing this information, you are helping your
employee avoid lapses in payment to his or her children
while serving our country.

E-IWO for Child Support
 Office of Child Support Enforcement
working with employers and states
to automate the income
withholding process with electronic
income withholding orders or e-
IWO
 2 types of implementation options

E-IWO Options
 Medium to large employer who has
IT resources that can commit several
months to programming
 IWOs sent in flat file format or .XML
document
 You process and make appropriate
updates to payroll system
 Get PDF of IWO
 You create acknowledgement record
whether accepting or rejecting
 Takes 3-5 months to implement
 Receive small number of
IWOs or have no IT
resources
 Receive an image ready
PDF copy of the IWO and a
prefilled acknowledgment
as an excel spreadsheet or
PDF
 Takes 2-4 weeks to
implement
 Need to configure server
and directories so some IT
support is still needed
84 ©2019 The Payroll Advisor
Option 1—System
to System
Option 2—No
Programing Option
(NPO)

85
PDF
Acknowledgement
Sample

Want a Single Acknowledgement
Entry Form?
 XLS is for you
 Receive a IWO PDF of each income
withholding order sent to you by a state and
a single spreadsheet for acknowledging
 Enter “accept” or “reject” for each row
 Supple a reason code if rejecting
 Save the file
 Move to outbound directory
 You are done

XLS Acknowledgment Sample

The Employer Can Also
 Notify a state when an employee
is terminated
 Notify a state when an employee
is going to receive a lump sum
payment
 Employer controls when the
notices are released

How to Enroll
 Must register by completing the e-IWO
profile form and providing FEINs
 Profile form includes:
 Agreement to exchange data
 Contact information
 Exchange preferences (system to system, PDF
or excel spreadsheet)
 File names
 Server info such as User ID, Password, IP
Address, Host Name, directory Name and Port

How to Enroll
For more information on this program:
eiwomail@acf.hhs.gov

Questions

93
How Ascentis Payroll can help
Payroll
HR &
Benefits
Talent
Management
Recruiting &
Onboarding
Time &
Attendance
Ascentis Payroll a number of settings that will help you with the
following scenarios:
› Employees with garnishments that receive small dollar
checks
› Employees with multiple garnishments or child support
orders
› Employees with different child support maximum limits
› Garnishment and child support payments paid to states via
EFT

Learn more
Learn more about how Ascentis can help your Payroll needs

How to earn credit
Stay on the webinar,
online for the full 60
minutes
Be watching using your
unique URL
Program codes
delivered by email, to
registered email,
approximately 30 days
following today’s
session

Contact Us
webinars@ascentis.com
www.ascentis.com
800.229.2713

Payroll Webinar: A to Z of Garnishments Part 1

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