#   INCOME WITHHOLDING 

training notes

## Module Objectives

![](media/image1.wmf){width="3.651388888888889in"
height="2.7354166666666666in"}

At the end of this module, you will be able to:

-   Calculate the allowable disposable income in a case exercise.

-   Calculate the correct amount of child and/or medical support for
    withholding.

-   Prioritize payment processing when multiple child support income
    withholding orders and/or garnishments and levies are involved.

-   Describe the employer's requirements in handling medical support
    orders and in providing medical insurance to dependents of employees
    who are non-custodial parents.

-   Determine (or identify the resource to help determine) when child
    support income withholding orders take precedence over other
    garnishments and withholdings.

Training Notes

-   Point out that income withholding is the single most effective tool
    for collecting child support. All cases are now subject to income
    withholding unless the two parties (custodial and non-custodial)
    agree to other payment arrangements, and no delinquency occurs.
    Also, income withholding is not required for the self-employed.

-   Make sure participants understand that income withholding is
    required by law in almost all cases and does not imply delinquency
    on the part of the noncustodial parent.

-   Garnishments for child support are different from other kinds of
    garnishments.

-   The definition of income is set forth in the Personal Responsibility
    and Work Opportunity Reconciliation Act (PRWORA) of 1996. This
    expanded the definition of income beyond weekly wages.

-   Bonuses and Lump Sums -- The PRWORA definition of income includes
    "bonuses," insofar as they are paid on a periodic basis (e.g., an
    annual Christmas bonus), but there is no federal definition of "lump
    sums" applicable to child support withholding. State laws may have a
    broader definition of income, which includes lump sums. If that is
    the case**, CCPA limits would apply.** State laws govern withholding
    from lump sum amounts (for example, a payout from an insurance
    settlement; a one-time "employee- of-the-year" award, etc.) If lump
    sums are not considered income under the state definition, they are
    not subject to CCPA withholding limits and 100% may be taken,
    depending on state law.

-   Tell participants that state laws can be viewed on the OCSE website,
    in the Information for Employer section, on the Income Withholding
    Order matrix. The link to the OCSE website is found at the end of
    the training slides (on page 7-9).

## income-withholding for Employees

![](media/image6.wmf)

-   **What?**

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```
-   A garnishment for child support owed, called an "income-withholding
    order." The employer deducts the specified amount each pay period
    and generally sends it to the state child support enforcement's
    State Disbursement Unit (SDU or central payment processing site).

> ![](media/image7.wmf){width="3.651388888888889in"
> height="2.7354166666666666in"}

-   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."

Training notes

-   The Order/Notice to Withhold Income for Child Support does not have
    to be "served" on the employer but may be sent by first-class or
    certified mail, by fax or by hand, as permitted by state law.

-   The Uniform Interstate Family Support Act (UIFSA), as adopted by
    each state, requires employers to accept direct income-withholding
    orders/notices from across state lines. For example, as an employer
    in New York, you could receive an income-withholding order from a
    child support agency in Nevada. Because interstate cases are the
    most difficult from which to collect, and comprise nearly 30 percent
    of all child support cases, the withholding order/notice
    standardizes the withholding process around the country.

**How?**

![](media/image8.wmf){width="3.701388888888889in" height="2.76875in"}

-   An income withholding order or notice may be:

1.  Judicial -- originates in the court system and is ordered by a
    judge.

2.  Administrative -- originates through the child support enforcement
    agency's "administrative process" in order to expedite case
    handling; is ordered by a child support hearing officer or
    equivalent, who has the same authority as a judge.

-   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).

**Where?**

-   An income withholding order may come from the employer's state
    agency, directly from another state, court or private attorney. If
    from an out-of-state agency, it is called "direct income
    withholding" because it comes directly from an out-of-state agency
    to the employer rather than being processed through the child
    support enforcement agency in the employer's state.

Training notes

**[Special Notes on an IWO]{.underline}:**

> There should not be more than one withholding order for the same child
> for current support.

**Note:** State CSE agencies issue IWOs for **arrears only** that are
owed to the State for a time period when welfare has been paid on behalf
of the custodial parent (CP) and child(ren). This IWO should be for
**arrears only** and is not considered a duplicate order.

training notes

-   What to do when an order/notice to withhold income for child support
    is received?

    -   Date of receipt is important because the employer is responsible
        for taking action within certain timeframes (i.e., when to begin
        withholding).

-   A copy of any interstate withholding orders must be given to the
    relevant employee. Most states do not require the employer to give a
    copy of an intrastate withholding order to the employee, but some
    states do. Be sure to check your state law.

-   Note that "regular on its face" is simply a legal term that means
    you should look at the document and use common sense; if the
    document looks like an official legal document, it is considered
    "regular on its face." (UIFSA Model Act Sec. 502) And, if it does
    not seem regular on its face or contains substantive errors, you may
    return it to the sender with a clear explanation as to why it is
    being returned.

-   If you receive withholding orders from more than one issuing
    agency/party for the same custodial family, be sure to contact all
    parties involved as soon as possible (something is wrong!). Continue
    to honor the first order that you received until and unless you
    receive official notice that a determination has been made that a
    different order should be honored. It is not the employer's
    responsibility to figure out which order is the one to be followed
    (you may hear this referred to as the "controlling order.")

-   There should not be more than one withholding order for the same
    child for current support.

    -   Note: State child support enforcement (CSE) agencies issue IWOs
        for **arrears only** that are owed to the State for a time
        period when welfare has been paid on behalf of the CP and
        child(ren). This IWO should be for **arrears only** and is not
        considered a duplicate order.

## Complying with the income withholding order for child SUPPORT

![](media/image9.png){width="3.390277777777778in"
height="2.5479166666666666in"}

The employer receives an Order/Notice to Withhold Income for Child
Support.

1.  Document the date and time of receipt.

2.  Determine if the order is "regular on its face" (that is, whether it
    appears to be an authentic and complete legal document).

3.  In interstate cases (and intrastate cases, whenever feasible), give
    a copy of the Order/Notice to your employee.

4.  Follow the terms of the order.

    **TRAINING NOTES**

-   Tell participants to turn to the Appendix: **Handout \# 1:
    Order/Notice to Withhold Income for Child Support** to follow along
    in this section.

    -   Tell participants to look at **Handout \# 2 IWO Flowchart,**
        which might be helpful to them as we go through this
        section**.**

-   Explain that the top of the form contains information about where
    the form is from. This is very important.

-   If the first box is checked (ORDER/NOTICE TO WITHHOLD INCOME FOR
    CHILD SUPPORT), the IWO should be from a
    state/tribe/territory/city/county/district or reservation with the
    authority to issue an **Order** to Withhold Income (IWO).

-   If the second box is checked (NOTICE OF AN ORDER TO WITHHOLD INCOME
    FOR CHILD SUPPORT), the **Notice** of an IWO is from a
    non-governmental entity or individual.

-   Non IV-D attorneys, individuals, and non-governmental entities must
    submit a **Notice** of an Order to Withhold and include a copy of
    the income withholding order unless, under a state's law, an
    attorney in that state is allowed to issue an income withholding
    **order**. In that case, the attorney may submit an Order/Notice to
    Withhold and include a copy of the state law authorizing the
    attorney to issue an income withholding order/notice.

    **Top of Form**:

    ![](media/image10.png){width="3.390277777777778in"
    height="2.5520833333333335in"}

> This section of the form contains:

Title of the Form: ORDER/NOTICE TO WITHHOLD INCOME FOR CHILD SUPPORT

-   Check box for: ORDER/NOTICE TO WITHHOLD INCOME FOR CHILD SUPPORT or
    NOTICE OF AN ORDER TO WITHHOLD INCOME FOR CHILD SUPPORT

    Non IV-D attorneys, individuals, and non-governmental entities must
    submit a [Notice]{.underline} of an Order to Withhold and include a
    copy of the income withholding order unless, under a state's law, an
    attorney in that state is allowed to issue an income withholding
    order. In that case, the attorney may submit an Order/Notice to
    Withhold and include a copy of the state law authorizing the
    attorney to issue an income withholding order/notice.

    **TRAINING NOTES**

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-   Type of Order/Notice (original; amended; terminated)

-   The top of the form identifies what entity
    (state/tribe/territory/city/county/district or reservation,
    non-governmental entity or individual) issued the IWO.

-   Date of order/notice, case number, employer's information,
    employee's name, Social Security number, case identifier, and
    obligee's name.

### Type of Order/Notice (original; amended; terminated) {#type-of-ordernotice-original-amended-terminated .unnumbered}

![](media/image11.png){width="3.390277777777778in"
height="2.5520833333333335in"}

> Form may be amended if:

-   The arrears are paid in full and only current support is due

-   Current support is paid and only arrears are due

-   The order was modified to change the amount of support due.

    Form may be terminated if child has reached age of majority (i.e.,
    18 or 21); child has died; or other reasons.

    An arrears is the unpaid current support previously due. It is not
    the employer's responsibility to keep track of arrears. The child
    support agency will send an amended order/notice when withholding
    for arrears should stop.

```{=html}
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```
-   The top of the form tells you who the IWO is from
    (state/tribe/territory or city/county/district/reservation or
    non-governmental entity or individual)

TRAINING NOTES

-   Explain that the check box about whether **arrears are 12 weeks or
    greater** is important in determining Consumer Credit Protection Act
    (CCPA) limits on withholding. This will be discussed in more detail
    in the next section.

-   Point out that in the very first paragraph, it states **"You are
    required by law to deduct these amounts from the
    employee's/obligor's income until further notice."** The employer
    should NOT stop withholding until receiving notification from the
    issuing entity.

### Identifying information  {#identifying-information .unnumbered}

(Case number, employer, employee and obligee's name)

> ![](media/image12.wmf){width="3.390277777777778in"
> height="2.5520833333333335in"}

**Order Information**:

> ![](media/image13.png){width="3.390277777777778in"
> height="2.5520833333333335in"}

-   This section provides information about what amount should be
    withheld. It provides totals, then breaks down payments to
    accommodate different payroll cycles. It includes current support,
    arrears, medical support and other data (such as court fees).

TRAINING NOTES

-   Note that the employer does not have to change its payroll cycle to
    adjust to the child support withholding. It works the other way
    around (child support withholding is adjusted to fit employer's
    payroll cycle). (42 USC 666 (b) 6 (c)).

**Order Information**:

![](media/image14.png){width="3.390277777777778in"
height="2.5520833333333335in"}

-   Note that the employer does not have to change its payroll cycle to
    adjust to the child support withholding. It works the other way
    around (child support withholding is adjusted to fit employer's
    payroll cycle).

training notes

-   Remittance information:

    -   The law of the ISSUING STATE must be followed for requirements
        that only the issuing state would know, such as where to send
        the payment, how much the payment should be, and whether medical
        support is ordered.

    -   The law of the EMPLOYEE'S PRINCIPAL PLACE OF EMPLOYMENT (PPOE)
        must be followed for requirements that pertain to the employer's
        tasks, such as when to begin withholding, whether an
        administrative fee may be imposed, and the maximum amount to
        withhold.

    -   The intent here is to make the employer's job easier since most
        employees will work in the employer's state, and the employer
        will be familiar with and can easily apply the same laws for
        each withholding order. However, this may not be true in areas
        like Washington DC/MD/VA where several states are close together
        and an employee often does not live in the state where he/she
        works.

**Remittance Information**:

![](media/image15.png){width="3.390277777777778in"
height="2.5520833333333335in"}

This section gives you the information needed to remit payments.

The information provided in this section follows the state law of the
issuing state, and most of the time the issuing state will be where the
employee works. However, the employer must always follow the law of the
**employee's principal place of employment** to determine:

-   When to begin withholding

-   When to remit payments following date of withholding

-   When to remit payments (this can be from 1 to 7 days after payday)

-   Maximum amount to be withheld (within the Consumer Credit Protection
    Act limits)

-   How to allocate withholding across multiple child support orders

-   Administrative fee that the employer is permitted to charge the
    employee and

-   Other terms and conditions that may be set by state law.

training notes

-   If the employer fails to comply with an order issued by its own
    state or another state, there are mandatory fines that apply under
    the law of the employer's state.

### Terms of the order/notice {#terms-of-the-ordernotice .unnumbered}

![](media/image16.png){width="3.390277777777778in"
height="2.5520833333333335in"}

**Remember:**

Always comply with the terms of the order/notice from the **issuing
state** for:

-   Duration and amount of child support, current and arrears

-   Person/agency designated to receive the payments

-   Payment of fees and/or costs charged by the child support
    enforcement agency, issuing court and custodial party's attorney.

**training notes**

**Contact Information**

![](media/image17.png){width="3.390277777777778in"
height="2.5520833333333335in"}

This section contains contact information for the entity sending the IWO
(Name, title and signature of issuing entity)

> NOTE: Non IV-D attorneys, individuals, and non-governmental entities
> must submit a Notice of an Order to Withhold and include a copy of the
> income withholding order unless, under a state's law, an attorney in
> that state may issue an income withholding order. In that case, the
> attorney may submit an order/notice.

training notes

-   We will talk more about the "Termination Notification" portion on
    page 2 in Module 6: Reporting Terminations.

-   Point out #6 -- Lump Sum Payments: You may be required to report and
    withhold from lump sum payments such as bonuses, commissions, or
    severance pay. If you have any questions about lump sum payments,
    contact the child support enforcement (IV-D) agency.

-   Tell participants that the child(ren)'s names and additional
    information were moved to the back of the form in the last revision.

-   Point out #10. If you or your employee/obligor have any questions,
    contact by telephone at \_\_\_\_\_\_\_\_\_\_\_\_\_ by Fax at
    \_\_\_\_\_\_\_\_\_\_ or by Internet at \_\_\_\_\_\_\_. -- The
    addition of the Internet access should be helpful to employers.

**Page 2: Additional Information to Employers and Other Withholders**

![](media/image18.png){width="3.390277777777778in"
height="2.5520833333333335in"}

-   This page is mostly informational.

-   A copy of the income withholding order/notice must be given to the
    employee if the box is checked on the reverse side of the IWO. You
    are required to provide a copy of this form to your
    employee/obligor. If your employee works in a state that is
    different from the state that issued this order, a copy must be
    provided to your employee/obligor even if the box is not checked.

-   #5 -- Termination Notification -- must be completed and returned to
    the issuing agency/party if the employee has terminated employment.

-   #6 -- Lump Sum Payments: You may be required to report and withhold
    from lump sum payments such as bonuses, commissions, or severance
    pay. If you have any questions about lump sum payments, contact the
    child support enforcement (IV-D) agency.

-   Child(ren)'s names and additional information.

-   10\. If you or your employee/obligor have any questions, contact by
    telephone at \_\_\_\_\_\_\_\_\_\_\_\_\_ by Fax
    \_\_\_\_\_\_\_\_\_\_\_\_\_ at or by internet at\_\_\_\_\_\_\_ .

training notes

**EXERCISE \# 1**

-   Review the brief case study of Jacob and Bridget Astor.

-   Ask participants to read the Order/Notice on their own, and then
    complete the information in their manuals.

### Exercise \# 1: Sample Case for Income Withholding {#exercise-1-sample-case-for-income-withholding .unnumbered}

![](media/image19.png){width="3.390277777777778in"
height="2.5479166666666666in"}

Jacob Astor and Bridget Quincy were married. After eight years of
marriage, the Astors decided to divorce. Their son, Frank, continues to
live with his mother in Lincoln, Nebraska after the separation.

In May, Jacob was ordered to pay \$400 each month (\$184.62 biweekly) in
child support as part of the divorce settlement. After the divorce,
Jacob moved to Richmond, Virginia.

In May, the Nebraska Child Support Enforcement Agency (CSEA) sent an
Order/Notice to Withhold Income for Child Support to Jacob's new
employer in Richmond, the Richmond Times.

Virginia law requires child support payments to be sent on each payday,
or within four days if remitted by EFT/EDI (electronic payment).

Richmond Times received the Order/Notice on Wednesday, May 23.

**Exercise Continued -\>**

training notes

Richmond Times' next paydays are Friday, May 31^st^ and Friday June
12^th^.

Date of Richmond Times' first withholding for Jacob would be Friday,
June 12^th^.

(June 12 would be the pay day corresponding to the May 31 statement. The
May 31 statement covers the dates from May 11-24. So the first full pay
period to be attached would be for the pay date of June 12.)

Withheld payment must be sent to the Nebraska SDU by Friday, June 12 if
sending paper check or by June 16 (4 days after June 12) if sending
electronically (Virginia law).

Richmond Times is allowed to charge an administrative fee of \$5.00 per
income-withholding (per Virginia law).

How much should Richmond Times withhold for child support?

(400.00 per month or 184.62 biweekly) + \$5.00 = \$405.00 per month or
189.62 biweekly since this payroll is biweekly.

Richmond Times' payroll is biweekly and the next payday is Friday, May
31 and the one after that is Friday, June 12.

Please complete:

Date Richmond Times sets up first income-withholding for Jacob
\_\_\_\_\_\_\_\_\_\_\_\_\_.

Withheld payment must be sent to the Nebraska SDU by
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Richmond Times is allowed to charge an administrative fee of \$5.00 per
income-withholding order. Jacob's biweekly gross pay is \$1,600.00.
Assume no more than 30 percent of gross pay is taken for mandatory
deductions.

Based on what we've covered so far, how much should Richmond Times
withhold for child support on the next payday?\_\_\_\_\_\_\_\_\_

training notes

-   The CCPA is a federal law that provides a minimum level of
    protection to an employee so that his entire paycheck cannot be
    withheld (he has to have something to live on!). Some states provide
    even more protection than the federal law, but all must adopt the
    minimum CCPA limits.

-   The CCPA limits to follow are those allowed by state law \-- the
    state that is the employee's official work site.

-   Calculating the allowable disposable income is a very simple
    two-step process: determining the disposable income and applying the
    CCPA limits.

-   Allowable disposable income (calculated for weekly income) is also
    known as Aggregate Disposable Weekly Earnings, or ADWE. This term is
    used in the Order/Notice to Withhold Income for Child Support.

-   What is the difference between allowable disposable income and net
    pay? Net pay is the take-home pay but may include non-mandatory
    deductions.

## Calculating Disposable Income

![](media/image20.png){width="3.390277777777778in"
height="2.5479166666666666in"}

-   **What?**

```{=html}
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-   **Disposable income** is the amount of earnings remaining after
    subtracting certain mandatory deductions from an employee's gross
    pay.

-   **Allowable disposable income** is simply a percentage of disposable
    income and is the amount actually subject to child support
    withholding.

    training notes

### Calculating Disposable Income {#calculating-disposable-income-1 .unnumbered}

![](media/image21.png){width="3.390277777777778in"
height="2.5479166666666666in"}

-   **How?**

```{=html}
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```
-   Allowable disposable income is calculated by applying the CCPA
    limits permitted by state law.

1.  Gross pay minus mandatory deductions = disposable income

2.  Disposable income times the CCPA limit = allowable disposable income

-   The allowable disposable income is the maximum available for child
    support withholding.

    training notes

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```
-   It is the employer's responsibility to withhold within the limits
    set by state law. It is recommended that withholding be made
    according to the higher percentage, unless the employer has
    documentation that shows the employee is indeed supporting a second
    family. The existence of a second child support order for a
    different child (and CP) does constitute evidence of a second
    family. Remember that a child support agency in one state may not
    even know that the non-custodial parent (NCP) has a child support
    order issued for a different family in a different state.

-   If you want to verify support of a second spouse or child, you could
    ask to see a spousal or child support order, a birth certificate, or
    a marriage certificate. The employee's tax or health insurance
    records might also prove that he has dependents other than those
    named in the child support withholding order. An affidavit from the
    employee could also be obtained.

-   Although the employer is more likely to know if the employee
    supports a second family, when in doubt, you may ask for guidance
    from the child support agency.

### Federal Consumer Credit Protection Act limits: {#federal-consumer-credit-protection-act-limits .unnumbered}

![](media/image22.png){width="3.390277777777778in"
height="2.5479166666666666in"}

This law sets limits on withholding a non-custodial parent's disposable
income based on his/her current family setting and payment history:

-   50% - Supports a second family, with no or fewer than 12 weeks in
    arrears

-   55% - Supports a second family, and more than 12 weeks in arrears

-   60% - Not supporting a second family, with no arrearage or fewer
    than 12 weeks in arrears

-   65% - Not supporting a second family, and is more than 12 weeks in
    arrears.

    Disposable income times the CCPA limit = Allowable disposable
    income.

    There are no set rules or regulations to guide the employer in
    determining whether your employee is supporting a second family.

    Title III of the Consumer Credit Protection Act (15 USC Sec. 1671 et
    seq; 29 CFR 870) simply states "...if the employee is supporting a
    spouse **or** child\..." other than the child or spouse for whom
    support is being sought, then the existence of a second family is
    established and a lower percentage should be withheld.

    The employee does not have to be living with the second family to be
    supporting them; a second child support order indicates that a
    second family is being supported.

    training notes

    **EXERCISE \# 2**

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```
-   According to the Order/Notice to Withhold, Jacob Astor owes a total
    of \$450 per month, and he is paid biweekly (450/2.1666 = 207.70
    biweekly).

### Exercise \# 2: Calculating Allowable Disposable Income {#exercise-2-calculating-allowable-disposable-income .unnumbered}

![](media/image23.png){width="3.390277777777778in"
height="2.5479166666666666in"}

Let's go back to Jacob Astor, an employee working for Richmond Times and
owing \$400/month (184.62 biweekly) in child support.

Now let's assume that Jacob is 4 months behind on his payments and has
been ordered to pay \$50/month (23.08 biweekly) in arrears in addition
to the current support he is already paying. Use the following
information to calculate Jacob Astor's **disposable income:**

-   **Nebraska:**

```{=html}
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```
-   Exceptions to federal CCPA limits: none

```{=html}
<!-- -->
```
-   **Virginia:**

```{=html}
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```
-   Exceptions to federal CCPA limits: none

    **Exercise Continued -\>**

    training notes

    **EXERCISE \# 2 (Continued)**

-   Although the Order/Notice was issued in Nebraska, Mr. Astor works
    for the Richmond Times, in Virginia, so Virginia law (law of the
    state where Mr. Astor works) applies to the calculation for
    allowable disposable income.

    Jacob's gross biweekly pay: \_\_[1,600.00]{.underline}\_

    Subtract mandatory deductions: \_\_[150.00]{.underline}\_\_\_\_\_

    Jacob's disposable income for biweekly pay period
    [1450.00]{.underline}

### Exercise \# 2: Calculating Allowable Disposable Income (Continued) {#exercise-2-calculating-allowable-disposable-income-continued .unnumbered}

![](media/image24.png){width="3.4006944444444445in"
height="2.5520833333333335in"}

-   Virginia follows the CCPA limits -- with no second family and more
    than 12 weeks in arrears, the CCPA limit for Jacob is 65 percent,
    the same cap that is specified in the Order/Notice.

```{=html}
<!-- -->
```
-   Richmond Times' payday is biweekly.

-   The following deductions are taken from Jacob's biweekly gross pay
    of \$1600.00:

```{=html}
<!-- -->
```
-   Federal/state/local taxes 95.00

-   FICA 45.00

-   Medicare 10.00

1.  Jacob's gross biweekly pay: \_\_\_\_\_\_\_\_\_\_\_

2.  Subtract mandatory deductions: \_\_\_\_\_\_\_\_\_\_\_

3.  Jacob's disposable income: \_\_\_\_\_\_\_\_\_\_\_

    **Exercise Continued -\>**

    training notes

    **EXERCISE \# 2 - Continued**

-   1\. Biweekly disposable income: \_[\$1450.00]{.underline}\_

-   2\. Multiplied by CCPA limit: \_\_\_[65%]{.underline}\_\_\_\_

-   3\. Maximum withholding allowed: \_\_[\$ 942.50]{.underline}\_\_

-   Is there sufficient money to withhold the entire amount ordered for
    Jacob for the biweekly pay period? (\$400 current + \$50 arrears +
    \$5.00 administrative fee = \$455.00 monthly or 212.70 biweekly)?
    YES

-   If Jacob worked in a different state, however, the cap might be
    lower even though the Order/Notice specifies 65 percent!

    Is there sufficient money to withhold the entire amount ordered for
    Jacob?

-   Current support 184.62 biweekly

-   Arrears 23.08 biweekly

-   Admin. fee 5.00 biweekly

-   TOTAL: 212.70 biweekly [YES]{.underline} or NO?

### Exercise \# 2 (Continued): Calculating Maximum Withholding {#exercise-2-continued-calculating-maximum-withholding .unnumbered}

![](media/image25.png){width="3.4006944444444445in"
height="2.5555555555555554in"}

Now let's suppose that Richmond Times pays biweekly and that Jacob's
gross biweekly earnings are \$1,600.

Calculate the **allowable disposable income** (or, "maximum
withholding") for this biweekly pay period by applying the Consumer
Credit Protection Act (CCPA) limits to Jacob's disposable income.

In applying CCPA limits, follow the state law for Jacob's work state.

1.  Biweekly disposable income: \_\_\_\_\_\_\_\_\_\_

2.  Multiplied by CCPA limit: \_\_\_\_\_\_\_\_\_%

3.  Maximum withholding allowed: \_\_\_\_\_\_\_\_\_

    Is there sufficient money to withhold the entire amount ordered for
    Jacob?

    Current support \_\_\_\_\_\_\_\_\_\_

    Arrears \_\_\_\_\_\_\_\_\_

    Admin. fee \_\_\_\_\_\_\_\_\_\_

    TOTAL: \_\_\_\_\_\_\_\_\_\_ YES or NO?

    training notes

-   In the case of prolonged illness, an employee may use available
    annual or sick leave. Child support may still be deducted from the
    pay received while the employee is on extended leave.

-   In the case of "leave without pay," child support withholding would,
    of course, stop. The employer must notify the child support agency
    of the employee's change in status, even if it is temporary.

-   The employee may wish to continue child support payments on his own
    in order to avoid accrual of arrears, or he may request a downward
    modification of the amount of the child support obligation.

-   Note that disability and worker's compensation payments both qualify
    as income under the Personal Responsibility and Work Opportunity
    Reconciliation Act (PRWORA) definition and therefore remain subject
    to withholding for child support.

## Income withholding when the employee is not working

![](media/image26.png){width="3.4006944444444445in"
height="2.5520833333333335in"}

> **When?**

-   Your employee may not be working because of prolonged illness or
    injury, or due to a short- or long-term disability.

-   Your employee receives disability payments or worker's compensation.

> **What?**

-   Child support withholding must still be made.

-   If you are responsible for the disability payments, then you are
    responsible for withholding child support according to the terms of
    the order.

-   If a third party payor is responsible for the payments, alert the
    third party payor that child support deductions are being made for
    the employee; send a copy of the income withholding order to the
    third party payor.

-   Notify the issuing agency immediately about the change in your
    employee's situation so it will know why you are no longer deducting
    child support. The agency will send a new Order/Notice to Withhold
    Income to the third party payor.

-   To avoid interruptions in payment to the employee's child, the third
    party payor may begin withholding by following the terms of the
    withholding order, or the employee may make his own payments to
    avoid accrual of arrears.

    training notes

```{=html}
<!-- -->
```
-   Normally when an employee is being paid his or her regular earnings,
    the full amount of the order can usually be withheld (in fact, the
    employee's earnings are a big factor in determining how much support
    is ordered). It is only when the paycheck falls short due to special
    circumstances that the employer may not be able to withhold the full
    ordered amounts.

-   The CCPA limits on withholding an employee's paycheck do not forgive
    the debt owed; the limits merely mean that the employee can take
    longer to pay off the debt.

-   We refer to state laws as "state CCPA laws." Remember, each state
    has either adopted the federal CCPA law, or passed its own law that
    affords more protection to the employee's pay.

-   Rule of thumb: If you receive more than one order from different
    states and the orders specify a different CCPA limit to apply in
    determining the maximum to withhold, apply the higher/est percentage
    if there are arrearages. (If Order A says 55 percent and Order B
    says 50 percent, then withhold up to 55 percent.)

-   If the amounts differ due to support of a second family rather than
    arrearages, apply the lower percentage (i.e., Order C says 50
    percent and Order D says 60 percent, then withhold 50 percent). One
    state was probably unaware that your employee is supporting a second
    family (this order may have pre-dated the second family).

-   For privacy reasons, the employer should not discuss other child
    support orders with a custodial parent (CP); simply state that there
    are "other claims against the income." (The CP may not be aware that
    the NCP has fathered children with other women.)

## Prioritizing Multiple Deductions, Or What Do I Pay First If There is Not Enough Money To Go Around?

![](media/image27.wmf){width="3.73125in" height="2.798611111111111in"}

-   **What?**

    -   Sometimes an employee's earnings do not stretch far enough to
        pay all his or her claimants. There are specific laws governing
        who is to be paid first. There are also laws protecting the
        employee from having his or her entire paycheck turned over to a
        third party.

    -   Consumer Credit Protection Act: A federal law that serves as the
        minimum protection to the employee; some states have passed
        their own version that provides more protection to the
        employee's pay.

```{=html}
<!-- -->
```
-   **When?**

    -   Multiple child support orders are received (for different
        children)

    -   Child support orders with other garnishments (for debt)

    -   Child support orders with other involuntary deductions (i.e.,
        tax levy, bankruptcy).

training notes

-   If you receive withholding orders from more than one issuing
    agency/party for the same custodial family, be sure to contact all
    parties involved as soon as possible (something is wrong!). Continue
    to honor the first order that you received until and unless you
    receive official notice that a determination has been made that a
    different order should be honored. It is not the employer's
    responsibility to figure out which order is the one to be followed
    (you may hear this referred to as the "controlling order.")

-   There should not be more than one withholding order for the same
    child for current support.

    -   Note: State CSE agencies issue IWOs for arrears-only that are
        owed to the State for a time period when welfare has been paid
        on behalf of the CP and child(ren). [This IWO should be for
        arrears only and is not considered a duplicate
        order]{.underline}**.**

## Multiple Child Support Orders

![](media/image28.png){width="3.390277777777778in"
height="2.5479166666666666in"}

Federal law requires that **some money will be paid to each order for
current support.**

Each state must have a method for allocation of withheld money between
or among the orders, up to that state's CCPA limits.

If there is any allowable disposable income left over (that is,
disposable income that falls within the CCPA limits for withholding),
then payments for **arrears** may be withheld up to the remaining
balance.

-   **Note:** You may receive more than one order from different states
    or counties for the same child(ren). If this happens, you may follow
    these steps:

5.  Continue to honor the first order you received. Give your employee a
    copy of the second order.

6.  Contact the issuing agency that sent the second withholding order
    and inform them that you are already sending withheld payments for
    the same child(ren) 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 them about the second order you
    have received. The issuing agencies must resolve the duplication.

    -   Note: State child support enforcement (CSE) agencies issue IWOs
        for arrears-only that are owed to the State for a time period
        when welfare has been paid on behalf of the CP and child(ren).
        This IWO should be for arrears only and is not considered a
        duplicate order.

        Training Notes

> **How?**

![](media/image29.png){width="3.390277777777778in"
height="2.5479166666666666in"}

> Most states use one of two methods to allocate withheld payments among
> multiple orders:

1.  Allocate a percentage to each order based on the total dollar amount
    of current support orders.

2.  Divide the total dollar amount of the orders equally by the number
    of orders.

    Follow the allocation method set by the employee's principal place
    of employment state.

Training Notes

-   Percentage method of allocation:

1.  Determine the amount of disposable income.

2.  Determine the total amount of all the income withholding orders
    (current support plus arrears).

3.  Determine whether there is enough to pay the total of all income
    withholding orders. If yes, pay all orders.

4.  If not, total only the ***current*** support amounts for all the
    income withholding orders.

### Percentage Method of Allocation (also called Prorate Method) {#percentage-method-of-allocation-also-called-prorate-method .unnumbered}

![](media/image30.png){width="3.390277777777778in"
height="2.5479166666666666in"}

When the allowable disposable income is less that the total amount
requested by the income withholding orders, determine the amount to be
sent for each order using the percentage method:

1.  Determine the amount of allowable disposable income.

2.  Determine the total amount of all the income withholding orders
    (current support plus arrears).

3.  Determine whether there is enough to pay the total of all income
    withholding orders. If yes, pay all orders.

4.  If not, total only the ***current*** support amounts for all the
    income withholding orders.

Training Notes

### Percentage Method of Allocation (also called Prorate Method) (Continued) {#percentage-method-of-allocation-also-called-prorate-method-continued .unnumbered}

![](media/image31.png){width="3.390277777777778in"
height="2.5479166666666666in"}

5.  Divide *each* income withholding order by the total amount of *all*
    the income-withholding orders for ***current*** support.

6.  Determine the percentage to be applied to each order for
    ***current*** support.

7.  Multiply the percentage for each order for ***current*** support by
    the amount of allowable disposable income.

Training Notes

  ----------------- ----------------------- ---------------------------------------
  Order A           \$90.00                 ÷ \$227 = 39.65%

  Order B           \$75.00                 ÷ \$227 = 33.04%

  Order C           [\$62.00]{.underline}   ÷ \$227 = 27.31%

  ***Total:***      ***\$227.00***          ***100%***

                                            
  ----------------- ----------------------- ---------------------------------------

-   If allowable disposable income is \$180, then Order A gets 39.65% x
    \$180 = \$71.37, Order B gets 33.04% x \$180 = \$59.47, etc.

### Percentage Method of Allocation Example: {#percentage-method-of-allocation-example .unnumbered}

![](media/image32.wmf){width="3.6069444444444443in"
height="2.704861111111111in"}

  ----------------- -------------- ---------------------------------------
  Order A           \$90.00        Divided by \$227 = 39.65%

  Order B           \$75.00        Divided by \$227 = 33.04%

  Order C           \$62.00        Divided by \$227 = 27.31%

  TOTAL             \$227.00       100%
  ----------------- -------------- ---------------------------------------

Assume allowable disposable income is \$180. There is not enough to pay
the full, ordered total of \$227.00

Calculate the percentage of the total for each order, then multiply that
percentage times the allowable disposable income:

  ----------------------- ----------------------------- ------------------
  Order A                 \$180 x 39.65%                = \$71.37

  Order B                 \$180 x 33.04%                = \$59.47

  Order C                 \$180 x 27.31%                = \$49.16

  TOTAL                                                 \$180.00
  ----------------------- ----------------------------- ------------------

Training Notes

-   **Equal method of allocation:**

    Using the numbers above, divide the allowable disposable income by
    the total number of orders (3).

    \$180 ÷ 3 = \$60 can be paid to each order.

    Only a few states use this method (e.g., KS and TX).

### Equal Method of Allocation Example: {#equal-method-of-allocation-example .unnumbered}

![](media/image33.png){width="3.390277777777778in"
height="2.5479166666666666in"}

Assume allowable disposable income is \$180. There are three orders, and
each is paid equally. Divide \$180 by 3 = \$60 to each order.

training notes

[EXERCISE \# 3]{.underline}

-   USE THE FLIP CHART TO REVIEW THIS EXERCISE.

-   What are the withholding limits for Jacob? 55%

-   Why? He owes arrears (more than 12 weeks), and the second child
    support order shows he is supporting a second family even though he
    is not living with them.

  ---------------------------------------------------- ------------------
  1\. Disposable income for child support purposes:    \$2000.00

  2\. Apply CCPA limits                                x \_\_55%

  3\. **Allowable disposable income**:                 \$1100.00

  4\. Total current support owed (add current orders   \$700.00
  together: \$400+\$300)                               

  5\. Total arrears owed per month:                    \$ 50.00

  6\. **Total monthly support owed**:                  \$750.00
  ---------------------------------------------------- ------------------

-   Is there enough allowable disposable income to pay the total in line
    6? yes

-   How much monthly support can be paid by Jacob's employer? The full
    \$750.00 that is owed. No problem this month!

-   The next exercise covers a situation where the monthly support owed
    **exceeds** the disposable income.

### Exercise #3: Calculating Payments Under Two Withholding Orders {#exercise-3-calculating-payments-under-two-withholding-orders .unnumbered}

![](media/image34.png){width="3.390277777777778in"
height="2.5479166666666666in"}

Jacob was married and has now been divorced twice. He now lives alone.
He had one child with each wife, and he now owes child support to both
children.

-   He owes \$400/month in current support and \$50/arrears for his
    older child (Order A) (and he's more than 12 weeks in arrears).

-   He owes \$300/month in current support for his younger child (Order
    B).

    Jacob received a raise and his disposable income is now
    \$2,000.00/month. The CCPA limits set by his state follow the
    federal CCPA limits.

    What are the withholding limits for Jacob? \_\_\_\_\_\_\_\_\_\_\_\_%

    Why?\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

  ----------------------------------------------- -----------------------
  1\. Disposable income for child support         \$2,000.00
  purposes:                                       

  2\. Apply CCPA limits                           x \_\_\_\_\_\_%

  3\. **Allowable disposable income**:            \$\_\_\_\_\_\_\_\_

  4\. Total current support owed (add both        \$\_\_\_\_\_\_\_\_
  orders)                                         

  5\. Total arrears owed:                         \$\_\_\_\_\_\_\_\_

  6\. **Total monthly support owed**:             \$\_\_\_\_\_\_\_\_
  ----------------------------------------------- -----------------------

Is there enough disposable income to pay the total in line 6?

How much monthly support can be paid by Jacob's employer?
\$\_\_\_\_\_\_\_\_

training notes

**EXERCISE #4**

-   USE THE FLIP CHART TO REVIEW THIS EXERCISE.

  -------------------------------------------------- --------------------------
  1\. Disposable income for child support purposes:  \$1,000.00

  2\. Apply CCPA limits                              x \_\_\_[55%]{.underline}

  3\. **Allowable disposable income**:               \$\_[550.00]{.underline}

  4\. **Total monthly support owed (current and      \$750.00
  arrears)**                                         
  -------------------------------------------------- --------------------------

-   Is there enough allowable disposable income to pay the total in line
    4? NO

-   How much monthly support can be paid by Jacob's employer? First, ask
    if current support can be met. The total **current support** due is
    \$700.00, and this can**NOT** be paid in full. The \$50 arrears
    cannot be paid at all.

-   To learn which method of allocation to use, the employer must first
    check the law of Jacob's work state. Let's say his state uses the
    percentage method of allocation.

-   Order A \$400 divided by 700 = 57%

-   Order B [\$300]{.underline} divided by 700 = 43%

    100%

-   Current support owed: \$700/month

-   Arrears owed: \$ 50/month

    Multiply each percentage times the amount available for child
    support, meaning the allowable disposable income (\$550):

    \$550 x 57% = \$313.50 for Order A (short by \$86.50+ \$50 arrears)

    \$550 x 43% = \$236.50 for Order B (short by \$63.50)

-   \$ 86.50 of unpaid current support will accrue as arrears against
    Order A

-   \$ 63.50 of unpaid current support will accrue as arrears against
    Order B.

-   **The employer does not need to track the arrears**; the child
    support enforcement agency is responsible for this.

### Exercise #4: Calculating Payments (Again) Under Two Withholding Orders {#exercise-4-calculating-payments-again-under-two-withholding-orders .unnumbered}

![](media/image35.wmf){width="3.6166666666666667in"
height="2.704861111111111in"}

Let's use the same example with Jacob again. Remember, he has two
children, and owes \$400/month in current support and \$50/month arrears
for his older child (Order A) and \$300/month in current support for his
younger child (Order B). His total amount owed per month is \$750.

This month, Jacob has taken a lot of time off without pay, and his
disposable income has decreased and is now only \$1,000.00/month.

Jacob is subject to the same withholding limits as before, 55%.

  -------------------------------------------------- -------------------------
  1\. Disposable income for child support purposes:  \$1,000.00

  2\. Apply CCPA limits                              x \_\_\_[55%]{.underline}

  3\. **Allowable disposable income**:               \$\_\_\_\_\_\_\_\_\_

  4\. **Total monthly support owed (current and      \$750.00
  arrears)**                                         
  -------------------------------------------------- -------------------------

Is there enough disposable income to pay the total in line 4?

How much monthly support can be paid by Jacob's employer? Use the
percentage method of allocation.

Order A = \$ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Order B = \$ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

training notes

-   Point out that between 50% and 65% of disposable income may be
    withheld for child support versus only 25% of disposable income for
    a commercial garnishment (or the excess weekly disposable income
    that exceeds 30 times the minimum wage earned that week if this
    amount is less).

-   Basically, the employer first withholds for child support from the
    allowable disposable income and then checks to see if the withheld
    amount is greater than the limits set for garnishment.

## Child Support With Other Garnishments

![](media/image36.png){width="3.390277777777778in"
height="2.5520833333333335in"}

**Rule of thumb**: A child support income-withholding order must be paid
before all other garnishments.

Note that not only do income-withholding orders take precedence over
other garnishments, more money may be withheld for child support than
for other garnishment debt.

**Example:** Tony's child support withholding for one week is \$69.23.
His disposable income for that week is \$270. Sears serves a garnishment
against Tony for a \$1,000 debt.

  ---------------------------------------------------- -----------------------
  Weekly disposable income                             \$270.00

  Calculate 25% of disposable income                   [x 25%]{.underline}

                                                       \$ **67.50**

  Subtract amount withheld for child support           [(69.23)]{.underline}

  **Available for garnishment**                        **\$0.00**
  ---------------------------------------------------- -----------------------

The child support withholding exceeds 25% of Tony's disposable income by
\$1.73, so there is nothing left over to pay Sears.

Note also that in this case, 25% of the disposable income is less than
the amount of weekly disposable income that exceeds 30 times the minimum
wage. If it were more, then *that* would be the withholding limit for
Sears.

> 30 x \$5.15 \[minimum hourly wage\] = \$154.50
>
> (\$270 - \$154.50 = \$115.50)

\$67.50 \< \[is less than\] \$115.50, so the employer can remit the
\$67.50 to Sears.

training notes

-   Reiterate that a federal tax debt takes precedence over a child
    support withholding order if it was served prior to the issuance of
    the child support order. The Internal Revenue Service (IRS),
    however, has stated its willingness to accommodate child support
    withholding orders that are served after the IRS levy. It is up to
    the employee to request this from the IRS.

-   Stress that it is also a good idea for the employer to notify the
    child support agency of the pre-existing IRS tax levy. The agency
    has no way of knowing that there is an existing IRS levy that takes
    precedence over its withholding order unless you tell them about it.

-   Background Notes to Trainer on Bankruptcy (do not need to cover with
    class unless asked)

    -   For child support withholding, we are only concerned with
        Chapters 7 and 13 (11 is for businesses and 12 is for family
        farmers). Chapter 7 is for liquidation and is usually resolved
        in a few months. Chapter 13 is reorganization and can take 2 to
        3 years.

    -   With the passage of Public Law 109-8, Section 211 to 219, it is
        clear that income-withholding orders are not subject to the
        automatic Stay of Proceedings against the bankrupt debtor in
        either a Chapter 7 or Chapter 13. This means any child support
        withholding should continue without interruption and any new
        withholding should be put in place without hesitation.

    -   Chapter 7 -- After-acquired property (that is, acquired after
        the date of bankruptcy filing, such as wages or tax refunds) may
        be attached for child support purposes. This is more common than
        Chapter 13. In addition, the IV-D agency may file a proof of
        claim with the bankruptcy court and ask to receive payment on
        child support arrears along with other unsecured creditors. The
        remainder of the child support debt is not discharged even if
        some payment is received from the bankruptcy court.

    -   Chapter 13 -- This is limited to individuals with "regular
        income" and debts below \$1 million. A bankruptcy trustee is
        appointed and after-acquired property is part of the bankruptcy
        estate. The debtor must file a "plan" for the repayment of debts
        and Chapter 13 may be converted to Chapter 7 if a plan is not
        filed on time. The plan must provide for full payment in cash of
        all priority claims (which includes child support, both current
        and arrears). The bankruptcy trustee would collect and pay the
        child support payments to the child support agency.

> **Rule of thumb**:

![](media/image37.png){width="3.390277777777778in"
height="2.5479166666666666in"}

-   Child support takes priority over everything else except a federal
    tax levy, but only if the federal tax levy was served **before** the
    original child support order was issued.

-   Special treatment applies to bankruptcy cases.

> **Federal Tax Levy**:

-   Internal Revenue Service (IRS) levy takes precedence over child
    support if the levy is served prior to the issuance of the child
    support order.

-   Employers who are withholding income to satisfy a tax levy should
    notify the IRS if they receive a child support order. In some cases,
    the IRS will yield priority to the child support order.

> **Bankruptcy**:

-   Even if an employee declares bankruptcy, he/she is still obligated
    to pay child support. Debts due for delinquent child support are not
    dischargeable in bankruptcy actions.

-   An employer may be notified, however, that it is no longer
    responsible for withholding the payments because a trustee of the
    bankruptcy court may take over this task. Continue withholding until
    official notification from the agency or bankruptcy court has been
    received.

training notes

-   Reiterate that a federal tax debt takes precedence over a child
    support withholding order if the levy was served prior to the
    issuance of the underlying child support order.

-   State examples:

    -   Non-tax federal debt

    -   Creditor garnishment -- garnishment from a store like Sears

    -   Assignment of wages -- when taking out a loan, a person may
        voluntarily sign over his future wages to pay a creditor in the
        event that he defaults on the loan.

> **Involuntary Deductions that never take precedence over child support
> withholding:**

![](media/image38.png){width="3.390277777777778in"
height="2.5520833333333335in"}

-   Non-tax federal debt

-   State and local tax levies

-   Creditor garnishment

-   Assignment of wages

> This is true even if the child support withholding order was served
> after the involuntary deduction.

training notes

-   Withheld child support payments are credited based on the employer's
    payday OR date of receipt by the receiving agency, which may result
    in a "temporary" arrearage.

-   Some states charge interest on arrearages.

-   Nevertheless, employers are not required to change payroll cycles to
    accommodate an income withholding order/notice.

## A Note About Arrears

![](media/image39.wmf){width="3.626388888888889in"
height="2.720138888888889in"}

The child support enforcement agency, not the employer, is responsible
for calculating arrears or keeping track of payments toward the arrears.

Some states calculate interest on unpaid child support. Depending on how
long ago these underpayments occurred, the interest owed could be a
sizable amount.

training notes

-   **Note: If this training is being provided to a payroll department
    that does not process medical insurance premiums, this section may
    be skipped.**

-   Remind the class that the definition of child (and medical) support
    was covered in Section 2.2.

-   The State Children's Health Insurance Program (SCHIP):

    -   Created as part of Balanced Budget Act of 1997.

    -   \$4.8 billion annual federal grant program that helps states
        cover uninsured children; for children in families with income
        too high for Medicaid but too low to afford private coverage.

-   Visit website at
    [www.cms.hhs.gov/home/schip.asp](http://www.cms.hhs.gov/home/schip.asp).

-   Of the 44 million Americans without health care coverage, 11.5
    million are children, and 4 million of these children live in
    single-parent families.

## withholding for medical support

![](media/image40.png){width="3.390277777777778in"
height="2.5479166666666666in"}

> **What?**

-   There are five basic types of health care coverage for a child who
    does not live with the providing parent, or non-custodial parent
    (NCP):

1.  The custodial party (CP) maintains coverage through his or her
    employer plan; NCP pays additional money to pay for this coverage.

2.  NCP maintains coverage through his or her employer's plan; employer
    withholds premiums for the child's care or "medical support" from
    the NCP's pay.

3.  NCP maintains coverage through a private plan and pays the premiums
    directly. Employer does not withhold medical support.

4.  Child is enrolled in a plan designed solely for coverage of
    children. Employer withholds premiums from NCP's pay and sends them
    to the child support enforcement agency to be paid to the child's
    insurer.

5.  Child is enrolled in the state Children's Health Insurance Program
    (CHIP) because neither parent has access to affordable health care
    coverage and the child is not eligible for Medicaid.

training notes

-   Tell class that Qualified Medical Child Support Orders (QMCSOs) will
    be discussed in more detail in a few minutes.

> **When?**

![](media/image41.png){width="3.390277777777778in"
height="2.5479166666666666in"}

-   Employers must provide medical insurance coverage to an employee's
    child per a child support order when:

    The employer offers family care coverage as part of its benefit plan
    [and]{.underline} the employee is eligible and enrolls in the family
    care coverage.

```{=html}
<!-- -->
```
-   If an employer does not offer this coverage, it is **not** required
    to obtain it simply to comply with a medical support order.

> **How?**
>
> When directed by a National Medical Support Notice (NMSN) from a court
> or child support enforcement agency, or Qualified Medical Child
> Support Order (QMCSO), and family coverage is available, the employer
> must:

-   Provide immediate coverage without regard to "open enrollment
    season" OR

-   Provide a method for the CP to enroll the child in the plan

-   Deduct premiums from the employee's pay (within CCPA limits).

> **Special Notes**:

-   The employer may not eliminate family coverage unless that coverage
    is eliminated for all employees.

training notes

-   Start by explaining that some health insurance plans offered by
    employers were previously able to circumvent paying for medical
    support for an employee's child(ren). Technically speaking, certain
    plans could exempt themselves from honoring medical support orders.
    This is no longer possible if a NMSN or a Qualified Medical Child
    Support Order is sent to the employer.

-   Note that the Omnibus Reconciliation Act of 1993 (OBRA '93) made big
    changes in medical insurance requirements placed on employers and
    insurance companies.

-   OBRA '93 is responsible for creating QMCSOs (by amending the
    Employee Retirement Income Security Act of 1974 or ERISA), and
    requiring both "insured" and "self-insured" plans under ERISA to
    honor QMCSOs.

-   Tell participants to turn to the Appendix, **Handout #3: National
    Medical Support Notice.**

### National Medical Support Notice (NMSN) {#national-medical-support-notice-nmsn .unnumbered}

![](media/image42.png){width="3.390277777777778in"
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To help obtain health care coverage for children, new laws were passed
creating the National Medical Support Notice (NMSN). The NMSN is a
notice sent to employers from the state child support enforcement
agency. Its purpose is to ensure that children receive health care
coverage when it is available and required as part of a child support
order. It is designed to simplify the work of employers and plan
administrators by providing uniform documents requesting health care
coverage.

An appropriately completed NMSN is considered a \"Qualified Medical
Child Support Order,\" or QMCSO, and as such must be honored by all
employers\' group health plans.

training notes

### How the NMSN Works {#how-the-nmsn-works .unnumbered}

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The NMSN complies with section 609 (a)(3) and (4) of ERISA, which
pertains to informational requirements and restrictions against
requiring new types or forms of benefits. It also includes:

-   applicable state law provisions for withholding employee
    contributions due under any group health plan in connection with
    coverage required to be provided;

-   duration of the withholding requirement;

-   applicability of limitations on such withholding under Title III of
    the Consumer Credit Protection Act (CCPA), or similar state law;

-   prioritization required under state law between amounts to be
    withheld for purposes of cash support and amounts to be withheld for
    purposes of medical support in cases where available funds are
    insufficient for full withholding for both purposes; and

-   the name and telephone number of the appropriate unit or division to
    contact at the state CSE agency regarding the NMSN.

training notes

### NMSN (Four documents and instructions): {#nmsn-four-documents-and-instructions .unnumbered}

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> Part A- Notice to Withhold For Health Care Coverage, will be completed
> by the CSE agency and sent to the employer with the rest of the
> packet.
>
> \"Employer Response\" is just that, your opportunity to respond to the
> request if one of the following situations exists:

1.  You do not provide health care coverage for your employees.

2.  The employee is not eligible for the health care coverage you
    provide.

3.  The employee has been terminated or has left this employment.

4.  The deduction for health care coverage cannot be made because of
    state or federal withholding limits and the state\'s priority for
    withholding. These limitations will be included in the instructions
    that accompany the NMSN or which you have received from your state,
    as mentioned above.

> Otherwise, follow the steps below to comply with the NMSN.
>
> Part B- Medical Support Notice To Plan Administrator. This document
> should be forwarded to your health care plan administrator for
> handling.
>
> \"Plan Administrator Response\" is completed by your plan
> administrator according to the accompanying instructions and returned
> to the CSE agency.

training notes

-   Tell participants to turn to the Appendix**, Handout #4: National
    Medical Support Notice Flowchart.**

-   Discuss the flowchart as you talk about the steps for the NMSN.

### Step By Step for the NMSN {#step-by-step-for-the-nmsn .unnumbered}

> Step 1: When you receive a NMSN, determine whether any question on the
> Employer Response applies to you or this employee. You may only be
> able to determine whether one of the first three questions applies at
> this stage.
>
> Step 2: If so, complete the Employer Response form and return it to
> the issuing agency within 20 business days. If none of the four
> questions on the Employer Response applies to you or this employee,
> forward Part B to your plan administrator.
>
> Step 3: The plan administrator will notify you when enrollment has
> been completed. You must then notify your payroll department to make
> the appropriate deductions for employee contributions required under
> the health plan. It is at this point that you may determine that the
> total deductions exceed the maximum allowed under the CCPA limits and
> any applicable state law.
>
> Step 4: If, in fact, you determine that the amount of support coupled
> with the deduction for health care premiums exceeds the maximum
> deduction allowable, you must look to state law in the state where the
> employee is employed to determine the priority for payment. If the
> CCPA limits preclude payment of ongoing support and health care
> premiums and the priority scheme does not allow for the payment of the
> health care premium first, you must notify the issuing agency by
> completing No. 4 on the Employer Response form and send the form to
> the agency.
>
> Step 5: If enrollment cannot be completed until after a waiting period
> or other contingency, you must notify the plan administrator when the
> employee is eligible for enrollment.
>
> In order to be \"qualified,\" a medical support order must clearly
> specify:

1.  the name and last known address of the participant and the name and
    address of each child covered by the order;

2.  a reasonable description of the coverage to be provided, or the
    manner in which coverage will be determined; and

3.  the period for which the order applies.

training notes

State laws require that health care coverage be provided under a medical
support order even if the child:

-   was born out of wedlock,

-   is not claimed as a dependent for tax purposes, or

-   does not reside with the parent or in the insurer\'s service area.

training notes

### Qualified Medical Child Support Orders (QMCSOs)  {#qualified-medical-child-support-orders-qmcsos .unnumbered}

-   A **QMCSO** is a medical child support order that creates or
    recognizes the right of an alternate recipient, any child or other
    beneficiary, to benefits for which a participant or beneficiary is
    eligible under a group health plan. It must include certain
    information and meet other statutory requirements.

-   An **alternate recipient** is any child of a group health plan
    participant who is recognized as having a right to enrollment
    through that participant (the child's parent).

-   A medical child support order is deemed "qualified" if it provides:

1.  Name and last known mailing address of participant (employee)

2.  Name and address of alternate recipient (child or designated agency)

3.  Reasonable description of coverage to be provided, or a way that the
    type of coverage can be determined

4.  Period to which the order applies.

-   The employer must honor a **QMCSO** once the health plan
    administrator deems it qualified.

training notes

-   When in doubt, call the child support enforcement agency!

## Common Concerns About Income Withholding

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> **If you send an incorrect amount and you immediately realize your
> error**:

-   Contact the State Disbursement Unit or other payee and inquire as to
    the requirements and timeframe for a refund. This process may vary
    from state to state.

> **If your employee says the amount withheld is incorrect**:

-   It is the responsibility of the employee, not the employer, to
    contact the agency/court to dispute the withholding. By law, the
    employer is bound to honor the terms of the income-withholding
    order.

> **If you are not sure when to stop withholding for an employee**:

-   Check the order/notice to see if a stop date is specified. If not,
    continue to withhold until you receive official notification (from
    the agency or court) to change or stop the withholding. Do not stop
    simply because your employee says it should be done. When in doubt,
    contact the issuing agency.

> **If you receive withholding orders for more than one employee**:

-   A single check for each pay period may be sent to cover all the
    child support withholdings if they are all sent to the same
    receiving state disbursement unit or agency/court. Identifying
    information about each individual's payment must be included with
    the check (amount withheld for each employee, date each amount was
    withheld, case number or other identifier).

training notes

##  Income Withholding summary

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**Income withholding:** automatic deductions from income that start as
soon as the order for support is established and the Order/Notice to
Withhold Income for Child Support has been received and validated by the
employer. All income is subject to income withholding for child support,
pursuant to a child support order but is protected by Consumer Credit
Protection Act limits, both state and federal.

-   Standardized "Order/Notice to Withhold for Child Support" form

-   "Direct income withholding" is allowed (employer must honor an
    income withholding order from an entity in another state).

-   Complying with the terms of the Order/Notice.

**Calculating the amount to withhold**:

-   This should be a straightforward process for most child support
    income withholding orders. The amount to withhold follows the terms
    of the order and might exceed the employee's allowable disposable
    income.

1.  Calculate **disposable income**: gross pay minus mandatory
    deductions.

2.  Calculate **allowable disposable income**: CCPA limits (%)
    multiplied by the disposable income = maximum withholding allowed
    for child support purposes.

training notes

### Income Withholding summary (Continued) {#income-withholding-summary-continued .unnumbered}

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**Accrual of Arrears**

-   When the employee falls behind in payments, the past-due child
    support is called arrears. The Order/Notice to Withhold will specify
    whether arrears are owed and how much to withhold to pay the
    past-due support. It is not the employer's responsibility to track
    accrual of arrears. The child support enforcement agency will do
    this.

**Special Situations**

-   Withholding is straightforward unless there is not enough allowable
    disposable income to cover the amount specified in the withholding
    order/notice or if the employee is obligated to pay for more than
    one withholding order.

-   Follow the prioritization set by law if there is not enough money to
    cover the employee's total obligation for child support or if there
    are other claims (levies, garnishments) against the employee's pay.

-   When withholding for more than one support obligation, follow the
    allocation formula set by state law.

-   When there are other garnishments and/or involuntary deductions from
    the employee's pay, remember that child support takes precedence
    over all other withholdings except federal tax levies that were
    served prior to the issuance of the child support withholding order.
    Special exceptions may apply in cases of bankruptcy; follow the
    instructions of the bankruptcy court or trustee.

training notes

### Income Withholding summary (Continued) {#income-withholding-summary-continued-1 .unnumbered}

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**Medical Support**

-   Follow the terms specified in the National Medical Support Order or
    the Qualified Medical Child Support Order (QMCSO). The obligated
    employee may be required to enroll his or her child in the
    employer-offered health insurance plan or to have additional monies
    withheld to cover medical expenses and/or health insurance premiums.
    The employer providing health insurance coverage to its employees
    must allow the obligated employee to enroll his or her child as a
    dependent in the plan, even if this occurs outside the open
    enrollment season.