#  INCOME-WITHHOLDING 

training notes

## Module Objectives

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

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

-   Calculate the allowable disposable income in a case exercise.

-   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 its
    employees.

-   Determine when child support income-withholding orders take
    precedence over other garnishments and withholdings.

Training Notes

-   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.

-   Income-withholding is also called: wage withholding, wage
    assignment, income deduction, withholding from earnings.

-   Income-withholding is required by law in almost all cases, and
    **does not imply delinquency** on the part of the non-custodial
    parent.

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

-   Hand-out 2 in the Appendix provides Title 5, Volume 1 of the Code of
    Federal Regulations (OPM regs), listing the periodic benefits from
    which child support can be deducted. ("Compensation for death"
    includes a monthly compensation for death from injury sustained in
    performance of duty and certain funeral & burial expenses.)

-   ![](media/image1.wmf)If participants include Social Security
    Administration or Veterans' Administration, refer them to Chapter II
    of *Working with Federal Agencies*, sections entitled,
    "Income-withholding from Federal Benefit Programs,"
    "Income-withholding from Federal Disability Benefits," and
    "Garnishment of Veterans' Benefits."

![](media/image2.wmf)

## income-withholding for Federal Employees

-   **What**:

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

-   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."

-   For federal employees, this is the list of federal benefits from
    which child support can be deducted:

> \(1\) Periodic benefits
>
> a\. Pensions;
>
> b\. Retirement benefits; (**covered in detail in "Income-withholding
> When the Employee is Retired," Module 6)**
>
> c\. Retired/retainer pay;
>
> d\. Annuities; and
>
> e\. Dependents\' or survivors\' benefits when payable to the obligor;

(2) Refunds of retirement contributions where an application has been
    filed;

(3) Amounts received under any federal program for compensation for work
    injuries;

(4) Benefits received under the Longshoremen\'s and Harbor Workers\'
    Compensation Act.

(5) Compensation for death under any federal program, including death
    gratuities.

> Included are:
>
> Social Security Administration benefits (but **not** SSI benefits)

Veterans Affairs (in certain instances)

> Railroad Retirement Board
>
> Black Lung

-   Per OPM regulations (5 CFR 581), cash awards, including
    performance-based cash awards, are considered income, as is any
    payment for accrued leave.

Training notes

-   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 wages.

-   **Bonuses and Lump Sums** -- The PRWORA definition of income
    includes "bonuses," insofar as they are paid on a periodic basis
    (i.e., 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, Consumer Credit Protection Act
    (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
    income under the state or federal definition, they are not subject
    to CCPA withholding limits and can be taken 100%, depending on state
    law.

-   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. Because **interstate cases**
    are the most difficult to collect, and comprise nearly 30 percent of
    all child support cases, the withholding order/notice standardizes
    the withholding process around the country.

    ![](media/image2.wmf)

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-   **How:**

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-   An income-withholding order/notice will usually be issued by the
    child support enforcement agency (but may be issued by a judge at
    the time the underlying child support order is entered).

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-   A standardized form entitled, "**Order/Notice to Withhold Income for
    Child Support,**" is now required for use in all states. This form
    includes information about the case (where the case is from, who the
    people are, and case-identifying information).

Training Notes

-   Ask participants to turn to **Hand-Out #3, Order/Notice to Withhold
    Income for Child Support**. This form is also available on the web
    at <http://www.acf.hhs.gov/programs/cse/forms/>

-   The **top of the form** contains information about where the form is
    from and to whom it applies.

-   Note that **medical support** can be ordered on this form. See
    *ORDER INFORMATION* where it states, "If checked, you are required
    to enroll the child(ren) identified above in any health insurance
    coverage available through the employee's/obligor's employment."

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

-   Note that the agency 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).

-   If you receive withholding orders from **more than one issuing
    agency/party for the [same]{.underline} custodial family,** be sure
    to contact all state agencies 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").

    ![](media/image1.wmf)

**Hand-Out 3: ORDER/NOTICE TO WITHHOLD INCOME FOR CHILD SUPPORT** Form
is also available at
[**www.acf.dhhs.gov/programs/cse/forms/**](http://www.acf.dhhs.gov/programs/cse/forms/)

-   **Top of Form**

> This section of the form contains:

-   Identifying information

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

> Form may be amended if:

-   Current support is all paid and only arrears are due,

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

-   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 for other reasons.

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

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-   **Order Information**

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-   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

Remittance information:

-   Even though it may seem confusing that the order/notice should be
    followed for some things, and not for others, it is really just a
    matter of common sense:

5.  The law of the **ISSUING STATE** must be followed for things that
    only the issuing state would know, such as where to send the
    payment, how much the payment should be and whether or not medical
    support is ordered.

6.  The law of the **EMPLOYEE'S OFFICIAL DUTY STATION (or principal
    place of employment)** must be followed for things that pertain to
    the employer's tasks, such as when to begin withholding, whether an
    administrative fee can 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.

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

-   Employers may charge their employees a minimal processing fee for
    handling the child support withholding. The amount of the fee is
    governed by state law and varies from state-to-state.

-   The signature of official(s) authorizing the Order/Notice \"may be
    optional only if the Order/Notice includes the name and title of an
    official of the state or local IV-D agency and a signature of the
    official is not required by state law" (per the form instructions).

    ![](media/image1.wmf)

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-   • **Remittance Information**

    This section gives you the information needed to make payments.
    Information filled in the blanks follows the state law of the
    issuing state, because that is usually the state where the employee
    works. However, the employer must always follow the law of the
    **employee's official duty station (principal place of employment)**
    to determine:

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-   When to begin withholding,

-   When to remit payments following date of withholding,

-   Maximum that can be withheld (subject to state Consumer Credit
    Protection Act \[CCPA\] limits),

-   How to prioritize withholdings,

-   How to allocate withholding among orders received for more than one
    family of the same employee,

-   Administrative fee of employer, or

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

    The rest of the Remittance Section provides information about
    transferring the payment to the person or agency designated to
    receive the payments.

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-   **Remember**:

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

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-   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, or

-   Medical support terms.

training notes

![](media/image2.wmf)

Where:

-   An income-withholding order may come from within the employer's
    state, or directly from another state. If from another state, it is
    called "direct income-withholding" because it is comes directly from
    another state to the employer, rather than going through the child
    support enforcement agency in the employer's state.

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-   **When**:

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-   Withheld child support payments should be sent within seven (7)
    business days of wage payments to the employee. *Some states have
    set a shorter time limit for making payment.*

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-   **Why:**

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-   This is the single most effective tool for collecting child support
    from non-custodial parents. It brings in over 70 percent of all
    monies collected.

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-   **Federal Addresses for Withholding:**

    -   State child support agencies send income-withholding orders to
        the designated agent of a federal agency.

    -   The title, mailing address and telephone number of the agents is
        published each spring in the *Federal Register* (also, 5 CFR
        Parts 581 and 582).

    -   Any changes should be sent to OPM by the end of the calendar
        year for publication in the spring.

    -   Also available at
        <http://www.acf.hhs.gov/programs/cse/newhire/contacts/iw_fedcontacts.htm>

training notes

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

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

-   Most (if not all) federal agencies require that a copy of the
    withholding order be given to the employee. A copy of **all
    interstate** withholding orders must be given to employees.

-   From a practical standpoint, giving a copy of the withholding order
    to the employee helps eliminate nasty surprises on the next payday.

-   "**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."

-   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.

## Complying with the income-withholding order for child and medical support

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

1.  Document the date of receipt.

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

3.  Determine if the order is "regular on its face."

4.  Follow the terms of the order.

training notes

-   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.

    DFW's next payday \_\_\_\_[5/17/02]{.underline}\_\_\_\_\_\_\_\_\_\_

    Date of DFW's first withholding for Jacob
    \_\_\_\_[5/17/02]{.underline}\_\_\_\_\_\_\_

    Withheld payment must be sent to Nebraska by
    \_\_[5/23/02]{.underline}\_ (can allow up to 4 business days, since
    the DFW agency will send it electronically)

    DFW charges an administrative fee of \$5.00 per income-withholding
    (per Virginia law).

    How much should DFW withhold for child support?

    ![](media/image1.wmf)[(\$100/week x 2) + \$5.00 = \$205.00, since
    this payroll is biweekly.]{.underline}

###  {#section .unnumbered}

###   {#section-1 .unnumbered}

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

Jacob Astor married Bridget Quincy in November 1992. After eight years
of marriage, the Astors decided to divorce. Their son, Frank, continued
to live with his mother in Lincoln, Nebraska after the separation.

In May 2000, Jacob was ordered to pay \$100 each week in child support.
After the divorce, Jacob moved to Richmond, Virginia.

In May 2002, an Order/Notice to Withhold Income for Child Support was
sent from Nebraska to his new employer in Richmond, the U.S. Department
of Fine Works (DFW).

DFW received the Order/Notice on 5/6/02.

DFW's payroll is biweekly and the next payday is 5/17/02.

Please complete:

Date of DFW's first withholding for Jacob \_\_\_\_\_\_\_\_\_\_\_\_\_\_

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

DFW charges an administrative fee of \$5.00 per income-withholding.
Jacob's weekly gross pay is \$800.00. 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 DFW 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** are those allowed by state law \-- the state
    that is the **employee's official duty station**.

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

-   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.

-   Health insurance premiums are allowed as a deduction for federal
    employees -- most states do not allow this deduction for private
    sector employees!

-   Thrift Savings Plan (TSP) contributions are considered mandatory
    deductions for federal employees under FERS, even though TSP
    contributions are voluntary, in an amount the employee chooses.
    However, TSP contributions are not mandatory deductions for federal
    employees under CSRS. For federal employees covered under CSRS, the
    CSRS contributions are considered mandatory deductions. \[TSP for
    the federal employee corresponds to a 401(k) plan for the private
    sector employee.\]

    ![](media/image2.wmf)

## Calculating Disposable Income for Federal Employees

-   **What**:

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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.

    The "certain mandatory deductions" are different for federal
    employees and are as follows:

-   Monies owed by the individual to the U.S. Government

-   Federal employment taxes, fines, and forfeitures ordered by military
    court-martial

-   Federal, state, and local income taxes as required by law (including
    FICA and Medicare)

-   Health insurance premiums

-   Retirement contributions including Old Age, Survivor, and Disability
    Insurance (OASDI) amounts and Thrift Savings Plan (TSP)
    contributions (but not amounts deducted for TSP loan repayments)

-   Life insurance premiums (but not including contributions for
    supplementary coverage).

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-   **Why**:

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-   Child support can only be withheld from allowable disposable income.

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-   **How**:

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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 the state CCPA 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 stand as evidence of a second family.
    Remember that a child support agency in one state may not even know
    that the NCP has a child support order issued for a different family
    in a different state.

-   If you wanted 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, you may ask for guidance from the child
    support agency when in doubt.

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-   **Federal Consumer Credit Protection Act limits:**

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

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-   50% Has a second family, with no arrearage or \< 12 weeks in arrears

-   60% Single, with no arrearage or \< 12 weeks in arrears

-   55% Has a second family, and over 12 weeks in arrears

-   65% Single, and is over 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

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-   According to the Order/Notice to Withhold, Jacob Astor owes a total
    of \$115 per month, and he is paid once a month, so we do not have
    to worry about the different amounts due for different pay cycles.

-   Although the Order/Notice was issued in Nebraska, Mr. Jones works in
    Virginia, so Virginia law applies to the allowable disposable income
    calculation.

    Jacob's gross weekly pay: \_\_[800.00]{.underline}\_\_\_\_\_

    Subtract mandatory deductions: \_\_[175.00]{.underline}\_\_\_\_\_

    Federal/state/local taxes, FICA plus health insurance.

    Health insurance is considered a mandatory deduction for federal
    employees.

    Jacob's disposable income for 1 week
    \_\_[625.00]{.underline}\_\_\_\_\_

    Biweekly disposable income \_[1,250.00]{.underline}\_\_\_\_\_

-   Remember that the mandatory deductions listed for Nebraska and
    Virginia do not apply to federal employees. Refer back to Section
    4.2 (page [5](#income-withholding-for-federal-employees)) for the
    list of deductions allowed for federal employees.

### ![](media/image1.wmf)  {#section-2 .unnumbered}

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

Let's go back to Jacob Astor, working for DFW in Richmond, and owing
\$100/week in child support.

Now assume that Jacob is 4 months behind on his payments and was ordered
to pay \$25/week in arrears. His total due is \$125/week. Use the
following information to first calculate Jacob Astor's **disposable
income.**

-   **Nebraska:**

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-   Mandatory deductions from pay: federal, state, local income taxes,
    FICA

-   Exceptions to federal CCPA limits: none

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-   **Virginia:**

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-   Mandatory deductions from pay: federal, state, local income taxes,
    FICA

-   Exceptions to federal CCPA limits: none

-   Virginia follows federal 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.

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-   DFW's payday is every other Friday.

-   The following deductions are taken from Jacob's weekly gross pay of
    \$800.00:

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-   Federal/state/local taxes 95.00

-   FICA 45.00

-   Medicare 10.00

-   Health insurance 25.00

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

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

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

4.  Biweekly disposable income: \_\_\_\_\_\_\_\_\_\_\_

    training notes

-   1\. Biweekly disposable income: \_[\$1,250.00]{.underline}\_

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

-   3\. Maximum withholding allowed: \_\_[\$ 812.50]{.underline}\_\_

-   Is there sufficient money to withhold the entire amount ordered for
    Jacob FOR A 2-WEEK PAY PERIOD? (\$200 current + \$50 arrears +
    \$5.00 administrative fee = \$255.00)? YES

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

    ![](media/image1.wmf)

### Exercise: Calculating Maximum Withholding {#exercise-calculating-maximum-withholding .unnumbered}

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

In applying CCPA limits, follow the state law for Jacob's official duty
station 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

-   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.**

5.  Work on next exercise to illustrate.

-   Over the entire year, the full \$4,800 will be withheld (some months
    will have five weekly payrolls instead of just 4), but until there
    is a month with five paychecks, the agency records might show an
    arrearage. In a month of five paychecks, the agency records an
    overpayment.

-   Some states charge interest on arrearages.

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

    ![](media/image1.wmf)

## A Note About Arrears

The child support enforcement agency, and 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 upon
how long ago these underpayments occurred, the interest owed could be a
sizable amount.

**Example:**

Annual child support obligation is \$4,800.00.

Calculate [monthly]{.underline} amount: 4800 ÷ 12 = \$400

Calculate [weekly]{.underline} amount: 4800 ÷ 52 = \$ 92.31

If the [weekly]{.underline} amount is withheld for a month (let's say
February) with just four weeks, how much is withheld that month? 4 x
92.31 = \$369.23

If the [weekly]{.underline} amount is withheld for a month (let's say
October) with five weeks, how much is withheld that month? 5 x 92.31 =
\$461.54

In which month will there be an apparent shortfall from the
[monthly]{.underline} amount due? February (\$369 \< \$400)

training notes

-   Consider how this allowance is treated -- **for tax purposes.** If
    the allowance is taxable and is not considered imputed income, then
    it is subject to child support withholding. If it is considered
    imputed income (for example, the employee is given a prepaid bus
    pass), then it is not subject to child support withholding.

## Imputed Income

-   **What**:

-   Imputed income is considered as fringe benefits provided to
    employees that must be counted as additional income subject to
    taxation, but not counted as additional income for calculation of
    disposable income for child support purposes.

-   Examples of imputed income:

    -   Parking garage fees

    -   Non-qualified tuition reimbursement

    -   Travel incentive (TIA)

-   **How**:

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-   For income tax purposes, the cash value of such fringe benefits is
    added to the employee's regular wages; taxes are increased and
    withheld on the increased amount.

-   In calculating disposable earnings for child support, do
    [not]{.underline} include the imputed income. Imputed income must
    first be deducted from the gross pay before disposable income (and
    then allowable disposable income) can be calculated for child
    support purposes.

    training notes

```{=html}
<!-- -->
```
-   Walk class through the following exercise:

  ---------------------------------------------------- ------------------------
  Gross pay                                            \$800.00

  Add imputed income **parking garage fees**           **\$200.00**

  Taxable earnings                                     \$1,000.00

  Deduct federal/state/local taxes                     (220.00)

  Net pay                                              \$780.00

  Subtract imputed income from net pay                 [(200.00)]{.underline}

  ![](media/image1.wmf)Amount of disposable earnings   **\$580.00**
  for child support                                    
  ---------------------------------------------------- ------------------------

###   {#section-3 .unnumbered}

### Exercise: Imputed Income {#exercise-imputed-income .unnumbered}

  ------------------------------------------------ ------------------------
  Gross pay                                        \$800.00

  Add imputed income: **parking garage fees**      **\$200.00**

  Taxable earnings                                 \$\_\_\_\_\_\_\_\_

  Deduct federal/state/local taxes                 (220.00)

  Net pay                                          \$\_\_\_\_\_\_\_\_

  Subtract imputed income from net pay             [( )]{.underline}

  **Amt of disposable earnings for child support** **\$\_\_\_\_\_\_\_\_**
  ------------------------------------------------ ------------------------

training notes

-   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):

5.  Created as part of Balanced Budget Act of 1997.

6.  \$4.8 billion annual federal grant program that helps states cover
    uninsured children; for kids in families with income too high for
    Medicaid but too low to afford private coverage.

7.  Visit website at [www.hcfa.gov/init/children.htm]{.underline}

## Withholding for Medical Support

-   **What**:

```{=html}
<!-- -->
```
-   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):

5.  The custodial parent (CP) maintains coverage through his or her
    employer plan; NCP may be required in the support order to pay for
    this coverage.

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

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

8.  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.

9.  Child is enrolled in SCHIP because neither parent has access to
    health care coverage and the child is not eligible for Medicaid, or
    the child is covered by Medicaid.

    Medical support provides health care coverage for a child through
    the non-custodial parent's health care plan at work. To comply with
    a medical support order, an employer must withhold employee
    contributions due under a group health plan in connection with
    health care coverage for the employee's child.

    training notes

-   A federal agency does have the authority to enroll an employee and
    his dependents if the employee fails to provide the coverage
    pursuant to a medical support order (under Public Law 106-394).

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

    Employers must provide medical insurance coverage to an employee's
    child per a child support order when the employee is eligible and
    enrolls in the family care coverage.

    Under the Federal Employees Health Benefits Program (FEHBP)
    regulations, a child support order that includes medical support
    constitutes a "change in family coverage," granting an employee an
    opportunity to change health plan coverage without waiting for the
    next open enrollment period.

-   **How**:

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

```{=html}
<!-- -->
```
-   Provide immediate coverage without regard to "open enrollment
    season,\"

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

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

    training notes

    The following information is background for the trainer and does not
    need to be covered unless questions are raised.

```{=html}
<!-- -->
```
-   The Omnibus Budget Reconciliation Act of 1993 (OBRA '93) made big
    changes in medical insurance requirements placed on employers and
    insurance companies; OBRA created **Qualified Medical Child Support
    Orders (QMCSOs)** by requiring both "insured" and "self-insured"
    plans under ERISA to honor QMCSOs. An employer must honor a QMCSO.

    In an effort to standardize the medical withholding format for
    employers, all IV-D agencies must use a new **National Medical
    Support Notice** (**NMSN**). The QMCSO may still be used in some
    private child support cases (i.e., by private attorneys).

```{=html}
<!-- -->
```
-   The NMSN is intended to be a \"one size fits all\" notice,
    applicable to both ERISA-covered employers and those who are not
    subject to ERISA.

![](media/image1.wmf)**\[Background information for trainer: \]** Both
the QMCSO and the NMSN are designed to respond to the specific statutory
requirements of ERISA (Employee Retirement Income Security Act of 1974).
The QMCSO and the NMSN come into play only if the health care plan under
which coverage is sought happens to be subject to ERISA, and the
majority of plans are ERISA-covered.

-   **Qualified Medical Child Support Orders (QMCSOs)**

```{=html}
<!-- -->
```
-   A **QMCSO** is a medical child support order that creates or
    recognizes the right of an alternate recipient 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)

    \- if there is a danger of domestic violence or abuse to the
    custodial parent and/or the child(ren), the IV-D agency may
    substitute the name of an official as well as its address for the
    address of the custodial parent and child(ren).

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.

-   The **NMSN**, a new standardized form, constitutes a QMCSO because
    it contains all the necessary elements of a QMCSO and therefore can
    be used in lieu of a QMCSO.

    Training Notes

```{=html}
<!-- -->
```
-   HOW MANY OF YOU CURRENTLY HANDLE MEDICAL SUPPORT? This section may
    be covered briefly if inapplicable to participants.

-   Ask participants to turn to **Hand-out #4, National Medical Support
    Notice,** and walk them through the four parts.

-   At the request of employers, the NMSN was developed to help
    standardize the process of medical support.

-   The new NMSN constitutes a QMCSO (it is equivalent to a QMCSO), so
    employers will see fewer QMCSOs over time. The NMSN final rule
    neither requires nor prohibits use of the NMSN by private attorneys.
    Some private attorneys may continue using QMCSOs.

-   The new NMSN constitutes a "change in family coverage" and there is
    no need to wait for open enrollment period to enroll the employee's
    dependent child.

-   A federal agency has the authority to enroll a child even if the
    employee fails to voluntarily provide the coverage. In other words,
    the agency can go against the employee's wishes in order to ensure
    medical coverage for the ordered child.

```{=html}
<!-- -->
```
-   The NMSN was in use in only a handful of states by the end of 2001,
    but many states intend to implement its use by July 2002, after
    enactment of required legislation.

    ![](media/image2.wmf)

**NATIONAL MEDICAL SUPPORT NOTICE**

As of October 1, 2001, all employers in states that passed enabling
legislation were required to respond to the new National Medical Support
Notice (NMSN). States that have not already begun using the NMSN must
begin using the NMSN by the first day of the first quarter following the
close of the first regular state legislative session that begins after
October 1, 2001.

The NMSN is a "one size fits all" form to be used for enrolling and
processing the dependent child(ren) of your employee who is ordered to
provide medical support.

-   The NMSN is actually four documents and instructions:

```{=html}
<!-- -->
```
-   **Part A - Notice to Withhold for Health Care Coverage** is
    completed by the child support agency and sent to you with the rest
    of the packet.

-   **Employer Response** is completed within 20 business days by the
    employer only if insurance is unavailable, employee has been
    terminated, or funds are not sufficient for the coverage.

-   **Part B - Medical Support Notice to Plan Administrator.** This
    document should be forwarded to your health care plan administrator
    within 20 business days.

-   **Plan Administrator Response** is completed by the plan
    administrator according to the instructions and returned to the
    child support agency. The plan administrator notifies you of the
    employee contribution needed once enrollment is completed.

```{=html}
<!-- -->
```
-   There is no additional cost or change in current business practice
    for you.

-   The NMSN will eventually replace the QMCSO for all medical support
    ordered by a state child support agency. Medical support set up by
    private attorneys could still be submitted in the form of the QMCSO.

-   The NMSN will be sent out by the state child support agency, with an
    income-withholding order, or separately.

    Training Notes

    **How it Works:**

```{=html}
<!-- -->
```
-   The NMSN will be sent out by the state child support agency, with an
    income-withholding order, or separately. The issuing agency
    completes the first page of Part A and the first page of Part B of
    the NMSN.

-   The employer completes the "Employer's Response" portion of Part A
    and returns it to the issuing child support agency within 20
    business days [if]{.underline}:

    1.  the employer offers no group health plan

    2.  the employee is ineligible for coverage under the health plan

    3.  the employee has terminated employment

    4.  withholding limits prevent payment of the employee's
        contribution to the group health plan for dependent coverage.

-   The employer forwards Part B to the plan administrator within 20
    business days from the date of the NMSN.

-   The plan administrator :

```{=html}
<!-- -->
```
-   completes the "Plan Administrator Response" (Part B) of the NMSN.

-   enrolls the child and lets the employer know how much to withhold
    from the employee to cover the contributions to the health care
    plan.

-   within 40 business days from the date of the NMSN, completes the
    response and returns it to the child support agency.

-   notifies the employee and the custodial parent of the child's
    enrollment, and provides claim forms to the custodial parent within
    40 business days of the date of the NMSN; or notifies the issuing
    agency when multiple options are available so appropriate coverage
    can be elected.

```{=html}
<!-- -->
```
-   If the NMSN is determined not to constitute a QMSCO, the plan
    administrator must complete Response 5 on the Plan Administrator
    Response and send it to the issuing agency and the parties within 40
    business days of the date of the NMSN.

-   Withholdings for both cash child support and medical support are
    subject to CCPA or more stringent limits set by the employee's
    official duty station state.

```{=html}
<!-- -->
```
-   **What if:**

10. The employee has not earned enough money to pay out both the cash
    child support due and the premium due towards dependent care
    coverage? Which is paid first?

-   Follow the state law of the employee's official duty station state
    to determine how to prioritize the withholdings.

-   Note that some states require the health care plan contributions to
    be paid first; other states require the cash support to be paid
    first.

11. The employee no longer works for the company?

-   The employer is required to notify the child support agency of the
    termination.

-   Use page 2, "Employer's Response" of Part A to report the
    termination.

```{=html}
<!-- -->
```
-   **Note:** An employee ordered to provide medical support will not be
    able to cancel his coverage on the "Employee Express" personnel
    kiosk.

    training notes

```{=html}
<!-- -->
```
-   In the case of prolonged illness, a federal employee may use
    available annual or sick leave.  Child support can still be deducted
    from the pay received while on extended leave.

-   In the case of "leave without pay," child support withholding would,
    of course, stop. The payroll agency 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.

-   NOTES FOR SSA TRAINEES ONLY (IF WITHHOLDING AGAINST DISABILITY
    BENEFITS):

If the income-withholding order is received while application for
benefits is pending, it must be honored **retroactively** to the date of
the income-withholding order.

Deductions for child support may be taken from the lump sum payment. The
monthly support due (up to the CCPA limits for each monthly disability
payment) can be deducted from the lump sum payment back to the
disability eligibility date, or the date of the withholding order,
whichever is later.

For instance, if you received the withholding order for Mr. Jones in
April, and his lump sum payment was issued in August, the deduction
could be made for 5 months (April -- August) only. Assuming the CCPA
limit applicable to Mr. Jones is 65 percent, then up to 65 percent of
each monthly portion of the lump sum payment can be withheld (but never
more than the monthly amount specified in the income-withholding order).

## INCOME-WITHHOLDING WHEN THE EMPLOYEE IS NOT WORKING

-   **When**:

```{=html}
<!-- -->
```
-   Your employee may not be working because of prolonged illness or
    injury, and he receives annual leave, sick leave, or worker's
    compensation during this time.

-   Your employee is on "leave without pay" status.

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

```{=html}
<!-- -->
```
-   Child support withholding must still be made if annual leave, sick
    leave, or worker's compensation is being paid. These payments are
    considered forms of income.

-   If your employee is on "leave without pay" status, 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.

-   You may wish to advise your employee that he can continue to make
    child support payments on his own, in order to avoid accrual of
    arrears. He can also request a downward modification in the amount
    of child support owed (he should contact the issuing agency).

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

```{=html}
<!-- -->
```
-   Refer to pages [5](#income-withholding-for-federal-employees),
    Income-withholding for Federal Employees, for more information about
    withholding from "other" federal benefits, such as Social Security
    Administration benefits.

    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 will 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 highest 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 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?

-   **What**:

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

```{=html}
<!-- -->
```
-   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

```{=html}
<!-- -->
```
-   **Percentage method of allocation:**

  ----------------- ----------------------- ---------------------------------------
  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***          
  ----------------- ----------------------- ---------------------------------------

-   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.

-   **Equal method of allocation:**

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

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

    ![](media/image1.wmf)Only a few states use this method.

    ![](media/image2.wmf)

    **How**:

```{=html}
<!-- -->
```
-   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 official duty
    station state.

```{=html}
<!-- -->
```
-   Percentage Method of Allocation (also called Prorate Method)

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

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

Figure out the percentage of the total for each order, then take that
percentage of 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
  ----------------------- ----------------------------- ------------------

-   **Equal Method of Allocation**

    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

![](media/image1.wmf)

## Multiple Child Support Orders

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 (that is, disposable income
that falls within the CCPA limits for withholding) left over, then
payments for **arrears** can 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.

6.  Give your employee a copy of the second order.

7.  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.

8.  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.

Training Notes

-   USE THE FLIP CHART TO REVIEW THIS EXERCISE.

-   Fred has been ordered to pay biweekly child support for four
    children on four different orders as follows:

  ------------------------------ ----------------------------------------
  Order A                        \$400

  Order B                        \$420

  Order C                        \$390

  Order D                        \$410
  ------------------------------ ----------------------------------------

-   The total ordered amount for Fred is \$1,620.

-   For this pay period, Fred's allowable disposable income is only
    \$1,200. Fred's official duty station state follows the prorate
    method for allocation. How much should be paid to each order?

  ----------------- ---------------- --------------------- ----------------
  Order A           400 ÷1620        24.7% x 1200          = \$296.30

  Order B           420 ÷1620        25.9% x 1200          = \$311.11

  Order C           390 ÷1620        24.1% x 1200          = \$288.89

  Order D           410 ÷1620        25.3% x 1200          = \$303.70

  **TOTAL**                                                **\$1,200.00**
  ----------------- ---------------- --------------------- ----------------

### Exercise: Applying Allocation Methods {#exercise-applying-allocation-methods .unnumbered}

-   Fred has been ordered to pay biweekly child support for four
    children on four different orders as follows:

  ------------------------------ ----------------------------------------
  Order A                        \$400

  Order B                        \$420

  Order C                        \$390

  Order D                        \$410
  ------------------------------ ----------------------------------------

-   The total ordered amount for Fred is \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_.

-   For this pay period, Fred's allowable disposable income is only
    \$1,200. Fred's official duty station state follows the prorate
    method for allocation. How much should be paid to each order?

  ------------------------------- ---------------------------------------
  Order A                         \$

  Order B                         \$

  Order C                         \$

  Order D                         \$
  ------------------------------- ---------------------------------------

-   How much would be withheld for each order if the equal allocation
    method was used?

    training notes

```{=html}
<!-- -->
```
-   USE THE FLIP CHART TO REVIEW THIS EXERCISE.

-   What are the withholding limits for Arthur? 55%

-   Why? He owes arrears (over 12 weeks) and the second child support
    order shows he is supporting a 2^nd^ 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 both orders -    \$700.00
  \$300+\$400)                                         

  5\. Total arrears owed:                              \$ 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 of the monthly support can be paid by Arthur'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 allowable disposable income.

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

Arthur was married and divorced twice. He now lives alone. He had one
child with each of his wives, and he owes child support to both
children. He owes \$300/month in current support and \$50/arrears for
his older child (and he's over 12 weeks in arrears). He owes \$400/month
in current support for his younger child.

Arthur's disposable income is \$2,000.00/month. The CCPA limits set by
his state follow the federal CCPA limits.

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

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

HINT: Refer back to Section 4.4, Calculating Disposable Income for
Federal Employees, page
[19](#calculating-disposable-income-for-federal-employees).

  ----------------------------------------------- -----------------------
  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 allowable disposable income to pay the total in line 6?

How much of the monthly support can be paid by Arthur's employer?
\$\_\_\_\_\_\_\_\_

training notes

-   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 &        \$750.00
  arrears)**                                         
  -------------------------------------------------- --------------------------

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

-   How much of the monthly support can be paid by Arthur'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 can not be paid at all.

-   The employer must first check the law of Arthur's official duty
    state. Let's say his state uses the percentage method of allocation.

-   Order A \$300 divided by 700 = 43%

-   Order B [\$400]{.underline} divided by 700 = 57%

-   Total \$700

-   Apply these percentages to the amount available for child support,
    the allowable disposable income (\$550):

    \$550 x 43% = \$ 236.50 for Order A (short by \$63.50 + \$50
    arrears)

    \$550 x 57% = \$313.50 for Order B (short by \$86.50)

-   \$63.50 of unpaid current support will accrue as arrears for Order A
    and \$86.50 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: Calculating Payments (Again) Under Two Withholding Orders {#exercise-calculating-payments-again-under-two-withholding-orders .unnumbered}

Let's use the same example with Arthur again. Remember, he has two
children, and owes \$300/month in current support and \$50/arrears for
his older child, and \$400/month in current support for his younger
child.

This month, Arthur's disposable income is only \$1,000.00/month.

Arthur 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 &        \$750.00
  arrears)**                                         
  -------------------------------------------------- -------------------------

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

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

training notes

-   From 50 percent to 65 percent of disposable income can be withheld
    for child support versus only 25 percent of disposable income (or
    the excess weekly disposable income that exceeds 30 times the
    minimum wage earned that week if this amount is less).

-   For **biweekly** disposable income, the calculation would be the
    difference between the income and **60 times** the minimum wage.

-   Basically, the employer first withholds for child support from the
    allowable disposable income, and then checks to see if the child
    support deduction is greater than the limit allowed for garnishment
    withholding.

-   If the child support deduction is **greater** than the limit that
    can be withheld for garnishment, nothing can be withheld for the
    garnishment. Otherwise, the **difference** between the child support
    deduction and garnishment limit can be withheld for the garnishment.

    ![](media/image2.wmf)

## Child Support With Other Garnishments

**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, a lot more money can be
withheld for child support than for other garnishment debt.

When you have a child support income-withholding order and a garnishment
for your employee:

1\) Deduct the child support withholding.

2\) Determine the LESSER amount of

A. The difference between the *biweekly* disposable income (*before*
child support withholding) and 60 times the minimum wage \[60 x \$5.15 =
\$309.00\]. Note that you would calculate 30 times the minimum wage for
*weekly* disposable income (30 x \$5.15=\$154.50).

\- if the biweekly disposable income is LESS than \$309 (or less than
\$154.50 for weekly disposable income), no withholding for garnishment
can be made.

B. 25 percent of the biweekly disposable income.

3\) For the garnishment, you may withhold the difference between the
lesser amount figured in step (2) above and the child support deduction.

**Example 1:** Tony's child support withholding obligation is
\$90.00/week. His biweekly disposable income is \$700. Sears serves a
garnishment against Tony for a \$1,000 debt.

1\) Deduct \$180 for child support from Tony's \$700 pay (Tony is single
and is not in arrears, so up to 60 percent, or \$420, can be withheld
for child support.)

2\) A. Disposable income minus 60 times minimum wage: 700 -- 309 = 391

B. 25 percent of disposable income: 25% x 700 = 175

\$175 is the LESSER of these two amounts.

training notes

###  {#section-4 .unnumbered}

### Note that unless the employee has a very low income, you will always take 25 percent of the disposable income for the garnishment test. {#note-that-unless-the-employee-has-a-very-low-income-you-will-always-take-25-percent-of-the-disposable-income-for-the-garnishment-test. .unnumbered}

###  {#section-5 .unnumbered}

### ![](media/image1.wmf)  {#section-6 .unnumbered}

###  {#section-7 .unnumbered}

3\) Difference between the allowed amount for garnishment and the child
support deduction taken: 175 - 180 = 0

**The child support deduction of \$180 has already exceeded the allowed
amount for garnishment, therefore NOTHING can be withheld for Tony's
Sears garnishment.**

**Example 2:** Tony's child support withholding obligation is
\$70.00/week. His biweekly disposable income is \$1,000. Sears serves a
garnishment against Tony for a \$1,000 debt.

1\) Deduct \$140 for child support from Tony's \$1,000 pay (Tony is
single and is not in arrears, so up to 60 percent, or \$600, can be
withheld for child support.)

2\) A. Disposable income minus 60 times minimum wage: 1000 -- 309 = 691

B. 25 percent of disposable income: 25% x 1000 = 250

**\$250 is the LESSER of these two amounts.**

3\) Difference between the allowed amount for garnishment and the child
support deduction taken: 250 - 140 = 110

**You can withhold \$110 for Tony's Sears garnishment.**

training notes

USE THE FLIP CHART FOR THIS EXERCISE.

**Scenario 1:** Alice's biweekly disposable income is \$400. Her
income-withholding order is for \$80 per pay period (she is single and
is not in arrears). J.C. Penney serves a garnishment against Alice for
\$500.

1\. Amount to withhold for child support**: \$80** (400 x 60% = \$240)

2\. A. Biweekly disposable income minus 60 times minimum wage = **\$91**

**400 -- 309 = 91**

B. 25 percent of disposable income = 25% x 400 = **\$100**

**LESSER amount of (A) and (B) = \$91**

3\. LESSER amount minus child support deduction - **\$91 -- 80 = \$11**

**Amount to deduct for Penney's garnishment = \$11.00**

**Scenario 2:** Alice's biweekly disposable income is \$1300. Her
income-withholding order is for \$400 per pay period (she is single and
is not in arrears). J.C. Penney serves a garnishment against Alice for
\$500.

1\. Amount to withhold for child support: **\$400** (1300 x 60% = 780)

2\. A. Biweekly disposable income minus 60 times minimum wage =
**\$991**

B. 25 percent of disposable income = **\$325**

**LESSER amount of (A) and (B) = \$325**

3\. LESSER amount minus child support deduction - **\$325 -- 400 = 0**

**Amount to deduct for Penney's garnishment = NOTHING**

### Exercise: Child Support and Other Garnishments {#exercise-child-support-and-other-garnishments .unnumbered}

**Scenario 1:** Alice's biweekly disposable income is \$400. Her
income-withholding order is for \$80 per pay period (she is single and
is not in arrears). J.C. Penney serves a garnishment against Alice for
\$500.

1\. Amount to withhold for child support: \$\_\_\_\_\_\_\_\_

2\. A. Biweekly disposable income minus 60 times minimum wage =
\$\_\_\_\_\_\_

B. 25 percent of disposable income = \$\_\_\_\_\_\_\_

LESSER amount of (A) and (B) = \$\_\_\_\_\_\_\_\_

3\. LESSER amount minus child support deduction = amount to deduct for
Penney's garnishment: \$\_\_\_\_\_\_\_\_\_\_

**Scenario 2:** Alice's biweekly disposable income is \$1300. Her
income-withholding order is for \$400 per pay period (she is single and
is not in arrears). J.C. Penney serves a garnishment against Alice for
\$500.

1\. Amount to withhold for child support: \$\_\_\_\_\_\_\_\_

2\. A. Biweekly disposable income minus 60 times minimum wage =
\$\_\_\_\_\_\_

B. 25 percent of disposable income = \$\_\_\_\_\_\_\_

LESSER amount of (A) and (B) = \$\_\_\_\_\_\_\_\_

3\. LESSER amount minus child support deduction -
**\$\_\_\_\_\_\_\_\_\_\_**

training notes

-   A **federal tax debt** **[does]{.underline}** take precedence over a
    child support withholding order if it was entered **before** the
    underlying child support order (as opposed to the Order/Notice to
    Withhold Income for Child Support). The Internal Revenue Service
    (IRS), however, has stated its willingness to accommodate child
    support orders that are entered **after** the IRS levy.

-   **If the IRS tax levy was received by the employer first:** contact
    the IV-D agency and tell them you are paying a 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.)

-   **If the child support withholding order was received first:**
    contact the IRS and tell them you are already withholding for child
    support.

    **[Background Notes on Bankruptcy]{.underline}**

An employee who files for bankruptcy is not relieved of the obligation
to pay child support, however, the withholding may be "stayed" for the
period of a chapter 13 bankruptcy. The child support would then be paid
as part of the bankruptcy plan. **A bankruptcy court order for
withholding has top priority, whether it was served before or after the
child support notice**. In that case, the court appointed trustee makes
the child support payments rather than the employer. \[Chapter 7 is for
liquidation, which is usually resolved in a few months; Chapter 13 is
reorganization, which can take two to three years.\]

If the employee tells you that he or she has declared bankruptcy, ask
for a copy of the stay. This is what prevents the withholding, and it
should have some instructions from the court. You may be directed to pay
the court, or to stop all withholding. The child support agency should
let you know when to start withholding again, or you may receive a
notice from the court. You do need something in writing before you stop
withholding, and it would be a good idea to let child support know why
you are no longer withholding. None of this would apply, however, in a
chapter 7 bankruptcy. In a chapter 7, which is the most common kind of
bankruptcy, the withholding would continue as before. The stay does not
apply to after-acquired property, which is what the employee's salary
would be.

![](media/image2.wmf)

## Child Support Versus Other Involuntary Deductions

-   **Rule of thumb**:

```{=html}
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```
-   Child support takes priority over everything else except a federal
    tax levy, but only if the federal tax levy was served **before** the
    income-withholding order.

-   Special treatment applies to bankruptcy cases.

```{=html}
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```
-   **Federal Tax Levy**:

```{=html}
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```
-   Internal Revenue Service (IRS) levies take precedence over child
    support if they are served first.

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

```{=html}
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```
-   **Bankruptcy**:

```{=html}
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```
-   Even if an employee declares bankruptcy, he 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 is
    received.

training notes

-   A **federal tax debt takes precedence** over a child support
    withholding order if it was served first.

-   State examples:

```{=html}
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```
-   Nontax federal debt -- Administrative Wage Garnishment

-   Creditor garnishment -- garnishment from a store like Sears

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

```{=html}
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```
-   Involuntary Deductions that never take precedence over child support
    withholding:

```{=html}
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```
-   Nontax federal debt

-   State and local tax levies

-   Creditor garnishment

-   Assignment of wages

```{=html}
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```
-   This is true even if the child support withholding order was served
    after the involuntary deduction.

training notes

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

## Common Concerns About Income-withholding

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

```{=html}
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```
-   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.

```{=html}
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```
-   **If your employee says the amount withheld is incorrect**:

```{=html}
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```
-   It is the employee's responsibility, and not the employer's, to
    contact the agency/court to dispute the withholding. By law, the
    employer is bound to honor the terms of the income-withholding
    order.

```{=html}
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```
-   **If you are not sure when to stop withholding for an employee**:

```{=html}
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```
-   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.

```{=html}
<!-- -->
```
-   **If you receive withholding orders for more than one employee from
    the same state child support agency**:

```{=html}
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```
-   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 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

-   **Income-withholding:** automatic deductions from income that start
    as soon as the agreement for support is established, and the
    order/notice to withhold income for child support is 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.

```{=html}
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```
-   Standardized "Order/Notice to Withhold for Child Support" form.

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

-   Complying with the terms of the Order/Notice.

```{=html}
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```
-   **Calculating the amount to withhold**:

```{=html}
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```
-   This should be a straightforward process for most child support
    income-withholding orders. The amount to withhold follows the terms
    of the order and cannot exceed the employee's allowable disposable
    income.

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

2.  Calculate allowable income: CCPA limits (%) applied to disposable
    income = maximum withholding allowed for child support purposes.

-   If the employee receives certain types of income, there are also
    special considerations in calculating the amount to be withheld:

> **Imputed Income** (fringe benefits) -- For child support purposes but
> not for tax purposes, subtract imputed income before calculating
> allowable disposable income.

-   **Accrual of Arrears**

```{=html}
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```
-   When the employee falls behind in payments, the past-due child
    support is called arrears. The order/notice to withhold will specify
    if arrears are owed, and how much to withhold to pay down the
    past-due support. It is not the employer's responsibility to track
    accrual of arrears (the child support enforcement agency will do
    this).

Training notes

-   **Special Situations**

```{=html}
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```
-   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 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.

-   Follow the allocation among multiple child support orders set by
    state law when withholding for more than one support obligation.

-   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 child support withholding order. Special
    exceptions may apply in cases of bankruptcy; follow the instructions
    of the bankruptcy court or trustee.

```{=html}
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```
-   **Medical Support**

```{=html}
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```
-   Follow the terms specified in the National Medical Support Notice
    (NMSN) 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 agency must enroll the obligated employee's child as a dependent
    in the health insurance plan, even outside open enrollment season.

-   Note that medical support can be ordered as part of the standardized
    Order/Notice to Withhold Income for Child Support.

When in doubt about how to proceed, handle an error, or obtain
information, contact the local child support enforcement agency or the
payee specified in the income-withholding order.

Training notes