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[Federal Register Volume 79, Number 221 (Monday, November 17, 2014)]
[Proposed Rules]
[Pages 68547-68587]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-26822]

[[Page 68547]]

Vol. 79

Monday,

No. 221

November 17, 2014

Part III

 Department of Health and Human Services

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Centers for Medicare & Medicaid Services

42 CFR Part 433

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Administration for Children and Families

45 CFR Parts 301, 302, 303, et al.

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 Flexibility, Efficiency, and Modernization in Child Support 
Enforcement Programs; Proposed Rule

Federal Register / Vol. 79 , No. 221 / Monday, November 17, 2014 / 
Proposed Rules

[[Page 68548]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 433

[CMS-2343-P]
RIN 0938-AR92

Administration for Children and Families

45 CFR Parts 301, 302, 303, 304, 305, 307, 308, and 309

RIN 0970-AC50

Flexibility, Efficiency, and Modernization in Child Support 
Enforcement Programs

AGENCY: Office of Child Support Enforcement (OCSE), Administration for 
Children and Families (ACF) and the Centers for Medicare & Medicaid 
Services (CMS), Department of Health and Human Services (HHS).

ACTION: Notice of proposed rulemaking (NPRM).

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SUMMARY: This NPRM is intended to carry out the President's directives 
in Executive Order 13563: Improving Regulation and Regulatory Review. 
The NPRM proposes revisions to make Child Support Enforcement program 
operations and enforcement procedures more flexible, more effective, 
and more efficient by recognizing the strength of existing state 
enforcement programs, advancements in technology that can enable 
improved collection rates, and the move toward electronic communication 
and document management. This NPRM proposes to improve and simplify 
program operations, and remove outmoded limitations to program 
innovations to better serve families. In addition, changes are proposed 
to clarify and correct technical provisions in existing regulations.

DATES: Consideration will be given to comments received by January 16, 
2015.

ADDRESSES: You may transmit written comments electronically via the 
Internet at http://www.regulations.gov. This approach is our preferred 
method for receiving comments. To download an electronic version of the 
rule, you may access http://www.regulations.gov and follow the provided 
instructions.
    Additionally, you may send comments via United States Postal 
Service to: Office of Child Support Enforcement, Administration for 
Children and Families, Department of Health and Human Services, 
Attention: Director, Division of Policy, Mail Stop: OCSE/DP, 370 
L'Enfant Promenade SW., Washington, DC 20447.
    You also may send comments via overnight service to: Office of 
Child Support Enforcement, Administration for Children and Families, 
Department of Health and Human Services, Attention: Director, Policy 
Division, Mail Stop: OCSE/DP, 901 D Street SW., Washington, DC 20447.
    You also may submit comments by facsimile to (202) 260-5980. 
Comments will be available for public inspection. To schedule an 
appointment, please call (202) 401-9271.

FOR FURTHER INFORMATION CONTACT: Anne Miller, Division of Policy, OCSE, 
telephone (202) 401-1467, email: anne.miller@acf.hhs.gov or Barbara 
Addison, Division of Policy, OCSE, telephone (202) 401-5742, email: 
barbara.addison@acf.hhs.gov. Deaf and hearing impaired individuals may 
call the Federal Dual Party Relay Service at 1-800-877-8339 between 8 
a.m. and 7 p.m. Eastern Standard Time.

SUPPLEMENTARY INFORMATION:

Submission of Comments

    Comments should be specific, address issues raised by the proposed 
rule, propose alternatives where appropriate, explain reasons for any 
objections or recommended changes, and reference the specific action of 
the proposed rule that is being addressed. Additionally, we will be 
interested in comments that indicate agreement with changed or new 
proposals. We will not acknowledge receipt of the comments we receive. 
However, we will review and consider all comments that are germane and 
are received during the comment period. We will respond to these 
comments in the preamble to the Final Rule.

Statutory Authority

    This NPRM is published under the authority granted to the Secretary 
of the Department of Health and Human Services by section 1102 of the 
Social Security Act (Act), 42 U.S.C. 1302. Section 1102 of the Act 
authorizes the Secretary to publish regulations, not inconsistent with 
the Act, which may be necessary for the efficient administration of the 
functions for which the Secretary is responsible under the Act.
    This proposed rule is published in accordance with the following 
sections of the Act: section 451 Appropriation, section 452 Duties of 
the Secretary, section 453 Federal Parent Locator Service, section 454 
State Plan for Child and Spousal Support, section 454A Automated Data 
Processing, section 454B Collection and Disbursement of Support 
Payments, section 455 Payment to States, section 456 Support 
Obligations, section 457 Distribution of Collected Support, section 458 
Incentive Payments to States, section 459 Consent by the United States 
to Income Withholding, Garnishment, and Similar Proceedings for 
Enforcement of Child Support and Alimony Obligations, section 460 Civil 
Actions to Enforce Support Obligations, section 464 Collection of Past-
due Support From Federal Tax Refunds, section 466 Requirement of 
Statutorily Prescribed Procedures to Improve Effectiveness of Child 
Support Enforcement, and section 467 State Guidelines for Child Support 
Awards.

Background

    The Child Support Enforcement program is intended to ensure that 
noncustodial parents provide financial support for their children. 
Child support payments play an important role in reducing child 
poverty, lifting approximately one million families out of poverty each 
year. In 2012, the Child Support Enforcement program collected $27.7 
billion in support payments for the families in State and Tribal 
caseloads. During this same period, 82 percent of the cases had support 
orders, and nearly 72 percent of cases with orders had at least some 
payments during the year.
    The proposed rule makes changes to strengthen the Child Support 
Enforcement program and update current practices in order to increase 
regular, on-time payments to families, increase the number of 
noncustodial parents working and supporting their children, and reduce 
the accumulation of unpaid child support arrears. These changes remove 
regulatory barriers to cost-effective approaches for improving 
enforcement consistent with the current knowledge and practices in the 
field, and informed by many successful state-led innovations. In 
addition, given that three-fourths of child support payments are 
collected by employers through income withholding, this proposed rule 
standardizes and streamlines payment processing so that employers are 
not unduly burdened by this otherwise highly effective support 
enforcement tool. The rule also removes outdated barriers to electronic 
communication and document management, updating existing child support 
regulations which frequently limit methods of storing or communicating 
information to a written or paper format. Finally, the proposed rule 
updates the program to reflect the recent Supreme Court decision in

[[Page 68549]]

Turner v. Rogers, 564 U.S. _, 131 S Ct. 2507 (2011).
    Executive Order 13563 directs agencies to increase retrospective 
analysis of existing rules to determine whether they should be 
modified, streamlined, expanded, or repealed so as to make the agency's 
regulatory program more effective or less burdensome in achieving 
regulatory objectives.\1\ In response to Executive Order 13563, OCSE 
conducted a comprehensive review of existing regulations to improve 
program flexibility, efficiency, and responsiveness; promote 
technological and programmatic innovation; and update outmoded ways of 
doing business. Some of these regulations have not been updated in a 
generation. Proposed regulatory improvements include: (1) Procedures to 
promote program flexibility, efficiency, and modernization; (2) updates 
to account for advances in technology; and (3) technical corrections.
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    \1\ Available at: http://www.whitehouse.gov/the-press-office/2011/01/18/improving-regulation-and-regulatory-review-executive-order. Also, the OMB Memorandum related to Executive Order 13563 is 
available at: http://www.whitehouse.gov/sites/default/files/omb/memoranda/2011/m11-10.pdf.
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    Before drafting the proposed rules, OCSE consulted with States, 
Tribes, employers, and other stakeholders. The National Council of 
Child Support Directors voluntarily established a subcommittee that 
would provide OCSE with cost saving proposals. We also sought Tribal 
input in a formal fashion as discussed in the Tribal Impact Statement.
    These efforts helped OCSE to: Identify regulations where we could 
encourage noncustodial parents to assume more personal responsibility; 
increase State and employer flexibility to better serve families; 
improve program effectiveness, efficiency, and innovation; streamline 
intergovernmental case processing; improve customer service; and remove 
barriers identified by employers, States, and families that impede 
efficient and timely child support payments. We also identified 
obsolete and outmoded requirements and technical fixes that are needed. 
This proposed rule recognizes and incorporates policies and practices 
that reflect the progress and positive results that have resulted from 
successful program implementation by States and Tribes.
    The section-by-section discussion below provides greater detail on 
the provisions of the proposed rule. All references to regulations are 
related to 45 CFR Part 300, except as specified in sections relating to 
the CMS regulations (42 CFR part 433).

Effective Date and Potential Impact on State Law

    In this NPRM, some of the proposed regulatory provisions would 
require a State to submit revised State plan pages and/or enact new 
State laws. A State may meet these requirements through enactment of 
State law, regulations (including court rules), and/or procedures that 
ensure compliance with Federal law. In this NPRM, we specifically seek 
public comment on the actions a State will need to take to ensure 
compliance with the proposed provisions. We are especially interested 
in the steps necessary to implement proposed provisions in Sec. Sec.  
302.32, 302.38, 302.56, 303.6, 303.8, 303.11, and 303.100.
    In addition, we seek public comment on the amount of time a State 
will need to take these actions and to implement the proposed 
provisions in this NPRM. We request comment on whether a general 
effective date of one year after publication of the final rule will be 
sufficient, for most changes, with the exception of Sec.  302.56(a), 
where we have proposed that a State meet the guidelines requirements 
within one year after completion of the State's next quadrennial review 
of its guidelines.
    When new State plan requirements were enacted in the past, and 
additional State legislation was required, in order for the State's 
Title IV-D plan to remain in compliance, Congress provided that the 
State must enact the needed legislation by the first day of the second 
calendar quarter beginning after the close of the first regular session 
of the State legislature that begins after the effective date of the 
regulation. If the State had a 2-year legislative session, each year of 
the session was considered a separate regular session of the State 
legislature. We are inviting comments concerning which of the proposed 
changes in this NPRM may require State legislation and may warrant a 
similar delay in the effective date.

Tribal Impact Statement

    In this NPRM, OCSE proposes to update existing State case closure 
rules in order to deliver more efficient child support services to 
families. There were no Tribal IV-D programs when case closure 
regulations were initially written in 1989. Today there are over 50 
fully operational Tribal IV-D programs. Because our proposed updates 
could have an impact on these programs, we invited Tribal leaders to 
engage in written consultation via a ``Dear Tribal Leader Letter,'' 
dated April 28, 2011. We specifically sought comments on how we could 
encourage efficient case transfer between a State and a Tribal IV-D 
program.\2\
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    \2\ Available at: http://www.acf.hhs.gov/programs/cse/pol/DCL/2011/dcl-11-07.htm.
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    In addition to written consultation, we engaged in a face-to-face 
consultation with Tribal leaders at the ACF Tribal Consultation Session 
on August 18, 2011 and March 6, 2012. We also invited Tribal leaders to 
participate in an additional day of consultation and dialogue, on 
August 19, 2011, to address any issues specific to Tribal child 
support.\3\ Finally, in 2011, OCSE met with Tribal IV-D directors, on 
January 12-13, 2011, February 23-24, 2011, and March 10-11, 2011, to 
discuss Medicaid reimbursement cases that involve enrolled Tribal 
members or those otherwise eligible for enrollment. Our efforts to 
engage Tribal leaders throughout this NPRM process proved to be 
beneficial. Tribal leaders provided valuable comments that helped us 
formulate proposed regulatory language.\4\
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    \3\ Available at: https://www.federalregister.gov/articles/2011/07/19/2011-18096/notice-of-meeting-administration-for-native-americans#p-8.
    \4\ For a detailed description of these proposed changes, please 
see the Case Closure section.
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    We would like to emphasize that case closure regulations proposed 
in this NPRM are only applicable to State IV-D agencies. However, 
during tribal consultation held previously, we consulted with tribes 
regarding a proposal to all State child support agencies to close a 
case when the case is opened due solely to a Medicaid referral for 
medical support enforcement of a case involving an IHS-eligible child. 
We encourage all interested parties, including Tribes, to provide 
comments regarding this portion of the regulations during the public 
comment period. We will review and consider all comments, before we 
issue a final rule.
    In addition to updating case closure regulations, we propose 
several technical corrections to existing Tribal regulations. These 
proposed corrections should have little to no impact on Tribal IV-D 
programs.

Section-by-Section Discussion of the Provisions of This Proposed Rule

    This NPRM proposes: (1) Procedures to promote program flexibility, 
efficiency, and modernization; (2) updates to account for advances in 
technology; and (3) technical corrections. The following is a 
discussion of all the regulatory provisions included in this NPRM. 
Please note the provisions are discussed in order by category. Because 
this is a lengthy NPRM, we present the proposed revisions in these 
three categories to

[[Page 68550]]

assist the reader in understanding the major concepts and rationale for 
the changes.

Topic 1: Procedures To Promote Program Flexibility, Efficiency and 
Modernization (Sec. Sec.  302.32; 302.33; 302.38; 302.56; 302.70; 
302.76; 303.3; 303.6; 303.8; 303.11; 303.31; 303.72; 303.100; 304.20; 
304.23; and 307.11)

Section 302.32: Collection and Disbursement of Support Payments by the 
IV-D Agency
    The Personal Responsibility and Work Opportunity Reconciliation Act 
of 1996 (PRWORA) (Pub. L. 104-193) centralized payment processing 
through the creation of State Disbursement Units (SDUs) and 
standardized income withholding provisions by requiring use of a 
uniform income withholding form. In the 1990s and 2000s, OCSE and State 
child support agencies partnered closely with employer and payroll 
organizations to implement the 1996 reforms. These collaborative 
efforts have been instrumental in streamlining the process for 
employers and ensuring that children receive billions of dollars in 
child support annually. Currently, over two-thirds of child support 
payments ($23 billion dollars in FY 2012) are collected by employers 
through income withholding, an enforcement tool which is, by far, the 
most effective remedy for ensuring that noncustodial parents are held 
accountable. While the overall framework for the processing and 
disbursing of child support payments is sound, the proposed rule 
addresses four ongoing concerns raised by employers, families, and 
States that hinder efficient income withholding and payment 
disbursement procedures: (1) State processing of income withholding 
payments on non-IV-D orders through the SDU; (2) SDU disbursement of 
child support payments directly to the family; (3) use of the Income 
Withholding for Support form; and (4) transmission of income 
withholding payments directly to the appropriate SDU.
    Section 302.32 describes requirements for State IV-D agencies 
regarding the collection and disbursement of support payments. In its 
current form, this section provides narrow guidance on specific 
disbursement timeframes for IV-D cases and clarifies that, with respect 
to a case where the family is receiving TANF and has assigned rights to 
child support, payments must go to the SDU and not directly to the 
family.
    A challenge for employers processing income withholding payments 
for child support is the interaction with SDUs, specifically in regard 
to payments on non-IV-D cases. An SDU is a State payment processing 
unit that receives and disburses payments collected on child support 
orders in both IV-D and non-IV-D cases. Employers are required by law 
to send all income withholding payments to the SDU designated on the 
OMB-approved Income Withholding for Support form. The State must 
receive the payments, determine the distribution of funds using their 
statewide automated system, and disburse the funds through the SDU to 
the appropriate payee. While this payment process is largely automatic 
and seamless, particularly with payments on IV-D cases, some employers 
have encountered problems when sending payments to SDUs in a few States 
on non-IV-D cases.
    Federal law requires SDUs to collect and disburse payments under 
orders in both IV-D cases and in non-IV-D cases in which the support 
order was initially issued on or after January 1, 1994, and the income 
of the noncustodial parent is subject to withholding pursuant to 
section 466(a)(8)(B) of the Act. In order to process these non-IV-D 
income withholding payments, SDUs must have access to basic information 
about the non-IV-D orders. To this end, section 454A(e) of the Act 
requires each State to maintain or have access to information about 
non-IV-D orders in its State Case Registry (SCR), which is a part of 
its statewide automated system. The SCR contains records on IV-D cases 
and on non-IV-D orders established or modified in the State on or after 
October 1, 1998. The State then uses the information on non-IV-D orders 
to identify any incoming non-IV-D payments and to handle their 
disbursement through the SDU. Data in the SCR, as part of the State's 
automated system, must be used to facilitate the collection and 
disbursement of child support payments through the SDU.\5\
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    \5\ For further information, see AT-98-08, Policy Questions and 
Responses Regarding the State Case Registry and the Federal Case 
Registry of Child Support Orders under sections 453(h) and 454A(e) 
of the Social Security Act, available at: http://www.acf.hhs.gov/programs/cse/pol/AT/1998/at-9808.htm.
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    Despite these statutory requirements to process non-IV-D income 
withholding payments automatically, employers have complained that a 
small number of States are not in compliance with these requirements 
and that some SDUs do not maintain information about non-IV-D orders 
prior to the employer sending payment to the SDU. In such cases, upon 
receipt of non-IV-D income withholding payments from employers, these 
States are contacting employers and custodial parents asking for 
additional information, forms, or documents before they process a 
payment on non-IV-D orders, increasing the burden on employers and 
families. In some instances, a few States are refusing to process the 
non-IV-D income withholding payments and returning the funds to 
employers. These returned or delayed payments result in confusion, 
customer service complaints, and added expense and paperwork for the 
employer. This practice also adversely impacts noncustodial parents 
trying to meet their financial obligations and ultimately delays child 
support from reaching families.
    Because States have some latitude in how they meet the requirements 
for managing their IV-D programs and structuring their statewide 
automated systems, the reasons States have trouble processing non-IV-D 
payments are likely to be diverse. In some situations, the problems may 
be traced to a State not fulfilling their responsibility for processing 
non-IV-D payments, while in others it may be associated with data 
processing procedures or certain characteristics of their statewide 
automated systems. For example, the problem may be related to: 
Challenges in the automated computer interface between State agencies 
and courts; delays in the original transfer of non-IV-D order 
information from the courts to the SCR; the sharing of non-IV-D order 
data between the SCR and the SDU; or the number and type of non-IV-D 
data elements in the SCR.
    To address employer problems with States not processing payments on 
non-IV-D orders through their SDUs, we propose to set forth in Sec.  
302.32 the basic requirements for SDUs, as stated in section 454B of 
the Act. Specifically, we propose revising Sec.  302.32(a) with 
language similar to section 454B(1) of the Act to describe the State's 
responsibility to establish and operate a SDU. Under proposed paragraph 
(a), a IV-D agency must establish and operate a SDU for the collection 
and disbursement of payments under support orders in all cases enforced 
under the title IV-D plan and in all cases not being enforced under the 
IV-D plan in which the support order is initially issued in the State 
on or after January 1, 1994, and in which the income of the 
noncustodial parent is subject to withholding pursuant to section 
466(a)(8)(B) of the Act. We propose a conforming change by deleting the 
existing language in paragraph (a). The existing paragraph (a) is a 
holdover regulatory provision from the Aid to Families with Dependent 
Children Program and addresses child support payments which are 
collected for a recipient of assistance under the

[[Page 68551]]

State's title IV-A plan. This language is no longer needed because it 
is subsumed under the new proposed paragraph (a) which states that 
payments in all IV-D cases must be made to the SDU.
    In the past, OCSE refrained from regulating SDU requirements 
because we considered the statute to be self-implementing. We noted 
that we would reconsider this position if a need arose.\6\ Because of 
the problems with non-IV-D payment processing, we believe that rules 
are needed. The regulatory approach we are proposing is predicated on 
the belief that States are returning or delaying non-IV-D payments for 
diverse reasons. Therefore, we believe a regulatory approach that is 
more general and less prescriptive is appropriate. While our aim is to 
dispel any confusion over the requirements, this approach will allow 
States flexibility to identify and remove the barriers to non-IV-D 
payment processing as they might occur uniquely in each State. We note, 
however, that there is no Federal statutory authority for States to 
require custodial parents or employers to provide information and data 
on non-IV-D orders as a condition to process these payments. We 
especially are interested in hearing from States and the public whether 
the general approach in the regulations will effectively address the 
problems with SDU payment processing on non-IV-D orders, and if there 
are additional problematic issues regarding SDU payment processing this 
rulemaking can or should address.
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    \6\ For further information, see AT-97-13, Collection and 
Disbursement of Support Payments, available at: http://www.acf.hhs.gov/programs/cse/pol/AT/1997/at-9713.htm.
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    As a final note on this proposal, over the years States have raised 
the question of whether FFP is available for activities in non-IV-D 
cases. In 2010 OCSE issued PIQ-10-01, ``Federal Financial Participation 
and non-IV-D activities,'' \7\ to expand on earlier SDU policy issued 
in Action Transmittal, AT-97-13, ``Collection and Disbursement of 
Support Payments.'' PIQ-10-01 states that FFP is available for the non-
IV-D case data requirements and payment processing required by the 
Social Security Act. In general, FFP is available for the submission 
and maintenance of data in the SCR with respect to non-IV-D support 
orders established or modified on or after October 1, 1998; the receipt 
and disbursement of collections through income withholding for child 
support orders initially issued in the State on or after January 1, 
1994; and the required reporting to OCSE of non-IV-D financial and 
statistical information. See OCSE-PIQ-10-01 for more information. We 
believe the clarification of FFP availability will mitigate States' 
cost concerns related to this proposed provision.
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    \7\ Available at: http://www.acf.hhs.gov/programs/cse/pol/PIQ/2010/piq-10-01.htm.
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Section 302.33: Services to Individuals Not Receiving Title IV-A 
Assistance
    Current Sec.  302.33(a)(4) requires that whenever a family is no 
longer eligible for assistance under a State's TANF, foster care, and/
or Medicaid programs, the IV-D agency must notify the family, within 5 
working days of the notification of ineligibility, that child support 
services will continue, without application, unless the family notifies 
the agency to the contrary. In certain situations, we believe that 
automatic continuation of child support services can be inappropriate 
for the family, such as once a child has been reunified with the family 
or the child has aged out of foster care. Therefore, based on a request 
from a joint child support/child welfare workgroup, we propose an 
efficiency change in Sec.  302.33(a)(4).
    We propose to eliminate ``title IV-E foster care'' from the first 
sentence in Sec.  302.33(a)(4) and to add to that provision stating 
that the requirement to notify the family within 5 working days that 
services will be continued, unless the family notifies the IV-D agency 
to the contrary, also applies when a child is no longer eligible for 
IV-E foster care, but only in those cases that the IV-D agency 
determines that such services and notice would be appropriate. This 
proposed revision provides State IV-D agencies with additional 
flexibility to determine whether notice to a family in which a child no 
longer receives foster care maintenance payments is appropriate and 
whether to close the case. We believe that these revisions will 
simplify the notification process in post-foster care cases, 
recognizing that continued child support enforcement may be 
inappropriate, for example, once foster care cases are closed due to 
family reunification or when children age out of foster care. However, 
existing arrearages in these IV-D referral cases would remain an 
obligation owed to the State and collectible under all applicable State 
laws and processes pursuant to section 456 of the Act and 45 CFR 
302.50(c).
    At the request of States, we propose to provide each State the 
option to elect in its State plan to allow an individual parent who 
files an application the flexibility to select child support services 
from a menu of service options to better meet the needs of the 
families. Currently, a parent who applies for services has to accept 
the full range of services.
    We propose to add a new paragraph (a)(6) that indicates that the 
State would elect in its State plan whether or not it provides 
applicants under subparagraph (a)(1)(i) the option to request limited 
services. This rule provides the State with authority to allow either 
the custodial or the noncustodial parent to request specific child 
support services tailored to the family's circumstances. In addition, 
we believe that limited services will result in increased customer 
satisfaction; help fathers assume more personal responsibility; help to 
make enforcement services more successful and efficient; and respond to 
families' needs. We believe that this will give States increased 
flexibility to be responsive to the family.
    Under this proposal, for example, a State could elect to allow an 
applicant for services to request paternity establishment services 
only. Based on the State's procedures, if an unwed mother lived with 
the biological father of a child, he could request paternity 
establishment services only. Having paternity legally established may 
provide the biological father a sense of personal responsibility for 
the child. This would benefit the unwed parents since genetic testing 
could be done at a reduced rate, and would benefit the child if 
paternity is established by clarifying birth records and establishing 
possible eligibility for dependents' benefits. Additionally, if the 
parents separate in the future, it would be easier for the State child 
support agency to establish and enforce a support obligation. In the 
Child Support Enforcement program, this menu of service options is 
called ``limited services.'' The child support community has discussed 
this approach for many years as a positive strategy to tailor services 
to serve families.
    If the State chooses this option, it would be required to define 
how this process would be implemented and establish and use procedures 
that would specify what limited services are allowed and under what 
circumstances. Additionally, the State's procedures would require that 
a limited services applicant requesting enforcement services must 
receive all appropriate mandatory enforcement services, such as the 
Federal Tax Refund Offset, income withholding, and credit bureau 
reporting. This provision also states that an application would be 
considered full-service unless the parent specifically applies for 
limited services in accordance with the State's procedures, and if one 
parent specifically requests limited services

[[Page 68552]]

and the other parent requests full services, the case will 
automatically receive full services. Also, for all limited service 
applicants, the State would be required to charge the application and 
service fees required under paragraphs (c) and (e) of the section, and 
may recover costs in accordance with paragraph (d) of this section if 
the State has chosen this option in its State plan. Finally, the State 
must also include information in its application form on the range of 
available services, consequences of selecting a limited service, and an 
explanation that the case will be closed when the limited service is 
completed.
    Before a State chooses to implement these new criteria, it would 
need to ensure that its automated system can be easily modified so that 
it can effectively manage its caseloads regarding what services are 
requested. Also, if a State provides this option, the State would have 
flexibility on how it implements these proposed changes. The State must 
ensure that these changes are made in a consistent manner in accordance 
with its State plan. The State could also choose to implement this 
option for one or two services, and expand this as it gains experience 
in implementing these changes.
    We believe that as States modernize their statewide automated 
systems, this option will be easier for States to implement and to 
manage in their caseloads, and at the same time will provide them 
additional flexibility to provide child support services that meet the 
needs of families. We expect limited services can be a cost-effective 
way to provide efficient and targeted services while avoiding 
expenditures on unnecessary and unproductive services.
    Also, the State must ensure that an application is received from 
the applicant documenting what limited services are being requested. 
Regarding the fees for a limited-services application, the State may 
choose to charge the same fees as a full-service application. However, 
the fees must be charged in accordance with paragraphs (c) and (e) of 
this section, and if the State chooses to recover costs, it must be 
done in accordance with paragraph (d) of this section.
    Finally, we are cognizant of the risk of domestic violence in the 
general operation of the child support program, and in particular as 
related to this proposed limited services provision. The child support 
program has required domestic violence safeguards in Sec.  303.21(e) 
and we will continue to work with States and advocates to ensure that 
best practices are in place to safeguard the affected parties. OCSE 
also has a major domestic violence initiative underway to identify and 
promote effective practices to support families. We invite comments on 
whether there are additional domestic violence safeguards that should 
be put in place with respect to the limited services options.
Section 302.38: Payments to the Family
    This proposed rule addresses concerns raised by States and families 
about the difficulties that families encounter when child support 
payments are disbursed directly to private collection agencies, 
bypassing the custodial families to whom the money is owed. Unlike 
private firms that contract with State child support agencies, private 
collection agencies contract directly with custodial parents for the 
collection of child support and are not affiliated with the State IV-D 
program. While earlier OCSE policy guidance did not preclude State IV-D 
programs from disbursing child support collections to private 
collection agencies if requested by the custodial parent-payee, OCSE 
now believes that disbursement of child support collections from SDUs 
to private collection agencies instead of directly to families puts the 
government in the role of indirectly enforcing private contracts and is 
not in the best interests of families and children.
    Numerous consumer complaints and litigation have highlighted the 
questionable practices of many private collection agencies. These 
practices include deceptive advertising; perpetual service contracts 
that require direct payment to the company and prohibit cancellation; 
falsely representing the business as a government office; using 
official-looking documents to pressure employers to redirect support 
withheld from employees' paychecks; demanding payments from 
grandparents; demanding payments that are not owed from noncustodial 
parents; and other allegedly deceptive and abusive tactics.\8\ OCSE's 
intent is not to regulate private collection agencies, but rather to 
ensure that child support programs are not facilitating, and the 
taxpayer is not subsidizing, the sometimes inappropriate business 
practices of private collection agencies not under contract to States. 
In order to provide protections for families and fulfill the intent of 
the founding child support legislation and subsequent policy, we 
propose that child support payments owed and payable to families be 
disbursed directly, and only, to families.
---------------------------------------------------------------------------

    \8\ These practices are described in various consumer complaints 
and letters to State consumer agencies, as well as in GAO report, 
Child Support Enforcement--Clear Guidance Would Help Ensure Proper 
Access to Information and Use of Wage Withholding by Private Firms, 
GAO-02-349 (2002), available at: http://www.gao.gov/new.items/d02349.pdf.
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    Such private collection agencies enter into contracts with 
custodial parents to collect child support, but are not subject to the 
same contractual or regulatory oversight as State IV-D agencies and 
other private firms that have contracts with States to carry out public 
child support functions. Many states contract with private firms to 
provide various child support services. These private firms act on 
behalf of the State IV-D agency and must comply with the same statutes 
and regulations as the State IV-D program. Moreover, the Federal Trade 
Commission has determined that child support private collection 
agencies are not subject to the Fair Debt Collection Practices Act, 15 
U.S.C. 1692-1692p, administered by the Federal Trade Commission because 
child support debt is not considered consumer debt.\9\
---------------------------------------------------------------------------

    \9\ Mabe v. G.C. Services Limited Partnership, 32 F. 3d 86 (4th 
Cir. 1994), available at: http://scholar.google.com/scholar_case?case=16399759672854246032&q=Mabe+v.+G.C.+Services+Ltd.+Partnership&hl=en&as_sdt=2,9&as_vis=1.
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    Since the Child Support Enforcement program was created over 30 
years ago, the statutory framework for payment processing imposed on 
States the requirement that collections owed to the family should be 
paid to the family. Section 457 of the Act, Distribution of Collected 
Support, requires the State to track and distribute payments, and 
clearly indicates that money owed to the family is paid to the family, 
unless the family received TANF assistance and has assigned its rights 
to support to the State as reimbursement. In accordance with section 
457 of the Act, the portion of the support owed to the family must be 
distributed ``to the family'' and not to any other party.
    Section 454(11)(B) of the Act reinforces the requirement that 
payments are made to families. According to this provision, States must 
provide in their State child support enforcement plans that any 
payments required to be made to a family pursuant to section 457 must 
be made to ``the resident parent, legal guardian, or caretaker relative 
having custody of or responsibility for the child or children'' 
(emphasis added). The law is clear that payments due to families are to 
be disbursed from SDUs to the individual with responsibility to protect 
and further the child's best interests.
    On December 29, 2010, ACF published final regulations in the 
Federal Register (75 FR 81894) for

[[Page 68553]]

Safeguarding Child Support Information (Safeguarding rule) by 
distinguishing between individuals who have a legal and fiduciary 
obligation to protect a child's best interests and those who do 
not.\10\ Specifically, the Safeguarding rule clarified that each of the 
categories of individuals authorized to receive child support 
information under section 453(c)(3) of the Act, has ``a relationship 
with the child that imposes an intrinsic responsibility to assure 
protection of the child's welfare and interests.'' The rule excludes 
those ``with a pecuniary interest of their own that may be inconsistent 
with the child's best interests'' from receiving confidential 
information contained in the Federal and State Parent Locator Service. 
According to the standard set in the Safeguarding rule, therefore, 
private collection agencies, with their financial self-interest and no 
fiduciary duty to serve the children's best interests, are not 
authorized to receive protected child support information.
---------------------------------------------------------------------------

    \10\ The 2010 Safeguarding final rule is available at: http://www.acf.hhs.gov/programs/cse/pol/AT/2010/at-10-12.htm.
---------------------------------------------------------------------------

    Because the categories of individuals authorized to receive 
information, as listed in section 453(c)(3) of the Act (``the resident 
parent, legal guardian, attorney, or agent of the child''), 
significantly overlap with the entities authorized to receive payment 
disbursement in section 454(11)(B) of the Act (``the resident parent, 
legal guardian, or caretaker relative having custody of or 
responsibility for the child or children''), the definitions used in 
the Safeguarding regulation are directly analogous to the discussion in 
this proposed rule.
    The Safeguarding rule notes that a ``resident parent'' lives with 
the child and provides the child's day-to-day care. Further, an 
individual who has been appointed by court order as a child's ``legal 
guardian'' is legally responsible for the child's care and has a legal 
obligation to act in the child's best interest. The Safeguarding rule 
further notes that a ``caretaker relative'' is a longstanding term used 
in the TANF program and its predecessor program, Aid to Families with 
Dependent Children (AFDC), to refer to those relatives responsible for 
the day-to-day care of children and who are eligible to apply for cash 
assistance for needy families, regardless of the existence of a legal 
custody order or legal guardianship status.
    Each of these individuals has a relationship with the child that 
imposes responsibility to assure protection of the child's welfare, 
while private collection agencies historically do not, even if those 
companies employ attorneys. Therefore, consistent with the specific 
statutory descriptions of authorized individuals, as well as the 
general standards set forth in the Safeguarding rule, this proposed 
rule would require that any payments made under Sec. Sec.  302.32 and 
302.51 would be made directly to the resident parent, legal guardian, 
or caretaker relative and not to a private collection agency with a 
contractual agreement with the family.
    The primary goal of the Child Support Enforcement program is to 
ensure that families benefit directly from child support payments. This 
family-first perspective is intended to ensure families' self-
sufficiency and strengthen parents' commitment to supporting their 
children. On the one hand, this approach is a shift from child 
support's earlier focus on welfare reimbursement and cost recovery for 
Federal and State governments; on the other hand, it is consistent with 
the original principle that payments due to families who never received 
welfare are disbursed to families directly. Congress affirmed these 
family-first principles when it passed the Deficit Reduction Act of 
2005 (DRA). Known as ``family first distribution,'' the purpose of 
section 7301(b) of the DRA is, ``Increasing child support payments to 
families and simplifying child support distribution rules''.\11\ 
Section 7301 of the DRA modified the rules of distribution and 
assignment of section 457 of the Act, and provided a set of options for 
States which, if adopted, would result in 100 percent of payments to 
families who are receiving or have received welfare assistance. The 
DRA's family-first approach clearly discourages redirecting payments to 
any individuals or entities other than families. In 2012, more than 94 
percent of child support collected by the IV-D program was paid to 
families.\12\
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    \11\ For further information, see Public Law No. 109-171, Title 
VII, Subtitle C, Section 7301 (2006), available at: http://www.gpo.gov/fdsys/pkg/PLAW-109publ171/pdf/PLAW-109publ171.pdf.
    \12\ For further information, see OCSE's FY 2012 Preliminary 
Report, Table P-1 available at: http://www.acf.hhs.gov/programs/css/resource/fy2012-preliminary-report-table-p-1. The figure was 
calculated by adding total payments to families, medical support, 
and the amount passed through to families for a total of $26.1 
billion distributed to families. This figure represents 94.2 percent 
of total collections in the amount of $27.7 billion.
---------------------------------------------------------------------------

    In sum, based on the intent of the original child support 
legislation and the more recent ``family-first'' policies, we propose 
to revise Sec.  302.38, ``Payments to the family,'' by inserting the 
word ``directly'' before the phrase ``to the resident parent, legal 
guardian, or caretaker relative.'' This proposed change will address 
concerns regarding disbursement of payments directly to the family. The 
purpose is to require SDUs to disburse child support payments directly 
to the intended beneficiary and not to divert those payments to another 
entity such as a private collection agency or other creditor of the 
custodial parent. The proposed change does not preclude a custodial 
parent from entering into a contractual relationship with a private 
collection agency for the collection of child support. Also, the 
proposed change is not intended to affect or change a State's current 
practices regarding electronic disbursements of child support payments. 
Disbursement of a child support payment to a custodial parent's bank 
account is a direct payment to the family. In addition, please note 
that this provision applies to payments that are due to the family; 
this provision does not preclude a State from sending payments for 
distribution and disbursement to initiating agencies on 
intergovernmental actions. We ask specifically for comments on whether 
the proposed regulations will affect State laws that permit the child 
support payment to be sent to other individuals/entities, such as a 
conservator or private attorney representing the custodial parent and 
child, with a legal and fiduciary duty to act in the child's best 
interest.
Section 302.56: Guidelines for Setting Child Support Awards
    We also propose to update Federal regulations in Sec.  302.56 that 
address State guidelines for setting child support awards. A number of 
these proposed changes are intended to ensure that parents meet their 
child support obligations and to assist States in complying with the 
U.S. Supreme Court decision in Turner v. Rogers, 564 U.S. __--, 131 S 
Ct. 2507 (2011). Consistent child support payments can help custodial 
families achieve economic stability, which is especially important to 
the millions of low- and moderate-income families served by the Child 
Support Enforcement program.\13\ However, basic fairness requires that 
child support obligations reflect an obligor's actual ability to pay 
them.
---------------------------------------------------------------------------

    \13\ For further information, see Carl Formoso, Child Support 
Enforcement: Net Impacts on Work and Welfare Outcomes pre- & post-
PRWORA, Washington State Division of Child Support (2000), available 
at: http://www.dshs.wa.gov/pdf/esa/dcs/reports/csepolicybrief.pdf.
---------------------------------------------------------------------------

    A growing body of research finds that compliance with child support 
orders in some States, regardless of income level, declines when the 
support obligation is

[[Page 68554]]

set above 15-20 percent of the obligor's income, and that orders for 
excessive amounts result in lower, not higher, child support 
payments.\14\ States like California and Washington have found that the 
direct result of establishing support obligations that exceed the 
ability of obligors to meet them is unpaid arrearages. Most arrearages 
are owed by noncustodial parents with earnings under $10,000 and are 
uncollectible.\15\ Research finds that high arrearages substantially 
reduce the formal earnings of noncustodial parents and child support 
payments in economically disadvantaged families, while reducing 
unmanageable arrearages can increase payments.\16\ Accumulation of high 
arrearage balances is often associated with incarceration, because 
parents have little to no ability to earn income while they are 
incarcerated, and little ability to pay off the arrearages when 
released due to lack of employment.\17\
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    \14\ Mark Takayesu, How Do Child Support Order Amounts Affect 
Payments and Compliance? Orange County, CA Department of Child 
Support Services, (Oct. 2011), available at: http://ncsea.omnibooksonline.com/2012policyforum/data/papers/PV_1.pdf#page=1; and Carl Formoso, Determining the Composition and 
Collectability of Child Support Arrearages, Volume 1: The 
Longitudinal Analysis (2003), available at: http://www.dshs.wa.gov/pdf/esa/dcs/reports/cvol1prn.pdf. See also HHS Office of Inspector 
General report, The Establishment of Child Support Orders for Low 
Income Non-custodial Parents, OEI-05-99-00390, (2000), available at: 
http://oig.hhs.gov/oei/reports/oei-05-99-00390.pdf.
    \15\ For further information, see Elaine Sorensen, Liliana 
Sousa, and Simon Schaner's report, Assessing Child Support Arrears 
in Nine Large States and the Nation (2007), available at: http://aspe.hhs.gov/hsp/07/assessing-CS-debt/.
    \16\ For further information, see Carolyn J. Heinrich, Brett C. 
Burkhardt, and Hilary M. Shager, Reducing Child Support Debt and Its 
Consequences: Can Forgiveness Benefit All? (2010), available at: 
http://www.irp.wisc.edu/research/childsup/cspolicy/pdfs/2007-09/FamiliesForward_3_19_10.pdf; Maria Cancian, Carolyn Heinrich, and 
Yiyoon Chung, Does Debt Discourage Employment and Payment of Child 
Support? (2009), available at: http://www.irp.wisc.edu/publications/dps/pdfs/dp136609.pdf; and Harry Holzer, Paul Offner, and Elaine 
Sorensen, Declining Employment Among Young Black Less-Educated Men: 
The Role Of Incarceration and Child Support (2004), available at: 
http://www.urban.org/uploadedpdf/411035_declining_employment.pdf.
    \17\ For further information, see Carmen Solomon-Fears, Gene 
Falk, and Adrienne L. Fernandes-Alcantara, Child Well-Being and 
Noncustodial Fathers (2013), Congressional Research Service. See 
also Amanda Geller, Irwin Garfinkel, and Bruce Western. The Effects 
of Incarceration on Employment and Wages: An Analysis of the Fragile 
Families Survey (2006), Center for Research on Child Wellbeing. 
Working Paper # 2006-01-FF. available at: http://www.saferfoundation.org/files/documents/Princeton-Effect%20of%20Incarceration%20on%20Employment%20and%20Wages.pdf. 
Also, the Report of the Re-Entry Policy Council, Charting the Safe 
and Successful Return of Prisoners to the Community, Council of 
State Governments, Reentry Policy Council, January 2005, Policy 
Statement 13, available at: http://reentrypolicy.org/Report/About. 
For further background, see Jessica Pearson's article, Building Debt 
While Doing Time: Child Support and Incarceration, Judges' Journal, 
American Bar Association, no. 1, vol. 43 (Winter 2004), available 
at: http://peerta.acf.hhs.gov/uploadedFiles/BuildingDebt.pdf.
---------------------------------------------------------------------------

    As a condition of State IV-D plan approval, section 467 of the Act 
requires a State to establish guidelines for child support awards 
issued in the State. Existing regulations provide a State with 
discretion to design its child support guidelines within the parameters 
of Sec.  302.56. Currently, under Sec.  302.56(c)(1), guidelines must 
take into consideration all earnings and income of the noncustodial 
parent.
    Research suggests that setting an accurate order based upon the 
ability to pay improves the chances that noncustodial parents will 
continue to pay over time. Compliance with support orders is strongly 
linked to ability to pay. Many low-income noncustodial parents do not 
meet their child support obligations because they do not earn enough to 
pay what is ordered.\18\ The HHS Office of the Inspector General 
concluded that child support orders set for low income parents are 
ineffective in generating child support payments when set too high 
relative to ability to pay, finding that compliance is significantly 
lower when a monthly order is more than 20 percent of a parent's income 
than when it is 15 percent or less.\19\ Similarly, studies conducted in 
Washington and California found that, regardless of income level, 
arrearages are unlikely to accumulate if the support obligation is no 
more than 20 percent of earnings, or lower.\20\
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    \18\ Michelle Ganow Jones, Options to Help Low-Income 
Noncustodial Parents Manage Their Child Support Debt (2002), 
available at http://76.12.61.196/publications/optionstohelplowincomeIN.htm.
    \19\ For further information, see HHS OIG report, The 
Establishment of Child Support Orders for Low Income Non-custodial 
Parents, OEI-05-99-00390 (2000), available at: http://oig.hhs.gov/oei/reports/oei-05-99-00390.pdf.
    \20\ Carl Formoso, Determining the Composition and 
Collectability of Child Support Arrearages, Volume 1: The 
Longitudinal Analysis (2003), available at: http://www.dshs.wa.gov/pdf/esa/dcs/reports/cvol1prn.pdf. Mark Takayesu, How Do Child 
Support Orders Affect Payments and Compliance? Orange County, CA 
Department of Child Support Services (Oct. 2011), available at: 
http://ncsea.omnibooksonline.com/2012policyforum/data/papers/PV_1.pdf#page=1.
---------------------------------------------------------------------------

    Setting child support orders that reflect an actual ability to pay 
is crucial to encouraging compliance, increasing accountability for 
making regular payments, and discouraging uncollectible arrearages. On 
January 30, 2013, the National Child Support Enforcement Association 
issued a policy statement indicating that: ``As a general rule, child 
support guidelines and orders should reflect actual income of parents 
and be changed proactively to ensure current support orders reflect 
current circumstances of the parents and to encourage regular child 
support payments. Presumed or default orders should occur only in 
limited circumstances.'' \21\ Many States have programs to ensure that 
child support orders are based on the ability to pay. As of September 
2011, at least 21 States and the District of Columbia were operating 
programs designed to ensure that child support orders reflect current 
earnings when orders are initially established and are modified when 
earnings change.\22\ For example, Idaho operates a Default Reduction 
Project, Arizona conducts modification workshops, Kentucky developed 
on-line assistance for parents to modify their orders, and Texas offers 
enhanced Web site assistance for modifying orders to match reduced 
income. In addition, as of April 2011, 38 States and the District of 
Columbia did not treat incarceration as ``voluntary unemployment,'' a 
legal barrier to modifying orders to reflect actual income.\23\ 
Evidence shows that engaging both parents in the order establishment 
process is likely to result in more accurate order setting, avoiding 
default orders, avoiding the unnecessary build-up of arrearages, and 
increasing parental commitment to regularly pay child support.\24\
---------------------------------------------------------------------------

    \21\ The National Child Support Enforcement Association policy 
statement, Setting Current Support Based on Ability to Pay, dated 
January 30, 2013, is available at: http://www.ncsea.org/documents/Ability_to_Pay-final.pdf.
    \22\ Department of Health and Human Services, Office of Child 
Support Enforcement, State Child Support Agencies with Programs to 
Ensure that Child Support Orders Reflect Current Earnings (2012), 
available at: http://www.acf.hhs.gov/programs/css/resource/state-child-support-agencies-with-programs-to-ensure-that-child-support.
    \23\ Thirty two States allow for an order modification when 
noncustodial parents are incarcerated and six other states do not 
have a legal bar against such modifications. See Department of 
Health and Human Services, Office of Child Support Enforcement, 
``Voluntary Unemployment,'' Imputed Income, and Modification Laws 
and Policies for Incarcerated Noncustodial Parents (2012), Project 
of Avoid Increasing Delinquencies, Child Support Fact Sheet, 
available at: http://www.acf.hhs.gov/sites/default/files/ocse/paid_no4_companion.pdf.
    \24\ See Elaine Sorensen and Tess Tannehill, Preventing Child 
Support Arrears in Texas by Improving Front-end Processes (2006), 
available at: http://www.urban.org/UploadedPDF/411829_child_support_arrears.pdf; Center for Policy Research, 
Reducing Child Support Default Orders in Colorado (2007), Colorado 
Division of Child Support Enforcement, Final Report for Grant No. 
90FD0080, available at: https://childsupport.state.co.us/siteuser/do/vfs/Read?file=/cm:Publications/cm:Reports/cm:Colorado_x0020_Default_x0020_Project_x0020_Final_x0020_Report.pdf;
 and Kelly Macatangay, Anton H. Westveld, Brian Kunkel, Intervening 
for Success.(2012) Final Report for Grant No. 90FD0136.

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[[Page 68555]]

    If States are unable to obtain data on the earnings and income of 
the noncustodial parent in a child support proceeding, many States 
impute the noncustodial parent's income. In some cases, imputation of 
income is based on an analysis of a parent's specific education, 
skills, and work experience,\25\ while in other cases, imputation of 
income is standardized based on full-time, full-year work at minimum or 
median wage, particularly if a noncustodial parent is not working, or 
there is no available income information.
---------------------------------------------------------------------------

    \25\ See PIQ-00-03, State IV-D Program Flexibility with Respect 
to Low Income Obligors--Imputing Income; Setting Child Support 
Orders and Retroactive Support; Compromising Arrearages; Referral to 
Work-Related Programs and Other Non-traditional Approaches to 
Securing Support, available at http://www.acf.hhs.gov/programs/cse/pol/PIQ/2000/piq-00-03.htm.
---------------------------------------------------------------------------

    However, research suggests that support orders based on imputed 
income often go unpaid because they are set beyond the ability of 
parents to pay them. The result is high uncollectible arrears balances 
that can provide a disincentive for obligors to maintain employment in 
the regular economy. Inaccurate support orders also can help fuel 
resentment toward the child support system and a sense of injustice 
that can decrease willingness to comply with the law.\26\ The research 
supports the conclusion that accurate support orders that reflect a 
noncustodial parent's actual income are more likely to result in 
compliance with the order, make child support a more reliable source of 
income for children, and reduce uncollectible child support 
arrearages.\27\
---------------------------------------------------------------------------

    \26\ Christy Visher and Shannon Courtney, Cleveland Prisoners' 
Experience Returning Home, Urban Institute (2006), available at 
http://www.urban.org/UploadedPDF/311359_cleveland_prisoners.pdf. 
Also, Maureen R. Waller and Robert Plotnick, Effective Child Support 
Policy for Low-Income Families: Evidence from Street Level Research, 
Journal of Policy Analysis and Management (2001), available at: 
http://www.jstor.org/stable/3325595.
    \27\ For further information, see the report, The Story Behind 
the Numbers: Understanding and Managing Child Support Debt, OCSE 
Study (2008), available at: www.acf.hhs.gov/programs/cse/pol/IM/2008/im-08-05a.pdf.
---------------------------------------------------------------------------

    Before child support programs were computerized, imputation of 
income was used as the basis for establishing support obligations 
because limited information was available to decision-makers. Today, 
however, States have access to multiple interstate data systems, 
including the State and National Directories of New Hires as well as 
the Financial Institution Data Match (FIDM) and Multistate Financial 
Institution Data Match (MSFIDM), that can verify when a noncustodial 
parent has a new job, is claiming unemployment insurance benefits, or 
has quarterly wage information available. Data, not assumptions, are a 
more accurate method of determining the income and resources of 
noncustodial parents.
    Accordingly, we propose to modernize standard practices for setting 
child support awards in order to set more accurate orders based on 
actual income. To address these changes, we propose a revision to Sec.  
302.56(a) to provide a State with sufficient time to address the 
revised requirements of Sec.  302.56. Specifically, we propose that a 
State meet the requirements of Sec.  302.56 within one year after 
completion of its next quadrennial review of its guidelines pursuant to 
Sec.  302.56(e).
    We propose to amend current Sec.  302.56(c)(1) to require 
guidelines to take into consideration a noncustodial parent's 
``actual'' earnings and income rather than ``all'' earnings and income. 
We believe this amendment will afford a State greater flexibility to 
set accurate orders that reflect a noncustodial parent's actual ability 
to pay support. The proposed revision will reflect common practice in 
some States and encourage operational updating in others. We 
specifically invite public comments on this proposed change.
    Additionally, we propose a new criterion as Sec.  302.56(c)(4). We 
propose that State guidelines take into consideration the noncustodial 
parent's subsistence needs (as defined by the State in its guidelines) 
and provide that amounts ordered for support be based upon available 
data related to the parent's actual earnings, income, assets, or other 
evidence of ability to pay, such as testimony that income or assets are 
not consistent with a noncustodial parent's current standard of living. 
``Subsistence'' is defined in the Merriam-Webster dictionary as, ``the 
minimum (as of food and shelter) necessary to support life.'' \28\ A 
number of States incorporate a self-support reserve into their 
guidelines to recognize the noncustodial parents' subsistence needs. 
See PIQ-00-03 (September 14, 2000).\29\ For example, New Jersey defines 
a self-support reserve as the amount of income that the State 
determines is necessary to ensure that a noncustodial parent ``has 
sufficient income to maintain a basic subsistence level and the 
incentive to work so that child support can be paid.'' \30\ This 
reserve amount is either disregarded or used to adjust the child 
support obligation so the noncustodial parent is able to meet his basic 
needs. The goal of this proposal is to establish an accurate child 
support order and obtain compliance with the order based upon the real 
circumstances of the parties and the best interests of the child. The 
IV-D agency must use the guidelines and take into consideration the 
obligated parent's ability to pay, or justify the deviation from the 
application of the guidelines. See PIQ-07-01 (February 6, 2007) 
(requiring similar considerations in the recoupment of medical expenses 
or birthing expenses owed to a State).\31\
---------------------------------------------------------------------------

    \28\ See http://www.merriam-webster.com/.
    \29\ PIQ-00-03, State IV-D Program Flexibility with Respect to 
Low Income Obligors--Imputing Income; Setting Child Support Orders 
and Retroactive Support; Compromising Arrearages; Referral to Work-
Related Programs and Other Non-traditional Approaches to Securing 
Support, available at: http://www.acf.hhs.gov/programs/css/resource/state-iv-d-program-flexibility-low-income-obligors.
    \30\ Rules Governing the Courts of New Jersey, Appendix IX-A 
Considerations in the Use of Child Support Guidelines, Section 7.h., 
Self-Support Reserve, available at: http://www.judiciary.state.nj.us/csguide/app9a.pdf.
    \31\ PIQ-07-01, Use of Federal Income Tax Refund Offset Program 
to recoup medical expenses or birthing expenses owed to a State, 
available at: http://www.acf.hhs.gov/programs/css/resource/tax-refund-to-recoup-medical-or-birthing-expenses-owed-to-state.
---------------------------------------------------------------------------

    The proposed regulation in Sec.  302.56(c)(4) allows a State to 
impute income where the noncustodial parent's lifestyle is inconsistent 
with earnings or income and where there is evidence of income or assets 
beyond those identified. We recognize, however, that some noncustodial 
parents may not make support payments because they are unwilling to do 
so. An example of this would be a noncustodial parent who, despite good 
educational credentials and marketable job skills, simply refuses to 
work. In this situation the court may deviate from the guidelines. We 
specifically invite comments on this provision.
    We also propose a new criterion as Sec.  302.56(c)(5) to prohibit 
the treatment of incarceration as ``voluntary unemployment.'' While the 
treatment of incarceration as voluntary unemployment used to be a 
common State guidelines policy, no more than a dozen States still 
maintain this policy. Treating incarceration as voluntary unemployment 
means that income is imputed and precludes modification of support 
orders. The research suggests that many incarcerated parents often 
leave prison with an average of $15,000-$30,000 or more in unpaid child 
support, with no means to pay

[[Page 68556]]

upon release.\32\ The research also indicates that orders that are 
unrealistically high may undermine stable employment and family 
relationships, encourage participation in the underground economy, and 
increase recidivism.\33\ We want to highlight and to specifically 
invite public comments on this provision.
---------------------------------------------------------------------------

    \32\ See Esther Griswold and Jessica Pearson, ``Twelve Reasons 
for Collaboration Between Departments of Correction and Child 
Support Enforcement Agencies,'' Corrections Today (2003 which is 
available at: http://www.thefreelibrary.com/Twelve+reasons+for+collaboration+between+departments+of+correction...-a0123688074; Jessica Pearson, ``Building Debt While Doing Time: 
Child Support and Incarceration,'' Judges' Journal (2004), which is 
available at: https://peerta.acf.hhs.gov/uploadedfiles/buildingdebt.pdf; Nancy Thoennes, Child Support Profile: 
Massachusetts Incarcerated and Paroled Parents (2002), which is 
available at: http://cntrpolres.qwestoffice.net/reports/profile%20of%20CS%20among%20incarcerated%20&%20paroled%20parents.pdf;
 and Pamela Ovwigho, Correne Saunders, and Catherine Born. The 
Intersection of Incarceration & Child support: A snapshot of 
Maryland's Caseload (2005), which is available at: http://www.familywelfare.umaryland.edu/reports1/incarceration.pdf. See also 
Federal Interagency Reentry Council, Reentry Myth Buster on Child 
Support (2011), available at: http://www.nationalreentryresourcecenter.org/documents/0000/1063/Reentry_Council_Mythbuster_Child_Support.pdf.
    \33\ U.S. Department of Health and Human Services, Office of 
Child Support Enforcement, Incarceration, reentry and Child Support 
Issues: National and State Research Overview (2006), available at: 
http://www.acf.hhs.gov/programs/cse/pubs/2006/reports/incarceration_report.pdf.
---------------------------------------------------------------------------

    Additionally, we propose a new criterion as Sec.  302.56(h) that 
will allow a State to recognize parenting time provisions when both 
parents have agreed to the parenting time provisions or pursuant to 
State guidelines. Parenting time is a legally distinct and separate 
right from the child support obligation. Nonetheless, in practical 
terms, parenting time is an important corollary to child support 
establishment because the child support agency, or finder of fact, 
needs information about the parenting time arrangements in order for 
the guideline amount to be effectively calculated. For the proposed 
parenting time provision, we want to emphasize that this is a minor 
change to existing regulations and merely allows a court or child 
support agency to include a parenting time agreement into the child 
support order when both parents have agreed to the parenting time 
provisions.
    Including both the calculation of support and the amount of 
parenting time in the support order at the same time increases 
efficiency, and reduces the burdens on parents of being involved in 
multiple administrative or judicial processes at minimal cost to the 
child support program. When a State has adopted child support 
guidelines that incorporate parenting time, the parenting time is 
integral to the support order calculation. ``State child support 
guidelines that incorporate parenting time'' refers to those States 
that have guidelines which incorporate allowances (or credits) for the 
amount of time children spend with both parents in the calculation of 
the child support order amount.
    This new parenting time provision is not intended to require State 
IV-D agencies to undertake new activities. IV-D program costs must be 
minimal and incidental to IV-D establishment activities and would not 
have any impact on the Federal budget. Our proposed regulation is 
intended simply to allow the inclusion of an uncontested and agreed 
upon parenting time provision incidental to the establishment of a 
child support order when convenient to the parties, IV-D agency and 
court to do so. We believe that this provision will reflect the current 
practice in some States and will encourage program flexibility in 
others. We specifically invite comments on this provision.
    Finally, we propose to redesignate current Sec.  302.56(h) as Sec.  
302.56(i) and to revise this section. Current Sec.  302.56(h) addresses 
the data that a State must consider as part of the review of a State's 
guidelines pursuant to Sec.  302.56(e) and requires that the analysis 
of the data must be used in the guidelines review to ensure that 
deviations from the guidelines are limited. We propose adding a new 
sentence at the end of this provision stating that deviations from the 
presumptive child support amount may be based on factors established by 
the State. Reasons for deviating from the guidelines in the best 
interest of children often include extraordinary medical expenses, and/
or educational costs of additional dependents.
Section 302.70: Required State Laws
    We propose changes to existing rules in section 302.70 to improve 
efficiency of state programs. OCSE has statutory authority to grant a 
State an exemption from implementing one or more of the laws and 
procedures required under section 466 of the Act if a State can 
demonstrate to the satisfaction of the Secretary that adoption of any 
one or all of the required laws and procedures will not increase the 
effectiveness and efficiency of the State's Child Support Enforcement 
program. Additionally, OCSE may grant an exemption if a State has and 
uses a similar procedure which does not fully comply with the mandate, 
law, or procedure and the State shows evidence that implementation of 
the mandatory procedure would not increase the efficiency and 
effectiveness of the State's existing procedure. In the past, OCSE has 
granted such State exemptions for a period up to 3 years. However, we 
believe that changing the time period to 5 years would reduce paperwork 
while ensuring sufficient accountability and oversight.
    We also propose to amend the provision in Sec.  302.70(d)(2) that 
allows a State to request extensions of its IV-D State plan exemptions 
every 3 years. OCSE believes that the requirement to request an 
extension every 3 years is unnecessary and that a 5-year review would 
be more appropriate. There are two reasons for this proposed change. 
First, OCSE reviews and analyzes initial exemption requests thoroughly 
to ensure that the statutory requirements pursuant to section 466(d) of 
the Act are met. Second, in over 20 years of reviewing extension 
requests for approved exemptions, OCSE has never denied an extension 
request. This proposed amendment to request extensions of IV-D State 
plan exemptions every 5 years will not change OCSE's authority to 
review and to revoke a State's exemption at any time, but it will 
promote efficiency by reducing the burden imposed on States submitting 
exemption extension requests.
Section 302.76: Job Services
    The evidence from recent research studies, including rigorous 
analyses of Texas' NCP Choices and the New York's Strengthening 
Families Through Stronger Fathers Initiative, indicates that child 
support-coordinated work programs can be an effective method of 
increasing child support payments to families.\34\ Although many State 
Child Support Enforcement programs have entered into local or statewide 
partnerships to provide noncustodial parent employment activities, the 
cost of work activities provided under an individual work plan has not 
been allowed as a IV-D reimbursable cost.\35\
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    \34\ For further information, see Daniel Schroeder and Nicholas 
Doughty's report, Texas Non-Custodial Parent Choices: Program Impact 
Analysis (2009), available at https://www.texasattorneygeneral.gov/cs/ofi/ncp_choices_program_impact.pdf. Also, Kye Lippold, Austin 
Nichols, and Elaine Sorensen's report, Strengthening Families 
Through Stronger Fathers: Final Impact Report for the Pilot 
Employment Programs (2011), available at: http://www.urban.org/uploadedpdf/412442-Strengthening-Families-Through-Stronger-Fathers.pdf.
    \35\ See OCSE AT-97-10, Question and Answer 4, under 
Miscellaneous, available at: http://www.acf.hhs.gov/programs/cse/pol/AT/1997/at-9710.htm; OCSE PIQ-98-03, available at: http://www.dshs.wa.gov/pdf/esa/dcs/reports/OCSE_PIQ_90_99.pdf; and OCSE AT 
00-08, Question and Answer 17, available at: http://www.acf.hhs.gov/programs/css/resource/collaborative-efforts-between-iv-d-agencies-and-welfare-to-work.

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[[Page 68557]]

    Section 454(13) of the Act requires that the state plan must 
``provide that the State will comply with such other requirements and 
standards as the Secretary determines to be necessary to the 
establishment of an effective program for locating noncustodial 
parents, establishing paternity, obtaining support orders, and 
collecting support payments.'' Pursuant to section 454(13) of the Act, 
we propose to add a new optional State plan provision, Sec.  302.76, 
Job Services. The proposal permits the State to provide certain 
specified job services to eligible noncustodial parents pursuant to 
Sec.  303.6(c)(5). If the State chooses this option, the state plan 
must include a description of the job services and eligibility 
criteria.
Section 303.3: Location of Noncustodial Parents in IV-D Cases
    Section 303.3 requires IV-D agencies to attempt to locate all 
noncustodial parents or sources of information or assets where that 
information is necessary. In addition to the Federal Parent Locator 
Service, the existing regulation lists appropriate locate sources, 
including ``police, parole, and probation records.'' The proposed 
change to Sec.  303.3(b)(1) specifically adds ``corrections 
institutions'' to this list.
    This proposed change will encourage child support agencies to use 
the available locate tools already at their disposal to identify 
incarcerated noncustodial parents and assure that their orders are 
appropriate.
Section 303.6: Enforcement of Support Obligations
    In addition to the State guidelines changes, we propose to update 
Federal regulations in Sec.  303.6 requiring States to have procedures 
in place ensuring that civil contempt proceedings take into 
consideration the subsistence needs of the noncustodial parent.
    We believe our effort to modernize current practices in this 
program area will encourage noncustodial parents to comply with child 
support orders, maintain legitimate employment, and minimize the 
accumulation of unpaid child support arrearages. This will ultimately 
help noncustodial parents to better fulfill their financial 
responsibilities toward their children.
    Existing Sec.  303.6(c) requires that the IV-D agency must maintain 
and use an effective system for enforcing a child support obligation by 
complying with the provisions in existing Sec.  303.6(c)(1) through 
(4). The IV-D agency must use this enforcement system for all cases 
referred to the IV-D agency or applying for services under Sec.  302.33 
in which a child support order has been established.
    To ensure that the low-income noncustodial parent is able to comply 
with the court order, we propose to redesignate paragraph (c)(4) to 
(c)(5) and add new paragraph (c)(4) requiring States to have procedures 
in place ensuring that in civil contempt proceedings, such enforcement 
activities take into consideration the noncustodial parent's 
subsistence level and income. In addition, we encourage States to 
develop procedures to take into account the noncustodial parent's 
subsistence level in other child support enforcement procedures such as 
credit bureau reporting, license revocation, State tax refund offset, 
and liens. Some States have reported that they are already doing this 
based on discretionary needs-based analysis that the States have 
developed for implementing several of these enforcement tools. We 
invite comments on whether OCSE should regulate having procedures for 
considering the noncustodial parent's subsistence level for other 
enforcement activities in the future.
    In addition, we propose in new paragraph (c)(4) that the IV-D 
agency must ensure, in a civil contempt proceeding, that a purge amount 
the noncustodial parent must pay in order to avoid incarceration takes 
into consideration actual earnings and income and the subsistence needs 
of the noncustodial parent. In addition, we propose that a purge amount 
must be based upon a written evidentiary finding that the noncustodial 
parent has the actual means to pay the amount from his or her current 
income or assets. This proposal will assure a fundamentally fair 
determination of whether a noncustodial parent is able to comply with 
the court order in a child support civil contempt proceeding that can 
lead to jail time. This proposed provision is intended to assist States 
seeking to add due process protections in accordance with the U.S. 
Supreme Court's recent decision in Turner v. Rogers, 564 U.S. _, 131 S 
Ct. at 2507 (2011), which noted that civil contempt proceedings must 
assure a ``fundamentally fair determination . . . whether the 
supporting parent is able to comply with the support order.'' As noted 
in Turner, ``A court may not impose punishment in a civil contempt 
proceeding when it is clearly established that the alleged contemnor is 
unable to comply with the terms of the order.'' Turner, 131 S. Ct. at 
2516, quoting Hicks v. Feiock, 485 U.S. 624, 638, n. 9.
    Under this provision, a court would not be allowed to set a 
standardized purge payment amount in a IV-D case, including a fixed 
dollar amount, a fixed percentage of the arrearage, or a fixed number 
of monthly payments, unless the provisions of proposed Sec.  
303.6(c)(4) are met. Under proposed Sec.  303.6(c)(4), a IV-D agency, 
for example, could implement procedures to assist the court in its 
determination, for example, by pre-screening cases to determine whether 
the case is appropriate for a contempt proceeding. The issue is not the 
use of contempt procedures per se, but contempt orders that, if not 
satisfied, can lead to jail time. While some States routinely use show 
cause or contempt proceedings, jail is not a typical outcome. We 
believe the proposed provision will provide safeguards to reduce the 
risk of erroneous deprivation of liberty in a child support civil 
contempt case. We note that a contempt order may not be monetary, but 
instead may require certain actions by the obligor, such as obtaining 
employment or participation in job search or other work activities. So 
long as the obligor has the present ability to do what is ordered of 
him or her, HHS believes such an order would appear to comply with the 
Turner decision.
    In an effort to make the program more effective and to increase 
regular child support payments, we propose program standards related to 
providing certain job services for eligible noncustodial parents 
responsible for paying child support. These services are designed to 
complement traditional enforcement tools and to help noncustodial 
parents find suitable employment opportunities so they can support 
their children.
    Stable child support collections depend on the economic stability 
of the noncustodial parent. In fact, over 70 percent of child support 
collections are made through wage withholding by employers.\36\ So 
while the child support program works well for those parents who have 
steady incomes through regular employment or other means, it has been 
less effective for the 20 to 30 percent of noncustodial parents who 
have a limited ability to pay child support because of their limited

[[Page 68558]]

earnings.\37\ For example, 70 percent of unpaid child support debt is 
owed by parents with no or low reported earnings.\38\ Many poor 
noncustodial parents, however, have little or no connection to the 
formal labor market and therefore cannot pay consistent support.\39\
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    \36\ DCL-13-16, OCSE Preliminary FY 2012 Data Report, is 
available at: http://www.acf.hhs.gov/programs/css/resource/fy-12-preliminary-data-report-announcement.
    \37\ For further information, see Elaine Sorensen and Chava 
Zibman's report, Poor Dads Who Don't Pay Child Support: Deadbeats or 
Disadvantaged? (2001), available at: http://www.urban.org/UploadedPDF/anf_b30.pdf.
    \38\ For further information, see Elaine Sorensen, Liliana 
Sousa, and Simon Schaner's report, Assessing Child Support Arrears 
in Nine Large States and the Nation (2007), available at: http://aspe.hhs.gov/hsp/07/assessing-CS-debt/.
    \39\ For further information, see Elaine Sorensen and Helen 
Oliver's report, Policy Reforms are Needed to Increase Child Support 
from Poor Fathers (2002), available at: http://www.urban.org/uploadedPDF/410477.pdf.
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    Traditional enforcement tools often prove ineffective in getting 
unemployed noncustodial parents to pay child support.\40\ In most 
cases, offering job services is a more effective approach for 
increasing the ability of unemployed noncustodial parents to get and 
keep a job and to pay child support on a regular basis, while holding 
parents accountable for supporting their children. As of February 2014, 
30 States and the District of Columbia are operating 77 work-oriented 
programs for noncustodial parents with active child support agency 
involvement. Three of these States are operating statewide programs--
Georgia, Maryland, and North Dakota. Many other States are operating 
programs in multiple counties. We estimate that roughly 30,000 
noncustodial parents were served by these programs in 2013. Many of 
these programs are associated with better child support and employment 
outcomes, and evaluations show they usually lead to increased support 
payments.\41\
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    \40\ For further information, see Maria Cancian, Daniel R. 
Meyer, and Eunhee Han's article, Child Support: Responsible 
Fatherhood and the Quid Pro Quo (2011), The ANNALS of the American 
Academy of Political and Social Science 635:140.
    \41\ U.S. Department of Health and Human Services, 
Administration for Children and Families, Office of Child Support 
Enforcement, Work-Oriented Programs for Noncustodial Parents with 
Active Child Support Agency Involvement (2014), available at: 
https://www.acf.hhs.gov/sites/default/files/programs/css/work_oriented_programs_for_non_custodial_parents_2014.pdf.
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    These programs build on a long history of national demonstrations 
providing employment services to noncustodial parents. The Parents' 
Fair Share (PFS) demonstration in the 1990s tested a comprehensive 
employment program designed to improve child support payments and other 
outcomes for unemployed noncustodial parents with children receiving 
public assistance. The evaluation of PFS found that this intervention 
increased reliable child support payments.\42\ Subsequent 
demonstrations or initiatives included the OCSE Responsible Fatherhood 
Programs (1998-2000), Partners for Fragile Families (2000-2003), 
Welfare-to-Work funded programs (1998-2004), and the Fathers at Work 
Demonstration (2003-2007). All of these programs aimed at increasing 
low-income parents' earnings and their child support payments, as well 
as increasing their involvement in their children's lives.\43\ These 
programs tended to generate appreciable gains in child support 
payments.
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    \42\ For further information, see Fred Doolittle, Virginia Knox, 
Cynthia Miller, and Sharon Rowser's report, Building Opportunities, 
Enforcing Obligations: Implementation and Interim Impacts of 
Parents' Fair Share (1998), available at: http://www.mdrc.org/sites/default/files/full_38.pdf.
    \43\ For further information, see Sarah Avellar, M. Robin Dion, 
Andrew Clarkwest, Heather Zaveri, Subuhi Asheer, Kelley Borradaile, 
Megan Hague Angus, Timothy Novak, Julie Redline, and Marykate 
Zukiewicz's report, Catalog of Research: Programs for Low-Income 
Fathers (2011), OPRE Report # 2011-20, available at: http://www.acf.hhs.gov/programs/opre/resource/catalog-of-research-programs-for-low-income-fathers.
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    We propose to add Sec.  303.6(c)(5) to provide program standards 
related to the proposed optional State plan provision for job services 
for noncustodial parents owing child support through the IV-D program 
that are reasonably expected to increase child support payments. Our 
proposed job services program standards emphasize rapid labor force 
attachment and job retention strategies rather than long-term career 
development. While there are other contexts in which services to 
promote access to better jobs and careers are important, we have 
determined that in the context of unemployed noncustodial parents with 
child support responsibilities, federal matching funds should be 
limited to those services best calculated to lead to rapid employment 
entry and employment retention. States may determine whether to provide 
job services and how to design an evidence-informed employment program 
that improves child support outcomes. State child support work-oriented 
programs have implemented a number of promising strategies such as 
tiered employment, sectoral strategies, and job-driven training--
training with a focus on business and labor market needs. Allowable job 
services are limited to those services which will help noncustodial 
parents find and maintain work so they can pay consistent and ongoing 
child support payments.
    To be eligible for job services, we propose that the noncustodial 
parent must have a IV-D case, have a current child support order, be 
unemployed or not making regular child support payments, not be 
receiving TANF assistance or assistance funded with State dollars 
counting toward TANF maintenance of effort, not be enrolled in a 
Supplemental Nutrition Assistance Program Employment and Training 
program under 7 CFR 273.7 and 273.24, not be receiving the same job 
services from Workforce Investment Act (WIA) under 20 CFR part 652 and 
parts 660-671, and not be receiving a Federal Pell Grant under 34 CFR 
part 690. The State child support agency may set additional eligibility 
criteria.
    We propose that allowable job services (for which FFP will be 
available under Sec.  304.20(b)(3)(ix)) include:
     Job search assistance;
     job readiness training;
     job development and job placement services;
     skills assessments to facilitate job placement;
     job retention services;
     certificate programs and other skills training directly 
related to employment, which may include activities to improve literacy 
and basic skills, such as programs to complete high school or a General 
Education Development (GED) certificate, as long as they are included 
in the same job services plan; and
     work supports such as transportation assistance, uniforms, 
or tools.
    We have included a focused set of job services based on rigorous 
research that shows positive effects of these types of services on the 
employment of noncustodial parents and their child support 
payments.\44\ This package includes certificate programs and other 
skills training directly related to employment. Previous successful 
programs have included a package of services including certificate 
programs and skills training, which only minimally increase the cost of 
this provision. We specifically invite comment on our proposed 
eligibility

[[Page 68559]]

criteria and the list of allowable job services.
---------------------------------------------------------------------------

    \44\ For further information, see Daniel Schroeder and Nicholas 
Doughty's report, Texas Non-Custodial Parent Choices: Program Impact 
Analysis (2009), available at https://www.texasattorneygeneral.gov/cs/ofi/ncp_choices_program_impact.pdf. Also, Kye Lippold, Austin 
Nichols, and Elaine Sorensen's report, Strengthening Families 
Through Stronger Fathers: Final Impact Report for the Pilot 
Employment Programs (2011), available at: http://www.urban.org/uploadedpdf/412442-Strengthening-Families-Through-Stronger-Fathers.pdf.
---------------------------------------------------------------------------

    Subsidized employment is not included as an allowable job service 
above, but we ask for comment regarding its inclusion here. Subsidized 
employment programs provide jobs to people who cannot find employment 
in the regular labor market and use public funds to pay all or some of 
their wages. Evaluations of subsidized employment programs suggest that 
they are effective at providing jobs in the short term and can have 
valuable ancillary benefits, including reduced welfare receipt and 
recidivism among ex-offenders.\45\ However, including subsidized 
employment in a jobs program can increase the cost of the program, and 
our principal focus here is on low-cost job services. We invite 
comments on the effectiveness of including subsidized employment as an 
allowable job service, including experience and evidence of the cost-
effectiveness of using this strategy to improve regular child support 
payment from low-income parents, and if allowed, options we might 
consider for limiting the costs of subsidized jobs efforts, such as 
limits on the length or amount of the subsidy. Since payment of child 
support obligations is the goal of job services in child support, we 
also ask for comments on the potential implications of withholding 
child support from IV-D funded subsidized wages.
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    \45\ For further information, see Cindy Redcross, Megan 
Millenky, Timothy Rudd, and Valerie Levshin. ``More than a Job: 
Final Results from the Evaluation of the Center for Employment 
Opportunities (CEO) Transitional Jobs Program,'' OPRE Report 2011-18 
(January 2012) available at: http://www.acf.hhs.gov/sites/default/files/opre/more_than_job.pdf. In addition, see Dan Bloom, Sarah 
Rich, Cindy Redcross, Erin Jacobs, Jennifer Yahner, and Nancy 
Pindus. ``Alternative Welfare-to-Work Strategies for the Hard-to-
Employ: Testing Transitional Jobs and Pre-Employment Services in 
Philadelphia,'' MDRC, (October 2009), available at: http://www.acf.hhs.gov/programs/opre/resource/alternative-welfare-to-work-strategies-for-the-hard-to-employ-testing.
---------------------------------------------------------------------------

Section 303.8: Review and Adjustment of Child Support Orders
    Effective review and adjustment of child support orders is an 
important step in ensuring that noncustodial parents comply with their 
child support obligations. Without an effective system to change child 
support orders to reflect actual ability to pay, arrears will 
accumulate. The unnecessary accrual of arrears is harmful because it 
hinders payment of regular support payments, leads to uncollectible 
debt, limits work opportunities for noncustodial parents, and 
interferes with parent-child relationships.\46\ To address the needs of 
families with a parent in prison, numerous States, including Missouri, 
Nevada, Oklahoma, Texas, and West Virginia, already communicate with 
incarcerated parents about review and adjustment policies and the 
importance of requesting modification of their child support 
orders.\47\
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    \46\ For further information, see Carolyn J. Heinrich, Brett C. 
Burkhardt, and Hilary M. Shager, Reducing Child Support Debt and Its 
Consequences: Can Forgiveness Benefit All? (2010), available at: 
http://www.irp.wisc.edu/research/childsup/cspolicy/pdfs/2007-09/FamiliesForward_3_19_10.pdf.
    \47\ For further information, see Department of Health and Human 
Services, Office of Child Support Enforcement, ``Voluntary 
Unemployment,'' Imputed Income, and Modification Laws and Policies 
for Incarcerated Noncustodial Parents (2012), Project of Avoid 
Increasing Delinquencies--Child Support Fact Sheet, available at: 
http://www.acf.hhs.gov/sites/default/files/ocse/paid_no4_companion.pdf.
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    Section 466(a)(10) of the Act requires a State to have in effect 
laws requiring the use of procedures for review and adjustment of child 
support orders. Existing regulations in Sec.  303.8 specify the 
requirements that a State must meet with respect to seeking adjustments 
to child support orders in IV-D cases. The current regulation 
establishes both a required system for review and adjustment for cases 
with assignments under part A of the Act and a means of accessing the 
review and adjustment process for other cases based upon a request from 
either parent. We propose to redesignate Sec.  303.8(b)(2) through 
(b)(5) as (b)(3) through (b)(6). Also, we propose to add a new 
paragraph (b)(2) that would allow the child support agency to elect in 
its State plan the option to initiate the review of a child support 
order and seek to adjust the order, if appropriate, after being 
notified that a noncustodial parent will be incarcerated for more than 
90 days. This review would not need a specific request, provided both 
parents had received notice. In electing this State plan option, the 
State may also need to consider whether further changes to State laws 
are required to implement this procedure. In most States, incarcerated 
parents must take affirmative steps to have their orders modified. We 
have found that very few incarcerated parents petition for a 
modification, even though their order could be suspended during 
incarceration. As a result, by the time that noncustodial parents are 
released from prisons, their child support arrearages have grown to 
very high levels, and may help drive the noncustodial parents into the 
underground economy to avoid paying support and may create an 
additional barrier to parent-child contact.\48\ A number of States, 
including Arizona, California, Michigan, Vermont, and the District of 
Columbia permit their child support agency to initiate review and 
adjustment upon notification that the noncustodial parent has been 
incarcerated.\49\ During the first year of implementing this new 
procedure, one State was able to modify over 300 orders resulting in an 
average of $5,156 in arrearages being avoided per case.\50\ We 
specifically invite comments on this provision, including any 
experiences commenters have had in trying to adjust orders for 
incarcerated noncustodial parents.
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    \48\ For further information, see the Report of the Re-Entry 
Policy Council: Charting the Safe and Successful Return of Prisoners 
to the Community, available at: http://www.reentrypolicy.org/publications/1694;file. See also Carmen Solomon-Fears, Gene Falk, 
and Adrienne L. Fernandes-Alcantara, Child Well-Being and 
Noncustodial Fathers (2013), Congressional Research Service.
    \49\ In 2012, Vermont enacted Senate Bill 203 that allows the 
child support program to file a motion to modify child support if a 
party is incarcerated from more than 90 days. For information about 
the other jurisdictions, see Department of Health and Human 
Services, Office of Child Support Enforcement, ``Voluntary 
Unemployment,'' Imputed Income, and Modification Laws and Policies 
for Incarcerated Noncustodial Parents (2012), Project of Avoid 
Increasing Delinquencies--Child Support Fact Sheet, available at: 
http://www.acf.hhs.gov/sites/default/files/ocse/paid_no4_companion.pdf.
    \50\ For further information, see the final report on Modifying 
Orders for DC Prisoners: An 1115 Demonstration Project (2006), 
abstract available at: http://archive.acf.hhs.gov/programs/cse/grants/abstracts/by_state.html.
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    In addition, we propose to redesignate existing Sec.  303.8(b)(6) 
which requires notice ``not less than once every three years,'' to 
Sec.  303.8(b)(7) and (b)(7)(i) and to add a new paragraph (b)(7)(ii) 
to add that a notice of the right to request a review and adjustment is 
also required when the IV-D agency has knowledge that a parent is 
incarcerated. Alabama and Texas provide inmates with information about 
the child support program and the steps needed to request a review of 
their child support order.\51\ Providing notice is a necessary first 
step in informing both parents of the ability to request a modification 
of their order when a parent has been incarcerated.
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    \51\ For further information, see Department of Health and Human 
Services, Office of Child Support Enforcement, ``Voluntary 
Unemployment,'' Imputed Income, and Modification Laws and Policies 
for Incarcerated Noncustodial Parents (2012), Project of Avoid 
Increasing Delinquencies--Child Support Fact Sheet, available at: 
http://www.acf.hhs.gov/sites/default/files/ocse/paid_no4_companion.pdf.
---------------------------------------------------------------------------

    In addition, Sec.  303.8 specifies requirements that a State must 
meet with respect to seeking adjustments to child support orders in IV-
D cases. Existing paragraph (d) of this section specifies that if the 
review indicates the

[[Page 68560]]

need to provide for the health care needs of the children in the order, 
such a need must constitute adequate justification under State law to 
petition for adjustment of the order, regardless of whether an 
adjustment in the amount of child support is necessary. Existing 
paragraph (d) restricts consideration of Medicaid as medical support.
    Since current OCSE policy does not consider the eligibility for or 
receipt of Medicaid to meet the health care needs of the child(ren), 
States are required to include private health insurance or establish a 
cash medical support order to address the child(ren)'s health care 
needs pursuant to Sec.  303.31(b). Although this has been a 
longstanding policy,\52\ we realize that our existing regulation 
restricts existing State flexibility available under the current 
statute and that it is no longer appropriate to restrict Medicaid, 
CHIP, and other coverage plans available in the State as part of 
medical support. In order to provide a State with flexibility to 
establish and enforce medical support obligations whenever a parent has 
access to health care coverage--private or public--at a reasonable 
cost, consistent with section 452(f) of the Act, OCSE proposes to 
delete the last sentence of paragraph (d) of Sec.  303.8 which 
prohibits Medicaid from being considered medical support.
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    \52\ For further information, see AT-91-02, http://www.acf.hhs.gov/programs/cse/pol/AT/1991/at-9102.htm, AT-92-02, 
http://www.acf.hhs.gov/programs/cse/pol/AT/1992/at-9202.htm, AT-92-
12, http://www.acf.hhs.gov/programs/cse/pol/AT/1992/at-9212.htm, and 
AT-08-08, http://www.acf.hhs.gov/programs/cse/pol/AT/2008/at-08-08.htm.
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Section 303.11: Case Closure Criteria
    Case closure, Sec.  303.11, is another area where changes in 
existing regulations will increase program flexibility, effectiveness, 
and efficiency. Case closure regulations were initially promulgated in 
1989. Since then, advances in technology have greatly increased the 
likelihood that if State IV-D agencies have sufficient information 
about a noncustodial parent, they can generally locate the noncustodial 
parents and find legitimate income and assets.
    The goal of the proposed case closure regulations is to direct 
resources for cases where collections are possible and to ensure that 
families have more control over whether to receive child support 
services. Under current case closure regulations, States are not 
permitted to close cases except under certain narrow and specific 
circumstances. This can mean that a State may be required to keep a 
case open for decades, well after the child has emancipated, and 
regardless of whether the family wants continued services. State case 
closure procedures are automated and subject to audits.
    The National Council of Child Support Directors provided OCSE with 
recommendations for improving the effectiveness and efficiency of the 
case closure criteria, while at the same time, ensuring that resources 
are directed to working cases and that children receive services 
whenever there is any reasonable likelihood for collections in the 
future. Additionally, we sought Tribal input in a formal fashion as 
discussed in the Tribal Impact Statement.
    The proposals in this regulation are intended to carry out good 
customer service and management practices in order to provide needed 
services where there is any reasonable chance to successfully work a 
case. The proposed regulation also ensures that safeguards are in place 
to keep recipients apprised of case closure actions. Cases are not 
closed without taking into consideration any new information provided 
by the affected parties.
    Section 454(4)(A)(ii) of the Act requires a State to provide IV-D 
services to any individual who files an application for services. In 
addition, sections 408(a)(3) and 454(29) of the Act require TANF 
assistance recipients to assign their rights to child support and to 
cooperate with the child support program in obtaining support. Existing 
regulations allow a State to close IV-D cases only under certain 
restricted circumstances even when the State is no longer able to 
provide effective and productive child support services. In all cases 
where case closure is proposed, recipients of child support services 
are given notice of the intent to close the case and are provided an 
opportunity to respond with information and to request that the case be 
kept open or, after the case is closed, to reopen the case.
    In an effort to modernize our regulations, we propose several new 
case closure criteria and revisions to existing criteria in Sec.  
303.11 that are intended to provide families with effective child 
support enforcement services, promote State flexibility, and ensure the 
efficient use of State and Federal resources. While the NPRM expands 
the number of case closure criteria, it also strengthens the case 
closure notice provisions to ensure that recipients are kept apprised 
of case closure actions and understand how to request additional 
services. The proposals in this regulation aim to balance good 
management and workable administrative decisions with providing needed 
services, always erring in favor of including any case in which there 
is a reasonable chance of success.
    In Sec.  303.11(b), we propose to clarify that a IV-D agency is not 
required to close a case that is otherwise eligible to be closed under 
that section. Case closure regulations are designed to give a State the 
option to close cases, if certain conditions are met, and to provide a 
State flexibility to manage its caseload. If a State elects to close a 
case under one of these provisions, we propose the State maintain 
supporting documentation for its decision in the case record. We 
emphasize that closing a case will not affect the legality of the 
underlying order. The child support order, including any payment or 
installment of support such as arrearages due under the order, remains 
in effect and legally binding.
    We propose a new criterion as Sec.  303.11(b)(2) that will allow a 
State to close cases where there is no current support order and all 
arrearages are owed to the State. This provision is intended to afford 
the State more resources to enforce those cases where debt is owed to 
families rather than to the State.
    We propose a new criterion as Sec.  303.11(b)(3) that will allow 
the IV-D agency to close arrearages-only cases against low-income 
senior citizens who are entering or have entered long-term care 
placement, and whose children have already reached majority age. In 
addition, these noncustodial parents must have no income or assets 
available above the subsistence level that could be levied or attached 
for support. The first generation of orders in the IV-D program was 
issued more than 35 years ago. We recognize that a portion of our 
noncustodial parent population is aging, many of whom may depend on 
fixed incomes. Old child support debt, carried well after the children 
have become adults and sometimes parents themselves, could pose a 
barrier for aging parents to obtain affordable housing, basic income, 
and health care. We believe enforcement efforts against these 
noncustodial parents are not only ineffective, but are also an 
inefficient way to expend child support resources. We would like to 
hear from States and other stakeholders about their experiences working 
with low-income, aging noncustodial parents, and receive 
recommendations for this rule.
    OCSE has redesignated Sec.  303.11(b)(2) as (b)(4) and proposes to 
add a new criterion as Sec.  303.11(b)(5) which allows a State to close 
cases when the noncustodial parent is either living with the minor 
children as the primary caregiver or is a part of an intact two-parent 
household, and the IV-D agency

[[Page 68561]]

has determined that services either are not appropriate or are no 
longer appropriate. This provision is intended to address situations 
where parents reconcile so services are no longer needed, as well as 
intact two-parent families where one parent works or is seeking work 
out of State and child support services were never needed. We have also 
redesignated paragraph (b)(3) as (b)(6).
    When States have made repeated efforts over time to locate 
noncustodial parents, and those efforts are unsuccessful because of 
inadequate identifying or location information, States should be 
allowed to close those cases and to focus efforts on productive cases. 
Current Sec.  303.11(b)(4)(i) permits a State to close cases that have 
identifying information, like full names, dates of birth, and verified 
Social Security Numbers, after 3 years, in which locate efforts have 
been exhausted. For those cases with sufficient identifying information 
and with enhanced locate tools, such as the National Directory of New 
Hires (NDNH) that provides current data on new hires and quarterly wage 
data and the Federal Case Registry (FCR), as well as tax information 
from the Internal Revenue Service and financial information from 
financial institutions data match, State experience has been that if a 
State is able to locate parents and assets, it is generally within 2 
years. Moreover, the NDNH data are only retained for 2 years. Given 
that, we propose to redesignate paragraph (b)(4) as paragraph (b)(7) 
and to revise the 3-year locate period in newly designated Sec.  
303.11(b)(7)(i) to a 2-year locate period. Given the low success rate 
for collections after 2 years, the extra time and resources that would 
have been used to locate may be better used to enforce other cases 
where appropriate.
    Similarly, under current Sec.  303.11(b)(4)(ii), a State is allowed 
to close cases after 1 year if it does not have sufficient identifying 
information, such as a date of birth or a verified Social Security 
Number, to initiate an automated locate effort. For the same reasons 
noted in the previous paragraph, we propose changing the locate period 
from a 1-year period to a 6-month period in proposed Sec.  
303.11(b)(7)(ii).
    Also, proposed Sec.  303.11(b)(7)(iii) adds a provision to allow a 
State to close cases after a 1-year period when there is sufficient 
information to initiate an automated locate effort, such as full names 
and dates of birth, but locate interfaces are unable to verify Social 
Security Numbers. OCSE implemented an interface between its Federal 
Parent Locator Service (FPLS) and the Social Security Administration's 
Enumeration Verification System (EVS) in 1996. FPLS is a computerized 
national location network that provides States with the most timely, 
accurate information available to locate noncustodial parents for the 
purpose of establishing or enforcing child support orders. The EVS 
system is an automated process to verify, correct, and identify Social 
Security Numbers. It supports the correct identification of individuals 
when incomplete or duplicate Social Security Numbers are found in child 
support enforcement records. States are required to use EVS and to 
obtain as much pertinent information as possible from custodial 
parents. However, if after 1 year neither EVS nor FPLS are able to 
verify Social Security Numbers, OCSE believes that case closure is 
warranted. Without sufficient information to use enhanced locate tools 
like EVS and the FPLS, locate efforts are futile and work time may be 
better allocated to other areas of enforcement.
    Current Sec.  303.11(b)(5) lists a limited number of circumstances 
under which a State may close cases if it determines a noncustodial 
parent cannot pay support for the duration of the child's minority. We 
propose to redesignate the existing provision as Sec.  303.11(b)(8) and 
to add the phrase ``the child has reached the age of majority'' to the 
first subparagraph under the proposed provision. This will allow a 
State to close both current support and arrearages-only cases if the 
circumstances described in proposed (b)(8) are met. We have also 
revised the proposed language by moving the phrase, ``and shows no 
evidence of support potential'' earlier in the paragraph to clarify 
that this condition applies to all of the circumstances described in 
proposed (b)(8). The current provision also allows a State to close 
cases in which the noncustodial parent has been incarcerated ``with no 
chance for parole'' and has no income or assets above the subsistence 
level, which could be levied or attached for support. We believe the 
``no chance for parole'' requirement unduly restricts a State's 
flexibility to determine that the child support case is unproductive 
and should be closed. Therefore, we propose to eliminate the phrase 
``with no chance for parole.'' We also propose to add a new provision 
that will allow a State to close cases in which the noncustodial parent 
cannot pay support and shows no evidence of support potential despite 
multiple referrals for services over a 5-year period, which have not 
been successful. A State will have the discretion to determine what 
services are appropriate and available under State law. Finally, we 
have added that these cases can only be closed under proposed (b)(8) if 
the noncustodial parent's does not have income or assets ``above the 
subsistence level.'' We believe that the IV-D agency should only pursue 
enforcement on these cases if the noncustodial parent has income or 
assets above the subsistence level (as defined by the State).
    We have also added a new criterion Sec.  303.11(b)(9) to allow a 
State to close a case when a noncustodial parent's sole income is from 
Supplemental Security Income (SSI) payments made pursuant to sections 
1601 et seq., of title XVI of the Act, 42 U.S.C. 1381, et seq., from 
both SSI and benefits pursuant to title II of the Act, or from other 
needs-based benefits. We are including the concurrent SSI/title II 
beneficiary in this proposal, because the noncustodial parent's income 
level is low enough to be eligible for SSI. Therefore, we believe that 
these cases should be closed since they would be unproductive for the 
IV-D agency to pursue. Additionally, we seek comments on whether 
additional guidance is warranted to strengthen protection of SSI, e.g., 
requiring enhanced notice provisions recognizing these exceptions to 
garnishment. We have also redesignated existing paragraphs (b)(6)-
(b)(8) as paragraphs (b)(10)-(b)(12).
    As previously discussed, we proposed under Sec.  302.33(a)(6) to 
allow a State to offer limited child support services. Currently, there 
is no corresponding provision that allows a State to close these cases 
opened under Sec.  302.33(a)(6), without first waiting for the 
recipient of services to request case closure. Therefore, we propose a 
new criterion Sec.  303.11(b)(13) that will allow the State to close a 
non-IV-A case after a limited service under Sec.  302.33(a)(6) has been 
completed without providing the notice under Sec.  303.11(d)(1). 
(Section 302.33(a)(6) requires that the individual be notified when 
applying for limited service(s) that the case will be closed after the 
limited service is completed.) However, after the case is closed, the 
IV-D agency must notify the recipient in accordance with Sec.  
303.11(d)(6). We have also redesignated current paragraph (b)(9) to 
(b)(14).
    In non-IV-A cases, or cases where the custodial parent and/or 
child(ren) does not receive cash assistance from the State, the State 
is required to distribute child support payments to the recipient of 
child support services. Although many State child support programs 
distribute payments through debit cards, it remains extremely important 
for the

[[Page 68562]]

recipient of services to keep the State informed of his or her current 
mailing address to ensure that the case can be processed effectively. 
If a State is unable to contact a recipient of services, current Sec.  
303.11(b)(10) requires the State to make an attempt of at least one 
letter sent by first-class mail to the recipient's last known address 
within 60 calendar days before beginning the process of case closure. 
If the attempt fails and the State does not hear from the recipient of 
services within the 60 days, under current paragraph (c), the State 
must then send another letter to inform the recipient of services of 
its intent to close the case in 60 days. In situations where the letter 
sent in the first attempt is returned by the Postal Service as 
undeliverable with no forwarding address, the State must still wait the 
full 60 days from the date the letter was mailed before sending the 60-
day case closure notice. We intend to streamline the case closure 
process by eliminating the 60-day wait requirement under proposed Sec.  
303.11(b)(15). We consider it to be more efficient to allow a State to 
attempt to contact the recipient of services through at least two 
different methods. With today's technology, there are many different 
options when it comes to notifying clients, such as first-class mail, 
electronic mail, text messaging, and telephone calls. A State will have 
discretion to determine what methods are most appropriate on a case-by-
case basis. As emphasized in Action Transmittal 10-11, ``Alternative 
Methods to Meet the Monthly Requirement,'' however, the underlying 
policy goal is effective notice.
    We redesignated existing paragraphs (b)(11)-(b)(14) as (b)(16)-
(b)(19) and propose a new criterion at Sec.  303.11(b)(20) to provide a 
State with flexibility to close cases referred inappropriately by the 
IV-A, IV-E, and Medicaid programs. We encourage State IV-D agencies and 
assistance programs, like IV-A, IV-E, and Medicaid, to work together to 
define referral criteria to ensure only appropriate cases are referred 
to the IV-D agency. The term appropriate is used in the regulation 
because section 454(4)(A) of the Act requires IV-D agencies to provide 
services ``as appropriate.'' Primarily due to automated interfaces 
between programs, a very small number of cases referred to the IV-D 
agency are plainly inappropriate for child support enforcement 
services, but existing regulations do not provide State IV-D agencies 
with a basis for closing such cases. We believe that these programs and 
child support agencies work hard to communicate regularly and 
effectively to assist each other in updating their respective case 
information to ensure that referrals are made appropriately.
    However, there are rare instances when a State inadvertently opens 
cases inappropriately referred for child support services. Therefore, 
we recommend a new criterion that will allow a IV-D agency to close a 
case that has been opened to establish or enforce child support because 
of an inappropriate referral from another assistance program.
    For example, in assistance cases which are referred for IV-D 
services, both parents may be living at home and functioning as an 
intact family although the parents are not married and paternity has 
not been established. Since both parents are living with their child, 
and there is no noncustodial parent, the IV-D agency may determine that 
pursuing the case is not appropriate for child support enforcement. 
Another example could be an intact family that is eligible for TANF. A 
married parent applied for TANF, while the other parent has left the 
area to find work. Since the family continues to function as an intact 
family, although one parent is away for economic reasons, the IV-D 
agency may determine that it is detrimental to the family to pursue 
child support. In these circumstances, we believe the IV-D agency 
should be in communication with the IV-A agency to ensure that the 
decision to close the IV-D case will not be viewed by the IV-A agency 
as noncooperation by the recipient of services.
    Another example of an inappropriate referral would be for a family 
receiving a non-recurring, short-term TANF benefit that does not fall 
within the definition of TANF assistance under Sec.  260.31 as required 
by existing law and policy \53\ that was unnecessarily referred to the 
IV-D program in error. In cases where there is no legal authority to 
require an assignment and the case was inappropriately opened by the 
IV-D agency, we believe that the IV-D agency should be able to close 
the case.
---------------------------------------------------------------------------

    \53\ For further information, see AT-98-24, August 19, 1998, 
available at: http://www.acf.hhs.gov/programs/cse/pol/AT/1998/at-9824.htm.
---------------------------------------------------------------------------

    Also, in IV-E cases which are referred to the IV-D agency, there 
may be cases where children are expected to be in foster care for only 
a short time before being reunited with their family or before adoption 
proceedings are finalized. The IV-D agency may determine that it is not 
appropriate to pursue child support. Finally, as discussed above in 
proposed Sec.  302.33(a)(4), we provide State IV-D agencies with 
additional flexibility to determine whether notice to a family in which 
a child no longer receives foster care maintenance payments is 
appropriate.
    While we believe that inappropriate referrals are limited in 
number, we believe a State should have the flexibility to close these 
cases on a case-by-case basis under proposed Sec.  303.11(b)(20). We 
specifically seek public comment on whether the proposed provision in 
Sec.  303.11(b)(20) effectively addresses the rare circumstance where 
an inappropriate referral may have been made or whether the language is 
too broad. We are interested in the pros and cons of this proposal and 
if you have any additional suggested criteria or revisions to ensure 
that a State is accorded the flexibility to close cases where 
inappropriate referrals have been made.
    In addition, we plan to update case closure regulations to 
encourage efficient case transfer between State and Tribal IV-D 
programs. Originally, when case closure regulations were written in 
1989, there were no Tribal IV-D programs. Presently, there are over 50 
fully operational Tribal IV-D programs. We invited Tribal leaders to 
engage in both written and face-to-face consultations to discuss issues 
and proposed solutions related to intergovernmental coordination. We 
also met with Tribal IV-D directors in several sessions around the 
country to have a conversation regarding Tribal Medical Child Support. 
We specifically discussed case transfer and case closure issues that 
will require a State IV-D agency to close Medicaid reimbursement cases 
that involve children receiving services from the Indian Health Service 
(IHS) when appropriate. We also discussed case transfer and case 
closure issues with State child support directors. As a result of these 
efforts, we received comments that helped us develop this NPRM.\54\
---------------------------------------------------------------------------

    \54\ See Tribal Impact Statement in preamble.
---------------------------------------------------------------------------

    In recent years, OCSE received a number of inquiries asking whether 
a State IV-D agency may close a case that has been transferred to a 
Tribal IV-D program and under what circumstances. OCSE responded to 
those inquiries in Policy Interpretation Question Tribal (PIQT) 05-
01.\55\ PIQT 05-01 clarified that a State may transfer a case to a 
Tribe if the custodial parent wishes to receive services from the 
Tribal IV-D agency rather than from the State IV-D agency, and requests 
that the case be transferred or consents to the transfer. The guidance 
stated that such transfers,

[[Page 68563]]

at the request of or with the consent of the custodial parent, may be 
appropriate if there are no assigned arrearages owed to the State. In 
other words, under existing policy, a State could close and transfer 
cases to Tribes only if there were no assigned arrearages owed to a 
State that required the State to maintain an open IV-D case. Similarly, 
if a Tribe had a current case but the parent requested that it be 
transferred to a State IV-D program and the Tribe no longer had an 
interest in the action, the Tribe could close and transfer the case to 
the State IV-D program. The current policy does not address cases where 
there is no current assignment. The State may transfer such cases to a 
Tribal IV-D agency for appropriate action.
---------------------------------------------------------------------------

    \55\ Available at: http://www.acf.hhs.gov/programs/cse/pol/PIQT/2005/piqt-05-01.htm.
---------------------------------------------------------------------------

    Proposed Sec.  303.11(b)(21) will permit a State the flexibility to 
close the case if it has been transferred to a Tribal IV-D agency, 
regardless of whether there is a State assignment. It will also allow a 
State to reduce data management demands by eliminating duplicate and 
outdated cases and to better allocate its limited resources to other 
enforcement activities. Before a case can be transferred to a Tribal 
IV-D agency, we propose that either the recipient of services must 
request the transfer or the State must notify the recipient that the 
case will be transferred to the Tribal IV-D agency and obtain the 
recipient's consent. We also propose that a State deems consent if the 
recipient does not respond to a notice to transfer within 60 calendar 
days from the date notice was provided. Although not a condition of 
eligibility, some Tribal IV-D applications for services contain a box 
that may be checked to affirm a Tribal applicant's consent to have the 
case transferred from a State IV-D agency to a Tribal IV-D agency. This 
may be regarded as sufficient proof of consent for transferring and 
closing the case. We specifically request comments from States, Tribes, 
and other stakeholders on this additional flexibility for States to 
transfer and close cases notwithstanding a State assignment, and will 
consider all comments and recommendations received before issuing the 
final rule. Finally, we propose the State notify the recipient that the 
case has been transferred to the Tribal IV-D agency.
    A State has the authority to accept less than the full payment of 
state-assigned arrearages on the same grounds that exist for compromise 
and settlement of any other judgment owed to the State.\56\ Therefore, 
a State may enter into an agreement with a Tribal IV-D agency to permit 
the Tribe to compromise any state-assigned arrearages.
---------------------------------------------------------------------------

    \56\ For further information see PIQ-00-03, available at: http://www.acf.hhs.gov/programs/cse/pol/PIQ/2000/piq-00-03.htm, and PIQ-
99-03, available at http://www.acf.hhs.gov/programs/cse/pol/PIQ/1999/piq-9903.htm.
---------------------------------------------------------------------------

    Any State debt owed under the pre-existing order remains in effect 
and legally binding. Once a case is closed and transferred to a Tribal 
IV-D program, the Tribal IV-D program will continue to adhere to 
Federal regulations and must extend the full range of services under 
its IV-D plan as required by Sec.  309.120(a). We strongly urge the 
State and the Tribe to work together in these instances to reach 
agreement on steps to take that will result in effective 
intergovernmental cooperation, smooth case transfer, less confusion 
about case ownership, and ongoing support payments to families, 
including the possibility of compromising arrearages permanently 
assigned to the State and/or entering into repayment agreements.
    We believe there is little likelihood a State can successfully 
perform IV-D functions in many Tribal cases, especially in cases with 
default child support orders. Although some child support enforcement 
services have been provided through cooperative agreements between 
Tribes and States and have helped bring child support services to some 
Tribal families, Indian families may experience some difficulty in 
getting IV-D services from State IV-D programs.
    One reason is because the authority of State and local government 
is either limited or nonexistent within much of Tribal territory, while 
jurisdiction is concurrent in other areas, as in States that adhere to 
Public Law 83-280. In addition, practical obstacles exist to State 
enforcement against Tribal members, particularly those low-income 
obligors who lack formal employment or who work in a tribally-owned 
business. Finally, Tribal IV-D programs incorporate certain tools and 
procedures not available to State IV-D programs, such as policies 
permitting in-kind support payments or traditionally-based dispute 
resolution procedures.
    In order to better serve Indian families, we propose a new criteria 
under Sec.  303.11(c) that will require a State IV-D agency to close a 
Medicaid reimbursement referral based solely upon health care services, 
including contract health services, provided through an Indian Health 
Program. The IHS is responsible for providing health care to American 
Indians and Alaska Natives under the Snyder Act. See 25 U.S.C. 13 
(providing that the Bureau of Indian Affairs (BIA) will expend funds as 
appropriated for, among other things, the ``conservation of health'' of 
Indians); 42 U.S.C. 2001(a) (transferring the responsibility for Indian 
health care from BIA to IHS). IHS provides such care directly through 
federal facilities and clinics, and also contracts and compacts with 
Indian tribes and tribal organizations to provide care pursuant to the 
Indian Self Determination and Education Assistance Act (ISDEAA), Pub. 
L. No. 93-638 (codified at 25 U.S.C. 458aaa-18(b)). In addition, the 
Snyder Act authorizes IHS to pay for medical care provided to IHS 
beneficiaries by other public and private providers as contract health 
services (CHS). The term ``Indian Health Program,'' defined at 25 
U.S.C. 1603(12), encompasses the different ways health care is provided 
to American Indians and Alaska Natives.
    Pursuant to 25 U.S.C. 1621e, IHS and Indian tribes seek to ensure 
maximum resources to perform this responsibility, and require 
individuals with third party insurance pay for health care services 
provided to IHS-eligible individuals through health programs 
administered under IHS authority, including contract health services 
(CHS). Third party payers or alternate resources include Medicaid, 
private insurance, or other health benefits coverage for individuals 
who receive health care services through such programs. An IHS-eligible 
patient is not considered a third party payer, and his/her resources 
are not considered to be alternate resources under 25 U.S.C. 1621e. 
Likewise, the parents of an IHS-eligible minor are not considered 
alternate resources under 25 U.S.C. 1621e. Custodial and noncustodial 
parents of IHS-eligible patients (or their resources) should not be 
distinguishable for purposes of payment. In other words, the IHS will 
not seek payment from noncustodial parents of IHS-eligible children who 
receive health care services provided through Indian Health Programs.
    Consistent with the IHS authority, the Centers for Medicare & 
Medicaid Services (CMS) propose conforming changes to Medicaid policy 
concerning third party liability and medical support with respect to 
IHS-eligible children who receive health services, including CHS, 
through an Indian Health Program. Under existing IHS policy, 
noncustodial parents are not considered liable third parties and their 
assets are not available for medical support for such services. 
Recognizing that the IHS has primary responsibility for determining the 
medical support obligations from Indian families for services provided 
through Indian Health Programs, CMS proposes to amend 42 CFR 
433.152(b)(1), consistent with IHS policy, to require that State 
Medicaid agencies not refer

[[Page 68564]]

cases for medical support enforcement services when the Medicaid 
referral is based solely upon health care services, including contract 
health services, provided through an Indian Health Program (as defined 
at 25 U.S.C. 1603(12)) to a child who is eligible for health care 
services from the Indian Health Service (IHS). This policy remedies the 
current inequity of holding noncustodial parents personally liable for 
services provided through the Indian Health Programs to IHS-eligible 
families that qualify for Medicaid, while not holding noncustodial 
parents personally liable for the same services for IHS-eligible 
families that do not qualify for Medicaid. Research indicates that most 
noncustodial parents of IHS-eligible children who qualify for Medicaid 
have difficulty meeting their child support obligations.\57\ Requiring 
them, but not parents of children who do not qualify for Medicaid, to 
use their personal resources to pay for health care provided through 
Indian Health Programs is unreasonable. To be clear, CMS, like IHS, 
will continue to require that State agencies seek reimbursement from 
any private insurance or other health care coverage purchased for the 
child, including coverage purchased by the noncustodial parent out of 
the parent's personal assets. The proposed revision to 42 CFR 
433.152(b)(1) also eliminates reference to 45 CFR Part 306 which was 
repealed in 1996.
---------------------------------------------------------------------------

    \57\ For further information, see Laudan Y. Aron's report, 
Health Care Coverage Among Child Support-Eligible Children (December 
2002), available at http://aspe.hhs.gov/hsp/CSE-health-ben02/index.htm; Laura Wheaton's report, Nonresident Fathers: To What 
Extent Do They Have Access to Private Health Insurance?, available 
at http://fatherhood.hhs.gov/ncp-health00/index.htm; Cara James, 
Karyn Schwartz and Julia Berndt, A Profile of American Indians and 
Alaska Natives and Their Health Coverage (June 2000), available at: 
http://www.kff.org/minorityhealth/7977.cfm; Sorensen, Elaine, A 
National Profile of Nonresident Fathers and Their Ability to Pay 
Child Support (1997), available at: http://www.jstor.org/stable/10.2307/353782; Elaine Sorensen, Liliana Sousa, and Simon Schaner, 
Assessing Child Support Arrears in Nine Large States and the Nation 
(2007), available at: http://aspe.hhs.gov/hsp/07/assessing-CS-debt/; 
and U.S. Department of Interior, Bureau of Indian Affairs, 2005 
American Indian Population and Labor Force Report, available at: 
http://www.bia.gov/cs/groups/public/documents/text/idc-001719.pdf.
---------------------------------------------------------------------------

    In light of the IHS's policy, OCSE and CMS propose that State 
Medicaid agencies not refer such cases and that IV-D agencies that 
receive Medicaid reimbursement referrals based solely on health care 
services, including contract health services, provided to IHS-eligible 
children through an Indian Health Program, will be required to close 
such cases, as these cases will have been inappropriately referred. 
Pursuant to IHS' policy and CMS' proposed policy, there would be no 
medical child support reimbursement obligation to pursue against any 
custodial or noncustodial parents, and any recovery from insurance 
policies would be outside the scope of the State IV-D agencies' 
authority. It is our understanding that such Medicaid referrals are 
common. The proposed corresponding child support case closure rule will 
make clear that State IV-D agencies should not seek medical child 
support based on the Medicaid referrals.
    Finally, we propose to redesignate existing Sec.  303.11(c) as 
Sec.  303.11(d) and to reorganize the provisions into subparagraphs for 
clarity.
    Under Sec.  303.11(d)(1) and (2), we also propose conforming 
changes to address renumbered and proposed provisions that either 
require notice to the recipient of services or, the initiating agency 
in an intergovernmental case that meet the criteria for closure, 60 
calendar days prior to closing the case of the State's intent to close 
the case. In addition, we have added a proposal in Sec.  303.11(d)(4) 
for a case meeting the criteria for closure in paragraph (b)(20) or (c) 
that the IV-D agency must notify the referring agency, in a record, 60 
calendar days prior to closure of the case of the State's intent to 
close the case. Additionally, we propose in Sec.  303.11(d)(5) that if 
the referring agency does not respond to the notice or does not provide 
information demonstrating that child support services are needed for 
the case, the IV-D agency may close the case. However, when the case is 
closed, the IV-D agency must notify the recipient of services that the 
case was closed under proposed paragraph (d)(6).
    In Sec.  303.11(d)(6), we are also proposing a new requirement for 
cases closed pursuant to paragraphs (b)(13) and (d)(5). The State must 
notify the recipient that the case has been closed within 30 calendar 
days of closing the case. This notice must also provide information 
regarding reapplying for additional child support services and the 
consequences of receiving IV-D services, including any State fees, cost 
recovery, and distribution policies. If the recipient reapplies for 
child support services in a case that was closed pursuant to paragraph 
(b)(13), the recipient will complete a new application for IV-D 
services and pay any applicable fee. If the recipient reapplies for 
services in a case that was closed pursuant to paragraph (d)(5), the 
recipient will complete a new application for IV-D services but will 
not be charged a fee since the case was originally opened through an 
inappropriate referral. We specifically seek comments related to these 
post-closure notices.
    It is important to note that after a IV-D agency has closed a case 
pursuant to the procedures outlined in Sec.  303.11, the former 
recipient of services may reapply for services at any time pursuant to 
the last sentence of existing Sec.  303.11(c), which we propose to make 
a new subparagraph and redesignate as Sec.  303.11(d)(7). Given that a 
State will have more discretion to close unproductive cases under the 
proposed rule, we request comments on redesignated Sec.  303.11(d)(7) 
and whether the language is sufficiently clear to ensure that a former 
recipient of services is able to reapply for and open a IV-D case. 
Finally, we redesignated existing paragraph (d) as proposed paragraph 
(e).
Section 303.31: Securing and Enforcing Medical Support Obligations
    While the child support program has long been involved with 
securing health care coverage for children, in the past, we have 
focused narrowly on private coverage available through a noncustodial 
parent's employer rather than taking full advantage of the many 
coverage options available to children. However, the Deficit Reduction 
Act of 2005 (DRA) (Pub. L. 109-171) made significant improvements to 
medical child support by emphasizing the importance of securing health 
care coverage. The DRA provided that the child support agency may look 
to either or both parents to provide medical support, including health 
care coverage and cash payments to defray the child's health care 
costs. The DRA recognized that custodial families are a common, and in 
many cases, a preferred source of insurance coverage for their children 
because it is often simpler for children to be on the same policy as 
their residential parent. The DRA also acknowledged that the cost of 
coverage is a critical consideration. However, existing medical support 
regulations focus narrowly on private insurance and do not allow 
families the opportunity to choose from the full range of health care 
coverage options that may be available to them.
    In general, families in the Child Support Enforcement program have 
limited access to employer-sponsored private insurance and are 
disproportionately eligible for Medicaid and the Children's Health 
Insurance Program (CHIP).\58\ A national research

[[Page 68565]]

study in the late 1990s, the most recent study of its kind, determined 
that half of noncustodial parents who were not currently covering their 
children did not have access to employer-sponsored family coverage at 
all, before even considering cost.\59\ Since 1999, the average cost of 
private family coverage has nearly tripled.\60\
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    \58\ For further information, see Laudan Y. Aron's report, 
Health Care Coverage Among Child Support-Eligible Children (2002), 
available at http://aspe.hhs.gov/hsp/CSE-health-ben02/index.htm.
    \59\ For further information, see Laura Wheaton's report, 
Nonresident Fathers: To What Extent Do They Have Access to Private 
Health Insurance? (2000), available at http://fatherhood.hhs.gov/ncp-health00/index.htm.
    \60\ In 1999, the average premium for family coverage was $5,791 
per year. In 2013, the average premium for family coverage was 
$16,351 per year. For further information, see Kaiser/HRET Survey of 
Employer-Sponsored Health Benefits, 2013, Exhibit 1.11, available 
at: http://kff.org/report-section/ehbs-2013-section-1/.
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    An analysis of selected States finds that issuing a National 
Medical Support Notice to the noncustodial parent's employer results in 
the child being enrolled in a health plan only 10 to 23 percent of the 
time. Therefore, although States have worked hard and committed 
substantial resources toward increasing the percentage of child support 
orders that include medical support from 60 percent to 80 percent since 
2002, medical support is actually provided as ordered in only 30 
percent of cases.\61\ While employer-sponsored and other private 
insurance is important for children who have access to it, most 
uninsured children in custodial families (79 percent) are eligible for 
Medicaid or CHIP. Therefore, to make sure that children get the 
coverage they need, the child support system needs to be in a position 
to take advantage of the full range of coverage options.
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    \61\ Center for Policy Research, Medical Child Support: 
Strategies Implemented by States, Prepared under Office of Child 
Support Enforcement Grant #08-C0067 to Texas Office of the Assistant 
Attorney Division of Child Support (2009).
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    OCSE proposes to amend Sec.  303.31 to provide a State with 
flexibility to permit parents to meet their medical support obligations 
by providing health care coverage or payments for medical expenses that 
are reasonable in cost and best meet the health care needs of the 
child. Section 303.31 is amended by removing restrictions that exclude 
the consideration of Medicaid, CHIP, and other State health programs as 
part of medical support and by providing greater flexibility to a State 
in defining the reasonable cost of health insurance. In accordance with 
section 452(f) of the Act, the proposed changes provide a State with 
options to define medical support to include private health insurance, 
other health care coverage options such as Medicaid, CHIP, or other 
coverage plans available in the State, and cash medical support.
    In Sec.  303.31(a)(2) we propose to clarify that health insurance 
includes public and private insurance. This is a clarification, as 
``health insurance'' already includes both public and private coverage.
    In Sec.  303.31(a)(3) we propose to omit the requirement that the 
cost of health insurance be measured based on the marginal cost of 
adding the child to the policy. In situations in which a parent may be 
required to purchase a family health insurance policy, it may be 
appropriate to consider the full cost the parent must pay for the 
coverage when determining if the coverage is reasonable in cost. 
Therefore, this proposed change gives a State additional flexibility to 
define reasonable medical support obligations.
    Next, Sec.  303.31(b) requires the State IV-D agency to petition 
the court for private health insurance that is reasonable in cost. OCSE 
proposes to remove the limitation in paragraphs (b)(1), (2), (3)(i), 
and (4) restricting this to private health insurance to allow a State 
to take advantage of both private and public health insurance options 
to meet children's health care needs, and emphasize the role of state 
child support guidelines in setting child support orders that address 
how parents will share the costs associated with covering their child. 
OCSE particularly requests comments regarding the IV-D program's role 
in carrying out its medical support statutory responsibilities, 
including the roles of cost allocation between parents and enrolling 
children in coverage.
Section 303.72: Requests for Collection of Past-Due Support by Federal 
Tax Refund Offset
    The Federal Tax Refund Offset Program was enacted into law to 
collect past-due child support payments from the Federal tax refunds of 
parents who have been ordered to pay child support. A State is required 
to submit all cases that meet the criteria for the Federal Tax Refund 
Offset to OCSE for collection. In addition, under current OCSE 
regulations, a State must notify any other State that is enforcing the 
same case when that case is submitted for offset and when the 
initiating State receives an offset. However, according to the current 
Department of Treasury regulations, an initiating State is only 
required to notify other States if it receives an offset.\62\
---------------------------------------------------------------------------

    \62\ See 31 CFR 285.3(c)(6).
---------------------------------------------------------------------------

    In order to make the regulatory requirements for the Federal Tax 
Refund Offset more streamlined and more efficient, OCSE proposes to 
modify its notice requirements to make them consistent with those of 
the Department of Treasury. The proposed modification will eliminate a 
mandate that inundates States with unnecessary case file information 
and ultimately will make program management procedures in this area 
more efficient.
    States are required to submit all cases that meet specific criteria 
for Federal Income Tax Refund Offset for collection through the Federal 
Tax Refund Offset program. The Federal Tax Refund Offset program is a 
collaborative effort between OCSE, the Department of the Treasury, and 
State IV-D agencies.
    Current OCSE regulations at Sec.  303.72(d)(1) require a State, in 
interstate situations, to notify any other State involved in enforcing 
the support order when it submits the case for offset and when the 
State receives the offset amount. However, the United States Treasury 
regulations at 31 CFR 285.3(c)(6) only require a State to notify any 
other State involved in enforcing the child support order when it 
receives the offset payment. In order to align these regulations with 
those of the United States Treasury, OCSE proposes to amend Sec.  
303.72(d)(1) by eliminating the phrase, ``when it submits an interstate 
case for offset.''
    State IV-D agencies have shared that when a State certifies and 
submits an interstate case for tax refund offset, the information is 
not particularly helpful to any other State involved in enforcing the 
support order. If a responding State needs to know that a case has been 
submitted for tax refund offset, this information is usually available 
through the Federal Collections application or the QUICK application 
\63\ accessed through the State Services Portal.\64\ For those States 
that have programmed for the transaction, this information may also be 
received through the Child Support Enforcement Network (CSENet) \65\ 
transaction that was developed to serve this purpose. OCSE believes 
that by discontinuing the

[[Page 68566]]

requirement for a State to notify other States involved in enforcing a 
support order when it submits an interstate case for tax refund offset, 
a State will not inundate other States with unnecessary information and 
will ultimately save both time and resources.
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    \63\ QUICK stands for Query Interstate Cases for Kids. It is a 
secure web application that allows child support workers to view 
financial, case status, and case activities information in another 
State's child support case in real time.
    \64\ State Services Portal is an OCSE Internet-based 
infrastructure that supports State worker access to child support 
services via a secure, single sign-on interface. A State worker can 
access multiple applications through this system.
    \65\ Child Support Enforcement Network or CSENet, provides a 
standardized format for State Child Support systems to generate and 
process automated interstate child support information.
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Section 303.100: Procedures for Income Withholding
    Recognizing that over two-thirds of child support payments are 
collected by employers through income withholding, we propose to 
standardize and streamline income withholding rules. These proposals 
will increase child support collections and ensure that employers are 
not unduly burdened by this highly effective enforcement tool. We 
propose making changes in Sec.  303.100 to address two of the problems 
employers have encountered in efficiently executing their 
responsibilities for income withholding: The inconsistent use of the 
OMB-approved Income Withholding for Support form and the transmission 
of payments on non-IV-D orders to the appropriate SDU.
    Child support payment processing has changed dramatically in the 
past 30 years. In the 1970s, child support payments were paid by 
noncustodial parents, primarily in cash or by check, directly to courts 
or local child support agencies. In the 1980s and early 1990s, Congress 
passed a series of laws that expanded and strengthened employer income 
withholding as an enforcement tool. The Child Support Enforcement 
Amendments of 1984 (Pub. L. 98-378), for example, added required 
procedures for mandatory income withholding, and the Family Support Act 
of 1988 (Pub. L. 100-485) required automatic income withholding for 
most child support orders. As States and employers implemented the 
income withholding provisions, they encountered barriers to payment 
processing. A 1992 General Accounting Office (now the Government 
Accountability Office) (GAO) report, Interstate Child Support: Wage 
Withholding Not Fulfilling Expectations, highlighted pervasive problems 
with the system in place. According to the GAO report, the lack of 
uniform withholding procedures across States and counties, the failure 
of timely service of withholding orders, and the tendency of States to 
involve the courts or require additional procedures in the process 
hampered effectiveness. These problems were compounded in interstate 
cases.\66\ Similarly, a 1991 Office of Inspector General report on the 
employer experience with income withholding found that employers were 
encountering difficulties implementing income withholding in an 
environment where State standards and procedures were confusing and 
varied from State to State.\67\
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    \66\ Government Accountability Office, Wage Withholding Not 
Fulfilling Expectations, HRD-92-65BR (1992), available at: http://www.gao.gov/products/HRD-92-65BR.
    \67\ U.S. Department of Health and Human Services, Office of 
Inspector General, An Employer Perspective: Fragmentation of State 
Practices Impair Ability of Employers to Effectively Implement Wage 
Withholding Process (1991).
---------------------------------------------------------------------------

    In response to employer requests to minimize employer burden, 
PRWORA included new provisions to strengthen income withholding, 
including standardizing procedures.\68\ Specifically, section 
466(b)(6)(A)(ii) of the Act requires that the notice given to the 
employer for income withholding in all IV-D cases shall be ``in a 
standard format prescribed by the Secretary, and contain only such 
information as may be necessary for the employer to comply with the 
withholding order.'' Section 466(a)(8)(B)(iii) of the Act requires that 
section 466(b)(6)(A)(ii) of the Act be applicable also to non-IV-D 
income withholding orders. In addition, section 454A(g)(1)(A)(ii) of 
the Act requires that a State transmit orders and notices for income 
withholding to employers (and other income withholders) using uniform 
formats prescribed by the Secretary. As noted by the GAO in its 2002 
report, these provisions clearly require all individuals and entities 
to use the form developed by the Secretary of HHS to notify employers 
of the income withholding order for child support in all IV-D and non-
IV-D cases.\69\
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    \68\ For further information, see the Committee on Ways and 
Means, U.S. House of Representatives, Summary of Welfare Reforms 
Made by Public Law 104-193, Nov. 6, 1996, available at: http://www.access.gpo.gov/congress/wm015.txt, Section 314.
    \69\ The GAO report, Child Support Enforcement: Clear Guidance 
Would Help Ensure Proper Access to Information and Use of Wage 
Withholding by Private Firms, GAO-02-349 (2002), available at: 
http://www.gao.gov/new.items/d02349.pdf.
---------------------------------------------------------------------------

    In response to the PRWORA directive to prescribe a standard format 
for income withholding, the Secretary of HHS developed the OMB-approved 
Income Withholding for Support (IWO) form (also referred to as the OMB-
approved form). The interim final rule, 45 CFR 303.100(e)(1), issued on 
February 9, 1999, implemented section 466(b)(6)(A)(ii) of the Act 
requiring the use of the OMB-approved form (OMB 0970-0154). The 
preamble to the rule states as follows:

    Paragraph (f) [of 45 CFR 303.100] is redesignated as paragraph 
(e). We are revising new paragraph (e)(1) by adding ``using the 
standard Federal format'' after the word ``notice''. We are making 
this revision to conform to section 466(b)(6)(A)(iii) of the Act 
(sic), which requires the States to issue income withholding notices 
in a standard format prescribed by the Secretary. On January 27, 
1998, the Office of Child Support Enforcement distributed this 
standard income withholding form to the States in OCSE-AT-98-03 (OMB 
No. 0970-0154).\70\
---------------------------------------------------------------------------

    \70\ 64 Fed. Reg. 6237, 6244 (Feb. 9, 1999) (original quote 
incorrectly refers to section 466(b)(6)(A)(iii), however, reference 
is to requirements of section 466(b)(6)(A)(ii); see also AT-99-01, 
February 10, 1999, available at: http://www.acf.hhs.gov/programs/cse/pol/AT/1999/at-9901.htm.

    The OMB-approved form, though used consistently by State IV-D 
agencies, is not used universally in non-IV-D cases by other entities, 
which is contrary to the requirement in section 466(b)(6)(A) of the 
Act. OCSE issued policy in 1999, 2001, and 2003 to clarify the 
requirements for issuing and complying with the OMB-approved form and 
complying with the child support order in OCSE PIQ-99-02, ``Order/
Notice to Withhold Income for Child Support,'' \71\ OCSE PIQ-01-01, 
``Clarification on Use of the Federal Order/Notice to Withhold Income 
for Child Support,'' \72\ and OCSE PIQ-03-03, ``Requirements for 
Issuing and Complying with the Federal Income Withholding Form.'' \73\ 
These policies made it clear that the OMB-approved form must be used in 
all income withholding cases. Despite this guidance, employers continue 
to raise concerns to OCSE that they routinely receive court documents 
and divorce decrees with income withholding instructions that are 
frequently difficult to understand and are not accompanied by the OMB-
approved form.
---------------------------------------------------------------------------

    \71\ Available at: http://www.acf.hhs.gov/programs/cse/pol/PIQ/1999/piq-9902.htm.
    \72\ Available at: http://www.acf.hhs.gov/programs/cse/pol/PIQ/2001/piq-01-01.htm.
    \73\ Available at: http://www.acf.hhs.gov/programs/cse/pol/PIQ/2003/piq-03-03.htm.
---------------------------------------------------------------------------

    Upon receipt of the OMB-approved form, the employer must determine 
if the form is regular on its face, meaning the employer determines 
that the sender has correctly followed the instructions on the form. 
Failure of individuals, private attorneys, and even some courts and 
States to use the OMB-approved form results in confusion, delays, and 
costly data processing for employers. To address this problem, we 
propose clarifications in two places in the regulations. Currently, 
Sec.  303.100(e) requires a State to use ``the standard Federal 
format'' when sending notice to employers to initiate income 
withholding on IV-D cases. In order to be as clear as possible, we 
propose

[[Page 68567]]

changing this phrase to ``the required OMB-approved Income Withholding 
for Support form.''
    We also propose requiring the use of the OMB-approved form in a new 
provision. In order to ensure that employers receive this standard form 
when processing income withholding, regardless of the type of entity 
sending the income withholding request and regardless of whether the 
case is IV-D or non-IV-D, we propose adding a new paragraph (h) under 
Sec.  303.100 titled ``Notice to employers in all child support 
orders,'' which imposes this requirement.
    While the language in the OMB-approved Income Withholding for 
Support form must appear verbatim when transmitted to an employer, OCSE 
recognizes and accepts that the variety of form-generation tools used 
may result in minor formatting variations to the OMB-approved form 
(e.g., inability to generate check boxes, different fonts, shading, and 
spacing). Variations to the form that are not acceptable, however, 
include addition or deletion of data or altering the general location 
of information on the OMB-approved form. State laws may require States 
to provide employers and obligees with certain state-specific income 
withholding provisions. In these situations, States may include this 
information on the OMB-approved form in the section for Additional 
Information as directed in the instructions on the use of the form.
    The second payment processing issue addressed in this section is 
the transmission of income withholding payments from employers to SDUs. 
Sections 454B and 466(b)(5) of the Act require employers to send income 
withholding payments to the appropriate SDU, regardless of whether the 
case is IV-D or non-IV-D. However, OCSE has received ongoing complaints 
from employers about income withholding orders that instruct the 
employer to send child support payments to individuals or entities 
other than the SDU. The most common examples, particularly in respect 
to non-IV-D cases, include instructions to send income withholding 
payments to custodial parents, courts, private collection agencies, or 
private attorneys.
    Bypassing the SDU in the income withholding process creates a 
significant burden on employers because these income withholding 
payments must be processed manually. In addition, when payments are 
diverted from the SDU, noncustodial parents do not receive proper 
credit for the portion of income withheld to pay for child support, 
payments to families are delayed, and confusion related to payment 
allocation is created, particularly in multiple-family scenarios.
    Under current Sec.  303.100(e)(1)(ii), employers are required to 
send all payments on IV-D cases to the SDU, however, income withholding 
payments on non-IV-D orders are not addressed in the rule. Therefore, 
we propose to state explicitly under new paragraph Sec.  303.100(i), 
that income withholding payments on non-IV-D cases must be directed 
through the SDU.
Section 304.20: Availability and Rate of Federal Financial 
Participation
    We recognize that existing child support regulations governing 
expenditures subject to Federal financial participation (FFP) are out 
of date and do not reflect a growing body of research that supports the 
effectiveness of a range of strategies that can help strengthen the 
ability and willingness of noncustodial parents to support their 
children. Accordingly, we propose to amend the regulations to increase 
the flexibility of State IV-D agencies to receive Federal reimbursement 
for cost-effective practices that increase the effectiveness of 
standard enforcement activities. As the program has evolved over the 
past decade, many State Child Support Enforcement programs have already 
implemented these strategies.
    Additionally, there is some uncertainty among some States about 
what expenditures are eligible for Federal reimbursement. To update old 
regulations, respond to State requests to allow Federal reimbursement 
for a broader range of activities that can increase collections, and 
address the uncertainty about allowability of expenditures, the 
proposed rule clarifies that FFP is available for necessary and 
reasonable expenditures properly attributed to the Child Support 
Enforcement program for services and activities designed to carry out 
the title IV-D State plan, including obtaining child support, locating 
noncustodial parents, and establishing paternity.
    Research supports a range of cost-effective strategies that can 
help move nonpaying cases into paying status and increase regular 
payments.\74\ Over the past decade, State, Tribal, and local Child 
Support Enforcement programs have updated their program policies, 
practices, and strategies to collect more child support payments for 
families by addressing some of the underlying reasons for nonpayment. 
For example, 21 States set child support obligations based on current 
earnings and modify the order when earnings change; 44 States 
compromise child support debt owed to the State; and 38 States have 
eliminated any legal standard that treats incarceration as ``voluntary 
unemployment.'' In addition, a number of States, such as Texas, 
Tennessee, and Oregon, recognizing the relationship between payment of 
child support and playing an active parenting role, address parenting 
time as part of their State child support guidelines.
---------------------------------------------------------------------------

    \74\ For further information, see Kye Lippold and Elaine 
Sorensen, Strengthening Families Through Stronger Fathers: Final 
Impact Report for the Pilot Employment Programs (2011), available 
at: http://www.urban.org/UploadedPDF/412442-Strengthening-Families-
Through-Stronger-Fathers.pdf; Daniel Schroeder and Nicholas Doughty, 
Texas Non-Custodial Parent Choices: Program Impact Analysis (2009), 
available at: http://www.utexas.edu/research/cshr/pubs/pdf/NCP_Choices_Final_Sep_03_2009.pdf; and Center for Policy Research 
and Policy Studies, Inc., Child Access and Visitation Programs: 
Participant Outcomes: Program Analysis (2007), available at: http://www.acf.hhs.gov/programs/cse/pol/DCL/2007/dcl-07-15a.pdf.
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    As States have begun to incorporate programs and activities to 
supplement their law enforcement practices for enforcing child support, 
we recognize that existing child support regulations governing the 
availability of FFP for child support expenditures, Sec. Sec.  304.20-
304.23, are out of date. Federal financial participation represents the 
Federal match available to reimburse a portion of the State's 
operational expenditures incurred under the State IV-D plan.
    Currently, the regulations do not consistently recognize the range 
of cost-effective approaches to increasing collections that complement 
traditional and often costly law enforcement practices such as contempt 
hearings, criminal prosecution, and jail. While there continues to be a 
role for these traditional law enforcement practices, the NPRM 
increases State flexibility within existing statutory authority to 
implement and receive reimbursement for necessary and reasonable 
activities properly attributed to the Child Support Enforcement program 
that complement standard automated tools and improve program outcomes.
    For the most part, the existing rules governing FFP were 
promulgated more than 30 years ago before modern program models were 
developed. These rules are formulated as a specific and limited list of 
``necessary'' activities for which FFP is available. The existing rules 
do not clearly state that FFP also is available for activities to carry 
out the State plan that may not be on the list but are within the 
program's statutory authority and are otherwise reasonable and properly 
attributed to the Child Support Enforcement program. For

[[Page 68568]]

many years, States have regularly claimed and received reimbursement 
for such expenditures, but there continues to be some lingering 
uncertainty about whether FFP is available. Accordingly, we propose to 
amend the rules to make the standard clear that FFP is available for 
``necessary and reasonable expenditures properly attributed to the 
Child Support Enforcement program, including but not limited'' to the 
activities listed in the rule.
    We are specifically requesting comments regarding the allowability 
of FFP for using electronic monitoring systems for child support 
purposes. These electronic monitoring systems may enable the 
noncustodial parent, cited for contempt of court for non-payment of 
support, to work and pay child support as an alternative to 
incarceration. If the noncustodial parent is allowed to work, the 
family continues to receive needed income, and the accumulation of 
additional arrearages is avoided. We are interested in comments on how 
and under what circumstances child support programs would propose to 
use electronic monitoring devices for child support program purposes. 
Additionally, we are soliciting comments regarding the desirability to 
provide Federal reimbursement under the title IV-D program for the use 
of electronic monitoring systems in child support cases.
    We propose to amend subparagraph (a)(1) of Sec.  304.20 to clarify 
that FFP is available for expenditures for child support services and 
activities necessary and reasonable to carry out the title IV-D State 
plan. This change reflects the OMB Cost Principles for State, Local, 
and Indian Tribal Governments (OMB Circular A-87), published at 2 CFR 
part 225.\75\ Appendix A to 2 CFR part 225 indicates that a State must 
ensure the funds are used in compliance with all applicable Federal 
statutory and regulatory provisions, costs are reasonable and necessary 
for operating these programs, and funds are not used for general 
expenses required to carry out other responsibilities of the State and 
its subrecipients. Additionally, the Appendix indicates that for costs 
to be allowable, they must be necessary and reasonable for proper and 
efficient performance and administration of Federal awards. It further 
defines that a cost is reasonable if, in its nature and amount, it does 
not exceed that which would be incurred by a prudent person under the 
circumstances prevailing at the time the decision was made to incur the 
cost.
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    \75\ Available at: http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&tpl=/ecfrbrowse/Title02/2cfr225_main_02.tpl.
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    We also propose revisions to paragraph (b) of this section to 
specify that FFP is available for necessary and reasonable expenditures 
which are properly attributed to the Child Support program, such as 
development and dissemination of educational materials about the child 
support program, child support educators or liaisons, child support 
case management, domestic violence safeguards, referrals to other 
programs, and other cost-effective activities to help carry out the 
State plan.
    We propose changes to Sec.  304.20(b)(1)(viii)-(ix) which address 
the establishment of agreements with other agencies administering the 
titles IV-D, IV-E, XIX, and XXI programs, to recognize activities 
related to cross-program coordination, client referrals, and data 
sharing when authorized by law. The proposed provisions include minor 
technical changes and specify the criteria necessary for these 
agreements. Proposed Sec.  304.20(b)(1)(viii)(D) and (E) add to the 
list of criteria procedures to be used to coordinate services and 
agreements to exchange data as authorized by law. Proposed Sec.  
304.20(b)(1)(ix) specifies that FFP is also available for the 
establishment of agreements with the CHIP program, along with the 
Medicaid program. Proposed revisions to Sec.  304.20(b)(1)(ix)(B) 
clarify that a criterion for the agreement is the procedures to be used 
to coordinate services. Proposed revisions to Sec.  304.20(b)(1)(ix)(C) 
specify that the criteria for agreements with Medicaid and CHIP 
agencies include provisions related to the exchange of data as 
authorized by law.
    For reasons cited above, we propose to amend Sec.  304.20(b)(2) by 
clarifying that FFP is available for services and activities for the 
establishment of paternity, including but not limited to the specific 
activities listed in Sec.  304.20(b)(2). We propose to add educational 
and outreach activities to Sec.  304.20(b)(2)(vii) to clarify that FFP 
is available for IV-D agencies to educate the public and to develop and 
disseminate information on voluntary paternity establishment. We also 
propose to amend Sec.  304.20(b)(3) by clarifying that FFP is available 
for services and activities for the establishment and enforcement of 
support obligations includes but is not limited to the specific 
activities listed in Sec.  304.20(b)(3).
    We are proposing to redesignate existing Sec.  304.20(b)(3)(v) as 
Sec.  304.20(b)(3)(viii). We have added a paragraph (b)(3)(v) to allow 
FFP for bus fare or other minor transportation expenses to allow 
participation by parents in child support proceedings and related 
activities such as genetic testing appointments.
    In addition, we have specifically included new rule provisions 
under paragraph (b)(3)(vi) to authorize FFP for activities designed 
both to increase parents' pro se access to child support proceedings 
and to encourage States to develop nonadversarial dispute resolution 
alternatives to a standard adjudicative hearing. The outcome of a child 
support proceeding has a substantial impact on parents' financial 
circumstances and, in some States that conduct civil contempt 
proceedings, can result in jail time and loss of liberty for 
noncustodial parents. It is highly important to encourage informed 
participation by both parents in those proceedings. Most custodial and 
noncustodial parents in the IV-D caseload are not represented by 
private attorneys and are attempting to navigate legal proceedings on a 
pro se basis. At the same time, many States have sought to reduce the 
adversarial nature of child support proceedings in order to positively 
engage both parents, reduce conflict between the parents which can be 
harmful to their children, and increase compliance with support orders 
and customer satisfaction. In addition, resolving cases outside the 
court system can help reduce delays, and save money and court time. 
Thus, we have added paragraph (b)(3)(vi) to recognize that FFP is 
available to increase pro se access to adjudicative and alternative 
dispute resolution processes in IV-D cases.
    We also propose to add paragraph (b)(3)(vii) to allow FFP for de 
minimis costs associated with the inclusion of parenting time 
provisions entered as part of a child support order and incidental to a 
child support enforcement proceeding. Under State laws, child support 
and child access rights are legally separate and independent rights and 
responsibilities. While Congress has authorized the IV-D program to 
establish child support, and not to resolve child access disputes, we 
have concluded that the mere inclusion of a parenting time provision in 
a IV-D order when all parties are present at the proceeding and 
willingly agree to the provision should be allowed when the activity is 
incidental to the child support proceeding and the added cost is de 
minimis or nonexistent.
    In light of the research showing appreciable gains in child support 
payments when job services are made available to unemployed 
noncustodial

[[Page 68569]]

parents, we propose to add paragraph (b)(3)(ix) to allow FFP for 
certain job services for noncustodial parents owing child support 
through the IV-D program that are reasonably expected to increase child 
support payments. Many State and local child support programs have 
developed partnerships to provide employment services for parents using 
a variety of funding streams, such as incentive payments, grants, TANF 
and Workforce Investment Act (WIA) funding, and private funding. 
However, State child support agencies have expressed concern that 
existing funding sources are inadequate to maintain a sufficient level 
of services on an ongoing basis and at scale. The paucity of 
sustainable resources available for noncustodial parent employment 
programs have limited child support agencies and courts trying to 
collect support from unemployed parents, leaving them with few 
effective options for securing child support for the children who need 
it.
    OCSE anticipates that most State child support agencies will 
purchase job services by entering into contracts with private and 
community-based employment, fatherhood, and prisoner re-entry programs, 
community action agencies, community colleges, or other service 
providers to deliver allowable job services, rather than offer the 
services in-house. However, this does not preclude a child support 
agency from providing job services to noncustodial parents directly. In 
addition, OCSE encourages child support agencies to develop and 
maintain partnerships with TANF, SNAP, workforce agencies, including 
Workforce Investment Boards, and American Job Centers to offer 
available job services to noncustodial parents whenever those resources 
are available. We also encourage State child support agencies to use 
all available resources with other organizations that can offer 
additional employment and training activities beyond those allowed 
under our rule.
    We propose to delete ``and'' at the end of Sec.  304.20(b)(9) and 
to add ``and'' at the end of Sec.  304.20(b)(11). Finally, we propose a 
new paragraph (b)(12) to allow FFP for the educational and outreach 
activities intended to inform the public, parents and family members, 
and young people who are not yet parents about the Child Support 
Enforcement program, responsible parenting and co-parenting, family 
budgeting, and other financial consequences of raising children when 
the parents are not married to each other. We believe that these 
educational and outreach activities are cost-effective strategies to 
teach the public about the financial and emotional consequences of 
parenting and provide information about child support services that may 
be properly attributed to the child support program.
Section 304.23: Expenditures for Which Federal Financial Participation 
Is Not Available
    For paragraph (d), we are proposing to add ``State and county 
employees and court personnel'' as a technical clarification that 
Federal financial participation is not available for the education and 
training of personnel, but this provision does not apply to other types 
of education and training activities (such as those provided to 
parents, which are addressed in other rules). We will continue to pay 
FFP for the short-term training provided to IV-D staff, as well as 
reasonable and essential short-term training related to hospital-based 
voluntary paternity acknowledgment programs pursuant to Sec.  
304.20(b)(2)(viii) and reasonable and essential short-term training of 
court and law enforcement staff assigned on a full or part time basis 
to support enforcement functions under the cooperative agreement 
pursuant to Sec.  304.21(a)(2).
    AT-81-18, ``Definition of Short Term Training,'' dated September 
11, 1981, defines ``short-term training'' to be any training that would 
directly improve an individual's ability to perform his or her current 
job or another IV-D-related job.\76\ However, short-term training is 
not related to providing a general education for an individual or 
training that is taken for the sole purpose of earning credit hours 
toward a degree or certificate. FFP is available under the above 
definition of short-term training regardless of the source of the 
training.
---------------------------------------------------------------------------

    \76\ Available at: http://www.acf.hhs.gov/programs/cse/pol/AT/1981/at-8118.htm.
---------------------------------------------------------------------------

Section 307.11: Functional Requirements for Computerized Support 
Enforcement Systems in Operation by October 1, 2000
    As discussed previously in the NPRM under the Case Closure section, 
Section 459(h) of the Act provides that only benefits that are based 
upon employment remuneration are subject to child support garnishment. 
Supplemental Security Income (SSI) is a means-tested program that is 
not based upon remuneration from employment. Federal policy on child 
support garnishments recognizes these exceptions by clearly directing 
child support agencies not to collect against SSI benefits (either 
directly or from bank accounts). Currently OCSE estimates that about 
three percent of noncustodial IV-D parents are currently receiving SSI.
    Most State IV-D agencies, including California, Florida, Ohio, and 
Pennsylvania, have front-end procedures in place to prevent garnishment 
of exempt benefits, and all State IV-D agencies have back-end 
procedures in place to correct improper garnishments. To our knowledge, 
improper State garnishment is very rare. However, the harm to the 
beneficiaries can be severe. We think it is important to have 
procedures in place to ensure that these noncustodial beneficiaries do 
not have their SSI or other needs-based benefits garnished, and if 
these benefits are incorrectly garnished, to ensure that the funds are 
quickly refunded. In this NPRM, we are proposing to strengthen our 
policies and incorporate provisions to provide additional safeguards so 
low-income noncustodial parents' financial accounts are not garnished 
when they are only receiving these exempt benefits, which retain their 
character as exempt even after being deposited.
    We propose a minor editing revision to paragraph (c)(3) and add a 
new provision under subparagraph (c)(3)(i) to require a IV-D agency to 
develop automated procedures in its statewide computerized support 
enforcement system to identify cases which have been previously 
identified as involving a noncustodial parent who is a recipient of SSI 
to prevent automatic garnishment of the noncustodial parent's financial 
account. We propose to extend similar protection to recipients of 
concurrent SSI and benefits under title II as we believe these 
noncustodial parents are in similar financial straits. The State must 
review these noncustodial parents' financial accounts to determine 
whether there are available assets above subsistence level available to 
garnish, other than SSI or concurrent SSI and benefits under title II 
of the Act. We believe that these new procedures will provide 
safeguards for the beneficiary to ensure that his or her SSI or 
concurrent SSI and benefits under title II of the Act are not 
inappropriately garnished.
    We are also adding a new subparagraph (c)(3)(ii) to require a IV-D 
agency to have automated procedures in place to return funds to a 
noncustodial parent within 2 days after the agency determines that SSI 
or concurrent SSI and benefits under title II of the Act in the account 
have been incorrectly garnished. We believe that if SSI or concurrent 
SSI and benefits under title II of the Act have been garnished from a 
noncustodial parent's financial account, the IV-D agency

[[Page 68570]]

needs to have procedures to refund the monies quickly so that it does 
not cause undue economic hardship. We recognize there may be situations 
in which the noncustodial parent's SSI or concurrent SSI and benefits 
under title II of the Act are garnished because the IV-D agency was not 
aware the recipient was receiving these benefits until after the 
beneficiary's bank account is garnished. However, if this occurs, we 
believe that it is imperative that the refund is sent to the 
noncustodial parent within 2 days. We specifically seek comments on 
whether this time frame is reasonable, and ways that OCSE might be able 
to assist State IV-D agencies in meeting these requirements.
    SSI accounts managed by representative payees (individuals or 
organization appointed by SSA to receive benefits for someone who 
cannot manage or direct someone else to manage his or her benefits) are 
clearly identified by the financial institution as representative payee 
accounts, with the beneficiary having sole ownership of the funds in 
the account. The representative payee is identified as a financial 
agent on the account, and does not have an ownership interest in the 
account. Therefore the SSI beneficiaries with representative payees 
would be covered by the same protections and safeguards against bank 
account garnishment as an account held directly by the beneficiary.

Request for Comments on Undistributed and Abandoned Collections

    A paramount policy goal for child support agencies is to distribute 
the child support collection to the family, and failing diligent 
efforts to do so, to return the payment to the noncustodial parent. 
Therefore, it is important for OCSE to ensure that State child support 
agencies are making concerted efforts to proactively locate the 
custodial parent or noncustodial parent, as well as making efforts to 
ensure that all collections are distributed. Therefore, in this NPRM, 
we ask State child support agencies to provide specific comments, 
including information about their policies and procedures related to 
both undistributable and abandoned child support collections and the 
efforts that States take both through the State child support agency 
and the State treasury office to maximize the probability that families 
receive the collections, or if that result cannot be achieved, that the 
payment is returned to the noncustodial parent.

Topic 2: Updates To Account for Advances in Technology Sec. Sec.  
301.1, 301.13, 302.33, 302.34, 302.50, 302.65, 302.70, 302.85, 303.2, 
303.5, 303.11, 303.31, 304.21, 304.40, 305.64, 305.66, and 307.5

    As discussed earlier in the preamble, the second set of revisions 
proposed in this regulation encompasses updates to remove barriers to 
electronic communication and document management. Throughout the 
regulation, where appropriate, we propose removing the words 
``written'' and ``in writing'' and inserting ``record'' or ``in a 
record.'' These simple changes will allow OCSE, States, and others the 
flexibility to use cost-saving and efficient technologies, such as 
email or electronic document storage, wherever possible. The proposed 
revisions to the regulation do not require a State to use electronic 
records for the specified purpose, but instead provide a State with the 
option to use electronic records, in accordance with State laws and 
procedures.
    The definition of ``record'' we propose in this regulation is taken 
from UIFSA 2001, section 102(15). The UIFSA drafters adopted the 
definition from another uniform law, the Uniform Electronic 
Transactions Act (1999). ```Record' means information that is inscribed 
on a tangible medium or that is stored in an electronic or other medium 
and is retrievable in perceivable form.'' The Uniform Electronic 
Transactions Act describes this definition further:

    This is a standard definition designed to embrace all means of 
communicating or storing information except human memory. It 
includes any method for storing or communicating information, 
including ``writings.'' A record need not be indestructible or 
permanent, but the term does not include oral or other 
communications which are not stored or preserved by some means. 
Information that has not been retained other than through human 
memory does not qualify as a record. As in the case of the terms 
``writing'' or ``written,'' the term ``record'' does not establish 
the purposes, permitted uses or legal effect which a record may have 
under any particular provision of substantive law. ABA Report on Use 
of the Term ``Record,'' October 1, 1996.\77\
---------------------------------------------------------------------------

    \77\ See comments to the Uniform Electronic Transactions Act 
(1999), section 2, Definitions, available at: http://www.law.upenn.edu/bll/archives/ulc/uecicta/eta1299.htm.

    Substituting the phrase ``in a record'' for ``in writing'' allows 
more flexibility for electronic options by preventing a record from 
being automatically denied legal effect or enforceability just because 
it is in an electronic format. In addition, the use of the word 
``record'' is designed to be technologically neutral; the word equates 
an electronic signature with a hand signature and an electronic 
document (whether scanned or created electronically) with a paper 
document. It neither means that electronic documents or electronic 
signatures will be required, nor will it affect any Federal 
requirements for what documents must contain to be valid or 
enforceable, such as a signature.
    We are aware that not everyone has access to the latest technology. 
For that reason, wherever individual members of the public are 
involved, we generally have not proposed removing requirements that the 
information is provided in a written format. However, we invite 
comments on this approach and whether individual members of the public 
should be provided the option to request information ``in writing'' or 
``in a record'', such as emails, text messaging, voice mails. In 
addition, we have not changed regulatory language where written formats 
are required by statute. We request comments on this approach as well, 
in general or referencing specific provisions.
    Finally, we acknowledge that some of the proposed revisions to 
insert the term ``record'' may seem awkward. We propose using the term 
``record'' because it maximizes flexibility and reflects terminology 
currently accepted within the child support community; however, we 
invite comments on this approach generally and request specific 
suggestions for alternatives. An example of an alternative approach 
might be for OCSE to define the terms ``written'' or ``in writing'' in 
the regulations to include electronic formats. OCSE could then leave 
the existing regulatory language as is. This alternative approach would 
provide States the option to use electronic formats as may be permitted 
or limited by State law procedures and requirements.
Part 301 (Sec. Sec.  301.1 and 301.13): State Plan Approval and Grant 
Procedures
    We propose to make changes to two sections in part 301, ``State 
Plan Approval and Grant Procedures.'' First, in Sec.  301.1, we propose 
amending the definition of ``Procedures'' by changing the phrase 
``written instructions'' to ``instructions in a record.'' This will 
allow instructions set forth under the State's child support plan to be 
made in a perceivable form that is not limited to a written format.
    In addition, we propose inserting the definition for the term 
``record'' (as discussed above). The use of the term ``record'' is 
broader than the term ``written'' and encompasses different

[[Page 68571]]

ways of storing information, including, for example, in a written or an 
electronic document.
    The first sentence of the introductory paragraph of Sec.  301.13, 
``Approval of State plans and amendments,'' describes the State plan as 
consisting of written documents furnished by the State to cover its 
Child Support Enforcement program under title IV-D of the Act. We 
propose replacing the words ``written documents'' with the word 
``records.'' The intent of this change is to allow for electronic 
submission, transmission, and storage of the State child support plan. 
When a State submits State child support plans electronically, it must 
ensure electronic signatures accompany the documents.
    Paragraphs (e) and (f), ``Prompt approval of the State plan'' and 
``Prompt approval of plan amendments,'' respectively, discuss the 
deadline by which OCSE must make a determination on a State plan or 
State plan amendments submitted by the State, and allow for the OCSE 
regional program office and the State to agree to an extension on the 
deadline in ``a written agreement.'' We propose changing the words ``a 
written agreement'' in both provisions to ``an agreement, which is 
reflected in a record.'' These changes will enable OCSE regional 
program offices to secure from IV-D agencies agreements to extend an 
approval deadline for either a State plan or State plan amendments in 
an electronic record format. In addition, we propose a technical change 
to paragraph (f) to change ``Regional Commissioner'' to ``Regional 
Office'' for consistency with Sec.  301.13.
Part 302 (Sec. Sec.  302.33, 302.34, 302.50, 302.65, 302.70, and 
302.85): State Plan Requirements
    We propose to make changes to several sections in part 302, ``State 
Plan Requirements.'' First, Sec.  302.33(d)(2), which discusses the 
recovery of State costs of providing services in nonassistance cases, 
requires a State to develop a written methodology to determine 
standardized costs which are as close to actual costs as is possible. 
We propose changing the phrase ``written methodology'' to 
``methodology, which is reflected in a record.'' This proposed change 
will afford a State record-keeping flexibility in developing a 
methodology for recovering standardized costs.
    Currently, the first sentence under Sec.  302.34 requires a State 
to enter into written agreements for cooperative arrangements under 
Sec.  303.107 with appropriate courts, law enforcement officials, 
Indian tribes, or tribal organizations. We propose editing the phrase 
``written agreements'' to read ``agreements, which are reflected in a 
record.'' This will ensure that any cooperative arrangements entered 
into by the IV-D agency can be agreed upon in a record and will not be 
limited to a written format. This amendment does not change any of the 
requirements for the document to be legally effective or enforceable, 
such as a signature.
    Next, Sec.  302.50 describes State requirements for the assignment 
of rights to support. Paragraph (b)(2) of that section requires a State 
to determine ``in writing'' the amount of an obligation, if there is no 
court or administrative order. We propose replacing the word 
``writing'' with ``a record'' so that the State has greater flexibility 
in the format of this amount determination, according to its own State 
laws and guidelines procedures.
    We also propose changes in Sec.  302.65, ``Withholding of 
unemployment compensation.'' Paragraph (b) requires a State IV-D agency 
to enter into a written agreement with the SESA [State employment 
security agency] in its State for the purpose of withholding 
unemployment compensation from individuals with unmet support 
obligations.\78\ We propose amending the sentence by changing the 
phrase ``a written agreement'' to ``an agreement, which is reflected in 
a record'' and as previously explained in footnote 76, replace SESA 
with SWA. Additionally, Sec.  302.65(c)(3) requires State IV-D agencies 
to establish and use written criteria for selecting cases to pursue via 
the withholding of unemployment compensation for support purposes. We 
propose changing the words ``written criteria'' to ``criteria, which 
are reflected in a record.'' These changes will establish that the 
agreements States develop with SESAs and the criteria for selecting 
cases in which to pursue withholding unemployment compensation are not 
limited to written agreements or written criteria. Again, these 
amendments do not impact any of the requirements for the documents to 
be legally effective or enforceable, such as a signature.
---------------------------------------------------------------------------

    \78\ Please note, as discussed under Topic 3, Technical 
Corrections, we also propose replacing the State employment security 
agency (SESA) with State workforce agency (SWA) in this section and 
Sec. Sec.  303.3 and 308.2.
---------------------------------------------------------------------------

    In Sec.  302.70, ``Required State laws,'' paragraph (a)(5) 
describes the procedures for paternity establishment. Paragraph 
(a)(5)(v) discusses requirements for objecting to genetic testing 
results and states that if no objection is made, a written report of 
the test results is admissible as evidence of paternity without the 
need for foundation testimony or other proof of authenticity or 
accuracy. We propose changing the phrase ``a written report of the test 
results'' to ``a report of the test results, which is reflected in a 
record.'' We believe this change will provide greater flexibility and 
efficiency in admitting evidence of paternity. Please note that in this 
same provision, we have not proposed to eliminate the phrase ``in 
writing'' in the requirement that any objection to genetic testing 
results must be made in writing within a specified number of days 
before any hearing at which such results may be introduced into 
evidence. In this instance, the phrase ``in writing'' is statutorily 
prescribed, according to section 466(a)(5)(F)(ii) of the Act.
    The final proposed change under State Plan Requirements is in Sec.  
302.85 on the ``Mandatory computerized support enforcement system.'' In 
the section describing the basis for OCSE to grant State waivers in 
regard to the mandatory computerized system, one of the requirements, 
described under Sec.  302.85(b)(2)(ii), mandates the State to provide 
written assurances that steps will be taken to otherwise improve the 
State's Child Support Enforcement program. We propose amending Sec.  
302.85(b)(2)(ii) by changing the phrase ``written assurances'' to 
``assurances, which are reflected in a record.'' This change will 
provide a State the option of communicating with OCSE electronically 
when providing the required assurances under this provision.
Part 303 (Sec. Sec.  303.2, 303.5, 303.11, and 303.31): Standards for 
Program Operations
    We are proposing to make amendments to several provisions in part 
303, ``Standards for Program Operations.'' In Sec.  303.2, 
``Establishment of cases and maintenance of case records,'' the 
regulation requires, under Sec.  303.2(a)(2), that the State IV-D 
agency send an application to an individual within no more than five 
working days of a written or telephone request. We propose replacing 
the phrase ``a written or telephone request'' with ``a request made by 
telephone or in a record,'' in order to allow for any requests for 
applications that are received by telephone or transmitted 
electronically, for example, by email or text.
    In this same section, we also propose changes to the requirements 
for applications for IV-D services, under Sec.  303.2(a)(3). Currently, 
this section defines an application as a written document provided by 
the State which . . . is signed by the individual

[[Page 68572]]

applying for IV-D services. We propose lifting the restriction that 
applications only be in a written or paper format by replacing the 
phrase ``written document'' with ``record.'' We also propose amending 
the regulatory language to allow for electronic signature by inserting 
the phrase ``electronically or otherwise'' after the word 
``signature.'' The proposed sentence would state that an application is 
a record that is provided or used by the State which indicates that the 
individual is applying for child support enforcement services under the 
State's title IV-D program and is signed, electronically or otherwise, 
by the individual applying for IV-D services.
    These proposed changes are in accordance with PIQ 09-02, which 
allows States to use electronic signatures on applications, as long as 
it is allowable under State law.\79\ As noted in PIQ 09-02, the 
appropriateness of the use of electronic signatures must be carefully 
determined by States. In making this determination, States should 
consider the reliability of electronic signature technology and the 
risk of fraud and abuse, among other factors.
---------------------------------------------------------------------------

    \79\ Available at: http://www.acf.hhs.gov/programs/cse/pol/PIQ/2009/piq-09-02.htm.
---------------------------------------------------------------------------

    Section 303.5 describes program standards for paternity 
establishment. Subparagraph (g)(6) of that section requires the State 
to provide training, guidance, and ``written instructions'' regarding 
voluntary acknowledgment of paternity to hospitals, birth record 
agencies, and other entities that participate in the State's voluntary 
acknowledgment program. We propose changing the phrase ``written 
instructions'' to ``instructions, which are reflected in a record.'' 
This change will allow a State the flexibility to provide program 
instructions in electronic formats, in addition to, or in place of, 
written instructions.
    Next, we propose a change to the requirements for the closure of 
IV-D cases, under proposed Sec.  303.11(d). This provision describes 
the process by which a State must notify service recipients, or, in 
regard to intergovernmental IV-D cases, the process by which responding 
agencies must notify initiating agencies, of their intent to close a 
case. The provision requires this notification be ``in writing.'' In 
order to allow for greater efficiency and flexibility, we propose 
allowing electronic notification in the instance of intergovernmental 
IV-D case closure when the responding agency is communicating with the 
initiating agency. However, we do not propose changing the ``written'' 
notification requirement from a State to the recipient of services, 
because of our general approach not to remove written requirements 
where members of the public are involved, as described earlier. 
However, we invite comments on this approach and whether a recipient of 
services should be provided the option to request the case closure 
notice ``in writing'' or ``in a record'', such as emails, text 
messaging, voice mails.
    Next, we propose amending the introductory language in Sec.  
303.31(b)(3) by changing the phrase ``written criteria'' to ``criteria, 
which are reflected in a record,'' so that criteria established to 
identify cases where there is a high potential for obtaining medical 
support can be either in an electronic or written format.
Part 304 (Sec. Sec.  304.21 and 304.40): Federal Financial 
Participation
    We propose two changes to part 304, ``Federal Financial 
Participation (FFP).'' Under Sec.  304.21, ``Federal financial 
participation in the costs of cooperative arrangements with courts and 
law enforcement officials,'' the regulations describe activities, under 
Sec.  304.21(a), that are eligible for FFP reimbursement, provided they 
are ``performed under written agreement.'' We propose amending this 
section by changing the words ``written agreement'' to ``agreement, 
which is reflected in a record,'' to provide flexibility in the format 
of the agreements between a State and courts or law enforcement 
officials.
    In addition, Sec.  304.40, ``Repayment of Federal funds by 
installments,'' describes the procedures the State must follow in order 
to repay unallowable FFP funds to the Federal Government in 
installments. Section 304.40(a)(2) requires a State to notify the OCSE 
Regional Office in writing of its intent to make installment 
repayments. We propose changing the phrase ``in writing'' to ``in a 
record.'' This change will give a State the option of notifying the 
Regional Office electronically of its intent to repay Federal funds in 
installments.
Part 305 (Sec. Sec.  305.64 and 305.66): Program Performance Measures, 
Standards, Financial Incentives, and Penalties
    Under part 305, ``Program Performance Measures, Standards, 
Financial Incentives, and Penalties,'' we propose changes to Sec. Sec.  
305.64 and 305.66. First, in Sec.  305.64, ``Audit procedures and State 
comments,'' a State may submit ``written comments'' in response to the 
interim audit report within a specified timeframe under Sec.  
305.64(c). We propose changing ``written comments'' to ``comments, 
which are reflected in a record,'' allowing IV-D agencies to submit 
comments on an interim audit report in a perceivable format other than 
in a written format, if appropriate. In this same provision, Sec.  
305.64(c), we also propose a change to omit the phrase ``by certified 
mail'' from the second sentence of this paragraph since OCSE currently 
sends these reports electronically and by overnight mail.
    An additional proposed change affects Sec.  305.66, ``Notice, 
corrective action year, and imposition of penalty.'' Under Sec.  
305.66(a), if a State is found to be subject to a penalty, OCSE ``will 
notify the State in writing of such finding.'' We propose to replace 
``in writing'' with ``in a record'' so that OCSE can notify the State 
that it is subject to a penalty in a perceivable or electronic format, 
not just in a written format.

Part 307 (Sec.  307.5): Computerized Support Enforcement Systems

    In this section on proposed updates for advancements in technology, 
we propose one change to part 307, ``Computerized Support Enforcement 
Systems.'' In the section on mandatory systems, Sec.  307.5, one of the 
three conditions for a waiver of any functional systems requirement or 
for a waiver of any conditions for APD approval is the State provides 
written assurance that steps will be taken to otherwise improve the 
State's Child Support Enforcement program, Sec.  307.5(c)(3). We 
propose amending this section by changing ``written assurance'' to 
``assurance, which is reflected in a record,'' so that a State can 
provide assurance in a perceivable format other than a written format, 
if it so chooses.

Topic 3: Technical Corrections (Sec. Sec.  301.15; 302.14; 302.15; 
302.32; 302.34; 302.65; 302.70; 303.3; 303.7; 303.11; 304.10; 304.12; 
304.20; 304.21; 304.23; 304.25; 304.26; 305.35; 305.63; 308.2; 309.85; 
309.130; 309.145; and 309.160)

    We propose a number of technical corrections that update, clarify, 
revise, or delete existing regulations to ensure that the child support 
enforcement regulations are accurate, aligned, and up-to-date.
Section 301.15: Grants
    State agencies that administer the Child Support Enforcement 
Program under Title IV-D of the Act are required to provide information 
each fiscal quarter to OCSE concerning administrative expenditures and 
the

[[Page 68573]]

receipt and disposition of child support payments from noncustodial 
parents. The enactment of PRWORA changed a number of the requirements 
affecting financial data needs. In September 1997, Form ACF-396 was 
introduced and approved by OMB for interim use for the reporting of 
expenditures, estimates, and projections while OCSE continued its 
review of the newly-enacted statutory changes. During that time, and as 
a result of the efforts of a Federal-State partnership representing all 
interested parties and individuals, new financial reporting forms were 
developed. These forms provide OCSE with the information needed to 
complete its various financial and reporting responsibilities with 
minimal collection and reporting burden on State agencies. The new 
reporting forms, the OCSE-396A and the OCSE-34A, replaced all previous 
form versions.
    State IV-D agencies are required to report quarterly expenditures 
and collections using Forms OCSE-396A and OCSE-34A, respectively. The 
information collected on these reporting forms is used to compute State 
quarterly grant awards and annual incentive payments. These forms 
provide valuable information on State program finances.
    Currently, Sec.  301.15 does not reference the new forms and 
ultimately relies on outdated reporting requirements. In order to bring 
that section into alignment with current program operations, we propose 
to rename paragraph (a) Financial reporting forms and to delete 
subparagraph (3). We also propose to replace subparagraph (1) Time and 
place and subparagraph (2) Description of forms with definitions of 
Form OCSE-396A and Form OCSE-34A, respectively.
    We also propose to rename paragraph (b) Review as Submission, 
review, and approval and to add under paragraph (b) the following: (1) 
Manner of submission; (2) Schedule of submission; and (3) Review and 
approval. Current Sec.  301.15(a)(1) indicates that the expenditure 
report has to be submitted 30 days following the end of a fiscal 
quarter, but the estimate for a grant has to be submitted within 45 
days prior to the period of the estimate. Additionally, the current 
reporting instructions for the expenditure and collections reports 
require States to submit the forms no later than 30 days following the 
end of each fiscal quarter. We are proposing, therefore, that the 
Schedule of submission section be modified so that the financial forms 
must be submitted no later than 45 days following the end of each 
fiscal quarter. This will be a change of policy for the expenditure and 
collections reports and will require revision to the instructions for 
the reports, if the proposal is accepted. This proposed modification 
will afford a State more time to submit its financial reports. The 
other revisions in this paragraph reflect the current operating 
procedures and processes that are currently in place.
    Additionally, we propose to revise paragraph (c) Grant award by 
deleting its existing language and replacing that language with three 
subparagraphs (1) Award documents; (2) Award calculation; and (3) 
Access to funds. Finally, we also propose to delete paragraph (d) 
Letter of credit payment system and replace it with a new provision 
describing administrative requirements, titled General requirements. 
These revisions are proposed to align the regulations with the current 
operating procedures.
Section 302.14: Fiscal Policies and Accountability
    In 1988, the Department implemented the common rule at 45 CFR part 
92. The common rule expanded the scope of 45 CFR part 92 to include 
nonentitlement grant programs, and to remove such programs from the 
scope of part 74 but did not include entitlement programs like Child 
Support Enforcement.
    In 2003, the Department revised its grants management regulations 
in order to bring its entitlement programs, like Child Support 
Enforcement, under the same regulations that already applied to 
nonentitlement programs for grants and cooperative agreements to State, 
Tribal, and local governments. Thus, the reference to part 74 has been 
erroneous since DHHS transferred the administrative requirements for 
title IV-D grant programs from 45 CFR part 74 to 45 CFR part 92 in 
2003.\80\ Therefore, we propose to replace the reference to part 74 
under Sec.  302.14 with reference to part 92. For consistency, as 
discussed below, we will also replace all references to part 74 with 
part 92, as appropriate, in 9 other provisions throughout the child 
support regulations, Sec. Sec.  302.15, 303.11, 304.10, 304.20, 304.25, 
309.85, 309.130, 309.145, and 309.160.
---------------------------------------------------------------------------

    \80\ See 45 CFR parts 74 and 92: Uniform Administrative 
Requirements for Awards and Subawards to Institutions of Higher 
Education, Hospitals, Other Nonprofit Organizations, and Commercial 
Organizations; and Certain Grants and Agreements with States, Local 
Governments and Indian Tribal Governments and Uniform Administrative 
Requirements for Grants and Cooperative agreements to State and 
Local Governments, 68 FR 52843, September 8, 2003, available at: 
http://edocket.access.gpo.gov/2003/pdf/03-22513.pdf.
---------------------------------------------------------------------------

Section 302.15: Reports and Maintenance of Records
    Section 302.15(a) references part 74. We propose to replace that 
reference with a reference to part 92.
Section 302.32: Collection and Disbursement of Support Payments by the 
IV-D Agency
    Because the dates contained in the introductory paragraph are 
outdated, we propose to update by removing the introductory paragraph. 
We also propose to revise paragraph (b) to replace ``State Disbursement 
Unit (SDU)'' with ``SDU.'' In addition, we propose to replace an 
incorrect cross reference in paragraph (b)(1) from Sec.  
303.7(c)(7)(iv) to Sec.  303.7(d)(6)(v).
Section 302.34: Cooperative Arrangements
    We propose to clarify that the term law enforcement officials 
includes ``district attorneys, attorneys general, and similar public 
attorneys and prosecutors,'' and to add ``corrections officials'' to 
the list of entities with which a State may enter into agreements for 
cooperative arrangements. This addition encourages Child Support 
Enforcement agencies to collaborate with corrections institutions and 
community corrections officials (probation and parole agencies).
Section 302.65: Withholding of Unemployment Compensation
    We propose to replace the term ``State employment security agency'' 
with ``State workforce agency,'' and the term ``SESA'' with ``SWA'' 
throughout this regulation for consistency with the terminology used by 
the Department of Labor.
Section 302.70: Required State Laws
    We propose making a technical correction under Sec.  302.70, 
``Required State laws,'' to paragraph (a)(8). Under this paragraph, the 
State plan must provide that a State has laws and implements procedures 
under which all child support orders issued or modified in the State 
include an income withholding provision, so that the withholding remedy 
will be available if arrearages occur without the necessity of filing 
an application for IV-D services in accordance with Sec.  303.100(i). 
We propose to replace the incorrect cross reference to Sec.  303.100(i) 
with Sec.  303.100(g).
Section 303.3: Location of Noncustodial Parents in IV-D Case
    In paragraph (b)(5), we propose to replace the term ``State 
employment security'' with ``State workforce.'' As

[[Page 68574]]

discussed above, this change is for consistency with the terminology 
that is now used by the Department of Labor.
Section 303.7: Provision of Services in Intergovernmental IV-D Cases
    Under this proposed rule, as discussed under Topic 1, paragraphs in 
Sec.  303.11 are renumbered. We propose to make conforming changes to 
paragraph (d)(10) of this section to update the cross references.
    Additionally, the final intergovernmental child support regulation, 
published in the Federal Register on July 2, 2010 and effective on 
January 3, 2011, inadvertently omitted reference to the $25 annual fee 
in Sec.  303.7. To address this, we propose to add paragraph (f), 
Imposition and reporting of annual $25 fee in interstate cases, to 
provide that the title IV-D agency in the initiating State must impose 
and report the annual $25 fee in accordance with Sec.  302.33(e).
Section 303.11: Case Closure Criteria
    In existing Sec.  303.11(b)(2), which has been redesignated as 
Sec.  303.11(b)(4), we propose to replace the outdated term ``putative 
father'' with the term ``alleged father.'' We also propose to replace 
the outdated term ``putative father'' with the term ``alleged father'' 
in existing Sec.  303.11(b)(3)(ii), which has been redesignated as 
Sec.  303.11(b)(6)(ii), and to remove the word ``or'' at the end of the 
sentence. In addition, we propose to add the word ``or'' to the end of 
proposed Sec.  303.11(b)(6)(iii). Finally, in Sec.  303.11(d), we 
propose to replace the reference to part 74 with a reference to part 92 
as previously discussed.
Section 304.10: General Administrative Requirements
    Section 304.10 references 45 CFR part 74 in three instances. We 
propose to replace these references with corresponding reference to 
part 92.
Section 304.12: Incentive Payments
    We propose to delete outdated paragraphs Sec.  304.12(c)(4) and (5) 
as they applied to fiscal years 1985, 1986, and 1987.
Section 304.20: Availability and Rate of Federal Financial 
Participation
    Section 304.20(b)(1)(iii) references part 74. For reasons described 
earlier, we propose to replace that reference with a reference to 45 
CFR 92.36(b). Additionally, we propose to delete Sec.  304.20(c) and 
(d) as they apply to fiscal years 1997 and 1998 and are out of date.
Section 304.21: Federal Financial Participation in the Costs of 
Cooperative Arrangements With Courts and Law Enforcement Officials
    We propose to clarify in paragraph (a) that the term law 
enforcement officials includes ``corrections officials,'' to be 
consistent with Sec.  302.34.
    Section 304.21(a)(1) lists activities for which FFP at the 
applicable matching rate is available in the costs of cooperative 
agreements with appropriate courts and law enforcement officials. We 
propose to modify the section to include a reference to Sec.  
304.20(b)(11), regarding medical support activities.
Section 304.23: Expenditures for Which Federal Financial Participation 
Is Not Available
    Federal financial participation is the portion of a State's 
operational expenditures that is paid by a Federal match and is 
available for necessary expenditures incurred under the State plan. 
Section 304.23(a) lists various programs for which FFP is not available 
for administering these programs. We propose to add the following 
programs to the list: Titles IV-B, which administers the Child Welfare 
Program; IV-E, which administers the Foster Care Program; and XXI, 
which administers the Children's Health Insurance Program (CHIP) of the 
Act; and the Supplemental Nutrition Assistance Program (SNAP), which is 
administered under 7 U.S.C. Chapter 51. These additions are technical 
corrections intended to ensure that the regulations are updated and to 
clarify that child support FFP is not allowed for carrying out these 
programs' responsibilities.
    We also propose to repeal Sec.  304.23(g). Language regarding 
medical support enforcement cooperative agreements was first added to 
the IV-D regulations in 1977 because section 1912 of the Act required 
the State Medicaid agencies to have cooperative agreements with the IV-
D agencies to implement the Third party Liability program. Paragraph 
(g) was originally intended to prohibit child support FFP for 
cooperative agreements, under part 306, between child support and 
Medicaid agencies. However, Sec.  304.23(g) is no longer necessary 
since the child support agencies now have increased responsibilities 
related to medical support enforcement activities as a result of PRWORA 
in 1996, which required States to enact a provision for health care 
coverage in all orders established or enforced by the child support 
agency. Today, OCSE does not require IV-D agencies to enter into 
agreements with the State Medicaid agencies.
Section 304.25: Treatment of Expenditures; Due Date
    Section 304.25(a) references part 74. We propose to replace that 
reference with a reference to part 92.
    Additionally, we propose to modify Sec.  304.25(b). Section 
304.25(b) requires a State to submit quarterly statements of 
expenditures under Sec.  301.15 30 days after the end of the quarter. 
We propose to modify the number of days from 30 to 45. This proposed 
modification will afford a State more time to submit quarterly 
statements of expenditures.
Section 304.26: Determination of Federal Share of Collections
    Additionally, OCSE proposes to make a technical correction to Sec.  
304.26(a)(1) by amending the Federal medical assistance percentage with 
respect to the distribution of child support collections for Title IV-E 
Foster Care cases in the U.S. territories and the District of Columbia. 
Section 457(c) of the Act indicates that the Federal medical assistance 
percentage rate for child support collections retained by Puerto Rico, 
the Virgin Islands, Guam, and American Samoa to reimburse TANF 
assistance is 75 percent. However, this rate does not apply to IV-E 
collections. The Federal medical assistance percentage rate for Foster 
Care maintenance payments in Puerto Rico, the Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa is 55 percent, according 
to section 1905(b) of the Act. (This rate was 50 percent until January 
1, 2011.) Therefore, we propose amending Sec.  304.26(a)(1) to clarify 
that the Federal medical assistance percentage rate for the 
distribution of child support collections to reimburse IV-E collections 
is 55 percent for Puerto Rico, the Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa according to section 1905(a) of the 
Act and implementing regulations at 45 CFR 302.52(b)(1) and (3). In 
addition, we also propose a technical fix to this provision to specify 
that the Federal medical assistance percentage rate to reimburse IV-E 
collections for the District of Columbia is 70 percent, according to 
section 1905(b)(3) of the Act. Please note that this rule only applies 
to States and other U.S. jurisdictions operating IV-D programs. This 
currently includes Puerto Rico, Guam, Virgin Islands, and the District 
of Columbia.
    We also propose to delete paragraphs (b) and (c) of Sec.  304.26. 
Those paragraphs require incentive and hold harmless payments to be 
made from the Federal

[[Page 68575]]

share of collections. This requirement is outdated. Incentive and hold 
harmless payments are no longer paid from the Federal share of 
collections.
Section 305.35: Reinvestment
    We are proposing several technical changes to this section. A key 
provision of the Child Support Performance and Incentive Act of 1998 is 
that State IV-D agencies are required to reinvest the amount of Federal 
incentive payments received into their child support program. Section 
458(f) of the Act provides that incentive funding shall be used to 
supplement rather than supplant existing funding. In order to ensure 
that this requirement is met in future years, OCSE promulgated 
regulations at 45 CFR 305.35 establishing a baseline level of funding 
that a State would be required to maintain. Although the regulations 
established a methodology for determining the baseline funding, States 
are uncertain about how to calculate their current spending level so 
that they could compare it to the baseline and evaluate their 
compliance with the statutory requirement.
    In response to comments in the Final Rule, published on December 
27, 2000 (65 FR 82177) regarding compliance with the prohibition of 
supplanting funds, we indicated that OCSE staff would have a role in 
monitoring this requirement. This was also addressed in AT-01-04, 
``Reinvestment of Child Support Incentive Payments.'' \81\ OCSE 
proposes adding this language to the regulation in order to clarify the 
potential consequences.
---------------------------------------------------------------------------

    \81\ Available at: http://www.acf.hhs.gov/programs/cse/pol/AT/2001/at-01-04.htm.
---------------------------------------------------------------------------

    OCSE proposes adding language that would clarify the definition of 
State Current Spending Level for purposes of determining if the State 
has met or fulfilled the baseline expenditures level. This will ensure 
that a State does not supplant their baseline expenditure level with 
Federal incentive payments. OCSE is specifically soliciting comments 
regarding this definition.
    To clarify the potential consequences of a State not maintaining 
the baseline expenditure level, we propose amending 45 CFR 305.35(d) by 
adding a sentence to the end of the paragraph to read: ``Non-compliance 
will result in disallowances of incentive amounts equal to the amount 
of funds supplanted.''
    We propose redesignating paragraph (e) as paragraph (f) and adding 
a new paragraph (e) to clarify how the State Current Spending Level 
should be calculated. Using the Form OCSE-396A, ``Child Support 
Enforcement Program Expenditure Report,'' the State Current Spending 
Level will be calculated by determining the State Share of Total 
Expenditures Claimed for all four quarters of the fiscal year minus 
State Share of IV-D Administrative Expenditures Made Using Funds 
Received as Incentive Payments for all four quarters of the fiscal 
year, plus the Fees for the Use of the Federal Parent Locator Service 
(FPLS) for all four quarters of the fiscal year.
    The equation for calculating the State Share of Total Expenditures 
Claimed is: Total Expenditures Claimed for the Current Quarter and the 
Prior Quarter Adjustments minus the Federal Share of Total Expenditures 
Claimed for the Current Quarter and Prior Quarter Adjustments. Using 
the Form OCSE-396A, this equation can also be translated as:

State Share of Expenditure = Line 7 (Columns A + C) - Line 7 (Columns B 
+ D) for all four quarters of the fiscal year.

    The equation for calculating the State Share of IV-D Administrative 
Expenditures Made Using Funds Received as Incentive Payments is:
    IV-D Administrative Expenditures Made Using Funds Received as 
Incentive Payments for the Current Quarter and the Prior Quarter 
Adjustments minus the Federal Share of IV-D Administrative Expenditures 
Made Using Funds Received as Incentive Payments for the Current Quarter 
and Prior Quarter Adjustments. Using the Form OCSE-396A, this equation 
can also be translated as:

State Share of IV-D Administrative Expenditures Made Using Funds 
Received as Incentive Payments = Line 1a (Columns A + C) - Line 1a 
(Columns B + D) for all four quarters of the fiscal year.

    The Fees for the Use of the FPLS can be computed by adding the FPLS 
fees claimed for all four quarters of the fiscal year. Using the Form 
OCSE-396A, this equation can also be translated as:
    Fees for the Use of the FPLS = Line 10 (Columns B) for all four 
quarters of the fiscal year.
Section 305.63: Standards for Determining Substantial Compliance With 
IV-D Requirements
    Section 305.63(d) erroneously cross references paragraph (b). We 
propose to replace that cross reference with a reference to paragraph 
(c). Our proposed revision will make this section consistent with the 
final rule on intergovernmental child support cases.
Section 308.2: Required Program Compliance Criteria
    The term ``State employment security agency'' is removed wherever 
it appears and replaced by ``State workforce agency.'' This change is 
for consistency with the terminology used by the Department of Labor, 
as discussed earlier. In addition, in subparagraph (c)(3)(i), we have 
capitalized Department of Motor Vehicles and used the section symbol 
for consistency.
Section 309.85: What records must a tribe or tribal organization agree 
to maintain in a Tribal IV-D plan?
    Section 309.85(b) references part 74. We propose to replace that 
reference with a reference to part 92.
Section 309.130: How will Tribal IV-D programs be funded and what forms 
are required?
    Section 309.130(b)(3) references Standard Form (SF) 269A, 
``Financial Status Report (Short Form).'' That form is obsolete. We 
propose to replace that reference with a reference to SF 425, ``Federal 
Financial Report,'' which is the new OMB approved form. To be 
consistent with our proposed change of Sec.  301.15(b)(2), we also 
propose in this section to change the reporting due date requirements 
for the OCSE-34A, ``Quarterly Report of Collections.'' This proposed 
modification will afford Tribes the same amount of time as States to 
submit reporting data. We are not making a similar due date change for 
the SF-425 report since this is determined by OMB.
    Section 309 references part 74 in paragraphs (d)(3) and (h). We 
propose to replace these references with references to part 92.
Section 309.145: What costs are allowable for Tribal IV-D programs 
carried out under Sec.  309.65(a) of this part?
    Section 309.145(a)(3) references part 74. We propose to replace 
that reference with a reference to part 92.
Section 309.160: How will OCSE determine if Tribal IV-D program funds 
are appropriately expended?
    This section references part 74. We propose to replace that 
reference with a reference to part 92.

Paperwork Reduction Act

    Under the Paperwork Reduction Act (Pub. L. 104-13), all Departments 
are required to submit to OMB for review and approval any reporting or 
recordkeeping requirements inherent in a proposed or final rule. There 
are seven new requirements as a result of these

[[Page 68576]]

regulations. These new regulatory requirements are one-time system 
enhancements to the statewide child support system. The description and 
total estimated burden for the changes are described in the chart 
below.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Number of         Average burden hours                     National     National state
        Section and purpose                Instrument          respondents:  54         per response        Total cost     federal share       share
--------------------------------------------------------------------------------------------------------------------------------------------------------
Added requirement under Sec.         Systems Modification.  One-time system        300 hours x $100 per       $1,620,000      $1,069,200        $550,800
 302.33 to generate notices.                                 enhancement.           54 States to modify
                                                                                    statewide child
                                                                                    support system.
Added optional requirement under     Systems Modification.  One-time system        5,000 hours x $100         13,500,000       8,910,000       4,590,000
 Sec.   302.33 for revised                                   enhancement.           per 27 States to
 applications for limited services.                                                 modify statewide
                                                                                    child support system.
Added requirement under Sec.         Systems Modification.  One-time system        200 hours x $100 x 54       1,080,000         712,800         367,200
 303.8 for notice of the right to                            enhancement.           States.
 request review and adjustment when
 parent is incarcerated.
Added optional requirement under     Systems Modification.  One-time system        1,000 hours x $100 x        2,700,000       1,782,000         918,000
 Sec.   303.11 for notice to                                 enhancement.           27 States.
 recipient when case closed because
 limited service has been completed.
Added requirement under Sec.         System Modification..  One-time system        500 hours x $100 x 54       2,700,000       1,782,000         918,000
 303.11 for notice because the                               enhancement.           States.
 referring agency does not respond
 to a notice or does not provide
 information demonstrating that
 services are needed.
Under Sec.   303.72 discontinue      Systems Modification.  One-time system        500 hours x $100 x 54       2,700,000       1,782,000         918,000
 notice requirement for interstate                           enhancement.           States.
 tax refund offset.
Under Sec.   307.11 develop          Systems Modification.  One-time system        400 hours x $100 x 54       2,160,000       1,425,600         734,400
 automated procedures to identify                            enhancement.           States.
 the recipient of Supplemental
 Security Income (SSI).
Under 42 CFR 433.152, regarding      State plan amendment.  One time for 54 State  2 hours x $36.63 x 54        3,956.04        1,978.02        1,978.02
 state plan amendments.                                      Medicaid Programs,     States.
                                                             (which includes DC
                                                             and 3 territories).
Under 42 CFR 433.152, regarding      Cooperative agreement  .....................  10 hours x $36.63 x         19,780.20        9,890.10        9,890.10
 cooperative agreements.                                                            54 States.
                                                                                                         -----------------------------------------------
    Totals.........................  .....................  .....................  .....................   26,483,736.24   17,475,468.12    9,008,268.12
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Part 302 contains information collection requirements as required 
by the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). Although we 
believe that the States will have to submit revised Child Support State 
plan pages for Sec. Sec.  302.33, 302.56, and 302.70, we do not 
estimate any additional burden on the ``State Plan for Child Support 
Collection and Establishment of Paternity Under Title IV-D of the 
Social Security Act,'' and the State Plan Transmittal Form [OMB 0970-
0017], which were reauthorized until July 31, 2014. When these forms 
were submitted for reauthorization, we had estimated that each State 
would be submitting eight State plan preprint pages annually as a 
result of changes in regulations, policies, and/or procedures.
    Additionally, various forms are discussed for use in different 
processes. None of these discussions are new burdens. For example Sec.  
303.11 clarifies the current regulation that states are required to use 
the Income Withholding Order (IWO) form. Use of the OMB-approved form 
is already required. The OMB Control # is 0970-0154 which expires on 
06/30/2014. Section 303.35 clarifies that the OCSE-396A is used to 
calculate the state current spending level. This form is an OMB-
approved form, Control # 0970-0181 which expires on 05/31/2017. 
Finally, there has been an update from use of form SF 269A to SF 425. 
This is a technical update with no addition burden. SF425 is an OMB-
approved form Control #0348-0061 which expires 2/28/2015.
    With regard to the proposed requirements for cooperative agreements 
for third party collections under 42 CFR 433.152, Medicaid State plan 
amendments will be required as well as amendments to state cooperative 
agreements. The one-time burden associated with the requirements under 
Sec.  433.152 is the time and effort it would take each of the 54 State 
Medicaid Programs, which includes the District of Columbia and 3 
territories, to submit State plan amendments and amend their 
cooperative agreements.
    Specifically, we estimate that it will take each State 2 hours to 
amend their state plans and 10 hours to amend their cooperative 
agreements. We estimate 12 total annual hours at a total estimated cost 
of $23,736.24 with a State share of $11,868.12. CMS reimburses States 
for 50 percent of the administrative costs incurred to administer the 
Medicaid State plan.
    In deriving these figures, we used the hourly rate of $36.63/hour 
for a GS-13-3 working in the Washington DC Baltimore area according to 
the calendar year 2013 federal pay scale.
    Besides what is addressed above, no additional information 
collection burdens, as described in the Paperwork Reduction Act of 1995 
(44 U.S.C. 3507(d)), are imposed by this proposed regulation.
    ACF and CMS will consider comments by the public on this proposed 
collection of information in the following areas:
    1. Evaluating whether the proposed collection is necessary for the 
proper performance of the functions of ACF and CMS, including whether 
the information will have practical utility;

[[Page 68577]]

    2. Evaluating the accuracy of ACF's and CMS' estimates of the 
proposed collection of information, including the validity of the 
methodology and assumptions used;
    3. Enhancing the quality, usefulness, and clarity of the 
information to be collected; and
    4. Minimizing the burden of the collection of information on those 
who are to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technology, e.g., permitting 
electronic submission of responses.
    OMB is required to make a decision concerning the collection of 
information contained in these proposed regulations between 30 and 60 
days after publication of this document in the Federal Register. 
Therefore, a comment is best assured of having its full effect if OMB 
receives it within 30 days of publication. This does not affect the 
deadline for the public to comment to the Department on the proposed 
regulations. Written comments to OMB for the proposed information 
collection should be sent directly to the following: Office of 
Management and Budget, either by fax to 202-395-6974 or by email to 
OIRA_submission@omb.eop.gov. Please mark faxes and emails to the 
attention of the desk officer for ACF.

Regulatory Flexibility Analysis

    The Secretary certifies, under 5 U.S.C. 605(b), and enacted by the 
Regulatory Flexibility Act (Pub. L. 96-354), that this proposed 
regulation will not result in a significant impact on a substantial 
number of small entities. The primary impact is on State Governments. 
State Governments are not considered small entities under the Act.

Regulatory Impact Analysis

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if the 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity.) Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, harmonizing rules, and of promoting 
flexibility. While there are some costs associated with these 
regulations, they are not economically significant as defined under 
E.O. 12866. However, the regulation is significant and has been 
reviewed by OMB.
    Within the NPRM an area with associated Federal costs is modifying 
the child support statewide automated system for one-time system 
enhancements to accommodate new requirements such as notices, 
applications, and identifying noncustodial parents receiving SSI. This 
proposal has an approximately $26,484,000 cost. There is a cost of 
$26,460,000 to modify statewide IV-D systems for the 54 (with an 
assumption that 27 States will implement the optional requirements) 
States or Territories at a cost of $100 an hour. A cost of 
approximately $24,000 is designated to CMS' costs for State plan 
amendments and cooperative agreements. Another area associated with 
Federal costs is that of job services. We propose to allow FFP for 
certain job services for noncustodial parents responsible for paying 
child support. The estimated total average annual net cost (over the 
first five years) of the job services proposal is $26,096,596 with 
$18,592,939 as the Federal cost. Thus, the total net cost of the NPRM 
is $52,580,596. These proposed regulations, along with proposed changes 
in recognition of technological advances, will improve the delivery of 
child support services, support the efforts of noncustodial parents to 
provide for their children, and improve the efficiency of operations.

Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 requires 
that a covered agency prepare a budgetary impact statement before 
promulgating a rule that includes any Federal mandate that may result 
in the expenditure by State, Tribal and local Governments, in the 
aggregate, or by the private sector, of $100 million or more in any one 
year. This $100 million threshold was based on 1995 dollars. The 
current threshold, adjusted for inflation is $141 million. This 
proposed rule would not impose a mandate that will result in the 
expenditure by State, local, and Tribal Governments, in the aggregate, 
or by the private sector, of more than $141 million in any one year.

Congressional Review

    This notice of proposed rulemaking is not a major rule as defined 
in 5 U.S.C. Chapter 8.

Assessment of Federal Regulation and Policies on Families

    Section 654 of the Treasury and General Government Appropriations 
Act of 1999 requires Federal agencies to determine whether a policy or 
regulation may negatively affect family well-being. If the agency's 
determination is affirmative, then the agency must prepare an impact 
assessment addressing seven criteria specified in the law. The required 
review of the regulations and policies to determine their effect on 
family well-being has been completed, and this rule will have a 
positive impact on family well-being as defined in the legislation by 
proposing evidence-informed policies and practices that help to ensure 
that noncustodial parents support their children more consistently and 
reliably as they grow up.

Executive Order 13132

    Executive Order 13132 prohibits an agency from publishing any rule 
that has federalism implications if the rule either imposes substantial 
direct compliance costs on State and local governments and is not 
required by statute, or the rule preempts State law, unless the agency 
meets the consultation and funding requirements of section 6 of the 
Executive Order. We do not believe the regulation has federalism impact 
as defined in the Executive Order. However, consistent with Executive 
Order 13132, the Department specifically solicits comments from State 
and local government officials on this proposed rule.

List of Subjects

42 CFR Part 433

    Administrative practice and procedure, Child support, Claims, Grant 
programs--health, Medicaid, Reporting and recordkeeping requirements.

45 CFR Part 301

    Child support, State plan approval and grant procedures.

45 CFR Part 302

    Child support, State plan requirements.

45 CFR Part 303

    Child support, Standards for program operations.

45 CFR Part 304

    Child support, Federal financial participation.

45 CFR Part 305

    Child support, Program performance measures, Standards, Financial 
incentives, Penalties.

45 CFR Part 307

    Child support, Computerized support enforcement systems.

45 CFR Part 308

    Child support, Annual State self-assessment review and report.

[[Page 68578]]

45 CFR Part 309

    Child support, Grant programs--social programs, Indians, Reporting 
and recordkeeping requirements.

(Catalog of Federal Domestic Assistance Programs No. 93.563, Child 
Support Enforcement Program.)

    Dated: August 26, 2014.
Mark Greenberg,
Acting Assistant Secretary for Children and Families.
    Dated: September 16, 2014.
Marilyn Tavenner,
Administrator for the Centers for Medicare & Medicaid Services.
    Approved: September 29, 2014.
Sylvia M. Burwell,
Secretary of Health and Human Services.

    For the reasons discussed above, the Department of Health and Human 
Services proposes the following changes to 42 CFR Part 433 and 45 CFR 
Chapter III as set forth below:

Centers for Medicare and Medicaid Services

42 CFR Chapter IV

PART 433--STATE FISCAL ADMINISTRATION

0
1. The authority citation for part 433 is revised to read as follows:

    Authority:  Sec. 1102 of the Social Security Act (42 U.S.C. 
1302).

0
2. Section 433.152 is amended by revising paragraph (b) to read as 
follows:

Sec.  433.152  Requirements for cooperative agreements for third party 
collections.

* * * * *
    (b) Agreements with title IV-D agencies must specify that:
    (1) The Medicaid agency may not refer a case for medical support 
enforcement when the following criteria have been met:
    (i) The Medicaid referral is based solely upon health care 
services, including contract health services, provided through an 
Indian Health Program (as defined at 25 U.S.C. 1603(12)) to a child who 
is eligible for health care services from the Indian Health Service 
(IHS).
    (ii) [Reserved]
    (2) The Medicaid agency will provide reimbursement to the IV-D 
agency only for those child support services performed that are not 
reimbursable by the Office of Child Support Enforcement under title IV-
D of the Act and that are necessary for the collection of amounts for 
the Medicaid program.

Administration for Children and Families

45 CFR Chapter III

PART 301--STATE PLAN APPROVAL AND GRANT PROCEDURES

0
3. The authority citation for part 301 continues to read as follows:

    Authority:  42 U.S.C. 651 through 658, 659a, 660, 664, 666, 667, 
1301, and 1302.

0
4. Amend Sec.  301.1 by revising the first sentence of the definition 
of ``Procedures'' and adding the definition of ``Record'' in 
alphabetical order to read as follows:

Sec.  301.1  General definitions.

* * * * *
    Procedures means a set of instructions in a record which describe 
in detail the step by step actions to be taken by child support 
enforcement personnel in the performance of a specific function under 
the State's IV-D plan. * * *
* * * * *
    Record means information that is inscribed on a tangible medium or 
that is stored in an electronic or other medium and is retrievable in 
perceivable form.
* * * * *
0
5. Amend Sec.  301.13 by revising the first sentence of the 
introductory text and paragraphs (e) and (f) to read as follows:

Sec.  301.13  Approval of State plans and amendments.

    The State plan consists of records furnished by the State to cover 
its Child Support Enforcement program under title IV-D of the Act. * * 
*
* * * * *
    (e) Prompt approval of the State plan. The determination as to 
whether the State plan submitted for approval conforms to the 
requirements for approval under the Act and regulations issued pursuant 
thereto shall be made promptly and not later than the 90th day 
following the date on which the plan submittal is received in OCSE 
Regional Program Office, unless the Regional Office has secured from 
the IV-D agency an agreement, which is reflected in a record, to extend 
that period.
    (f) Prompt approval of plan amendments. Any amendment of an 
approved State plan may, at the option of the State, be considered as a 
submission of a new State plan. If the State requests that such 
amendments be so considered, the determination as to its conformity 
with the requirements for approval shall be made promptly and not later 
than the 90th day following the date on which such a request is 
received in the Regional Office with respect to an amendment that has 
been received in such office, unless the Regional Office has secured 
from the State agency an agreement, which is reflected in a record, to 
extend that period.
* * * * *
0
6. Amend Sec.  301.15 by revising paragraphs (a), (b), (c), and (d), 
and by removing paragraph (e) to read as follows:

Sec.  301.15  Grants.

* * * * *
    (a) Financial reporting forms. (1) Form OCSE-396A: Child Support 
Enforcement Program Expenditure Report. States submit this form 
quarterly to report the actual amount of State and Federal Share of 
title IV-D program expenditures and program income of the current 
quarter and to report the estimated amount of the State and Federal 
share of title IV-D program expenditures for the next quarter. This 
form is completed in accordance with published instructions. The 
signature of the authorized State program official on this document 
certifies that the reported expenditures and estimates are accurate and 
that the State has or will have the necessary State share of estimated 
program expenditures available when needed.
    (2) Form OCSE-34A: Child Support Enforcement Program Collection 
Report. States submit this form quarterly to report the State and 
Federal share of child support collections received, distributed, 
disbursed, and remaining undistributed under the title IV-D program. 
This form is completed in accordance with published instructions. The 
signature of the authorized State program official on this document 
certifies that the reported amounts are accurate. The Federal share of 
actual program expenditures and collections and the Federal share of 
estimated program expenditures reported on Form OCSE-396A and the 
Federal share of child support collections reported on Form OCSE-34A 
are used in the computation of quarterly grant awards issued to the 
State.
    (b) Submission, review, and approval. (1) Manner of submission. The 
Administration for Children and Families (ACF) maintains an On-line 
Data Collection (OLDC) system available to every State. States must use 
OLDC to submit reporting information electronically. To use OLDC, a 
State must request access from the ACF Office of Grants Management and 
use an approved digital signature.
    (2) Schedule of submission. Forms OCSE-396A and OCSE-34A must be 
electronically submitted no later than 45

[[Page 68579]]

days following the end of the each fiscal quarter. No submission, 
revisions, or adjustments of the financial reports submitted for any 
quarter of the fiscal year will be accepted by OCSE later than December 
31, 3 months after the end of the fiscal year.
    (3) Review and approval. The data submitted on Forms OCSE-396A and 
OCSE-34A are subject to analysis and review by the Regional Grants 
Officer in the appropriate ACF Regional Office and approval by the 
Director, Office of Grants Management, in the ACF central office. In 
the course of this analysis, review, and approval process, any reported 
program expenditures that cannot be determined to be allowable are 
subject to the deferral procedures found at 45 CFR 201.15 or the 
disallowance process found at 45 CFR 304.29 and 201.14 and 45 CFR part 
16.
    (c) Grant award. (1) Award documents. The grant award consists of a 
signed award letter and an accompanying ``Computation of Grant Award'' 
to detail the award calculation.
    (2) Award calculation. The quarterly grant award is based on the 
information submitted by the State on the financial reporting forms and 
consists of:
    (i) An advance of funds for the next quarter, based on the State's 
approved estimate; and
    (ii) The reconciliation of the advance provided for the current 
quarter, based on the State's approved expenditures.
    (3) Access to funds. A copy of the grant documents are provided to 
the HHS Division of Payment Management, which maintains the Payment 
Management System (PMS). The State is able to request a drawdown of 
funds from PMS through a commercial bank and the Federal Reserve System 
against a continuing letter of credit. The letter of credit system for 
payment of advances of Federal funds was established pursuant to 
Treasury Department regulations. (Circular No. 1075).
    (d) General requirements. A copy of the Terms and Conditions 
applicable to this program is available to the State annually. In 
general, the following Federal regulations govern the administration of 
this program:
    (1) 2 CFR part 225, ``Cost Principles for State, Local and Indian 
Tribal Governments (OMB Circular A-87);''
    (2) 45 CFR part 92, ``Uniform Administrative Requirements for 
Grants and Cooperative Agreements to State, Local, and Tribal 
Governments,'' with the following exceptions:
    (i) 45 CFR 92.24, ``Matching or cost sharing;'' and
    (ii) 45 CFR 92.41, ``Financial reporting;'' and
    (3) 45 CFR part 95, ``General Administration--Grant Programs 
(Public Assistance, Medical Assistance and State Children's Health 
Insurance Programs).''

PART 302--STATE PLAN REQUIREMENTS

0
7. The authority citation for part 302 continues to read as follows:

    Authority: 42 U.S.C. 651 through 658, 659a, 660, 664, 666, 667, 
1302, 1396a(a)(25), 1396b(d)(2), 1396b(o), 1396b(p), and 1396(k).

0
8. Revise Sec.  302.14 to read as follows:

Sec.  302.14  Fiscal policies and accountability.

    The State plan shall provide that the IV-D agency, in discharging 
its fiscal accountability, will maintain an accounting system and 
supporting fiscal records adequate to assure that claims for Federal 
funds are in accord with applicable Federal requirements. The retention 
and custodial requirements for these records are prescribed in 45 CFR 
part 92.
0
9. Amend Sec.  302.15 by revising paragraph (a)(7), redesignating the 
undesignated concluding paragraph of paragraph (a) as paragraph (a)(8), 
and revising newly redesignated paragraph (a)(8) to read as follows:

Sec.  302.15  Reports and maintenance of records.

* * * * *
    (a) * * *
    (7) Statistical, fiscal, and other records necessary for reporting 
and accountability required by the Secretary.
    (8) The retention and custodial requirements for the records in 
this section are prescribed in 45 CFR part 92.
* * * * *
0
10. Amend Sec.  302.32 by revising the introductory text, paragraph 
(a), paragraph (b) introductory text, and paragraph (b)(1) to read as 
follows:

Sec.  302.32  Collection and disbursement of support payments by the 
IV-D Agency.

    The State plan shall provide that:
    (a) The IV-D agency must establish and operate a State Disbursement 
Unit (SDU) for the collection and disbursement of payments under 
support orders--
    (1) In all cases being enforced under the State IV-D plan; and
    (2) In all cases not being enforced under the State IV-D plan in 
which the support order is initially issued in the State on or after 
January 1, 1994, and in which the income of the noncustodial parent is 
subject to withholding pursuant to section 466(a)(8)(B) of the Act.
    (b) Timeframes for disbursement of support payments by SDUs under 
section 454B of the Act.
    (1) In interstate IV-D cases, amounts collected by the responding 
State on behalf of the initiating State must be forwarded to the 
initiating State within 2 business days of the date of receipt by the 
SDU in the responding State, in accordance with Sec.  303.7(d)(6)(v) of 
this chapter.
* * * * *
0
11. Amend Sec.  302.33 by revising paragraph (a)(4), adding paragraph 
(a)(6), and revising the first sentence of paragraph (d)(2) to read as 
follows:

Sec.  302.33  Services to individuals not receiving title IV-A 
assistance.

    (a) * * *
    (4) Whenever a family is no longer eligible for assistance under 
the State's title IV-A and Medicaid programs, the IV-D agency must 
notify the family, within 5 working days of the notification of 
ineligibility, that IV-D services will be continued unless the family 
notifies the IV-D agency that it no longer wants services but instead 
wants to close the case. This notice must inform the family of the 
benefits and consequences of continuing to receive IV-D services, 
including the available services and the State's fees, cost recovery 
and distribution policies. This requirement to notify the family that 
services will be continued, unless the family notifies the IV-D agency 
to the contrary, also applies when a child is no longer eligible for 
IV-E foster care, but only in those cases that the IV-D agency 
determines that such services and notice would be appropriate.
* * * * *
    (6) The State may elect in its State plan to allow an individual 
under paragraph (a)(1)(i) of this section who files an application to 
request limited services. If the State chooses this option, the State 
must define how this process will be implemented and must establish and 
use procedures, which are reflected in a record, that specifies when 
and what limited services will be allowed. The State's procedures must 
require that a limited services applicant requesting enforcement 
services will receive all mandatory enforcement services, if 
appropriate, including income withholding, Federal Tax Refund Offset, 
and credit bureau reporting. An application will be considered full-
service unless the parent specifically applies for limited services in 
accordance with the State's procedures. If one parent specifically 
requests limited services and the other parent requests full services, 
the case will automatically receive full services. The

[[Page 68580]]

State will be required to charge the application and service fees 
required under paragraphs (c) and (e) of this section for a limited 
service, and may recover costs in accordance with paragraph (d) of this 
section if the State has chosen this option in its State plan. The 
State must provide the applicant an application form with information 
on the range of available services, consequences of selecting a limited 
service, and an explanation that the case will be closed when the 
limited service is completed.
* * * * *
    (d) * * *
    (2) A State that recovers standardized costs under paragraph (d)(1) 
of this section shall develop a methodology, which is reflected in a 
record, to determine standardized costs which are as close to actual 
costs as is possible. * * *
* * * * *
0
12. Amend Sec.  302.34 by revising the first sentence to read as 
follows:

Sec.  302.34  Cooperative arrangements.

    The State plan shall provide that the State will enter into 
agreements, which are reflected in a record, for cooperative 
arrangements under Sec.  303.107 of this chapter with appropriate 
courts; law enforcement officials, such as district attorneys, 
attorneys general, and similar public attorneys and prosecutors; 
corrections officials; Indian tribes or tribal organizations. * * *
* * * * *
0
13. Revise Sec.  302.38 to read as follows:

Sec.  302.38  Payments to the family.

    The State plan shall provide that any payment required to be made 
under Sec. Sec.  302.32 and 302.51 to a family will be made directly to 
the resident parent, legal guardian, or caretaker relative having 
custody of or responsibility for the child or children.
0
14. Amend Sec.  302.50 by revising paragraph (b)(2) to read as follows:

Sec.  302.50  Assignment of rights to support.

* * * * *
    (b) * * *
    (2) If there is no court or administrative order, an amount 
determined in a record by the IV-D agency as part of the legal process 
referred to in paragraph (a)(2) of this section in accordance with the 
requirements of Sec.  302.56.
* * * * *
0
15. Revise Sec.  302.56 to read as follows:

Sec.  302.56  Guidelines for setting child support awards.

    (a) Within one year after completion of the State's next 
quadrennial review of its guidelines, pursuant to Sec.  302.56(e), as a 
condition of approval of its State plan, the State must establish one 
set of guidelines by law or by judicial or administrative action for 
setting and modifying child support award amounts within the State that 
meet the requirements in this section.
    (b) The State must have procedures for making the guidelines 
available to all persons in the State whose duty it is to set child 
support award amounts.
    (c) The guidelines established under paragraph (a) of this section 
must at a minimum:
    (1) Take into consideration actual earnings and income of the 
noncustodial parent;
    (2) Be based on specific descriptive and numeric criteria and 
result in a computation of the support obligation;
    (3) Address how the parents will provide for the child(ren)'s 
health care needs through health insurance coverage and/or through cash 
medical support in accordance with Sec.  303.31 of this chapter;
    (4) Take into consideration the noncustodial parent's subsistence 
needs and provide that any amount ordered for support be based upon 
available data related to the parent's actual earnings, income, assets, 
or other evidence of ability to pay, such as testimony that income or 
assets are not consistent with a noncustodial parent's current standard 
of living; and
    (5) Provide that incarceration may not be treated as voluntary 
unemployment in establishing or modifying support orders.
    (d) The State must include a copy of the guidelines in its State 
plan.
    (e) The State must review, and revise, if appropriate, the 
guidelines established under paragraph (a) of this section at least 
once every four years to ensure that their application results in the 
determination of appropriate child support award amounts.
    (f) The State must provide that there will be a rebuttable 
presumption, in any judicial or administrative proceeding for the award 
of child support, that the amount of the award which would result from 
the application of guidelines established under paragraph (a) of this 
section is the correct amount of child support to be awarded.
    (g) A written finding or specific finding on the record of a 
judicial or administrative proceeding for the award of child support 
that the application of the guidelines established under paragraph (a) 
of this section would be unjust or inappropriate in a particular case 
will be sufficient to rebut the presumption in that case, as determined 
under criteria established by the State. Such criteria must take into 
consideration the best interests of the child. Findings that rebut the 
guidelines shall state the amount of support that would have been 
required under the guidelines and include a justification of why the 
order varies from the guidelines.
    (h) Child support awards established under paragraph (a) of this 
section may recognize parenting time provisions pursuant to State child 
support guidelines or when both parents have agreed to the parenting 
time provisions.
    (i) As part of the review of a State's guidelines required under 
paragraph (e) of this section, a State must consider economic data on 
the cost of raising children and analyze case data, gathered through 
sampling or other methods, on the application of, and deviations from, 
the guidelines. The analysis of the data must be used in the State's 
review of the guidelines to ensure that deviations from the guidelines 
are limited. Deviation from the presumptive child support amount may be 
based on factors established by the State.
0
16. Amend Sec.  302.65 by:
0
a. In paragraph (a), removing the definition of ``State employment 
security agency'';
0
b. In paragraph (a), adding the definition of ``State workforce 
agency'' in alphabetical order;
0
c. Removing the term ``SESA'' wherever it appears and adding in its 
place the term ``SWA'' in paragraphs (c)(1), (2), and (5) through (7); 
and
0
d. Revising paragraphs (b) and (c)(3).
    The revisions and additions read as follows.

Sec.  302.65  Withholding of unemployment compensation.

* * * * *
    (a) * * *
    State workforce agency or SWA means the State agency charged with 
the administration of the State unemployment compensation laws in 
accordance with title III of the Act.
* * * * *
    (b) Agreement. The State IV-D agency shall enter into an agreement, 
which is reflected in a record, with the SWA in its State for the 
purpose of withholding unemployment compensation from individuals with 
unmet support obligations being enforced by the IV-D agency. The IV-D 
agency shall agree only to a withholding program that it expects to be 
cost-effective and to reimbursement for the SWA's actual, incremental 
costs of providing services to the IV-D agency.
    (c) * * *
    (3) Establish and use criteria, which are reflected in a record, 
for selecting

[[Page 68581]]

cases to pursue via the withholding of unemployment compensation for 
support purposes. These criteria must be designed to insure maximum 
case selection and minimal discretion in the selection process.
* * * * *
0
17. Amend Sec.  302.70, by revising paragraphs (a)(5)(v), (a)(8), and 
the first sentence of paragraph (d)(2) to read as follows:

Sec.  302.70  Required State laws.

    (a) * * *
    (5) * * *
    (v) Procedures which provide that any objection to genetic testing 
results must be made in writing within a specified number of days 
before any hearing at which such results may be introduced into 
evidence; and if no objection is made, a report of the test results, 
which is reflected in a record, is admissible as evidence of paternity 
without the need for foundation testimony or other proof of 
authenticity or accuracy;
* * * * *
    (8) Procedures under which all child support orders which are 
issued or modified in the State will include provision for withholding 
from income, in order to assure that withholding as a means of 
collecting child support is available if arrearages occur without the 
necessity of filing an application for services under Sec.  302.33, in 
accordance with Sec.  303.100(g) of this chapter.
* * * * *
    (d) * * *
    (2) Basis for granting exemption. The Secretary will grant a State, 
or political subdivision in the case of section 466(a)(2) of the Act, 
an exemption from any of the requirements of paragraph (a) of this 
section for a period not to exceed 5 years if the State demonstrates 
that compliance would not increase the effectiveness and efficiency of 
its Child Support Enforcement program. * * *
* * * * *
0
18. Section 302.76 is added to read as follows:

Sec.  302.76  Job services.

    The State plan may provide for job services for eligible 
noncustodial parents pursuant to Sec.  303.6(c)(5) of this chapter. If 
the State chooses this option, the State plan must include a 
description of the job services and the eligibility criteria.
0
19. Amend Sec.  302.85 by revising paragraph (b)(2)(ii) to read as 
follows:

Sec.  302.85  Mandatory computerized support enforcement system.

* * * * *
    (b) * * *
    (2) * * *
    (ii) The State provides assurances, which are reflected in a 
record, that steps will be taken to otherwise improve the State's Child 
Support Enforcement program.

PART 303--STANDARDS FOR PROGRAM OPERATIONS

0
20. The authority citation for part 303 is revised to read as follows:

    Authority:  42 U.S.C. 651 through 658, 659a, 660, 663, 664, 666, 
667, 1302, 1396a(a)(25), 1396b(d)(2), 1396b(o), 1396b(p), 1396(k), 
and 25 U.S.C. 1603(12) and 1621e.

0
21. Amend Sec.  303.2 by revising the first sentence of paragraph 
(a)(2) and revising paragraph (a)(3) to read as follows:

Sec.  303.2  Establishment of cases and maintenance of case records.

    (a) * * *
    (2) When an individual requests an application for IV-D services, 
provide an application to the individual on the day the individual 
makes a request in person or send an application to the individual 
within no more than 5 working days of a request made by telephone or in 
a record. * * *
    (3) Accept an application as filed on the day it and the 
application fee are received. An application is a record that is 
provided or used by the State which indicates that the individual is 
applying for child support enforcement services under the State's title 
IV-D program and is signed, electronically or otherwise, by the 
individual applying for IV-D services.
* * * * *

Sec.  303.3  [Amended]

0
22. Amend Sec.  303.3 by:
0
a. In paragraph (b)(1), adding ``corrections institutions;'' after 
``unions;'' and before ``fraternal organizations;''; and
0
b. In paragraph (b)(5), removing the term ``State employment security'' 
and adding the term ``State workforce'' in its place.
0
23. Amend Sec.  303.5 by revising paragraph (g)(6) to read as follows:

Sec.  303.5  Establishment of paternity.

* * * * *
    (g) * * *
    (6) The State must provide training, guidance, and instructions, 
which are reflected in a record, regarding voluntary acknowledgment of 
paternity, as necessary to operate the voluntary paternity 
establishment services in the hospitals, State birth record agencies, 
and other entities designated by the State and participating in the 
State's voluntary paternity establishment program.
* * * * *
0
24. Amend Sec.  303.6 by:
0
a. Removing ``and'' at the end of paragraph (c)(3);
0
b. Redesignating paragraph (c)(4) as paragraph (c)(6); and
0
c. Adding paragraphs (c)(4) and (5).
    The revision and addition read as follows:

Sec.  303.6  Enforcement of support obligations.

* * * * *
    (c) * * *
    (4) Having procedures ensuring that enforcement activity in civil 
contempt proceedings takes into consideration the subsistence needs of 
the noncustodial parent, and ensures that a purge amount the 
noncustodial parent must pay in order to avoid incarceration takes into 
consideration actual earnings and income and the subsistence needs of 
the noncustodial parent. A purge amount must be based upon a written 
evidentiary finding that the noncustodial parent has the actual means 
to pay the amount from his or her current income or assets; and
    (5) As elected by the State in Sec.  302.76 of this chapter, 
provide job services to eligible noncustodial parents. In addition to 
eligibility criteria which may be set by the IV-D agency, the 
noncustodial parent must have a IV-D case, have a current child support 
order, be unemployed or not making regular child support payments, not 
be receiving TANF assistance or assistance funded with State dollars 
counting toward TANF maintenance of effort, not be enrolled in a 
Supplemental Nutrition Assistance Program Employment and Training 
program under 7 CFR 273.7 and 273.24, not be receiving the same job 
services under Workforce Investment Act (WIA) under 20 CFR parts 652 
and 660 through 671, and not be receiving a Federal Pell Grant under 34 
CFR part 690. These job services may include:
    (i) Job search assistance;
    (ii) Job readiness training;
    (iii) Job development and job placement services;
    (iv) Skills assessments to facilitate job placement;
    (v) Job retention services;
    (vi) Certificate programs and other skills training directly 
related to employment, which may include activities to improve literacy 
and basic skills, such as programs to complete high school or a General 
Education Development (GED) certificate, as long as they are included 
in the same job services plan; and

[[Page 68582]]

    (vii) Work supports, such as transportation assistance, uniforms, 
and tools.
* * * * *
0
25. Amend Sec.  303.7 by revising paragraph (d)(10) and adding 
paragraph (f) to read as follows:

Sec.  303.7  Provision of services in intergovernmental IV-D cases.

* * * * *
    (d) * * *
    (10) Notify the initiating agency when a case is closed pursuant to 
Sec. Sec.  303.11(b)(17) through (19) and 303.7(d)(9).
* * * * *
    (f) Imposition and reporting of annual $25 fee in interstate cases. 
The title IV-D agency in the initiating State must impose and report 
the annual $25 fee in accordance with Sec.  302.33(e) of this chapter.
0
26. Amend Sec.  303.8 by:
0
a. Redesignating paragraphs (b)(2) through (6) as paragraphs (b)(3) 
through (7), respectively;
0
b. Adding paragraph (b)(2); and
0
c. Revising newly redesignated paragraph (b)(7) and paragraph (d).
    The addition and revision read as follows:

Sec.  303.8  Review and adjustment of child support orders.

* * * * *
    (b) * * *
    (2) The State may elect in its State plan to initiate review of an 
order, after being notified that a noncustodial parent will be 
incarcerated for more than 90 days and without the need for a specific 
request, and, upon notice to both parents, adjust the order, if 
appropriate, pursuant to paragraph (b)(1)(i) of this section.
* * * * *
    (7) The State must provide notice--
    (i) Not less than once every 3 years to both parents subject to the 
order informing the parents of their right to request the State to 
review and, if appropriate, adjust the order consistent with this 
section. The notice must specify the place and manner in which the 
request should be made. The initial notice may be included in the 
order.
    (ii) If the State has not elected paragraph (b)(2) of this section, 
when the IV-D agency learns that a noncustodial parent is incarcerated, 
to the incarcerated noncustodial parent and the custodial parent 
informing them of the right to request the State to review and, upon 
request, to adjust the order consistent with this section. The notice 
must specify, at a minimum, the place and manner in which the request 
should be made.
* * * * *
    (d) Health care needs must be an adequate basis. The need to 
provide for the child's health care needs in the order, through health 
insurance or other means, must be an adequate basis under State law to 
initiate an adjustment of an order, regardless of whether an adjustment 
in the amount of child support is necessary.
* * * * *
0
27. Revise Sec.  303.11 to read as follows:

Sec.  303.11  Case closure criteria.

    (a) The IV-D agency shall establish a system for case closure.
    (b) The IV-D agency may elect to close a case if the case meets at 
least one of the following criteria and supporting documentation for 
the case closure decision is maintained in the case record:
    (1) There is no longer a current support order and arrearages are 
under $500 or unenforceable under State law;
    (2) There is no longer a current support order and all arrearages 
in the case are assigned to the State;
    (3) There is no longer a current support order, the children have 
reached the age of majority, the noncustodial parent is entering or has 
entered long-term care arrangements (such as a residential care 
facility or home health care), and the noncustodial parent has no 
income or assets available above the subsistence level that could be 
levied or attached for support;
    (4) The noncustodial parent or alleged father is deceased and no 
further action, including a levy against the estate, can be taken;
    (5) The noncustodial parent is living with the minor child (as the 
primary caregiver or in an intact two parent household), and the IV-D 
agency has determined that services are not appropriate;
    (6) Paternity cannot be established because:
    (i) The child is at least 18 years old and action to establish 
paternity is barred by a statute of limitations which meets the 
requirements of Sec.  302.70(a)(5) of this chapter;
    (ii) A genetic test or a court or administrative process has 
excluded the alleged father and no other alleged father can be 
identified;
    (iii) In accordance with Sec.  303.5(b), the IV-D agency has 
determined that it would not be in the best interests of the child to 
establish paternity in a case involving incest or forcible rape, or in 
any case where legal proceedings for adoption are pending; or
    (iv) The identity of the biological father is unknown and cannot be 
identified after diligent efforts, including at least one interview by 
the IV-D agency with the recipient of services;
    (7) The noncustodial parent's location is unknown, and the State 
has made diligent efforts using multiple sources, in accordance with 
Sec.  303.3, all of which have been unsuccessful, to locate the 
noncustodial parent:
    (i) Over a 2-year period when there is sufficient information to 
initiate an automated locate effort; or
    (ii) Over a 6-month period when there is not sufficient information 
to initiate an automated locate effort; or
    (iii) After a 1-year period when there is sufficient information to 
initiate an automated locate effort, but locate interfaces are unable 
to verify a Social Security Number;
    (8) The IV-D agency has determined that throughout the duration of 
the child's minority (or after the child has reached the age of 
majority), the noncustodial parent cannot pay support and shows no 
evidence of support potential because the parent has been 
institutionalized in a psychiatric facility, is incarcerated, has a 
medically-verified total and permanent disability, or has had multiple 
referrals for services by the State over a 5-year period which have 
been unsuccessful. The State must also determine that the noncustodial 
parent has no income or assets available above the subsistence level 
that could be levied or attached for support;
    (9) The noncustodial parent's sole income is from:
    (i) Supplemental Security Income (SSI) payments made pursuant to 
sections 1601 et seq., of title XVI of the Act, 42 U.S.C. 1381 et seq.;
    (ii) both SSI and benefits under title II of the Act; or
    (iii) other needs-based benefits not subject to garnishment;
    (10) The noncustodial parent is a citizen of, and lives in, a 
foreign country, does not work for the Federal government or a company 
with headquarters or offices in the United States, and has no reachable 
domestic income or assets; and State has been unable to establish 
reciprocity with the country;
    (11) The IV-D agency has provided location-only services as 
requested under Sec.  302.35(c)(3) of this chapter;
    (12) The non-IV-A recipient of services requests closure of a case 
and there is no assignment to the State of medical support under 42 CFR 
433.146 or of arrearages which accrued under a support order;

[[Page 68583]]

    (13) The IV-D agency has completed a limited service under Sec.  
302.33(a)(6) of this chapter;
    (14) There has been a finding by the responsible State agency of 
good cause or other exceptions to cooperation with the IV-D agency and 
the State or local assistance program, such as IV-A, IV-D, IV-E, and 
Medicaid, which has determined that support enforcement may not proceed 
without risk of harm to the child or caretaker relative;
    (15) In a non-IV-A case receiving services under Sec.  
302.33(a)(1)(i) or (iii) of this chapter, or under Sec.  
302.33(a)(1)(ii) when cooperation with the IV-D agency is not required 
of the recipient of services, the IV-D agency is unable to contact the 
recipient of services despite a good faith effort to contact the 
recipient through at least two different methods;
    (16) In a non-IV-A case receiving services under Sec.  
302.33(a)(1)(i) or (iii) of this chapter, or under Sec.  
302.33(a)(1)(ii) when cooperation with the IV-D agency is not required 
of the recipient of services, the IV-D agency documents the 
circumstances of the recipient's noncooperation and an action by the 
recipient of services is essential for the next step in providing IV-D 
services;
    (17) The IV-D agency documents failure by the initiating agency to 
take an action which is essential for the next step in providing 
services;
    (18) The initiating agency has notified the responding State that 
the initiating State has closed its case under Sec.  303.7(c)(11);
    (19) The initiating agency has notified the responding State that 
its intergovernmental services are no longer needed;
    (20) Another assistance program, including IV-A, IV-E, and Medicaid 
has referred a case to the IV-D agency that is inappropriate to 
establish, enforce, or continue to enforce a child support order and 
the custodial or noncustodial parent has not applied for services; or
    (21) The case has been transferred to a Tribal IV-D agency and the 
State IV-D agency has complied with the following procedures:
    (i) Before transferring the case to a Tribal IV-D agency:
    (A) The recipient of services requested the State to transfer its 
case to the Tribal IV-D agency; or
    (B) The IV-D agency has notified the recipient of services of its 
intent to transfer the case to the Tribal IV-D agency and the recipient 
did not respond to the notice to transfer the case within 60 calendar 
days from the date notice was provided;
    (ii) The IV-D agency completely and fully transferred the case; and
    (iii) The IV-D agency notified the recipient of services that the 
case has been transferred to the Tribal IV-D agency.
    (c) The IV-D agency must close a case and maintain supporting 
documentation for the case closure decision when the following criteria 
have been met:
    (1) The child is eligible for health care services from the Indian 
Health Service (IHS); and
    (2) The IV-D case was opened because of a Medicaid referral based 
solely upon health care services, including contract health services, 
provided through an Indian Health Program (as defined at 25 U.S.C. 
1603(12)).
    (d) The IV-D agency must have the following requirements for case 
closure notification and case reopening:
    (1) In cases meeting the criteria in paragraphs (b)(1) through (10) 
and (b)(15) through (16) of this section, the State must notify the 
recipient of services in writing 60 calendar days prior to closure of 
the case of the State's intent to close the case.
    (2) In an intergovernmental case meeting the criteria for closure 
under paragraph (b)(17) of this section, the responding State must 
notify the initiating agency, in a record, 60 calendar days prior to 
closure of the case of the State's intent to close the case.
    (3) The case must be kept open if the recipient of services, or the 
initiating agency supplies information in response to the notice 
provided under paragraph (d)(1) or (2) of this section which could lead 
to the establishment of paternity or a support order or enforcement of 
an order, or, in the instance of paragraph (b)(15) of this section, if 
contact is reestablished with the recipient of services.
    (4) In a case meeting the criteria for closure in paragraph (b)(20) 
or (c) of this section, the IV-D agency must notify the referring 
agency, in a record, 60 calendar days prior to closure of the case of 
the State's intent to close the case.
    (5) If the referring agency does not respond to the notice provided 
under paragraph (d)(4) of this section, or does not provide information 
that indicates that child support services are needed for the case, the 
IV-D agency may close the case.
    (6) For cases closed pursuant to paragraphs (b)(13) and (d)(5) of 
this section, the State must notify the recipient that the case has 
been closed within 30 calendar days of closing the case. This notice 
must also provide information regarding reapplying for child support 
services and the consequences of receiving services, including any 
State fees, cost recovery, and distribution policies. If the recipient 
reapplies for child support services in a case that was closed pursuant 
to paragraph (b)(13) of this section, the recipient will complete a new 
application for IV-D services and pay any applicable fee. If the 
recipient reapplies for services in a case that was closed pursuant to 
(d)(5), the recipient will complete a new application for IV-D services 
but will not be charged a fee.
    (7) If the case is closed, the former recipient of services may 
request at a later date that the case be reopened if there is a change 
in circumstances which could lead to the establishment of paternity or 
a support order or enforcement of an order by completing a new 
application for IV-D services and paying any applicable application 
fee.
    (e) The IV-D agency must retain all records for cases closed 
pursuant to this section for a minimum of three years, in accordance 
with 45 CFR part 92.
0
28. Amend Sec.  303.31 by revising paragraphs (a)(2), (a)(3), (b)(1), 
(b)(2), (b)(3) introductory text, (b)(3)(i), and (b)(4) to read as 
follows:

Sec.  303.31  Securing and enforcing medical support obligations.

    (a) * * *
    (2) Health insurance includes fee for service, health maintenance 
organization, preferred provider organization, and other types of 
private and public coverage which is available to either parent, under 
which medical services could be provided to the dependent child(ren).
    (3) Cash medical support or the cost of health insurance is 
considered reasonable in cost if the cost to the parent responsible for 
providing medical support does not exceed five percent of his or her 
gross income or, at State option, a reasonable alternative income-based 
numeric standard defined in State law, regulations, or court rule 
having the force of law or State child support guidelines adopted in 
accordance with Sec.  302.56(c) of this chapter.
    (b) * * *
    (1) Petition the court or administrative authority to:
    (i) Include health insurance that is accessible to the child(ren), 
as defined by the State, and is available to the parent responsible for 
providing medical support at reasonable cost, as defined under 
paragraph (a)(3) of this section, in new or modified court or 
administrative orders for support; and
    (ii) Determine how to allocate the cost of coverage between the 
parents.

[[Page 68584]]

    (2) If health insurance described in paragraph (b)(1) of this 
section is not available at the time the order is entered or modified, 
petition to include cash medical support in new or modified orders 
until such time as health insurance, that is accessible and reasonable 
in cost as defined under paragraph (a)(3) of this section, becomes 
available. In appropriate cases, as defined by the State, cash medical 
support may be sought in addition to health insurance coverage.
    (3) Establish criteria, which are reflected in a record, to 
identify orders that do not address the health care needs of children 
based on--
    (i) Evidence that health insurance may be available to either 
parent at reasonable cost, as defined under paragraph (a)(3) of this 
section; and
* * * * *
    (4) Petition the court or administrative authority to modify 
support orders, in accordance with State child support guidelines, for 
cases identified in paragraph (b)(3) of this section to include health 
insurance and/or cash medical support in accordance with paragraphs 
(b)(1) and (2) of this section.
* * * * *
0
29. Amend Sec.  303.72 by revising paragraph (d)(1) to read as follows:

Sec.  303.72  Requests for collection of past-due support by Federal 
tax refund offset.

* * * * *
    (d) * * *
    (1) The State referring past-due support for offset must, in 
interstate situations, notify any other State involved in enforcing the 
support order when it receives the offset amount from the Secretary of 
the U.S. Treasury.
* * * * *
0
30. Amend Sec.  303.100 by revising paragraph (e)(1) introductory text 
and adding paragraphs (h) and (i) to read as follows:

Sec.  303.100  Procedures for income withholding.

* * * * *
    (e) Notice to the employer for immediate and initiated withholding. 
(1) To initiate withholding, the State must send the noncustodial 
parent's employer a notice using the required OMB-approved Income 
Withholding for Support form that includes the following:
* * * * *
    (h) Notice to employers in all child support orders. The notice to 
employers in all child support orders must be on an OMB-approved Income 
Withholding for Support form.
    (i) Payments sent to the SDU in child support order not enforced 
under the State IV-D plan. Income withholding payments made under child 
support orders initially issued in the State on or after January 1, 
1994 that are not being enforced under the State IV-D plan must be sent 
to the State Disbursement Unit for disbursement to the family in 
accordance with sections 454B and 466(a)(8) and (b)(5) of the Act and 
Sec.  302.32(a) of this chapter.

PART 304--FEDERAL FINANCIAL PARTICIPATION

0
31. The authority for part 304 continues to read as follows:

    Authority: 42 U.S.C. 651 through 655, 657, 1302, 1396a(a)(25), 
1396b(d)(2), 1396b(o), 1396b(p), and 1396(k).

0
32. Revise Sec.  304.10 to read as follows:

Sec.  304.10  General administrative requirements.

    As a condition for Federal financial participation, the provisions 
of part 92 of this title (with the exception of 45 CFR 92.24, Matching 
or Cost Sharing and 45 CFR 92.41, Financial Reporting) establishing 
uniform administrative requirements and cost principles shall apply to 
all grants made to States under this part.

Sec.  304.12  [Amended]

0
33. Amend Sec.  304.12 by removing paragraphs (c)(4) and (5).
0
34. Amend Sec.  304.20 by:
0
a. Revising paragraphs (a)(1), (b) introductory text, (b)(1)(iii) 
introductory text, (b)(1)(viii) introductory text, (b)(1)(viii)(A), 
(b)(1)(ix), (b)(2) introductory text, (b)(2)(vii), (b)(3) introductory 
text, and (b)(11);
0
b. Removing the ``.'' at the end of paragraph (b)(1)(viii)(C) and 
adding a ``;'' in its place;
0
c. Redesignating paragraph (b)(3)(v) as paragraph (b)(3)(viii);
0
d. Adding paragraphs (b)(1)(viii)(D), (b)(1)(viii)(E), (b)(3)(v) 
through (vii), (b)(3)(ix), and (b)(12);
0
e. Removing ``and'' at the end of paragraph (b)(9); and
0
f. Removing paragraphs (c) and (d).
    The additions and revisions read as follows:

Sec.  304.20  Availability and rate of Federal financial participation.

    (a) * * *
    (1) Necessary and reasonable expenditures for child support 
services and activities to carry out the State title IV-D plan;
* * * * *
    (b) Services and activities for which Federal financial 
participation will be available will be those made to carry out the 
title IV-D State plan, including obtaining child support, locating 
noncustodial parents, and establishing paternity, that are determined 
by the Secretary to be necessary and reasonable expenditures properly 
attributed to the Child Support Enforcement program, including, but not 
limited to the following:
    (1) * * *
    (iii) The establishment of all necessary agreements with other 
Federal, State, and local agencies or private providers to carry out 
Child Support Enforcement program activities in accordance with 
Procurement Standards, 45 CFR 92.36(b). These agreements may include:
* * * * *
    (viii) The establishment of agreements with agencies administering 
the State's title IV-A and IV-E plans including criteria for:
    (A) Referring cases to and from the IV-D agency;
* * * * *
    (D) The procedures to be used to coordinate services; and
    (E) Agreements to exchange data as authorized by law.
    (ix) The establishment of agreements with State agencies 
administering Medicaid or CHIP, including criteria for:
    (A) Referring cases to and from the IV-D agency;
    (B) The procedures to be used to coordinate services; and
    (C) Agreements to exchange data as authorized by law.
    (2) The establishment of paternity, including, but not limited to:
* * * * *
    (vii) Developing and providing to parents and family members, 
hospitals, State birth records agencies, and other entities designated 
by the State and participating in the State's voluntary paternity 
establishment program, under Sec.  303.5(g) of this chapter, 
educational and outreach activities, written and audiovisual materials 
about paternity establishment and forms necessary to voluntarily 
acknowledge paternity; and
* * * * *
    (3) The establishment and enforcement of support obligations 
including, but not limited to:
* * * * *
    (v) Bus fare or other minor transportation expenses to enable 
custodial or noncustodial parties to participate in child support 
proceedings and related activities;
    (vi) Services to increase pro se access to adjudicative and 
alternative dispute resolution processes in IV-D cases;
    (vii) De minimis costs associated with the inclusion of parenting 
time provisions entered as part of a child

[[Page 68585]]

support order and incidental to a child support enforcement proceeding;
* * * * *
    (ix) Job services activities pursuant to Sec.  303.6(c)(5) of this 
chapter.
* * * * *
    (11) Medical support activities as specified in Sec. Sec.  303.30, 
303.31, and 303.32 of this chapter; and
    (12) Educational and outreach activities intended to inform the 
public, parents and family members, and young people who are not yet 
parents about the Child Support Enforcement program, responsible 
parenting and co-parenting, family budgeting, and other financial 
consequences of raising children when the parents are not married to 
each other.
0
35. Amend Sec.  304.21 by revising paragraphs (a) introductory text and 
(a)(1) to read as follows:

Sec.  304.21  Federal financial participation in the costs of 
cooperative arrangements with courts and law enforcement officials.

    (a) General. Subject to the conditions and limitations specified in 
this part, Federal financial participation (FFP) at the applicable 
matching rate is available in the costs of cooperative agreements with 
appropriate courts and law enforcement officials in accordance with the 
requirements of Sec.  302.34 of this chapter. Law enforcement officials 
means district attorneys, attorneys general, similar public attorneys 
and prosecutors and their staff, and corrections officials. When 
performed under agreement, which is reflected in a record, costs of the 
following activities are subject to reimbursement:
    (1) The activities, including administration of such activities, 
specified in Sec.  304.20(b)(2) through (8) and (b)(11);
* * * * *
0
36. Revise Sec.  304.23 to read as follows:

Sec.  304.23  Expenditures for which Federal financial participation is 
not available.

    Federal financial participation at the applicable matching rate is 
not available for:
    (a) Activities related to administering titles I, IV-A, IV-B, IV-E, 
X, XIV, XVI, XIX, XX, or XXI of the Act or 7 U.S.C. Chapter 51.
    (b) Purchased support enforcement services which are not secured in 
accordance with Sec.  304.22.
    (c) Construction and major renovations.
    (d) Education and training programs and educational services for 
State and county employees and court personnel except direct cost of 
short term training provided to IV-D agency staff or pursuant to 
Sec. Sec.  304.20(b)(2)(viii) and 304.21.
    (e) Any expenditures which have been reimbursed by fees collected 
as required by this chapter.
    (f) Any costs of those caseworkers described in Sec.  303.20(e) of 
this chapter.
    (g) Any expenditures made to carry out an agreement under Sec.  
303.15 of this chapter.
    (h) The costs of counsel for indigent defendants in IV-D actions.
    (i) The costs of guardians ad litem in IV-D actions.

Sec.  304.25  [Amended]

0
37. Amend Sec.  304.25 by:
0
a. In paragraph (a), removing the reference ``part 74'' and adding the 
reference ``part 92'' in its place; and
0
b. In paragraph (b), removing ``30 days'' and adding ``45 days'' in its 
place.
0
38. Amend Sec.  304.26 by revising paragraph (a)(1), removing and 
reserving paragraph (b), and removing paragraph (c) to read as follows:

Sec.  304.26  Determination of Federal share of collections.

    (a) * * *
    (1) 75 percent for Puerto Rico, the Virgin Islands, Guam, and 
American Samoa for the distribution of retained IV-A collections; 55 
percent for Puerto Rico, the Virgin Islands, Guam, the Northern Mariana 
Islands, and American Samoa for the distribution of retained IV-E 
collections; 70 percent for the District of Columbia for the 
distribution of retained IV-E collections; and
* * * * *
0
39. Amend Sec.  304.40 by revising paragraph (a)(2) to read as follows:

Sec.  304.40  Repayment of Federal funds by installments.

    (a) * * *
    (2) The State has notified the OCSE Regional Office in a record of 
its intent to make installment repayments. Such notice must be given 
prior to the time repayment of the total was otherwise due.
* * * * *

PART 305--PROGRAM PERFORMANCE MEASURES, STANDARDS, FINANCIAL 
INCENTIVES, AND PENALTIES

0
40. The authority for part 305 is revised to read as follows:

    Authority: 42 U.S.C. 609(a)(8), 652(a)(4) and (g), 658a, and 
1302.

0
41. Amend Sec.  305.35 by:
0
a. In paragraph (d), adding a sentence to the end of the paragraph;
0
b. Redesignating paragraph (e) as paragraph (f); and
0
c. Adding paragraph (e).
    The revision and addition read as follows:

Sec.  305.35  Reinvestment.

* * * * *
    (d) * * * Non-compliance will result in disallowances of incentive 
amounts equal to the amount of funds supplanted.
    (e) Using the Form OCSE-396A, ``Child Support Enforcement Program 
Expenditure Report,'' the State Current Spending Level will be 
calculated by determining the State Share of Total Expenditures Claimed 
for all four quarters of the fiscal year minus State Share of IV-D 
Administrative Expenditures Made Using Funds Received as Incentive 
Payments for all four quarters of the fiscal year, plus the Federal 
Parent Locator Service (FPLS) fees for all four quarters of the fiscal 
year.
    (1) The State Share of Expenditures claimed is: Total Expenditures 
Claimed for the Current Quarter and the Prior Quarter Adjustments minus 
the Federal Share of Total Expenditures Claimed for the Current Quarter 
and Prior Quarter Adjustments claimed on the Form OCSE-396A for all 
four quarter of the fiscal year.
    (2) The State Share of IV-D Administrative Expenditures Made Using 
Funds Received as Incentive Payments is: IV-D Administrative 
Expenditures Made Using Funds Received as Incentive Payments for the 
Current Quarter and the Prior Quarter Adjustments minus the Federal 
Share of IV-D Administrative Expenditures Made Using Funds Received as 
Incentive Payments for the Current Quarter and Prior Quarter 
Adjustments claimed on the Form OCSE-396A for all four quarters of the 
fiscal year.
    (3) The Fees for the Use of the Federal Parent Locator Service 
(FPLS) can be computed by adding the FPLS fees claimed on the Form 
OCSE-396A for all four quarters of the fiscal year.
* * * * *
0
42. Amend Sec.  305.63 by revising paragraph (d) introductory text to 
read as follows:

Sec.  305.63  Standards for determining substantial compliance with IV-
D requirements.

* * * * *
    (d) With respect to the 75 percent standard in paragraph (c) of 
this section:
* * * * *
0
43. Amend Sec.  305.64 by revising the second sentence of paragraph (c) 
to read as follows:

[[Page 68586]]

Sec.  305.64  Audit procedures and State comments.

* * * * *
    (c) * * * Within a specified timeframe from the date the report was 
sent, the IV-D agency may submit comments, which are reflected in a 
record, on any part of the report which the IV-D agency believes is in 
error. * * *
0
44. Amend Sec.  305.66 by revising paragraph (a) to read as follows:

Sec.  305.66  Notice, corrective action year, and imposition of 
penalty.

    (a) If a State is found by the Secretary to be subject to a penalty 
as described in Sec.  305.61, the OCSE will notify the State, in a 
record, of such finding.
* * * * *

PART 307--COMPUTERIZED SUPPORT ENFORCEMENT SYSTEMS

0
45. The authority for part 307 continues to read as follows:

    Authority:  42 U.S.C. 652 through 658, 664, 666 through 669A, 
and 1302.

0
46. Amend Sec.  307.5 by revising paragraph (c)(3) to read as follows:

Sec.  307.5  Mandatory computerized support enforcement systems.

* * * * *
    (c) * * *
    (3) The State provides assurance, which is reflected in a record, 
that steps will be taken to otherwise improve the State's Child Support 
Enforcement program.
* * * * *
0
47. Amend Sec.  307.11 by revising paragraph (c)(3) to read as follows:

Sec.  307.11  Functional requirements for computerized support 
enforcement systems in operation by October 1, 2000.

* * * * *
    (c) * * *
    (3) Automatic use of enforcement procedures, including those under 
section 466(c) of the Act if payments are not timely, and the following 
procedures:
    (i) Identify cases which have been previously identified as 
involving a noncustodial parent who is a recipient of SSI or concurrent 
SSI and benefits under title II of the Act, to prevent garnishment of 
the noncustodial parent's financial account; and
    (ii) Return funds to a noncustodial parent, within 2 days after the 
agency determines that SSI or concurrent SSI and benefits under title 
II of the Act, in the noncustodial parent's financial account have been 
incorrectly garnished.
* * * * *

PART 308--ANNUAL STATE SELF-ASSESSMENT REVIEW AND REPORT

0
48. The authority for part 308 continues to read as follows:

    Authority:  42 U.S.C. 654(15)(A) and 1302.

0
49. Amend Sec.  308.2 by revising paragraphs (b)(2)(ii), (c)(3)(i), and 
(f)(2)(i) to read as follows:

Sec.  308.2  Required program compliance criteria.

* * * * *
    (b) * * *
    (2) * * *
    (ii) If location activities are necessary, using all appropriate 
sources within 75 days pursuant to Sec.  303.3(b)(3) of this chapter. 
This includes all the following locate sources as appropriate: 
Custodial parent, Federal and State Parent Locator Services, U.S. 
Postal Service, State workforce agency, employment data, Department of 
Motor Vehicles, and credit bureaus;
* * * * *
    (c) * * *
    (3) * * *
    (i) If location activities are necessary, using all appropriate 
location sources within 75 days pursuant to Sec.  303.3(b)(3) of this 
chapter. Location sources include: Custodial parent, Federal and State 
Parent Locator Services, U.S. Postal Service, State workforce agency, 
Department of Motor Vehicles, and credit bureaus;
* * * * *
    (f) * * *
    (2) * * *
    (i) If location is necessary to conduct a review, using all 
appropriate location sources within 75 days of opening the case 
pursuant to Sec.  303.3(b)(3) of this chapter. Location sources 
include: Custodial parent, Federal and State Parent Locator Services, 
U.S. Postal Service, State workforce agency, unemployment data, 
Department of Motor Vehicles, and credit bureaus;
* * * * *

PART 309--TRIBAL CHILD SUPPORT ENFORCEMENT (IV-D) PROGRAM

0
50. The authority for part 309 is revised to read as follows:

    Authority: 42 U.S.C. 655(f) and 1302.

0
51. Amend Sec.  309.85 by revising paragraph (b) to read as follows:

Sec.  309.85  What records must a Tribe or Tribal organization agree to 
maintain in a Tribal IV-D plan?

* * * * *
    (b) The Tribal IV-D agency will comply with the retention and 
access requirements at 45 CFR 92.42, including the requirement that 
records be retained for at least 3 years.
0
52. Amend Sec.  309.130 by revising paragraphs (b)(3), (b)(4), (d)(3), 
and (h) to read as follows:

Sec.  309.130  How will Tribal IV-D programs be funded and what forms 
are required?

* * * * *
    (b) * * *
    (3) SF 425, ``Federal Financial Report,'' to be submitted quarterly 
within 30 days after the end of each of the first three quarters of the 
funding period and within 30 days after the end of each of the first 
three quarters of the liquidation period. The final report for each 
period is due within 90 days after the end of the fourth quarter of 
both the funding and the liquidation period; and
    (4) Form OCSE-34A, ``Quarterly Report of Collections'' must be 
submitted no later than 45 days following the end of each fiscal 
quarter. No revisions or adjustments of the financial reports submitted 
for any quarter of the fiscal year will be accepted by OCSE later than 
December 31, 3 months after the end of the fiscal year.
* * * * *
    (d) * * *
    (3) The non-federal share of program expenditures must be provided 
either with cash or with in-kind contributions and must meet the 
requirements found in 45 CFR 92.24.
* * * * *
    (h) Grant administration requirements. The provisions of part 92 of 
this title, establishing uniform administrative requirements and cost 
principles, shall apply to all grants made to Tribes and Tribal 
organizations under this part.
0
53. Amend Sec.  309.145 by revising paragraph (a)(3) introductory text 
to read as follows:

Sec.  309.145  What costs are allowable for Tribal IV-D programs 
carried out under Sec.  309.65(a) of this part?

* * * * *
    (a) * * *
    (3) Establishment of all necessary agreements with other Tribal, 
State, and local agencies or private providers for the provision of 
child support enforcement services in accordance with Procurement 
Standards found in 45 CFR part 92. These agreements may include:
* * * * *
0
54. Amend Sec.  309.160 by revising the first sentence to read as 
follows:

[[Page 68587]]

Sec.  309.160  How will OCSE determine if Tribal IV-D program funds are 
appropriately expended?

    OCSE will rely on audits required by OMB Circular A-133, ``Audits 
of States, Local Governments, and Non-Profit Organizations'' and 45 CFR 
part 92. * * *
* * * * *
[FR Doc. 2014-26822 Filed 11-13-14; 8:45 am]
BILLING CODE 4184-01-P
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