The Story Behind the Numbers

States with COLAs and with automated reviews
than it was among the study States without them.
While not all study States had information about
the results of their reviews, the State using a
COLA reported that over 80% of COLA reviews
resulted in adjustments, and the two study States
with automated processes reported that 64% of
their automated reviews result in adjustments. In
contrast, two study States without automated
processes reported that just over 50% of requests
result in adjustments.

PERIODIC REVIEW OF TANF ORDERS

When the study was conducted, five out of the
nine study States periodically reviewed all public
assistance cases. This included three States that
use electronic review processes, one State that
applies a COLA, and one other State. The four
States that do not review all public assistance
cases do not have automated review processes.

Only one study State studied tracked the number
of public assistances cases it reviewed per year.
That State reviews about one-third of its TANF
cases each year, resulting in a review of all TANF
cases with orders over a three-year period. Two
States with automated review processes reported
that their automated systems annually checked all
public assistance cases for review eligibility.

CONCLUSIONS

Although information and analysis for this brief
were limited, it does not appear that lower
modification thresholds affect the number of
requests for review. There is some evidence,
however, to suggest that States can gain some
efficiency by encouraging requests that are more
likely to result in adjustments. Many reviews end
because the requesting party does not provide
income information, or because the requesting
party withdraws the request after he or she learns
more about the likely outcome. To eliminate the
first problem, a State could require the requesting
parent to provide a financial statement and income
documentation with the review request. States
could address the second problem by providing
more information about thresholds and how the
guidelines work so that parties are better informed
of the likely consequences of a review.

Needed information may include how child
care expenses and the child’s health
insurance premium are considered in
guidelines calculations. It may also be
advantageous for States to develop a
guidelines calculator so that parties can
estimate the potential effect of a guidelines
review prior to making a request. States
could also gain efficiencies by using COLAs
and automated processes.

"DHHS/ACF/OCSE Contract Number 105-00-8300, Task Order 39
with Policy Studies Inc. States were selected because they represent a
range of modification thresholds and because many had recently
received OCSE 1115 grants to improve the review and adjustment

rocess,

See §7302 of the DRA of 2005, Public Law 109-171, which amends
42 USC 666(a)(10).
* 45 CFR §303.8.
*45 CFR Ch. 111 §303.8.
§ The count considers the 50 States, the District of Columbia, Guam,
Puerto Rico, and the Virgin Islands, Information is derived from the
2005 Intergovernmental Referral Guide made available by OCSE.
Information is reported by the States to OCSE, and may include
thresholds established as part of a State’s guidelines and/or thresholds
set in the IV-D agency’s policy for pursuing a modification after a
review. The Guide is available on the Internet at:
hutp://ocse.acf.hhs.gov/exvirg/sps/selectastate.cfm,
© The Federal minimum wage was $5.15 per hour when the
simulation was conducted, which is $893 per month. In States with a
higher minimum wage (Alaska, Maine, New York, Vermont, and
Washington), the State’s minimum wage of $6.50 to $7.35 was used.
7 The Lewin Group, 2001. Automated Cost-of-Living Adjustments of
Child Support Orders in Three States: Report to the Department of
Health and Human Services Assistant Secretary for Planning and
Evaluation and Office of Child Support Enforcement. Available on
the Internet
hutp://www.acf.hhs.gov/programs/cse/pubs/reports/cola.

USS, Department of Health and Human Services
Administration for Children and Families

Office of Child Support Enforcement
http://www.acf.hhs.gov/programs/cse/
No

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The Story Behind the Numbers
December 8, 2006


The Story Behind the Numbers

Impact of Modification Thresholds on Review and
Adjustment of Child Support Orders

Most States’ child support guidelines contain
quantitative thresholds that must be met before the
order can be modified. These thresholds are
defined as a percentage and/or dollar change in the
current child support obligation. For example,
guidelines may provide that an order cannot be
modified unless the new financial circumstances
result in at least a 15% change in the order
amount, either upward or downward.

The use of thresholds:

Y sets the parameters for when modification
actions are appropriate;

¥ helps manage the expectations of the parties
about when a change in circumstances might
warrant a modification to the support order;

Y ensures stability in order levels when the
parties’ circumstances have not changed
substantially;

¥ limits the number of modification actions the
child support agency or private parties pursue; and
¥ allows the child support agency to manage its
resources more efficiently.

This brief explores the impact of modification
thresholds. Information was obtained by
reviewing reports and data relevant to review and
adjustment and by conducting interviews with nine
States: Alaska, Colorado, Iowa, South Dakota,
Maine, Montana, New York, Vermont, and
Washington.' This study was conducted before
passage of the Deficit Reduction Act of 2005,”
which reinstates the requirement that States,
beginning in October 2007, review all Temporary
Assistance for Needy Families (TANF) cases with
support orders at least once every three years.

FEDERAL REQUIREMENTS AND MODIFICATION
THRESHOLDS

Federal regulation requires that at least once every
three years States must notify parties in IV-D
cases of their right to request a review.’ In
addition, States must have procedures allowing a
party to request a review outside the three-year
cycle, if the requesting party demonstrates a

substantial change in circumstances (e.g.,
change in income).

The review is to be an objective evaluation
of information necessary for application of
the State’s guidelines. The State may use a
“reasonable quantitative standard,” or
threshold, as a basis for determining whether
a variance between the current order amount
and amount resulting from application of the
guidelines—based on current information—
is adequate grounds for petitioning for
adjustment of the order.

In addition to guidelines-based reviews,
Federal law and regulation allow States to
apply a cost of living adjustment (COLA),
as determined by the State, or use automated
methods including income information from
automated sources to identify orders eligible
for review, conduct the review, and apply
the appropriate adjustment.‘

STATE MODIFICATION THRESHOLDS
Nationally, almost all States report having a
quantitative modification threshold.*

Y thirty-six States set a percentage
threshold;

Y fifteen States provide both a percentage-
and dollar-based threshold; and

Y two States have only a dollar-based
threshold.

A few States apply a higher threshold if the
review is requested outside the state-
determined cycle. Most of the percentage-
based thresholds are evenly divided among a
10%, 15%, and 20% change in the support
amount to be paid, although four States set a
threshold of 25%. Dollar thresholds range
from $10 to $100 per month, but most
dollar-based thresholds are either $25 or $50
per month. Most thresholds pertain to the
order amount, but a few States also have
thresholds that apply to changes in a party’s
income.


‘The Story Behind the Numbers

The lowest reported percentage threshold is a 10%
change. The highest threshold is “a change of
50% or more in a parent's net income,” but this
State only applies it to requests made less than 24
months since the order was entered, last modified
or last reviewed,

FINDINGS FROM STUDY STATES

Y Study States received an average of 3-12
requests for review per year for every 100 ordered
cases. The State with the most requests has no
threshold if the order is more than 36 months old
and a 10% threshold if the order is less than 36
months old. There were two States that averaged
3 requests for review per year for every 100
ordered cases. For one State, the threshold was a
15% change in order amount. For the other State,
the threshold was a $25 change in monthly order
amount or a change in circumstances.

Y In States that prescreened requests before
proceeding with a review, between 4% and 12% of
requests are not accepted for review. These States
check to determine if three years have elapsed
since the last review, and if not, whether the
requesting party provides evidence of a change in
circumstance or whether other state-determined
criteria are met.

Y Study States with available data find that
about 40% of reviews are not completed. The
most common reasons for this are that the
requesting party changes his/her mind and the
requesting party does not provide income
information.

Y “No change” in order amount—that is, the
modification threshold was not met—occurs in
about 8% to 17% of the reviews. The proportion
of orders with “no changes” does not appear to be
correlated with modification thresholds.

Y Orders are modified in 52% to 65% of cases
requesting a review in most of the study States.
Two States had modification rates higher than
80%. One of those States relies on COLA. The
other State requires a financial statement and
evidence of income with the request for review.

¥ About half of the modified orders are upward
and about half of the modified orders are
downward.

Y Most study States modify 2% to 3% of their
ordered cases per year.

¥ States do not typically track which
parent requested the review nor if there was
an increase in compliance after
modification.

Simulation of the Impact of Modification
Thresholds on Low-Income Noncustodial
Parents

As part of the study, we performed
simulations to determine how much the
noncustodial parent’s income would have to
increase or decrease to meet modification
thresholds of 10%, 15%, and 20%. The
simulations considered a scenario in which
the current order had been based on
noncustodial parent earnings at minimum
wage.° Most States will impute the
noncustodial parent’s income at minimum
wage if income information is unavailable
and the noncustodial parent has little or no
work history, but is not incapacitated.

For noncustodial parents with minimum-
wage incomes, the simulations indicated that
the guidelines amount was a more important
factor than if the modification threshold was
set at 10%, 15%, or 20%. For example, in
the four States where the guidelines amount
for minimum-wage income is $50-$100 per
month, a 10% threshold is reached when the
noncustodial parent’s income increases by
about $9-$50 per month. For the same four
States, a 20% threshold is reached when the
noncustodial parent’s income increases by
about $26-$79 per month. In contrast, the
two States where the guidelines amount for
minimum-wage income is more than $200
per month would require an increase in the
noncustodial parent’s income of about $124-
$135 per month to reach a 10% threshold
and about $274-$279 per month to reach a
20% threshold.

Downward Modifications and Minimum
Wage Income. The decrease in income
needed for a downward modification when
the noncustodial parent has minimum-wage
income is generally limited by the State’s
guidelines. Most of the study States have
guidelines that provide minimum order
amounts or set order amounts below child-


rearing costs for incomes below or near minimum-
wage income. For example, the minimum-wage
order is the minimum guidelines amount in two of
the study States. In these States, the order amount
cannot be modified any lower than the States’
minimum order amounts (i.e., $50 and $100 per
month) even if a modification threshold is met
without a deviation from the guidelines.

Simulation of the Impact of Modification
Thresholds for Incomes above Minimum Wage.
The larger the order amount is, the larger the
change that is needed in order to reach percentage-
based modification thresholds. For example, 10%
of a $1,000-order ($100) is more than 10% of a
$500-order ($50). Since all State guidelines result
in higher order amounts as income increases, the
modification threshold generally becomes a more
important factor as incomes increases. However,
the State’s guidelines model also plays a role in
how much income is needed to reach a particular
modification threshold. The change in income
needed will vary depending on whether the
guidelines (1) are based on the noncustodial
parent’s income only or both parents’ incomes,
and (2) assign a flat or decreasing percentage of
income to support.

Factors that Affect the Number of Review
Requests and Modifications

Based on their experiences, study States were
asked to identify what factors affected the number
of requests for reviews and whether the requests
resulted in modifications.

Y Sending the parties notification of their right
to review. States have found a significant increase
in review requests (up to 60% in one State) when
they mail notifications to parties about their right
to a review.

Y Providing a process that is understandable and
user friendly. One State developed tools and
information to help parties review their own cases
prior to submitting a review request to the child
support agency. The State found that this reduced
the number of requests by 11% and increased the
proportion of requests that were ultimately
modified. This also reduced the amount of staff
time spent reviewing orders that resulted in no
change.

¥ Changes in the circumstances of the
case, such as a change in income. Anecdotal
evidence suggests that parties are likely to
pursue a modification when they know the
other party’s income has changed or when
their own income changes.

¥ Information shared by the parties.
Anecdotal evidence suggests that as parties
learn more about each other’s situation
through the initiation of the review, the
requesting party drops the request. For
example, as parents learn more about child
care expenses, health insurance premium
costs, and other expenses considered in the
order calculation, they decide to keep the
order at the current level.

COLAS AND AUTOMATED METHODS

COLAs - There are only three States that use
COLAs: Minnesota, New Jersey, and New
York. All three States will also conduct a
guidelines-based review of the order upon
request of a party. More information about
COLAs can be found in a recent Federal
Office of Child Support Enforcement
(OCSE) report.’

Review and Adjustment Automation
Several of the study States--Alaska, Maine,
and Vermont--have automated review and
adjustment processes. In part, they were
selected for the study because of the
automation, because it was anticipated that
they would be more likely to have numbers
tracking requests and modifications.

More information about how States have
used automation to enhance their review and
adjustment processes is provided in a new
report by OCSE: Automation System for
Child Support Enforcement: A Guide for
Enhancing Review and Adjustment
Automation. It is available on the Internet
at:
http://www.acf.hhs.gov/programs/cse/pol/D
CL/2006/dcl-06-22a.pdf.

Impact of COLAs and Automation on
Modifications

The percent of reviews resulting in
modifications was higher among the study