Child Support Garnishments: Payroll Processing and Withholding Procedures

Transcription

1 Child Support Garnishments: Payroll Processing and Withholding Procedures FEATURED FACULTY: Vicki M. Lambert, CPP, The Payroll Advisor (702)

2 Vicki M. Lambert, CPP, "The Payroll Advisor" Vicki M. Lambert, CPP is an adjunct faculty member at Brandman University in Southern California and is the creator of and instructor for their Practical Payroll Online program. She is also the President and Academic Director of The Payroll Advisor a firm specialized in the training of payroll professionals. With over three decades of hands-on experience in all facets of payroll functions as well as over 20 years as a trainer and author, Ms. Lambert is a sought-after and respected voice in the practice and management of payroll issues. She has conducted open market training seminars on payroll issues across the United States as well as serving as an in-house trainer for businesses such as Sun Microsystems, Fox Studios, Disney, County of Riverside and the City of Hesperia. Ms. Lambert currently produces and presents payroll related audio seminars, webinars and webcasts for clients and business groups throughout the country.

3 **Certificates of attendance and CEUs, when available, must be requested through the online evaluation.** Evaluation for Live Event: We d like to hear what you thought about the audio conference. Please take a moment to fill in the survey located here: Requests for continuing education credits and certificates of attendance must be submitted within 10 days of the live event. Evaluation for CD Recording: Please use the following link to submit your evaluation of the recorded event: Please note: All links are case sensitive Receive 1.5 recertification credit hours toward PHR and SPHR recertification through the Human Resource Certification Institute (HRCI)! For more information about certification or recertification, please visit the HRCI homepage at "The use of this seal is not an endorsement by the HR Certification Institute of the quality of the program. It means that this program has met the HR Certification Institute's criteria to be preapproved for recertification credit." APA Approved Provider: Receive 1.5 RCH by attending! Receive 1.5 CPE credits by attending the live Audio Conference! CCM is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be addressed to the National Registry of CPE Sponsors, 150 Fourth Avenue North, Suite 700, Nashville, TN, Web site: Program Level: Intermediate Prerequisites: This course is for participants with some exposure to the subject. Advanced Preparation: None Delivery: Group Live CPE Credits: 1.5 Recordings of the program do not qualify for CPE credits. For more information regarding administrative policies such as complaint and refund, please contact our offices at C4CM (2426).

4 Child Support Garnishments: Payroll Processing and Withholding Procedures 1 About the Speaker 2 Vicki M. Lambert, CPP, is President and Academic Director of The Payroll Advisor, a firm specializing in payroll education and training. The company s website provides unique and expert services for anyone dealing with the complexities and technicalities of the payroll process. As an adjunct faculty member at Brandman University, Ms. Lambert is the creator of and instructor for the Practical Payroll Online payroll training program, which is approved by the APA for recertification credits. 1

5 What Is Our Focus For Today? 3 Terms, Definitions and Priorities Laws and Regulations Handling Child Support in the Payroll Office Doing the calculations Medical support orders The Statistics 4 According to the Office of Child Support Enforcement: Of the over $31.7 billion collected for child support in FY 2009, 67.4% or $21.4 billion came from employers through income withholding. 2

6 5 Steps for Child Support 5 Report new hires and respond to employment verification requests. Withhold income Enroll children for medical insurance. Disburse payments. Report terminations. Our focus today Usual Suspects 6 Child Support Tax Levies Federal and State Creditor Student Loans Bankruptcies Usual order of priority 3

7 Exceptions on Priority 7 Federal tax levy is received prior to child support order Bankruptcy may include other levies and child support and therefore could go first Automatic stays do not apply to child support Contact court is best policy The Laws and Regulations 8 4

8 The Laws 9 Consumer Credit Protection Act (CCPA) Child Support Enforcement Amendments of 1984 Family Support Act of 1988 Uniform Interstate Family Support Act Personal Responsibility and Work Opportunity Reconciliation Act of 1996 Consumer Credit Protection Act 10 Limits the amount that can be deducted from disposable pay for child support and creditor garnishments Limits apply if more than one garnishment is in effect Watch out for lump sum payments for child support 5

9 Limits on Child Support 11 CCPA Limits: 50% of disposable earnings if employee has second family 60% if does not Add 5% if in arrears to both State may be lower 50% is the common amount 12 Other General Child Support Requirements or Provisions UIFSA is now in effect-out of state orders must be obeyed Administrative fees may be available-depends on the state Notification of employee termination is now required Section on withholding order to use 6

10 Withholding and Paying Child Support 13 Uniform Notice to Withhold is now used Begin deducting within 14 days or earlier if state requires Remit payment within 7 days or earlier if state requires State disbursement units are set up in all states- Except SC May combine payments on one check EFT may be required or available Definition of Income 14 Income is defined as any periodic form of payment due to an individual, regardless of source, including wages and salaries, commissions, bonuses, workers compensation, disability, payments pursuant to a pension or retirement program, and interest. 7

11 Disposable Earnings 15 Disposable Income = gross pay - mandatory deductions. Disposable income is the amount of earnings remaining after subtracting certain mandatory deductions from an employee's gross pay. Disposable Earnings 16 Mandatory deductions include federal, state and local taxes; unemployment insurance; workers' compensation insurance; state employee retirement deductions; other deductions determined by state law. Note that disposable income is not necessarily the same as net pay. An employee may have a deduction taken from his pay that is not mandatory, such as union dues or a car loan payment. 8

12 Item Disposable Income Net Pay Gross Pay $ $ Federal Income Tax (95.00) (95.00) Social Security (45.57) (30.87) Medicare (10.66) (10.66) CA PIT (36.75) (36.75) CA SDI (6.08) (6.08) Cafeteria plan deduction Pretax (25.00) Union dues (10.00) Savings bond (25.00) Union pension (30.00) Credit union car loan (50.00) Total mandated deductions (179.36) Total payroll deductions (319.36) Totals $ $ Item Disposable Income Net Pay Gross Pay $ $ Federal Income Tax (95.00) (95.00) Social Security (45.57) (45.57) Medicare (10.66) (10.66) State SIT (36.75) (36.75) Local Tax (6.08) (6.08) Cafeteria plan deduction Pretax (25.00) Union dues (10.00) Savings bond (25.00) Union pension (30.00) Credit union car loan (50.00) Total mandated deductions (194.06) Total payroll deductions (334.06) Totals $ $

13 Allowable Disposable Income 19 Allowable disposable income is the maximum available for child support withholding. In most cases, the amount ordered to be withheld will be less than the allowable disposable income amount, and the ordered amount can be withheld without any problem. Even if the withholding order specifies a higher payment, the allowable disposable income is the most that may be withheld. 20 Example of Allowable Disposable Income Weekly gross pay is $760. Weekly child support due is $200. Mandatory deductions total $ Employee-parent is single and does not owe back child support. The law of the state where the employee works (the "principal place of employment" state) determines which deductions are mandatory. In California, the example on the next slide would change if the union dues, for example, are mandatory deductions. 10

14 So the Math Would Be 21 Gross pay - mandatory deductions = disposable income: $760 - $ = $ Disposable income x CCPA % limit = allowable disposable income: $ x 50% = $ $ $200.00, so the full $200 is withheld for child support. Pretax Deductions Example 22 The employee voluntarily elected to trade current disposable income for a deferred benefit, there is no reason to deny a portion of this income to his or her child. Pre-tax deductions must be added to the employee's taxable wages before determining the obligated employee's allowable disposable income. 11

15 So the Math Would Be 23 Item Calculations Gross Pay $ (k) pretax deduction (100.00) FIT/PIT taxable income Mandated deductions: Federal Income Tax (200.00) Social Security (62.00) Medicare (14.50) CA PIT (50.00) CA SDI (10.00) Total mandated deductions (336.50) Net Pay $ Add back in pretax deduction Disposable earnings $ Withholding Orders 24 12

16 Types of Cases 25 There are two types of child support cases: IV- D and non IV-D. IV-D: The Federal Child Support Program was authorized by Title IV-D of the Social Security Act. A state child support enforcement program is commonly referred to as the IV-D agency, providing child support services to parents at little or no cost. Non IV-D refers to cases handled privately, not by a child support agency (IV-D), usually for fees. Proper Source 26 A Notice of an Order to Withhold Income requires the sender to provide a copy of the underlying administrative or court order that contains a provision authorizing income withholding. Non IV-D attorneys, individuals and private collection agencies must submit a copy of the underlying administrative or court order that contains a provision authorizing income withholding. 13

17 Income Withholding Order 27 An income withholding order may come from the employer s state agency, directly from another state, court or private attorney. If from an out-ofstate agency, it is called direct income withholding because it comes directly from an out-of-state agency to the employer rather than being processed through the child support enforcement agency in the employer s state. An Income or Withholding Order May Be 28 Judicial originates in the court system and is ordered by a judge. Administrative originates through the child support enforcement agency s administrative process in order to expedite case handling; is ordered by a child support hearing officer or equivalent, who has the same authority as a judge. 14

18 But It Will Be 29 A standardized form entitled Order/Notice to Withhold Income for Child Support (IWO) is now required for use in all states. This form includes information about the case (where the case is from, who the persons in the case are, and caseidentifying information)

19 The IWO Form Includes 31 Names of the parties, including children; Original withholding order/notice information Whether to begin withholding, change the amount being withheld, or terminate the withholding; Whether to enroll the child(ren) in any available health insurance coverage; IWO Form Continued 32 How much to withhold for current support, pastdue support, medical support and other specified amounts; How much to prorate for different pay frequencies; Remittance information; Additional information about priority, combining payments, reporting the withhold date, multiple withholding for an employee, termination notice, lump-sum payments, liability, anti-discrimination, and withholding limits. 16

20 New Form for Changed the wording on what is a valid order: Added the links for all the matrixes available on the OCSE website to assist employers instead saying contact Moved the type of form all in one row Took out the gray box on information area Changed Payment Remittance area 34 New 17

21 Changed Signature area 35 New Changed Additional Info Area 36 Added new wording above Took out the bolding on topics Moved a round a little bit 18

22 Changed Additional Info Area 37 New Employment Termination Area 38 Took out the gray Added nor received periodic income to check boxes 19

23 Processing Through Payroll 39 A Child Support is Received in Payroll 40 Several steps payroll needs to do before processing on the payroll system Should set up written procedures so all in department follow the same methods The following steps should be included 20

24 New Form for Under the following circumstances, the IWO must be rejected and returned to sender: IWO instructs the employer/income withholder to send a payment to an entity other than a State Disbursement Unit (e.g., payable to the custodial party, court, or attorney). Each State is required to operate a State Disbursement Unit (SDU), which is a centralized facility for collection and disbursement of child support payments. Exception: If this IWO is issued by a Court, Attorney, or Private Individual/Entity and the initial child support order was entered before January 1, 1994 or the order was issued by a Tribal CSE agency, the employer/income withholder must follow the payment instructions on the form. Form does not contain all information necessary for the employer to comply with the withholding. Form is altered or contains invalid information. Amount to withhold is not a dollar amount. Sender has not used the OMB-approved form for the IWO (effective May 31, 2012). A copy of the underlying order is required and not included

25 New For Effective 05/31/2012: if an employer receives a document to withhold that is not issued on a OMBapproved IWO form then the employer must reject the document and return it to the sender. Is It Your Employee? 44 Does the employee currently work for you? Does the name and Social Security number match your records? Doesn t mean you can t process just need to clarify with issuing party 22

26 Is It Legal? 45 On the proper form? 5/31/12 From the proper source? Completed correctly? Delivered properly? Remember: The Order/Notice to Withhold Income for Child Support does not have to be served on the employer but may be sent by first-class or certified mail, by fax or by hand, as permitted by state law. What Laws Do I Follow? 46 State law is where the employee is located for some items Where the support order originates for others Need source on rules and regulations for states you are located in Child Support State Income Withholding Information: esource/state-income-withholdingcontacts-and-program-information Books, guides, internet are good sources 23

27 Generally Follow the Issuing State For: 47 Duration and amount of child support, current and arrears, Medical support terms, Where to remit payments, and Payment of fees and costs charged (if any) by the child support enforcement agency, issuing court, or custodial party's attorney. 48 Follow the Principle Place of Employment For: When to begin withholding, When to remit payments (1 to 7 days after payday), Mandatory deductions, Maximum amount to be withheld (within CCPA limits), How to allocate withholding across multiple child support orders, Administrative fee that employer is permitted to charge, and Other terms and conditions that may be set by state law. 24

28 Setting It Up 49 Always date stamp the garnishment Discuss security later Process on the same day as received Do not let sit in your in-box Determine pecking order if employee has more than one child support or garnishment Seek legal advice Set It Up In Payroll 50 Kept in separate files in payroll Each garnishment should have separate file even if multiple for one employee Tracking system separate from payroll system for reconciliations and questions Cross years, and even systems over the life of the withholding order They can last 18 to 20 years or more Line item on payroll pay stub for child support 25

29 Priority of Deduction for Child Support 51 Current Child and Spousal Support Medical Support Child Support Arrears What If You Get Two for One Child 52 Continue to honor the first order received. Give your employee a copy of the second order. Contact the issuing agency that sent the second withholding order and inform it that you are already sending withheld payments for the same child to another jurisdiction. Provide payment information such as the amount of the withholding and where the withholding is being sent. Contact the issuing agency that sent the first withholding order and inform it of the second order. 26

30 Multiple Income Withholding Orders Same Employee and Different Children 53 Federal regulations require that some money must be paid to each order for current support if there is more than one withholding order (for different situation of the same employee). In addition, states have enacted laws specifying the method for allocating money toward current support due for each order. Thus, some money must be allocated toward all current support orders. The orders should not be paid on a "first come, first served" basis. Go Tell It To The Employee 54 May be time limit Child support form includes employee notification if the order is from out of state Should include form letter from payroll Should be done regardless if garnishment requires 27

31 Payroll Form 55 Create template for each type of child support situation you may encounter to inform the employee as to: What you have received Payroll it will begin on Amount of deduction Contact information for deduction questions Disclaimer on responsibility of garnishment Sample Letter Child Support Withholding Order 56 NOTE: This notice is not meant to be construed as legal advice but as a sample of the type of letter that a payroll department may send. It is recommended that payroll departments get legal advice before issuing notification letters. 28

32 Date: To: From: Payroll Department RE: Child Support Withholding Order The attached child support withholding order has been received by the payroll department. To comply with all federal and state regulations concerning the withholding and remittance of child support this withholding order will begin on (insert payroll date). The amount of $ (insert withholding amount) for current child support will be withheld per payroll check. The withholding order does/does not include any arrears (circle one) to be withheld. An additional amount of $ will be taken each paycheck to apply to the arrearage amount of $. This will be taken until the arrearage is satisfied. The amount for current child support will be taken until a release order is Received from the issuing agency. If you have any questions regarding the processing of this notice within the payroll Department please contact. However, please be aware that the payroll department has no control over the amount of the withholding to be deducted except to comply with legal federal and state limits under Title III of the Consumer Credit Protection Act. If you have any disputes as to the amount of the withholding, the legality of the order to withhold itself or any other legal matters please contact the issuing agency listed on the attached copy of the withholding order. The payroll department cannot delay or suspend or in any way alter the withholding order. 57 Tracking System 58 Basically an excel spreadsheet One for each child support order processed Use for life of IWO Include amounts and dates of payments Current balance due if arrears Of course, reconciliation spreadsheet for all garnishments processed matches payroll totals 29

33 Paying It Out 59 Different states have different due dates Best to do by paydate to make sure you comply with all state requirements EFT may be required Example: CA, OR, FL, ND, PA, and VA What if there is Not Enough Money for all the Orders? 60 Sometimes an employee's earnings do not stretch far enough to pay all his or her obligations. If there is not enough allowable disposable income, the allocation method of the employee's principal state of employment must be followed to determine how much to pay to each order. Most states use one of two methods to allocate withheld payments among multiple withholding orders: 30

34 Methods 61 Prorate by allocating a percentage to each order based on the total dollar amount of current support ordered, or Share equally by dividing the allowable disposable income by the total number of orders. Reconciling 62 Make sure you reconcile the G/L account each month Spread sheet you created for tracking comes in handy now Reconcile spreadsheet to payroll before releasing payments 31

35 Security 63 Confidentiality is a must Anything that may be a garnishment should come to payroll first Only payroll has access NO Human Resources does not need to know Watch out for processing through A/P Security 64 Never discuss garnishments over the phone Payroll personnel need to be secure as well 32

36 Security for Payroll Personnel 65 A must in this day and age Blind mail boxes for e- mail Voice mail for phone Fake name for payroll personnel handling garnishments/lawsuits Physical security of building or office Face to Face by manager Medical Support Orders 66 33

37 Medical Support 67 National Medical Support Notice is a federal form requiring enforcement of a medical support order Part A Notice to Withhold Health Care Coverage, Employer Response, and Instructions to Employer Part B Medical Support Notice to Plan Administrator, Plan Administrator Response, and Instructions to Plan Administrator Medical Support 68 Latest version expires 03/31/2014 Changes are not major Page 2 is the Limitations on Withholding and Priority of Withholding all alone then goes to Employer Response e/state-medical-support-contacts-andinformation 34

38 Medical Support 69 This section added to Employer Response Employer NMSN Requirements 70 NMSN does not need to be filed with the court Deliver copy of the NMSN to the employee within 10 days of receipt Begin coverage within 20 days of receipt of NMSN by sending Part B to the plan administrator Current child support plus health insurance coverage must not exceed 50% of the employee s disposable income. When this occurs, complete the Employer Response Form and send to the appropriate local child support agency within 20 days 35

39 NMSN Requirements Cont 71 Provide written notification to the local child support agency within 10 business days of any change and/or lapse in health insurance coverage for the minor child(ren). Include the following information: Reason for the lapse Whether the lapse is temporary Date coverage is to resume NMSN Requirements Cont 72 If coverage is not available, complete and sign the employer Response Form and return to the appropriate agency within 20 days There are penalties if the employer does not comply 36

40 Let s Do Some Examples 73 Calculation Example (State uses 50%) 74 Employee s disposable income is $ Multiply by 50% x 50% Allowable Disposable Income $ Employee has one current child support (CC/S) order for $200 and a health insurance premium of $125 37

41 So If We Do the Calculation 75 $200 CC/S + $125 health insurance premium = $325 Max. support deduction $ Obligation -$ We can take the entire obligation no problems 76 Let s add an arrearage to the equation (state allows only 50%) CC/S and HI $ Arrearage $ total $ Max. support deduction $ Now we are over our maximum 38

42 Here s how we fix it 77 Take the $200 CC/S and the $125 health insurance premium but only $6 partial arrears payment. That totals the maximum deduction allowed of $ You can take more if the state law allows for arrearage percentage or has the higher federal limits Multiple Order Calculations 78 Disposable Income $ Multiply by 50% x 50% Max. support deduction $ Order A $150 cc/s + $50 arrears = $ Order B $100 cc/s + $25 arrears = $ Total for both orders $ No problem forward to both agencies 39

43 Same Disposable Income But 79 Order A $150 cc/s + $50 arrears = $ Order B $100 cc/s + $25 arrears = $ Order C $175 cc/s + $25 arrears = $ Totals $425 cc/s + $100 arrears = $ We are over our maximum so the first to go is the arrears since current child support must be satisfied first Percentages Made Easy 80 To satisfy the orders you need to determine the percentages for each order of the entire amount owed. Then use those percentages to determine how much of the allowable deduction of $ each order will get. (watch out for states that still use the equal split rule. That would then apply) Finally a use for algebra!!! 40

44 Here s How It Is Done 81 Order A = $150 Order B = $100 Order C = $175 Total $425 $150/$425 = 35% $100/$425 = 24% $175/$425 = 41% Total 100% Let s Apply the Percentages 82 Order A $331 x 35% = $ Order B $331 x 24% = $ Order C $331 x 41% = $ Totals: = $ You would then forward those amounts to each agency. 41

45 Don t Forget to Communicate! 83 Always remember to send along a letter of explanation when forwarding less than the order designated amount. Include an explanation of the other support orders and amounts in the letter. Don t forget to explain why the arrearages were not taken as well. Let s try one with arrears included 84 Same maximum support deduction of $331 Order A $100 cc/s + $50 arrears = $ Order B $ 75 cc/s + $25 arrears = $ Order C $100 cc/s + $25 arrears = $ Totals $275 cc/s + $100 arrears = $ As you see on the next slide 42

46 We can take all the current support but only partial on the arrears 85 Same maximum support deduction of $331 Order A $100 cc/s + $50 arrears = $ Order B $ 75 cc/s + $25 arrears = $ Order C $100 cc/s + $25 arrears = $ Totals $275 cc/s + $100 arrears = $ We go back to the percentages 86 Maximum Support Deduction $ CC/S all orders -$ Total towards arrears $ Order A $50/$100 = 50% Order B $25/$100 = 25% Order C $25/$100 = 25% 43

47 Calculate the Arrearages 87 Order A $56 x 50% = $28 Order B $56 x 25% = $14 Order C $56 x 25% = $14 100% = $56 Forward the Following 88 Order A $100 cc/s + $28 arrears = $128 Order B $ 75 cc/s + $14 arrears = $ 89 Order C $100 cc/s + $14 arrears = $114 Total $275 cc/s + $56 arrears = $331 44

48 Processing with Other Garnishments 89 Bankruptcy and Child Support 90 Even if an employee declares bankruptcy, he is still obligated to pay child support. Debts due for delinquent child support are not dischargeable in bankruptcy actions. Several changes to the Bankruptcy law went into effect on October 17, One of the most significant changes related to child support is that the automatic stay provisions under the bankruptcy code no longer apply to the withholding of domestic support obligations from a noncustodial parent s income or wages. 45

49 Bankruptcy Continued 91 This provision means that it is not necessary to ask the court to provide relief from the stay for purposes of withholding the noncustodial parent s support obligation. Income withholding orders must be implemented immediately, and those income withholding orders already in place should continue without interruption. Bankruptcy 92 If an employer receives information or notification regarding a bankruptcy filing for an employee, the employer should continue withholding amounts for domestic support obligations. A "domestic support obligation" is defined as a debt or an amount that is in the nature of alimony, maintenance or support, even if not expressly designated as such. Arrears are included in this definition. 46

50 93 A domestic support obligation includes amounts that are owed to: a spouse, former spouse, child, parent of a child, legal guardian of a child, responsible relative of a child, or a governmental unit. Bankruptcy 94 If there is any doubt about whether a withholding order is a domestic support obligation, please contact the agency, court or entity who issued the withholding order. An employer may be notified, however, that it is no longer responsible for withholding the payments because a trustee of the bankruptcy court has taken over this task. Withholding should continue until official notification from the agency or bankruptcy court has been received. 47

51 95 Creditor Garnishment Calculation Tony has a creditor garnishment of $1,000 to honor and has $700 in disposable income Step 1: Determine the lesser of: Disposable income minus 30 times minimum wage: $700 - $ = $ b. 25% of disposable income: 25% x $700 = $175 $175 is the lesser of these two amounts. Step 2: We can take the $175 to satisfy the garnishment 96 But What if There s a Child Support Order? Tony's child support withholding obligation is /week. Deduct $180 for child support from Tony's $700 pay Difference between allowed amount for garnishment and the child support deduction taken: $175 - $180 = -$5 The child support deduction of $180 has already exceeded the allowed amount for garnishment; therefore nothing may be withheld for Tony's creditor garnishment. 48

52 Let s do one where he has the money 97 Tony's child support withholding obligation is $140/week. His weekly disposable income is $1,000. A creditor serves a garnishment against Tony for a $1,000 debt. Deduct $140 for child support from Tony's $1,000 pay Then do the garnishment calculation 98 Determine the lesser of: Disposable income minus 30 times minimum wage: $ $ = $ % of disposable income: 25% x $1000 = $250 $250 is the lesser of these two amounts. 49

53 So we can take 99 Difference between allowed amount for garnishment and the child support deduction taken: $250 - $140 = $110 $110 can be withheld for Tony's creditor garnishment Special Situations

54 Lump Sum Payments 101 If the child support enforcement agency becomes aware that the noncustodial parent is or may be entitled to a lump-sum payment (bonus, severance pay, etc) a separate lump sum transaction may be sent to the employer in order to obtain part or all of the payment to apply to the noncustodial parent s support obligations. The latest version of the child support income withholding order allows for an agency to request child support be withheld. A ONE TIME ORDER/NOTICE LUMP SUM PAYMENT box is now available on the order to handle these requests. Lump Sum Payments 102 The question for payroll departments is what rules govern lump sum payments as opposed to ongoing deductions. Do the same limits apply? Does the state have any special rules that apply only to lump sum payments? The answer is depends on the state 51

55 103 To Help With Lump Sum Payment Questions the OCSE Offers A Chart That Gives Definition of lump sum payments Requirements for reporting lump sum payments including citation of state laws Threshold amounts for lump sums to be reported if any Length of time employers must hold the lump sum payment Whether or not the state uses the income withholding order for lump sums CCPA limits that apply to lump sums New Tool Debt Inquiry Service 104 The new Debt Inquiry Service (DIS) provides employers the ability to report information about employees who are eligible to receive a bonus, lump-sum or other type of payout online using a web application. Participation in the DIS is voluntary for both employers and states. The DIS allows registered and authorized employers to send information about employees who are eligible to receive a bonus or lump-sum payment either by uploading a file or entering information on a screen on the DIS application. The federal Office of Child Support Enforcement (OCSE) compares this information to its debtor file, maintained at the federal level containing information on all state-submitted non-custodial parents who owe past-due child support. The DIS returns matches to the appropriate state child support agency(ies) responsible for collecting past-due support. 52

56 Terminating Employees 105 Upon termination, mail or fax a completed "Termination Notification" form to the issuing agency, OR some states will accept this information over the telephone or online. The employer should have the following information available: Employee's name, Employee's case identifier, Last known home address, New employer's address (if known), and Date of separation. Medical Support Order 106 States using the National Medical Support Notice (NMSN) require that additional information on medical support or insurance be reported, primarily to avoid interruption of medical coverage for the employee's child. 53

57 Rehired Employees 107 If the employee is temporarily laid off (i.e., due to seasonal work), retain the income withholding order that was being honored prior to the termination. The amount of time that an income withholding order is kept on file following a termination varies from state to state. For example, some states require that an income withholding order be reactivated if the employee is rehired within 90 days. Rehired Employees 108 Upon re-hire, submit a new hire report if the employee completes a new W-4 form and reactivate the income-withholding order. If possible, reactivate the medical support order as well. This will depend on the requirements of the health insurance plan. 54

58 When to Stop a Child Support Order 109 Do not stop withholding for child support until one of the following occurs: Official notification to stop withholding is received from the issuing agency. The employee is terminated, for whatever reason. Bankruptcy proceedings are underway and a bankruptcy trustee takes over the withholding. If Your Employee is Called Up for Active Duty! 110 For those reservists who owe child support, it would be helpful if you would: Contact the child support agency that issued the income withholding order Tell them that your employee-reservist has been called up to military duty Provide the date of activation. The child support agency can then issue a new income withholding order to the military service branch. By providing this information, you are helping your employee avoid lapses in payment to his or her children while serving our country. 55

59 Thank You 111 Questions? 56