HOW CHILD SUPPORT IS DISTRIBUTED

Transcription

1 HOW HILD SUPPORT IS DISTRIBUTED IN ALIFORNIA A GUIDE FOR ADVOATES I. INTRODUTION The 1996 federal welfare law -- the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) -- included major changes to the distribution of child support payments. For the most part, these changes are very favorable to families, providing them with their past-due child support ahead of the state s welfare recoupment. These changes were effective October 1, 1998 in alifornia. This handout is intended to assist advocates working with both custodial parents (Ps) and noncustodial parents (NPs) on distribution issues in alifornia s child support program. The program is run by the Department of hild Support Services (DSS) and operated by the local child support agency (LSA) in your county. II. OLLETIONS A. MEANS OF OLLETION If the NP is employed, collections must be made through wage withholding, unless the NP and P have a specific agreement to the contrary. Wage withholding is governed by 42 U.S.. 666(b); 45 FR ; al. Family ode 5200 et seq.; and al. Welfare & Institutions ode (i). The most important rules are: The maximum amount of withholding is governed by the onsumer redit Protection Act, 15 U.S (b): If the NP is supporting a spouse or dependent child other than the child for whom support is being sought, the maximum withholding is 50% if there are no arrears over 12 weeks. If there are, then the maximum is 55%. If the NP is not supporting a spouse or dependent child other than the child for whom support is being sought, the maximum withholding is 60%, or 65% if there are arrears over 12 weeks delinquent. The withholding must comply with procedural due process. There must be procedures for promptly refunding to NPs amounts which have been improperly withheld. There must be procedures for withholding regardless of whether the NP owes arrears. Even if the NP is not currently paying support through wage withholding, because of an agreement between the parents, wages are subject to withholding on the day that the NP fails to make a payment equal to one month's child support obligation. Federal and state tax refunds, as well as any money owed to the NP by the state, such as lottery winnings, ADV 2-1

2 should be intercepted if the NP owes past-due support. LSAs are required to submit all eligible child support cases to DSS for submission to federal and state tax refund intercept programs. LSAs must first verify the accuracy of the arrears and the NP s name and social security number. There are special procedures for NPs to appeal tax refund intercepts. These are set out in the notice of the refund intercepts that the NP is sent. The following sources should be examined when looking at intercept issues: DSS, Manual of Policies and Procedures (MPP) ; FSD Letter No (Sept. 30, 1998); FSDIN Letter No. I (Nov. 8, 1996); FSDIN Letter No. I (Oct. 10, 1997); FSDIN Letter No. I (May 5, 1998). Additional collection methods include use of the Franchise Tax Board or Internal Revenue Service for general collections, attachment of bank accounts and liens on real or personal property. B. THE SOURE OF THE PAYMENT The source of the collection also affects its distribution. If the support payment is collected by intercepting the NP's federal income tax refund, different rules apply to the distribution of the funds (see Section III. below).. THE DATE OF OLLETION Although the "date of collection," and not the date of receipt, determines the month for which support is considered current, under PRWORA, the date of collection for child support is generally the date of receipt by the State Disbursement Unit (SDU). 1 If, however, current support is withheld by an employer in the month when due, but is received by the SDU in a month other than the month when due, states may use either the date of withholding or the date of receipt as the legal date of collection. However, alifornia must continue to use the date the employer withholds the support amount as the date of collection, at least until the SDU is fully functioning. See federal Office of hild Support Enforcement (OSE), Action Transmittal (AT) 98-24, Question 23 (Aug. 19, 1998). The LSA in each county (or the SDU, once it is in operation) has a duty to find out the legal date of collection for each payment received. D. INTEREST AND PENALTIES Interest is charged at the rate of 10% per year on all arrears. al. ode of ivil Procedure Interest is paid to either the state (if the past-due support goes to the state for welfare reimbursement) or the P (if the past-due support goes to the P). Additionally, in some private (non-iv-d) cases an additional 6% per month may be levied on arrears. Family ode 4720 et seq. III. DISTRIBUTIONS The new child support distribution laws are found at 42 U.S.. 657; ode of ivil Procedure ; and DSS, MPP et seq. In addition, detailed instructions and helpful examples can be found in the OSE-AT (Oct. 21, 1997), available from the U.S. Department of Health & Human Services, Office of hild Support Enforcement, or through their website at: 1 Each state was required to have a State Disbursement Unit by October 1, 1998 to collect and distribute child support at a single location for all cases in the state child support program and for collections from wage withholding in private cases. 42 U.S.. 654b. However, alifornia does not yet have a functioning SDU. In the meantime, collections will continue to be processed by individual LSAs. ADV 2-2

3 In addition, several alifornia FSD Letters provide additional guidance on how support is distributed: FSD Letter No (Feb. 26, 1998) (issuing new reports and answering questions); FSD Letter No (Apr. 16, 1998) (eliminating pass-on payment for collections in excess of the welfare grant); FSD Letter No (Apr. 28, 1998) (questions and answers, especially allocation of collected support between multiple cases and tracking arrears); FSD Letter No (June 23, 1998) (two-days to disburse child support collections); FSD Letter No (July 6, 1998) (clarifying questions and answers); FSD Letter No (Aug. 4, 1998) (more questions and answers, also lists detailed order of distribution); FSD Letter (Oct. 6, 1998) (more questions and answers). A. FAMILIES THAT HAVE NEVER REEIVED WELFARE alifornia must forward all the money collected on behalf of a family that has never received welfare to the family within two business days of receipt by the state disbursement unit or LSA. A detailed distribution hierarchy is set out in DSS, MPP B. FAMILIES THAT HAVE REEIVED WELFARE 1. FAMILIES URRENTLY REEIVING ALWORKS These provisions apply to child support collections from all sources except federal (IRS) tax refund intercepts. For distribution of federal tax refund collections, see part, below. As a prerequisite for receiving assistance, alworks recipients assign their rights to child support payments to the state. The law regarding assignments under PRWORA can be found at 42 U.S.. 608(a); Welfare & Institutions ode When the LSA collects child support for a family receiving alworks, it must first pay the federal government its share of the amount collected. After that, federal law gives states discretion either to distribute the remaining support to the family or to retain the state share of the amount collected, up to the amount of assistance paid to the family. alifornia has chosen to continue its disregard or pass-through. The first $50 of support collected on behalf of a family receiving aid in any month is passed through to the family and disregarded in calculating the family s welfare grant amount. Welfare & Institutions ode ; DSS, MPP (c). Money collected beyond this $50 disregard is retained by the state as recoupment for welfare paid to the family. DSS, MPP (d), (g) The state may never retain funds beyond the unreimbursed assistance pool, which is measured by the total aid the family has received minus all amounts recouped by the state. Any child support collected in excess of the unreimbursed assistance pool must be passed through to the family. This is counted as income and will reduce the family s welfare grant. 42 U.S.. 657(a); DSS, MPP (f), (h), (i). Only one disregard payment will be made for each month even if support is collected from more than one NP. Even though the disregard is paid to the family, it still reduces the family s total unreimbursed assistance pool. ollections from a federal tax refund interception cannot be used to pay the disregard. Such collections are applied only to past-due, not current, support 2. FAMILIES THAT HAVE FORMERLY REEIVED WELFARE Again, these provisions apply to child support collections from all sources except federal (IRS) tax refund intercepts. For distribution of support collected through federal tax refunds, see part, below. While on welfare, families had to have assigned their rights to child support payments to the state. 42 ADV 2-3

4 U.S.. 608(a)(3); Welfare & Institutions ode For assignments in effect on or before September 30, 1998, all arrears which accumulated before or during the time the family received assistance are permanently assigned and payable to the government. Arrears which accumulate after a family stops receiving assistance are never assigned and are owed to the family so long as the family is not receiving assistance. For assignments entered into on or after October 1, 1998, all arrears which accumulated during the time the family received assistance are permanently assigned. Arrears which accumulated before the family began receiving aid are temporarily assigned until the day the family leaves aid, at which time they become conditionally assigned. Arrears which accumulate after a family stops receiving assistance are never assigned and are owed to the family as long as the family is not receiving assistance. hild support payments collected by the state are distributed in the following order of priority: (1) urrent support: To the family (2) Never-assigned arrears (arrears that have accumulated since the family stopped receiving aid): To the family (3) onditionally assigned arrears: To the family (unless payment is from a federal tax refund intercept) (4) Permanently assigned arrears, up to the total amount of aid the family received: To the state (5) Arrears beyond the total amount of aid the family received: To the family The distribution hierarchy is spelled out in greater detail in DSS, MPP SUPPORT OLLETED THROUGH FEDERAL TAX REFUND INTEREPTS Federal law mandates that collections from federal tax refund intercepts be used to repay arrears in the following order of distribution: (1) Permanently assigned arrears: To the state (2) Temporarily and conditionally assigned arrears: To the state (3) Never-assigned arrears: To the family No current support or disregard is to be paid out of a federal tax refund intercept. For more information, see DSS, MPP ; FSD Letter No (Apr. 28, 1998), Questions 8 and 46. D. TIME FRAME FOR DISTRIBUTION The local child support agency (or the SDU) must distribute support collections on time. If the P is not currently receiving alworks cash assistance: Effective October 1, 1998, collected support must be sent to the P within two (2) business days after the date of receipt. 42 U.S.. 654b(c); DSS, MPP There is a limited exception for cases with disputed arrears. The two-day timeframe applies to both Ps who have never received welfare and Ps who previously received welfare. See OSE-AT (Sept. 15, 1997), Question 70. Even though alifornia s SDU is not yet operational, individual LSAs will still have to distribute collected support within two business days. FSD Letter No (June 23, 1998). If the P is currently receiving alworks cash assistance: While the new federal law is not ADV 2-4

5 completely clear about the timing of distribution for families currently receiving welfare, disregard payments are to be distributed within two business days of receipt. See OSE-AT (Sept. 15, 1997), Question 70; DSS, MPP Payments to welfare families beyond the disregard may be held up until the end of the month to allow for the welfare distribution analysis. However, it is not clear if alifornia s 13 days from the end of the month to do the welfare distribution process complies with federal requirements. See DSS, MPP (a); OSE-AT (Sept. 15, 1997), Question 70. IV. MULTI-FAMILY ISSUES Federal and state law prohibits giving all the support collected to one family if the NP owes money to more than one household. In this case, the support collected is divided between all the applicable households, with all the money going first to current support. 45 FR (a)(5). In alifornia, if there is not enough money to satisfy all the current support obligations, payments are to be prorated based on each case s proportionate share of the total current support due. DSS, MPP Once current support has been paid, collections are allocated based on each case s arrears due as a proportion of the total arrears due for all the NP s cases. DSS, MPP Money collected from IRS and FTB tax refund intercepts and from wage assignments may have slightly different allocations. See DSS, MPP If the P is on alworks and is not getting the $50 disregard each month because the LSA is giving some money to another household, or if the P is not on alworks and is not getting a proper share of the current support while the other household is being paid current support, a complaint should be made immediately. If an NP pays (or owes) child support for children in more than one household, make sure the support payments have been properly credited to the separate accounts for each household. ompare the allocation of support collected to the court orders for each P household. V. AOUNTINGS FOR OLLETIONS AND DISTRIBUTIONS In alifornia, both Ps and NPs have the right to an accounting of the child support collected and distributed by the local child support agency. The payment history of an obligor pursuant to a support order may be examined by or released to the court, the obligor, or the person on whose behalf enforcement actions are being taken or that person's designee. Welfare & Institutions ode (c)(3). While the right to an accounting exists, the Department of hild Support Services has not given the LSAs any instructions or time limits for responding to requests for accountings. Therefore, getting a prompt and complete accounting may require some persistence. It may be necessary to make this request more than once. Often, the records of both child support collections and welfare assistance are incomplete and confusing. When in doubt, ask questions. To request an accounting, write to the local child support agency and ask for a complete accounting of the support collected and how it was distributed. If a P gets child support from more than one NP or an NP owes support to more than one family, a separate accounting should be obtained for each relevant NP and P. State the time period you want the accounting to cover. You should ask for the information on a month-to-month basis. The form of the accounting will vary since different counties do things differently. The following should ADV 2-5

6 be identifiable: The county's name; the P's name and case number; the NP's name and social security number; and the date and amount of the court order. If more than one county or state is involved with collecting or distributing the child support, ask for an accounting from every relevant county and state. If the accounting is based on other records, especially computer records, ask to see the other records, including any hard copy used to enter information into the computer. If the accounting is a computer printout, ask to have it thoroughly explained. If the accounting mentions a rule that purportedly applies to how a collection or distribution was handled, check any statute or regulation you are given and any OSE Action Transmittal or SS or SSIN Letter that explains the rule. Make sure that the rule is generally interpreted and applied properly. Then check to see if the quoted law is properly applied to the case. If the accounting does not match other information or records, ask for a written explanation that includes the source of the information upon which the LSA compiled its records. Be persistent. Keep asking questions until the matter is resolved. To understand if the funds have been handled properly, the following information should be determined for each and every payment: The legal date of collection and the actual date of receipt of the funds by the Local hild Support Agency (LSA) or state disbursement unit The amount and source of payment. The amount of the payment applied to the following categories: (1) urrent support paid to the family. (2) $50 welfare disregard paid to the family. (3) urrent support used to pay welfare recoupment to the government. (4) Past-due support used to pay never-assigned or conditionally assigned arrears to the family. (5) Past-due support used to pay permanently assigned arrears to the government for welfare recoupment. (6) Past-due support used to pay conditionally assigned arrears to the government for welfare recoupment. (7) Any additional past-due support paid to the family. Read the accounting records carefully. ompare them to the court order for child support and to any information the P or NP can provide (e.g., from an employer, tax refund intercept notices, canceled checks, bills, statements or LSA Monthly Notices of ollections and Distribution). ompare the accounting to any audits certified for income tax refund intercepts. If the information does not match, consider a challenge. VI. HOW TO OMPLAIN If the P or NP thinks the accounting records are incorrect as to the amount of payment or would like more information, (s)he should appeal right away by doing the following: ADV 2-6

7 1. Request a written resolution of her/his complaint within 90 days of the date (s)he knew or should have known of the LSA s action or inaction. (S)he can do this orally or in writing. The best way is to fill out form LR001", which (s)he can get at his/her LSA, and mail it to his/her LSA. 2. If (s)he does not get a satisfactory written resolution of his/her complaint within 30 days, request a state hearing (within 90 days of an unsatisfactory written resolution, or within 90 days of making the complaint if (s)he does not get a written resolution within 30 days) by calling toll free , or by mailing a request to State Hearing Office, 744 P Street, M.S , Sacramento, A The best way is to fill out form SH 001", which (s)he can get at his/her LSA, and mail it to the state. 3. If (s)he is not satisfied with the state hearing decision in his/her case, (s)he has one year to appeal that to court, and if (s)he wins, the state has to pay his/her attorney. 4. There may be groups in the community that help Ps and NPs. The largest group for Ps is AES (the Association for hildren for Enforcement of Support). AES can be reached by calling AES. Other resources for assistance in the community may include legal services or legal aid programs and low-cost family law clinics. Remind him/her to keep copies of all letters and forms (s)he mails in. National enter for Youth Law under a grant from the Rosenberg Foundation. November, 2001 ADV 2-7