PA Child Support Changes–More Problems for Payroll

Pennsylvania has recently passed legislation on collecting fees for withholding child support payments. Normally this is good news for payroll. However, the PA legislature has really gone out of its way to make it tough for payroll to enforce the new rules.  If I can get on my soap box for one moment, this is the reason I dread state legislatures getting involved in enacting legislation that is payroll related before check with payroll professionals, which they never do! This legislation, in fact,  could cause “nightmares” for payroll systems as it goes against the norm for collecting such fees.  Basically it boils down to this, which was distributed by the Office of Child Support Enforcement (OCSE):

On July 1, 2016 Governor Tom Wolf signed Act 64, which amends Section 4348(j) of Title 23 of the Pennsylvania Consolidated Statutes. Section 4348(j) permits employers to charge their employees an administrative fee for withholding income for support.  Employers were previously permitted to deduct up to two percent of the ordered amount per pay period as reimbursement for administrative costs related to withholding support. Effective August 30, 2016, employers may deduct a one-time fee of $50 for reimbursement of expenses related to withholding income for support. The two-percent fee is no longer permitted. There are no other changes to the law. Pennsylvania’s income withholding requirements stipulate that administrative fees cannot be deducted from the withholding amount and that Consumer Credit Protection Act (CCPA) limitations apply to amounts withheld from the obligor’s income.

The Pennsylvania Bureau of Child Support Enforcement is providing the Frequently Asked Questions below to address concerns related to the implementation of the new fee. Additional questions regarding the implementation of Act 64 should be directed to the Pennsylvania State Collection and Disbursement Unit at 1-877-676-9580. 

Frequently Asked Questions:

 1. Can employers assess the fee on subsequent orders?

Answer: The one-time $50 fee applies to each employee, not each order. Therefore, employers may only collect up to $50 in administrative fees for the duration of the individual’s employment, regardless of the number of income attachments received for the employee.

2. How should employers handle employees who left employment and were subsequently rehired? When can the fee be reassessed?

Answer: The $50 one-time fee limitation applies for the duration of the individual’s employment. Seasonal, transient, and other typically low-income employees will be adversely affected by Act 64 if each subsequent rehire with the same company is regarded as a new eligibility period for the $50 one-time fee. Therefore, rehired individuals are only eligible for a new $50 fee when their start date is greater than one year from their previous leave date.

3. What should employers do if they are unable to update their payroll system before the August 30, 2016 effective date?

Answer: Employers may withhold the one-time $50 fee at any time during the income attached employee’s tenure with the company. Employers who are unable to update their payroll systems before August 30, 2016 may elect to withhold the fee after their system updates are complete. Employers may not continue to withhold a percentage fee until they are able to take the $50 one-time fee.

So payroll can only deduct a one-time fee per employee no matter how many income withholding orders are received for that employee.  PA child support has also provided additional clarification after releasing the above information.  One addresses the issue of insufficient funds.  If there are not enough funds to take the entire fee in one pay period, can it be pro-rated and taken over multiple periods?  PA Child Support says yes, the employer may deduct the fee over multiple periods if there are insufficient funds to deduct in a single payment.

There are still a lot of unanswered questions for payroll.  I will keep you posted on any further changes to the PA child support situation as they come in.

 

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OCSE Redesigns Website with Users in Mind

This is a first for us today.  We have a guest blogger.  Tristan Anderson from the Office of Child Support Enforcement (OCSE). OCSE has redesigned and launched their new website.  Her blog post today will help guide users through this new, redesigned OCSE website with all its great new features.  Welcome Tristan:

Here Today, Gone Tomorrow:

Technology moves fast. What once was new can quickly become old and outdated. Although we redesigned and launched a new website in 2012, by 2014 it no longer fit our users’ needs. In September 2012, only 12 percent of the people visiting our website did so on a mobile device. By September 2013, almost 25 percent were mobile users — a 102 percent increase in just 12 months! Each year we see a steady increase in the number of mobile users.

ocse blog picture 2On average, about 35 percent of our visitors are on their mobile device. To keep up with demand, we decided to redesign our website and make it mobile-friendly. That means our site will re-adjust the content to fit the size of any device, whether it is a desktop computer, a smart phone, a tablet, or something else.

Considerations for developers

  • Define your audience — who needs to know what? Our site must meet the needs of a variety of audiences: from parents to child support professionals, employers, and other partners; all groups need accurate information specific to them.
  • Identify top tasks — why are people visiting our site and what do they need? To answer these questions, we went to frequent website visitors.

User testing with employers

User testing with employers gave us insight into why you visit our website and how you navigate it. Based on feedback, we organized the main menus and submenus to accommodate your top tasks.

Here are examples of the most popular reasons you visit our website:

Understand employer responsibilities

Learn about electronic and online services

Find a complete list of federal forms used by employers

Access state contact information and program requirements

Get answers to frequently asked questions on a variety of topics

As more people visit websites using mobile platforms and as technology moves forward, you will see more updates and refinements. If you’d like to help test our site or have suggestions for improvements, contact Tristan Anderson at tristan.anderson@acf.hhs.gov.

Local Minimum Wage Rates Expanding Sphere of Influence

When local minimum wages began cropping up several years ago it was clearly understood that this was going to be an area that could cause complications for payroll. Employees that worked in different cities with different minimum wages would require very accurate accounting of hours worked. But now it seems that local minimum wages are expanding their sphere of influence in payroll. Beginning July 1, 2016 when calculating the amount of disposable income that can be subject to a garnishment in California the payroll department must take into account the local wage paid as well as the state minimum wage. It must base the calculation on the higher of the two. California is the first state that has passed this type of legislation but will it be the last?

Many other states have local minimum wages including New Mexico, Illinois, Maryland, and Washington to name a few. And with the movement growing to increase the minimum wages on the local level because state legislatures and the federal government have not moved on this issue it may be only a matter of time before all states with local minimum wage rates will require the same type of calculation as California. I personally am in favor of the higher minimum wages, especially in more expensive cities.  And the fact that the federal minimum wage hasn’t changed in nine years is simply silly.  But until the federal government moves on this, payroll will have to deal with the fallout of complying with dozens of local wages and the changes to rules to accommodate them.

If Health Insurance is Mandatory…Is it a Mandatory Deduction (for Garnishments)?

The Affordable Care Act has been in full swing for a couple of years now.  However, there appears to still be one more question that needs to be answered.  If health insurance is mandatory then does it now qualify as a mandatory deduction under garnishment rules? Both payroll professionals and employees have been tackling with this question so let’s see what the actual law requires.  The Consumer Credit Protection Act (CCPA) is the governing law when it comes to deducting for garnishments.  It is enforced by the federal Department of Labor. It states that the employer must take the gross wages and minus out all “mandated deductions” to arrive at the disposable pay. The garnishment percentage (such as 25% for a creditor garnishment) is then taken from this amount.  It states clearly that mandated deductions include taxes such as federal and state income tax, FICA taxes, local taxes, and mandated pension plans such as PERS (Public Employee Retirement System).  401(k)s etc. do not count.  So if I am required as an employee to have health insurance is that now mandated.  The answer is easy…NO.  The DOL has been asked by the APA Government Affairs Manager, Bill Dunn, if they planned to change the definition of mandated deductions to include health insurance.  The answer was no they are not.  Although it is mandated that a taxpayer have health insurance it is not mandated that they have the employer’s insurance. They could buy it through the open exchange and by-pass the employer altogether. So as far as the CCPA is concerned health insurance does not reduce the disposable income.

However, always remember that the states can always do less than the CCPA. It is possible that the state may permit the health insurance as a mandated deduction. Many state legislatures are looking at legislation that will adjust their requirements. It would appear on the garnishment you receive if the state permits the deduction.  You should also be aware that state tax levies might also permit the health insurance deduction. For example, Colorado and Virginia have added the deduction from state tax levies.

So to recap…the federal CCPA is not adding health insurance as a mandated deduction for garnishments.  However, the state legislature may or may not pass legislation to permit it as a mandated deduction, you need to check on each state requirements by reading the garnishment.

Anyone for E-IWO (Except SC)

Well the day has finally come when all the states (except South Carolina) are now offering electronic Income Withholding Orders or e-IWO.  What exactly is an e-IWO and how does it differ from getting cheiwoild support orders on paper?  Very simply, by using the e-IWO employers receive their Income Withholding Orders (IWO) for child support electronically as a pdf file rather than through the snail mail on paper.  This saves a lot of time and expenses on the side of the state.  But the employer also gets to acknowledge the receipt electronically which saves time and money on that side as well.  In addition, the same portal also allows the employer to report terminations and lump sum payments electronically, again saving time and money.

All you need to do to partake in this system is to implement the e-IWO in one of two ways.  For large (I mean really large) employers with thousands of child support orders you could set up a system-to-system process.  This obviously is going to take a lot of programming and time.  But if you are a smaller employer with maybe only dozens of child support orders or less you could set up the No Programming option.  This is just like setting up your phone really. You just set up the port etc. and then begin receiving the IWOs.  Takes just a few weeks but well worth it in terms of time and money saved.

Want more info before making the plunge to electronic then check out the Office of Child Support Enforcement’s website on e-IWO. There you will find all the info you need on setting up the different systems as well as FAQs. Want to speak to someone directly about the program.  By all means contact William Stuart @william.stuart@acf.hhs.gov.  Bill will be glad to answer your questions, give you back ground info and even give you info on other employers, who are just like you, so you can speak with them about the system.

Electronic is the wave of the future for payroll so don’t be left out and holding the paper form when everyone else is going paperless with their IWOs.  The system is up and running so now is the time to check it out and start using it.

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Child Support Lump Sum Reporting and Terminations Can Now be Done Electronically

Reporting lump-sum payments for child support used to be done online through what was called Debt Inquiry Service. Now using the Employer’s Services Web Application employers can report lump-sums and terminations to states quickly and efficiently. Debt Inquiry Service is now known as Lump-Sum Reporting. eTerm allows employers to report termination to participating states electronically. eTerm can also be used to respond to income withholding orders received for individuals who no longer or never worked for your company. This takes the place of completing page 3 of the IWO and sending it to the child support agency. Employers using e-IWO can do both processes through the e-IWO system. For more info about lump sum reporting or eTerm or to schedule a demonstration contact OCSE Employer Services at employerserviceswebapp@acf.hhs.gov.

 

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Child Support in the 21st Century

Child support is going digital.  President Obama has signed into law legislation that now requires all states to provide the option to receive the child support withholding orders (IWO) electronically.  The deadline for the states is October 1, 2015.  The electronic version of the IWO, known as the e-IWO, has been available for a couple of years through the Federal Office of Child Support Enforcement (OCSE).  According to the OCSE’s website currently 32 states offer this option.  These include AL, AZ, AR, CA, CO, CT, DE, DC, FL, HI, ID, IL, IN, ME, MA, MI, MO, NC, ND, NE, NJ, NY, OH, OK, OR, PA, SD, TN, TX, VA, WA, and WV.  Two more states, KY, and MD are currently implementing the process.

This process allows the employer to receive the IWO (as a PDF file) through a portal directly into the employer’s computer.  This is not done through email but rather through either a Secure File
Transfer Protocol (SFTP) or a File Transfer Protocol Secure (FTPS). This process allows the employer to accept or reject the IWOs electronically as well as process terminations.  Large employers can implement a fully automated system.  However, smaller employers can use the no programming option that is easy to implement with limited technical resources.

The OCSE is pushing for employers to sign up now to use this electronic service. For more information check out the OCSE’s webpage on Electronic Income Withholding Orders or contact William.stuart@acf.hhs.gov.