Checklist: Compliance with child or spousal support orders (USA)

Introduction

This checklist will assist in-house counsel, private practitioners and human resource professionals who are responsible for ensuring an employer’s compliance with child or spousal support orders.

The checklist is presented as a list of requirements that employers can check off as each one is addressed. At the end of each step, there are explanatory notes corresponding with each requirement in the checklist.

This checklist addresses the following steps:

1. Complying with requirements before receiving an income withholding order
2. Complying with requirements after receiving an income withholding order
3. Complying with a National Medical Support Notice (NMSN)

This Checklist can be read in conjunction with How-to guide: Overview of US employment law.

Step 1 – Complying with requirements before receiving an income withholding order

Step 2 – Complying with requirements after receiving an income withholding order

Step 3 – Complying with a National Medical Support Notice

Explanatory notes

Spousal support orders oblige one former spouse to pay alimony (spousal support payments after a divorce) to the other former spouse. Child support orders oblige a parent to pay a certain amount for the support of their children when the paying parent does not live with them (noncustodial parent). The parent may also become subject to a National Medical Support Notice, which requires the parent to provide health care coverage for their children.

While complying with such orders requires an analysis of the specific facts and circumstances, this checklist provides an overview of the framework for ensuring compliance that should then be adapted to the organization’s individual situation.

Legal framework

Legal issues relating to child support and alimony are generally governed by state law, and standards differ from state to state. There are ways in which the federal government assists state and local governments to help children and families. The Department of Health and Human Services’ Office of Child Support Services (OCSS) is a US government office that provides assistance in locating parents, determining paternity, and enforcing support orders. Most states have in some way modeled their child support services on the OCSS, and most states participate in OCSS programs through their own state plans.

Key considerations

Federal and state laws require employers to register all new employees either with the OCSS or with the state's child enforcement agency. This must be done regardless of  whether that employee is a parent. All employers are required to:

• comply with any and all child support income withholding orders issued by the courts or by state agencies; and
• comply with withholdings for health insurance of dependents of any employees who are noncustodial parents.

Child support and alimony are generally administered at the state level rather than by the federal government, and enforcement largely is a state matter. The OCSS works with state, local, and tribal offices to secure financial support for children (45 CFR Subtitle B Chapter III). Under the Deadbeat Parents Punishment Act of 1998 (18 USC Sect 228) it is an offense for a noncustodial parent to willfully fail to pay child support.

Step 1 – Complying with requirements before receiving an income withholding order

There are a number of requirements for employers to be aware of before an income withholding order is received.

1.1 If the employer operates in more than one US state, register as a multistate employer with the Office of Child Support Services (OCSS)

This registration can be made via the US Department of Health and Human Services Child Support Portal (Child Support Portal) or through the use of the Multistate Employer Registration Form delivered by email or by US post.

1.2 Report all new hires and rehires

If a company pays wages to an employee, that company must report that employee as a new hire to the requisite state agency. This requirement applies to any individual who is an employee for the purposes of federal income tax withholding (42 USC Sect 653A).

This obligation does not apply to labor or employment referral agencies unless that agency pays the employee’s wages. Labor organizations and hiring halls need only report on their own employees. The employer must indicate whether an employee was hired on a full-time or part-time basis. An employee who leaves a company for 180 days or more and then returns must be reregistered when they resume employment.

1.2.1 Required time period

Employers have 20 calendar days to report all newly hired employees to the requisite state agency. New hires include any full-time, part-time, or temporary employees and any employees that have left employment and returned to work due to layoff, furlough, medical leave, leave of absence, or separation from work.

1.2.2 Required information

Each registration must include the following information:

• employer’s name;
• employer’s federal employer identification number (EIN);
• employer’s address;
• employee’s social security number;
• employee’s full legal name;
• employee’s home address; and
• date of hire.

Step 2 – Complying with requirements after receiving an income withholding order

Each state is required to send a noncustodial parent’s employer a standard Income Withholding for Support (IWO) form that includes the amount to be withheld from the non-custodial parent’s income, including the maximum amount that can be withheld (45 CFR 303.100(e)(1)).

An IWO can come from one of two sources:

• It can be a notice sent by an attorney, tribal legal representative, private collection agency, or individual.
• A court or child support agency called an SDU (state disbursement unit, the state agency dealing with IWOs) can send the order.

OCSS has provided the Income Withholding for Support Flowchart that can serve as a valuable resource for businesses to ensure that they remain in compliance with an IWO.

2.1 Do not discriminate against the employee based on an income withholding order

The employer may not discriminate against the noncustodial parent because of the withholding by discharging a noncustodial parent from employment, refusing to employ them, or taking disciplinary action against them. Fines for this wrongful discrimination are set by state law (45 CFR 303.100(e)(1)(v)).

2.2 Provide a copy of the income withholding order to the employee

Upon receipt of an IWO form, the employer may have an obligation to provide a copy of the form to the employee. If the employee who is subject to income withholding works in a state other than the state that issued the income withholding order, the employer must provide that employee with a copy of the IWO form.

2.3 Withhold the correct amount

Once an income withholding order has been received the employer must ensure that it fully complies with the withholding requirements.

2.3.1 Required time

Following receipt of the IWO form from the state, the employer must begin the withholding either:

• on the next pay period; or
• within 14 days.

2.3.2 Correct amount (top limit)

There are limits to how much can be withheld from the income of a noncustodial parent based on the federal Consumer Credit Protection Act. The top limit for a noncustodial parent with a second family (spouse or dependent child) is 50% of the parent’s net disposable income, and 60% of net disposable income for a parent without a second family. Those numbers may be increased up to an additional 5% if the noncustodial parent’s payments are in arrears (29 CFR 870.11(b)(1)).

If an employer fails to withhold income in accordance with the income withholding order, the employer is liable under state law for the amount the employer should have deducted from the noncustodial parent’s income (45 CFR 303.100(e)(1)(vi)).

For information on calculating net disposable income, see the OCSS website.

2.3.3 Priority of multiple orders

A noncustodial parent may be responsible for support payments to multiple children from multiple relationships. Federal law requires that each obligation is honored, but rules on how priority is set vary from state to state. It is best practice for employers to familiarize themselves with the regulations in all states in which they do business.

2.3.4 Wages and lump sum payments

Earnings subject to an IWO may include wages or lump sum payments such as commissions, productivity bonuses, sign-on bonuses, overtime pay, severance packages, insurance settlements, or profit sharing.

2.4 Deduct administrative fee to the extent permitted

The employer is authorized to deduct a fee for the administrative costs incurred for each withholding, but only if the fee is allowed by the state. The amount of such fees, if any, are also determined at the state level (45 CFR 303.100(e)(1)(iii)). The fee is deducted from the employee's wages, not from the child support payment.

2.5 Submit amount

The employer must disburse the amount due to the requisite state agency (see list) within seven days of the date that the noncustodial parent is paid, and must do so in the required manner (eg, electronic funds transfer) (45 CFR 303.100(e)(1)(ix)).

2.6 Continue with payments until release order is received

Until the state issues a notice of release, in the form of either a termination or an amendment of the income withholding order, the employer is obligated to continue the withholding and submission of payments (45 CFR 303.100(e)(1)(iv)).

2.7 Give notice of upcoming lump sums

States vary on the manner in which they collect lump sums. Lump sums include bonuses, commissions, severance payments, vacation pay, retroactive pay increases, and other payments that are considered income. Most do so through the use of an income withholding order issued to the noncustodial parent’s employer. Employers may complete the Lump Sum Reporting application available on the US Child Support Portal to report employees eligible for lump sum payments and to notify child support agencies about any such upcoming lump sum payments. Applications made to the portal will be forwarded to the relevant state, if that state participates. States accept lump sum notifications directly.

2.8 Give notice when employment is terminated

When the parent who is obligated to pay support is no longer an employee, the employer must give prompt notification to the requisite state agency of the parent’s change in employment. Precise timelines vary between states.

2.8.1 Required information

Along with its notification to the state, the employer must provide the noncustodial parent’s last known address and the name and address of the noncustodial parent’s new employer, if known (45 CFR 303.100(e)(1)(x)).

Step 3 – Complying with a National Medical Support Notice

The National Medical Support Notice (NMSN) is a form used by agencies in all states to notify an employer of its obligation to withhold health insurance premiums for a child from a noncustodial parent’s wages when a court or state agency orders that parent to provide health insurance. It includes two parts – Part A for the employer response and Part B for the plan administrator (45 CFR 303.32(c)(1)).

An NMSN and an IWO are both essential tools used to enforce child support obligations. They do, however, serve different purposes. While both forms require an employer to withhold money from an employee’s wages, the IWO is for cash support payments, while the NMSN is for health insurance premiums. It is crucial to understand the distinction in order to ensure compliance. An IWO is a court or administrative order that directs an employer to deduct a specific amount of money from an employee’s wages to satisfy a child or spousal support obligation, while the NMSN is a standardized form that requires employers to enroll a noncustodial parent's child(ren) in their employer-sponsored health insurance plan.

3.1 Determine dependent eligibility

The employer must return a response to the issuing agency within 20 days if the noncustodial parent’s dependents cannot be enrolled for the following acceptable reasons:

• the employer does not provide health insurance;
• the employee is not eligible for insurance;
• the employee is no longer employed by employer;
• deductions exceed maximum withholding limits; and
• the employer has a mandatory waiting period prior to plan enrollment.

3.2 If the employee is eligible, forward the NMSN to the health plan administrator

If the dependents are eligible for health insurance under the employer’s plan, the employer has 20 days to forward the NMSN to the health plan administrator. The plan administrator has an additional 20 days (40 days from issuance of the NMSN) to complete Part B and return it and any other requisite documents to the requesting agency.

3.3 Deduct premiums

An employer that provides health insurance to employees may receive a NMSN instructing it to withhold enough funds to cover health plan premiums. The employer must forward this notice to the Health Plan Administrator within 20 business days (as mentioned above) to enroll the employee’s children. Enrollment must occur upon receipt, regardless of any seasonal enrollment restrictions, and the notice will include all necessary enrollment information. An employer must withhold any financial obligation of the noncustodial parent that is necessary for the coverage of the dependents and send that amount directly to the plan (45 CFR 303.32(c)(4)).

Once activated, income withholding for health coverage applies to current and future employment periods. A child cannot be removed from coverage while the employee is eligible, unless a court orders it, or the child obtains comparable coverage with an effective date that matches the disenrollment date.

The NMSN takes precedence over all other state legal processes against the noncustodial parent's earnings, except for orders of income withholding for current child support. The Consumer Credit Protection Act limits apply to the total withheld for child support and medical coverage, with child support taking priority.

Employees can contest withholding for health care premiums due to a factual error by objecting within 20 days of receiving the notice. They must notify the agency that issued the notice. However, employers must initiate premium withholding and forward the notice to the Health Plan Administrator as instructed while the objection is reviewed. DSER or the issuing state child support agency will notify the employer once the issue is resolved.

3.4 Inform the requesting agency if the plan lapses

The employer must promptly notify the requesting agency if the plan lapses, or if the employee has left the company or no longer is eligible for insurance coverage (45 CFR 303.32(c)(6)).

Additional resources

US Child Support Portal
US Department of Health and Human Services – Office of Child Support Services (OCSS)

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