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Garnishment: The Untold Story

2015-07-07 08:00:00

Garnishment: The Untold Story

October 23, 2014 – 1 pm ET
CPE: 1 Credit
RCH: 1 Hour
CEU: 0.1 Unit 

The ADP Research Institute’s recent study of more than 13 million employee records breaks down garnishments by industry, region, age, and income and explores the three main reasons for garnishment, including child support. As more and more states are moving toward electronic income withholding orders (e-IWOs) for child support, employers will increasingly need to rely on electronic methods for receiving and responding to orders, as well as making payments.

Join ADP’s Ahu Yildirmaz and Corrinne Flores as they review the recent research findings, including the impact of wage garnishments on both employers and employees, and discuss options for simplifying the processing of e-IWOS for child support and other types of garnishments.

leader-yildirmaz 160Ahu Yildirmaz, Ph.D.

Sr. Director, ADP Research Institute

Dr. Ahu Yildirmaz leads the ADP Research Institute, a specialized group within ADP that provides insights to leaders in both the private and public sectors on current and emerging issues in human capital management, employment trends, and workforce strategy. The Institute leverages ADP’s deep expertise across the entire spectrum of human capital management, as well as insights gained from ADP’s approximately 600,000 clients and its 20M+ employee sample, to conduct research that illuminates the crucial trends shaping today’s working environments.

Dr. Yildirmaz earned a doctorate degree in Economics from the Graduate Center of the City University of New York and a bachelor’s degree in economics from Bosphorus University in Istanbul, Turkey.



Corrinne Flores

Manager, Government Relations, ADP, Inc.

Corrinne has been with ADP for over 18 years and currently manages the relationships and various applicable compliance requirements between ADP and agencies for child support, various types of garnishments, new hire reporting, and unemployment compensation benefits.


Garnishment: The Untold Story”

sponsored by ADP



18 OCTOBER 23, 2014



MODERATORS: Mr. Jim Medlock, CPP
Director of Education and Training

 Mr. Larry White, CPP
Director of Payroll TrainingS: Ms. Ahu Yildirmaz, Ph.D.

Vice President Market Insights
Head of ADP Research Institute

12 Ms. Corrine Flores
Agency Liaison Director for
13 Garnishments, ADP


LARRY WHITE: Once again, Jim will be

back with you shortly as soon as he regains his audio

connection. And he is — It looks like he’s very near

that at this point. So, if you’ll just be patient,

stand by, and we’ll get that connection back with Jim

here momentarily.

Thank you again for your patience and

for being at our webinar from the American Payroll

Association, sponsored by ADP.

JIM MEDLOCK: Thanks a lot, Larry. I am

back. Technology is wonderful when it works. I don’t

know what happened to my phone connection, but it just

disappeared all of a sudden.

So, let me get back into the beginning

of the introductions, and I was just about ready to

start as the telephone so rudely took it away from me.

So, our instructors today are Corrine

Flores and Ahu Yildirmaz.

Corrie is the Agency Director of

Garnishment for ADP. She manages the relationship

between ADP and the garnishment agencies, to gather

information and cultivate a positive relationship.

Corrie has been with ADP for over 19 years and has

spent a majority of her time within the Agency

Relations Department.
Dr. Ahu Yildirmaz is the head of ADP

Research Institute, where she directs economic and

human capital management research. The Institute

leverages ADP’s deep expertise across the entire

spectrum of human capital management, as well as

insights gained from ADP’s approximately 600,000

clients and its more than 35 million global employee

sample, to conduct research that illuminates the

crucial trends shaping today’s working environments.

Additionally, Dr. Yildirmaz is

responsible for managing ADP’s renowned ADP National

Employment Report®, a monthly measure of U.S.

employment derived from an anonymous subset of

approximately 350,000 U.S. business clients.

Let’s first welcome Ahu. So, please

welcome Dr. Yildirmaz. And, Ahu, if you would — and

get your phone there — if you would look to begin your


AHU YILDIRMAZ: Thank you, Jim. And

good afternoon, all. We have a full agenda this

afternoon. Today we will first introduce our study

about wage garnishments. We will define what — the

wage garnishment rate along with sector and demographic

dynamics. Then we will give you some background

information about the garnishment landscape and how it
can impact employers and employees.

We will also talk about the wage

withholding basics. Then we will go deeper and we will

provide you the types of wage garnishments. And then

we will conclude our presentation with regulatory and

compliance updates. So, let’s get going.

We undertook this study because there

were limited national statistics about wage

garnishments. We also knew these seizures appear to be

rising fast in certain states, and this could be due to

a variety of factors — a national divorce rate of

50 percent, an increased number of tax levies, and a

rising level of bankruptcies. However, to this point

there has not been substantial research to reflect the

garnishment trends.

So, our goal in this study is to supply

and to provide an accurate, detailed landscape by type

of garnishment and also identify if employees having

garnishments had specific characteristics which differ

from the labor force in general.

So, we wanted to do a comparative

analysis of those who are being garnished, those

employees who are being garnished and if there are any

specific characteristics which differentiate them from

the average labor force employee in general. So, this

may help employers better inside and react to the

challenges of debt recovery.

In this study the ADP researchers used

aggregated, anonymous payroll data from 2011 to 2013,

so we worked with three years of dataset. Though all

the detailed analyses were based on data from 2013, we

looked at the 2011 and 2012 data just to check that if

there were any anomalies from the trends perspective.

And the data we worked for 2013 was

comprised of approximately 13 million employees, ages

16 and older. So, the data we had was real-time

empirical data, a very large sample set, and it was

very (inaudible), from 2013, the whole entire year.

The garnishment categories we examined

included state and federal bankruptcy, court-ordered as

well as private child support, state and federal tax

levies, and a general garnishment category comprised of

all remaining miscellaneous judgments.

Our approach with the data was very

straightforward. We defined the rate of garnishment as

the percentage of employees having their wages

garnished compared to the entire labor force. In other

words, we just looked at how much percent of the

overall labor force or overall workforce employees are

being garnished.

And we evaluated employees with

garnishments along a variety of dimensions. So, we

were able to look at the age and gender demographic

profiles. We were able to look at the garnishments by

region, by state, to really understand if there were

any geographic profiles or differences.

We also looked at the garnishment rates

by industry, by firm size, and also from the employee

perspective by different income groups. So, our goal

again was to identify if there were any specific

characteristics of these employees for garnishment.

As I said, the goal was to provide

tax-based analysis of employees whose wages were being

garnished. I want to reemphasize again we worked with

an empirical, large dataset. This wasn’t a survey, so

this was all the data — all the garnishments rates

came from actual empirical payroll database.

Our study found that 7.2 percent of U.S.

workers have their wages garnished. This corresponds

approximately ten million individuals, and

approximately one million workers have multiple wage

garnishments. They have more than one garnishment in

their paychecks.

3.4 percent of — we go back — Yes,

thank you.
So, we also looked at the primary

reasons for garnishments, so we looked at the child

support, taxes, and other loans. 3.4 percent of U.S.

employees have child support garnishments. So, the

primary driver in the U.S. for the overall garnishment

rates is child support, 3.4 percent.

1.5 percent of individuals have

garnishments due to tax debts. So, we start with the

child support. It’s 3.4. That’s the top. And then

tax levy comes with 1.5 percent of overall individuals

in the labor force.

And then we also have the other bucket,

which we called lower loans, and that was the second

actually. That was 2.9 percent. And this is where we

have student loans, consumer loans, and other debts.

So, 2.9 percent of all the U.S. employees have

garnishments related to this bucket, and it includes

students loans, consumer loans, and other debts.

When the garnishment rates were

calculated for 2011 and 2012, we found that 2011 rates

were somewhat higher than 2012 and 2013. The overall

proportion of employees whose wages were garnished was,

again, 7.6 percent, and this was in 2011. So, let me

go back there, 2011. So, this was 7.6 percent.

And rates for all individual types of
garnishments were also higher. So, then 2011 was

7.6 percent, higher than 2012 and 2013, and this was

consistent also where we looked at the details for

every type of garnishment. That meant in most of 2012

and 2013 there was virtually no change in the

garnishment landscape. We see a 7.2 percent consistent

rate when we look at the 2012 and also 2013.

So, why is that? I mean this is

probably related to the continuing economic recovery.

As the economy gets better, we expect the garnishment

rate to go lower. Of course, it’s a very (inaudible)

rate. It’s not going to change and jump with big

numbers, but from a general trend perspective, as the

economy grows better, the debts are lower.

And this is also really — When we look

at 2012 and 2013, this is where really the recovery

started to change and we started really seeing the

numbers job — numbers coming much more healthier than

2011 and before. So, this is very consistent with the

other data that we see in the economy.

Let me move to the next slide. Okay.

So as I said, because we are working with a large

payroll database with the empirical data, we were also

able to cut the data from different angles. So, let’s

look at the garnishment landscape by industry.

1 When firms were considered in

2 manufacturing, 48 percent of the firms had at least one

3 or more employees with garnishments. So, from an

4 industry perspective, manufacturing firms had the

5 highest rate.

6 On the other hand, approximately one in

7 five companies had garnishments in the sectors of

8 professional and business services, education and

9 health services, and financial activities. So,

10 probably you know where I’m going. So, this disparity,

11 suggests a possible relationship between garnishments

12 and blue and white color job categories. And you will

13 see this also consistent rate in the other data cuts

14 that we’re going to present later. So, this was when

15 the firms were considered.

16 When the employees were considered, more

17 than 10 percent of the employees had garnishments in

18 manufacturing and in the transportation and utilities

19 sectors. So, let me clarify again.

20 Okay. We will take the garnishment by

21 industry, but we look at it from a firm perspective,

22 firms by which industry, but we also look at it from

23 the number-of-employees perspective by industry.

24 So, 48 percent is when we looked at the

25 firms in terms of how many — which industry had the
1 highest proportional to garnishments in the — in the

2 labor force. So, when firms were considered, in

3 manufacturing, 48 percent of the firms had at least one

4 or more employees with garnishments. So, this is by

5 looking at the number of companies in the economy.

6 Then if you look at the number of

7 employees in the workforce, more than 10 percent of the

8 employees had garnishments in manufacturing. And in

9 the transportation and utilities sector, they also had

10 similar percentages. Again, this is more — again

11 related to the blue collar versus white collar.

12 Then this is my favorite one because we

13 also looked at the garnishment rates by demographic.

14 So, how does age play a role? Well, younger and older

15 employees had longer rates of garnishments compared to

16 the mid-range age group. Not surprising, right? So, a

17 multiple increase beginning at age 25 and then multiple

18 decrease in the late 50s.

19 So, in the 35 to 44 age group, mid-age

20 group, the highest garnishment rate was seen, observed,

21 and it was approximately 11 percent — 10.5 percent,

22 which is typically the age of peak debt load, child

23 rearing, and divorce. This is, again, relevant with

24 what we see with the other economic data, with the

25 other dynamics, and the labor force.
1 Then we looked at the garnishments, this

2 time by income groups. Similar to age data,

3 garnishments rates were highest at mid-range wage

4 levels and the lowest among higher and lower earners.

5 Again, this is very much consistent with the age data

6 because we said that younger and older employees had

7 lower rates of garnishments.

8 We know that the younger employees make

9 less, they are in lower income groups, so their

10 garnishment rate is not high. But the mid-range wage

11 levels, especially between 25,000 and 40,000 group,

12 that’s where we observed the highest rates in most

13 garnishment categories.

14 Child support on the other hand showed a

15 little bit different behavior. Child support rates

16 were highest for those earning 40,000 to 60,000.

17 Then next we looked at it by gender.

18 For nearly all categories, garnishment rates were

19 similar for men and women and identical for bankruptcy,

20 so there wasn’t any discrepancy. There wasn’t any

21 difference.

22 However, there was a substantial

23 difference in child support garnishment rates between

24 genders. Females had a 0.6 percent rate, a low rate,

25 while males had a 5.8 percent rate. So, we’re talking
1 about almost 0.0 percent for females compared to almost

2 6.0 percentage rate for child support for males.

3 Again, this finding may reflect that more women than

4 men have physical custody of children and men are more

5 likely to be required to pay child support.

6 Then last we looked at the garnishment

7 rates by region. The Midwest has the highest

8 percentage of total workforce garnishments. And, in

9 contrast, the Northeast had the lowest overall

10 garnishment rates. So, this is interesting, right?

11 The garnishment rates differ by regions.

12 This has also to do something with how

13 the industry concentrations vary among these regions.

14 Because, remember, we talked about the manufacturing

15 having the highest garnishment rates and we also know

16 that the Midwest has more manufacturing companies than

17 the Northeast. So, this is definitely very much

18 related to the industry composition within each region.

19 Then the western section of the country

20 was consistently lower with one exception, and that was

21 the tax levy category. Other than that, it was very

22 much lower than the other regions. And one of the

23 reasons for this the disparity, again, is the industry

24 concentration. So, not only Midwest, the South also

25 has more manufacturing companies than the Northeast and
1 West, and we also know that the rate of garnishment in

2 the manufacturing sector is higher than the service

3 sector.

4 So, when we look at the overall

5 garnishment landscape, the results consistently show

6 that certain groups, demographics, and certain

7 industries show different behavior compared to the rest

8 of the nation in terms of the garnishment rates. Jim.

9 JIM MEDLOCK: Excuse me. I had to —

10 I’ve been dealing with a lot of people that are having

11 difficulty hearing. We suspect that there is an issue

12 with the Internet. I’m listening on a second computer

13 in my office, and I’m not having a problem.

14 So, if you could, please, respond to our

15 first poll. We’d just like your opinion as to what is

16 not a primary reason for a garnishment. So, if you

17 could just give us an idea as to what you think might

18 be not a primary reason.

19 So, Ahu, it looks like you have quite a

20 bit of information, and do you think that our

21 participants are going to be able to pick out which one

22 wasn’t the primary reason?

23 AHU YILDIRMAZ: I’m hoping so. This is

24 an easy one, Jim.

25 JIM MEDLOCK: I think it might be.
1 Now, if the poll didn’t pop open for

2 you, take your cursor up to that green tab at the top

3 of your screen, and it will drop down the toolbar. On

4 the right-hand side you’ll see a down arrow, and under

5 that down arrow, when you click on it, will be the

6 polling option. And that will activate this poll.

7 And, hopefully, the polls we’ll have remaining during

8 today’s webinar.

9 So, it looks like we’ve got just a few

10 more seconds. If you haven’t yet clicked through,

11 please do so to share with us your opinion on what is

12 not a primary reason for a garnishment.

13 So, it looks like we’re just about

14 finished, and WebEx is running their calculators right

15 now so that they can give me the results. And I think,

16 Corrie and Ahu, we’ve got — almost everybody has

17 answered this one correctly. And I will be able to

18 share that with you in just a second. So, if you’ll

19 give me just a second to be able to share that with you

20 and we’ll be able to move there.

21 Okay. There are the results. So, what

22 do you see? Looks like 95 percent, so I think everyone

23 understands what those different rules were.

24 So, Corrie, I think it’s time for you to

25 begin your part of the presentation. But before we do,
1 I just want to make one more announcement.

2 If you could please send your chats and

3 your questions to all panelists if you’re having issues

4 with the audio, so that all of us that are working to

5 get you the information about the audio, how to connect

6 to the audio, we’ll all be able to help, to respond.

7 I’m having a lot come directly to me, and I can’t

8 respond to all of them, and I appreciate your patience.

9 So, Corrie, if you could move to the

10 next slide and continue the presentation, please.

11 CORRINE FLORES: Sure. Thank you, Jim.

12 And Ahu, great information, so thank you very much.

13 Now let’s take a look at the impact that

14 garnishments have on your employees. Employees often

15 find it humiliating because the courts have had to

16 intervene and employers have had to become involved in

17 their private struggles.

18 Employees in this position may feel

19 they’re now working for institutions to which they’re

20 indebted rather than for themselves or for their

21 future, and stress and anxiety are obviously a natural

22 outcome, but garnishments are not an anomaly. They’re

23 very common, especially when we’re looking at child

24 support. Many of us know someone or may even be

25 receiving child support ourselves.
1 Unfortunately, employers can realize the

2 anxiety that their employees feel in the form of

3 decreased worker productivity or overall lack of

4 motivation. However, companies can become proactive in

5 helping those employees dealing with the garnishment

6 and helping to decrease future garnishments.

7 One suggestion would be making a

8 financial wellness expert available to provide counsel

9 such as budget education and preventative financial

10 wellness training. Those things may help minimize the

11 negative effects of wage garnishments and help

12 employees manage their debts. Tax education can also

13 assist your employees in successfully lowering tax debt

14 in some cases.

15 Employers may also be exposed to

16 financial risks when employees’ wages are being

17 garnished. It’s not something that only phases or

18 interacts with the employee, but you, as the employer,

19 are a key player in this process.

20 Companies may avoid fines and penalties

21 if they become familiar with garnishments laws,

22 developing a reliable and timely procedure for

23 garnishment processing, and ensuring that they

24 implement policies that in no way discriminate against

25 an employee facing a wage garnishment.
1 Now let us take a look at garnishment

2 processing in today’s fast-paced environment.

3 Essentially, when a wage withholding or garnishment can

4 be used as a general term in order to require an

5 employer to withhold the wages of an employee to repay

6 a debt, it’s crucial that you, as the employer, know

7 the laws, rules, and regulations and how to apply those

8 laws and regulations to each of the garnishment types

9 that you receive.

10 Employers can be found 100 percent

11 liable if the garnishment is processed incorrectly, or

12 severe penalties can actually be assessed against the

13 employer. For example, in Illinois there is an actual

14 penalty that employers can be found liable for $100 per

15 day, per payment that they fail to withhold.

16 Banks may also receive withholding

17 orders for customers, so not just for their employees

18 but actually the customers that have money in their

19 accounts. And, again, the banks can be liable if they

20 fail to withhold properly.

21 In one example, a bank received a

22 garnishment totaling $517,000 for one of their

23 customer’s accounts. The bank failed to withhold the

24 garnishment, and, as a result of that failure,

25 penalties and interest were accrued and the creditor
1 actually sued the bank, and the bank was liable for

2 over $580,000. I know going in to my boss and saying

3 that I would have to pay a penalty of a garnishment for

4 $580,000 that we didn’t budget for would not go over

5 well.

6 Additionally, there are programs that

7 can cause delinquent child support obligors to have

8 their licenses or passports revoked, including driver’s

9 and professional licenses. Imagine getting ready to go

10 on a trip or a honeymoon. You go to get your passport,

11 or to renew it, and you’re denied because you have

12 delinquent child support obligations.

13 Someone who wants to potentially go on a

14 vacation or get their hunting license will actually

15 have to make that obligation or that delinquency whole

16 prior to receiving their license or passport. This has

17 been a great program that has helped get child support

18 collected.

19 Now let’s take a look at typical

20 in-house garnishment tasks. I’m not going to go into

21 every single one of these steps, but the majority of

22 these steps have to be looked at and worked through for

23 each and every garnishment you receive.

24 There’s the basic receipt. Some

25 employers indicate that they receive bins and bins of
1 mail on the various types of garnishment orders. Then

2 you have to determine how are you going to store those

3 orders. Do you have scanning capability?

4 Then there’s the interpretation. You

5 have to identify the type of garnishment, you have to

6 make sure that you’re complying with the instructions

7 on the order, and you have to make sure it gets entered

8 into your payroll system.

9 The notification process is not an easy

10 one, either. There are some situations where you need

11 to notify the sender, notify the employee. Some of

12 your responses need to be notarized, so that takes it

13 out of the normal systemic process that some employers

14 have actually implemented to get that response

15 notarized. It’s not just a matter of sending the

16 payment.

17 There’s also the calculation phase.

18 Your system and you, as the employer, need to be aware

19 of what the priority by lien type is and make sure that

20 you’re calculating the correct disposable earnings, and

21 that can be at a state level or at a federal level.

22 So, once you get to the disbursement,

23 the payment can actually be made, but it’s not as easy

24 as just sending out the payment. You have to send it

25 out in the agreed-upon method in which you negotiated
1 with the agency, you need to maintain the historical

2 data, and make sure the payments are sent out.

3 Then there’s the resources you need as

4 the employer to handle any incoming inquiries. The

5 payments have gone out the door, but you have

6 potentially custodial parents, agencies calling you

7 asking the disposition of the case, finding out what

8 the payment history is. Those are all additional

9 resources that the employer must be able to

10 accommodate.

11 So, besides going through all the steps,

12 it’s critical that you stay up to date with any of the

13 changes. The changes can be at a legislative level.

14 It can be an agency rule change. And you must meet —

15 And it’s critical that you stay aware at the federal

16 and state level in order to withhold correctly. To

17 stay on top of all those changes is very challenging.

18 Some of the resources that may help you,

19 whether you’re doing garnishments in-house or

20 outsourcing, can be publications and websites. Many of

21 the agencies now have websites that are very

22 user-friendly and provide a wealth of information that

23 can assist you with processing garnishments to them.

24 Additionally, there’s legislative tracking tools and

25 associations, like the American Payroll Association,
1 that help you stay abreast of all the incoming changes.

2 Jim, do you want to take us through the

3 next question?

4 JIM MEDLOCK: Yes. Sorry, Corrie. I

5 was working on another issue at the time.

6 So, the next question is what happens to

7 an individual who is delinquent on their child support?

8 And we’ve got four different options. They have to

9 submit a written apology to the courts, their driver’s

10 licenses or passports can be revoked, they’ll have to

11 change their names and social security numbers, or are

12 you not sure? We’ve got lots of answers coming in.

13 So, corrie, which one do you think most

14 of our participants will answer?

15 CORRINE FLORES: Well, I’m hoping they

16 answer B, the driver’s licenses or passports can be

17 revoked.

18 JIM MEDLOCK: And so far we’ve got a

19 vast majority of them that are answering that. So,

20 we’ve got just a few more seconds. If you haven’t yet

21 clicked through, this is the time to do so to allow us

22 to register your attendance — register your answer to

23 this poll. We’ve got just a few more seconds. I know

24 there’s a few that are working on it right now. And as

25 soon as they finish and WebEx gives me the ability,
1 I’ll be able to shale the results with everyone. So,

2 just a second and that will happen.

3 Corrie, I think you’ll be pleasantly

4 surprised as to how many we have answering this

5 question correctly. Just a second and I should be able

6 to share with you the results. And there they are.

7 CORRINE FLORES: Good to hear.

8 JIM MEDLOCK: Okay. So, Corrie, if

9 you’d like to continue with your presentation, please.

10 CORRINE FLORES: Sure. All right.

11 These are the most common garnishment types that

12 employers are receiving today, and we’re going to go

13 over a few of them in the next few slides.

14 In no particular order, we’re going to

15 start with creditor garnishment. Creditor garnishments

16 are actually the most complex for employers to process

17 because there’s no central governing body or agency

18 that employers can work with in order to negotiate best

19 practices.

20 Creditor garnishments really are at a

21 state level, and they can vary by state, by court

22 requirements. You can have five judges located in one

23 courthouse and four out of the five may be doing

24 something a little different because the laws are so

25 vague that they’re open to interpretation.
1 Response and answer requirements also

2 vary at a state level for creditor garnishments. And

3 when I talk about creditor garnishments, when a person

4 is delinquent on retained credit that was extended to

5 them, the creditor may issue the garnishment order.

6 And we all know there’s billions of

7 credit card solicitations out there, and I’m sure many

8 of you receive them in the mail like I do. If you’re

9 on college campuses, there’s booths set up to apply for

10 credit cards. But it’s not just the credit cards that

11 fall into this creditor garnishment category. It could

12 be payday loans. Any type of credit that is extended

13 could potentially fall into this category.

14 Bankruptcies are the other type of

15 garnishments employers may be receiving, and about

16 96 percent of all bankruptcies are for personal filings

17 rather than business filings.

18 So, there’s two types of personal

19 bankruptcies. There’s Chapter 7 and Chapter 13, with

20 Chapter 7 bankruptcy being a debt forgiveness or

21 liquidation while Chapter 13 is for the individual to

22 make repayment plans on repaying a portion of that

23 debt. That’s known as the wage earner’s plan. And

24 you, as the employer, may be receiving garnishments

25 because of the Chapter 13 and sending the wages on to
1 the trustee.

2 Another type of garnishment is called

3 the wage assignment because the employee actually

4 voluntarily goes in to you, as the employer, and says I

5 want you to withhold a specific amount from my wages

6 and send it on to a specific party.

7 Voluntary wage assignments are governed

8 by state laws, so they do not fall under a maximum

9 limit under the federal Consumer Credit Protection Act.

10 However, a voluntary wage assignment is at the

11 employer’s discretion on whether they want to honor

12 those or not. So, you, as the employer, are not

13 obligated to honor a voluntary wage assignment.

14 Now let’s briefly discuss student loans.

15 The U.S. Department of Education may contact collection

16 agencies to enforce on the defaulted student loans, and

17 the Debt Collection Improvement Act authorizes those

18 agencies to garnish up to 15 percent of disposable

19 earnings to repay the open debt owed to the U.S.

20 Department of Education. So, employers are a critical

21 part in helping replenish the student loan funds that

22 are available out there to our potential students.

23 From a tax levy perspective, the tax

24 levy can be issued at a federal, state, or local level.

25 A common tax levy that is received is from the IRS.
1 And the IRS data report for fiscal year 2013 reports

2 that there were 1.8 [sic] federal levies issued on

3 third parties. That’s down considerably from 2.9

4 million in 2012. And while the decrease is great

5 because it’s less IRS tax levies that you, as the

6 employer, are receiving, you’re still receiving the

7 local and the state tax levies, as well.

8 From an IRS perspective, there’s

9 certain requirements that you must comply with in order

10 to process their levies. There’s the notification to

11 the employee. You should not stop withholding until

12 you actually receive a release from the IRS.

13 And something unique with the IRS is

14 they may actually enter into a voluntary wage repayment

15 plan with the employee. And so, that voluntary

16 repayment plan you will be notified on a Payroll

17 Deduction Agreement, otherwise known as a Form 2159, by

18 the IRS.

19 You, as the employer, do not have to

20 implement that voluntary wage repayment plan, but what

21 we often see happen is, if the employee enters into

22 this voluntary agreement to set aside and pay

23 individually a specific amount to the IRS and if they

24 ever fall delinquent in that voluntary repayment plan,

25 you, as the employer, will receive an IRS tax levy that
1 you, by law, have to implement, so it no longer becomes

2 voluntary.

3 From a child support perspective,

4 employers by far receive — the highest volume of the

5 court orders are for child support purposes. And you

6 may not also just be receiving a child support order.

7 You may be receiving a medical support. You may

8 receive a lump sum order. And these things vary by

9 state laws in how you actually process those lump sum,

10 one-time orders.

11 But child support, you, as the employer,

12 make a difference. Payments can be disbursed to the

13 children or to the families via EFT, check or direct

14 deposit. And 72 percent of reported in fiscal year

15 2012, of all moneys collected across the United States

16 is done by the employer community. So, wage

17 withholding for child support is an effective way to

18 make sure that money is being collected and sent on to

19 the needy families.

20 The employer who is processing new hire

21 reports also contributes to that amount of collections

22 because 52 million employees were reported to new hire

23 agencies in fiscal year ’12.

24 The preliminary reports for fiscal year

25 ’13 reports that 55 million newly-hired employees were
1 reported to new hire agencies. What that means is

2 those newly-hired employees that may be delinquent in

3 child support obligations are able to be located by the

4 child support agencies and collections can be begin

5 much faster.

6 Here’s a chart that quickly depicts how

7 much the employers are withholding. And as I

8 mentioned, it’s about $22.9 billion or 72 percent. But

9 the preliminary reports for fiscal year ’13 actually —

10 the number that employers are paying and collecting on

11 is really about $23.6 billion. So, it’s huge. And the

12 federal Office of Child Support really recognizes the

13 impact that employers are making to this entire

14 process.

15 Now let’s take a little look at some

16 regulatory and compliance updates. We’re going to move

17 away from the foundation of wage withholding and look

18 at what the future holds. So, we’re going to talk a

19 little bit about bankruptcy reform, some garnishment

20 trends that we’re experiencing, some child support

21 trends, what we’re seeing in that environment as far as

22 the revised federal Income Withholding Order, the

23 Electronic Income Withholding Order, otherwise known as

24 the e-IWO, nothing to do with the Old McDonald’s Farm

25 song, but that’s what it’s referred to, lump sum and
1 debt increase service, which really is now called lump

2 sum reporting, and electronic payments.

3 So, effective October 17, 2005, laws

4 passed to reform the bankruptcy process. And while

5 this happened some years back, it made major impact to

6 the employer community. These were the major changes

7 that occurred with the reforms. But from an employer

8 perspective, the fact that more employees had to enter

9 into a Chapter 13 filing meant there were more

10 repayment plans that employers were receiving as well

11 as the extended payment plan, from a three-year payment

12 plan to a five-year payment. So, employers had to

13 manage that for a longer time frame.

14 We actually saw a decrease in the number

15 of bankruptcy filings, from 1.5 million in 2010 to

16 1.2 million. However, experts believe that after 2013,

17 we may begin to see a slight increase because those

18 that sought bankruptcy protection prior to the reform

19 in 2005 became eligible to seek out bankruptcy

20 protection again after 2013.

21 Exciting news in the garnishment

22 perspective. So, the American Payroll Association’s

23 Government Relations Task Force Subcommittee is

24 pursuing the need for standardization within the

25 garnishment area, and so we’re working very closely
1 with the Uniform Law Commission to create a standard

2 uniform act that can be implemented into state

3 legislation in order to bring standardization for

4 processing garnishment.

5 The ULC comes together, and it’s

6 essentially a two-year project. Sometimes it does take

7 a little longer than that, but basically we come

8 together and we work with these law commissioners who

9 have been appointed by their state legislatures to

10 review and propose a model act.

11 Some of the most common model acts that

12 have come out of the ULC is the Uniform Commercial

13 Code, Uniform Interstate Family Support Act to name a

14 few, and together we’re working to come up with a model

15 act for garnishment that these ULC commissioners will

16 be able to take back and ask that their states

17 implement.

18 So, it’s not going to happen overnight

19 with the two-year commitment. We met in March of 2014.

20 We’re meeting again in December, but within the coming

21 years we’re really hoping for some change in a positive

22 way that will benefit the employer community.

23 So, garnishment payments. Sending

24 payments electronically, or the electronic world,

25 really is an efficient way that agencies who are
1 looking to do more with less resources are exploring.

2 Tax levy agencies are accustomed to

3 receiving payments electronically, so why not send the

4 tax levies that employers are reporting or sending to

5 them electronically. Bankruptcy — Send bankruptcy

6 payments electronically to the trustees, as well as to

7 students loan agencies.

8 A huge change for us was Puerto Rico’s

9 courts previously required that all payments to their

10 courts be a cashier’s check or money order, which was

11 very cumbersome for employers. And in late 2013, we

12 worked with them to get that law changed.

13 Additionally, Minnesota tax levies

14 actually need the responses to be filed electronically,

15 and we were able to successfully implement that process

16 with them. So, we log on to the Minnesota Department

17 of Revenue website and return those garnishments

18 electronically.

19 Finally, Michigan, the largest — one of

20 the largest counties in Michigan, indicated that they

21 needed their responses for Wayne County Court to be

22 sent electronically. So, if you’re an employer that’s

23 paying a civil case to Wayne County, you do need to log

24 on to their system and send the response electrically,

25 as well.
1 Do you have any questions that we need

2 to take at this point?

3 JIM MEDLOCK: Corrie, this group is so

4 inquisitive, they’ve got all kinds of questions. We

5 started getting questions before you even started —

6 even started presenting.

7 So, the first question I have comes from

8 Jessica. And Jessica’s question is: “I understand

9 there’s supposed to a standard form for child support

10 garnishments. There are a few states that send us the

11 orders on their own version of the standard form. What

12 are we supposed to do? Are we supposed to honor them

13 or reject them?”

14 CORRINE FLORES: Great question,

15 Jessica. So, actually, as we move through the slides,

16 our very next slide talks a little bit about that. And

17 so, Jessica, there is a federal Income Withholding

18 Order that has to be reviewed every three years, and

19 this form was actually finalized in 2014 without any

20 major changes, but the change that you are referring to

21 or your question is referring to happened in 2011.

22 So, in 2011, if the order does not

23 direct the payments to be sent to the State

24 Disbursement Unit or it’s not on the approved IWO form,

25 you, as the employer, can return that the sender.
1 So, let me repeat that. Those two key

2 initiatives are if the order does not instruct you,

3 as the employer, to send the payment to the State

4 Disbursement Unit or if it is not on the approved IWO

5 form, you, as the employer, can return it to the sender

6 and ask that they reissue it properly. There is a

7 checkbox on the second page. If the payments need to

8 be returned. If the order needs to be returned, you

9 can do that.

10 JIM MEDLOCK: Should we take one more

11 question, Corrie?


13 JIM MEDLOCK: The next question I have

14 comes from Sal, and he says, “We’re in a state without

15 state income tax. We have an employee who used to live

16 in a state with state income tax. The employee is

17 working for us now and he’s received a state

18 garnishment for taxes. Should we honor it?” And he

19 says, “Thanks so much for helping.”

20 CORRINE FLORES: That is a two-part

21 question. The first would be the obligation is owed

22 because the employee was subject to those taxes when he

23 lived in that state.

24 Now, I would suggest you get your legal

25 area to provide some additional insight to that
1 because, if you have a presence there in the additional

2 state, then, obviously, you are subject to the

3 authority of that state and that court. So, I would

4 definitely reach out to the tax levy agency that issued

5 that order and also seek legal advice.

6 JIM MEDLOCK: So, before I let you

7 continue your presentation, Corrie, I just want to

8 remind everyone, if you’ve got a question, please use

9 the Q&A box and send it to all panelists. That way

10 I’ll be able to share the question with Corrie in our

11 final Q&A.

12 Corrie, if you’d like to go ahead and

13 continue your presentation, please.

14 CORRINE FLORES: Sure and thank you.

15 So, while Jessica’s question took us through what you

16 can do if it’s not on the approved federal income

17 withholding form, I’m going to move on to one of my

18 favorite topics, which is e-IWO.

19 So, essentially, e-IWO occurs when the

20 states actually send the paper IWO electronically.

21 Employers can receive that, they respond to it, and

22 it’s all based on your federal identification number.

23 Through e-IWO you can process

24 terminations, lump sum payments, and there’s three

25 various options that you can implement.
1 System to system, which does take some

2 development resources, ADP implemented the system to

3 system, and we did have to work through it as a

4 project, or the fillable PDF and spreadsheet options,

5 which is very quick and simple. It’s, essentially,

6 creating a folder where the information can be placed,

7 and then the information in your electronic orders

8 actually are placed into that folder.

9 There is no cost to employers, so it’s

10 free to employers to set up this system, and it’s a

11 great option that OCSE has created, in collaboration

12 with employers, to make the collection process that

13 much easier.

14 So, here is the high-level e-IWO

15 process. So, remember we went through all those steps

16 back a few slides. This is from 1 to 11, front to

17 back, how you process the e-IWO. It’s an great

18 opportunity for employers that really want to

19 streamline.

20 Here are the states set up participating

21 in e-IWO today. And further in the presentation,

22 you’re going to hear some changes that’s going to

23 eventually make this entire map green.

24 So, if you want to do e-IWO, as I

mentioned, it does not cost anything. There’s a

profile to set up on the portal, and you conduct a

test. Once you’ve done your test, you’re up and

running to go.

The benefits? Ultimately, the money

gets to the families sooner. And, really, I think

that’s what we’re all working towards. It helps with

time and savings and the administrative costs, and it

helps increase the accuracy and reliability of data

because data comes to you the same way, the same time

every time.

Some of the lessons learned — Sorry.

Some of the lessons learned from when we implemented

our project, as I mentioned, we had to get in our

project roadmap. Not all states are participating, so

you do have to continue to maintain two processes


We’re also looking at whatever

enhancements are made at every three years to the IWO

paper order, there may potentially be enhancements

needed periodically. So, as of September 15th, e-IWO,

the portal processed its three-millionth order. It’s

well — It’s a well-oiled process. It works well. And

if you are interested in this process, OCSE is always

willing to help.


JIM MEDLOCK: There is our — There’s

our third poll, and in this one we would like you to

tell us how many steps are there in the electronic

income withholding process.

Corrie, I know there’s a lot of steps in

it, but do you think our participants are going to be

able to get the exact one that’s correct?

CORRINE FLORES: I’m hoping. I would

love for it to be three or seven, but it’s not quite

there, yet.

JIM MEDLOCK: Well, I was hoping maybe

we could get it one at some time. Do you think we can

just do it and have it done just through everybody’s

mind? We’d get a mind meld begin the child support

withholding order and it goes directly into our systems

that way.

CORRINE FLORES: Well, I know with the

paper it’s a lot of steps, so electronic is always the

way to go.

JIM MEDLOCK: Okay. Well, we’ve got

just a few more seconds. If you haven’t yet clicked

through on the poll, please do so at this time. And as

soon as WebEx gives me the ability, I’ll be able to

share with you the results.

I think we’re not quite as high in

percentage that we had answer this one correctly,

Corrie, as we did in the other one. So, let’s take a

look, and you see when I’m able to share the results

with you. In just a second that should happen. There

we go, and there are our results. So, what does it

look like to you, Corrie?

CORRINE FLORES: The majority did go

with number C, which is correct. There’s eleven steps.

Again, I would love for us to get to seven or three,

but, realistically, it’s eleven steps down from

probably 35 to 40 steps that you have to go on th

epaper order.

JIM MEDLOCK: That’s for sure. e-IWO is

definitely the way to go. So, Corrie, would you like

to finish your presentation, please.

CORRINE FLORES: Sure. So, major change

recently happened with e-IWO. So, House Bill 4980,

Preventing Sex Trafficking and Strengthening Families

Act, actually was signed by the President on the

29th of September.

And, essentially, what this bill does is

it says all states have to implement an e-IWO option

for employers to utilize by 10/1/2015. So, by

October 1, 2015, all states will have to have this

option available to employers.

What we think may happen is, once the

states comply and have the option available, they may

begin to look at mandating specific employers based on

specific criteria, such as volume of orders, to

implement an e-IWO portion or process.

If you’re interested in e-IWO, I’ve

listed the link here that you can go on to OCSE’s

portal. There’s handouts. There’s actually

(inaudible) and a wealth of information to assist you.

Now let’s talk about lump-sum reporting

or one-time reporting. Some states require employers

to report that they will be making a lump-sum or

one-time payroll, such as a bonus payroll, before

actually sending it to their employees. This allows

child support agencies to determine if there’s

delinquent child support obligations that they’re going

to withhold on.

Other states recommend that you actually

notify them, but they may not have specific

requirements. Seventeen states mandate the reporting

today. Ohio has the most stringent reporting options.

And there are states that are currently

looking at introducing new laws or have already passed

new laws in regards to lump sums. So, Delaware

recently passed Senate Bill 273, New Hampshire passed

Senate Bill 406 which actually indicates that you can

collect child support for medical injury claims. And

lastly, Vermont actually passed recent legislation that

says you can withhold on specific types of payments for

child support needs.

So, OCSE, again looking for a way to

make this process easier for employers, created a

central process that employers can report their list of

employees so they don’t have to go out to every single


They filtered that list for these

employees to one central portal. That portal then

takes it and compares it to past-due obligations that

are owed, filters the information on to the states, and

the states then send the employers the one-time wage


There’s a link at the bottom of this

slide that actually provides more information, and

there’s a great PowerPoint that’s on OCSE’s website

that walks you through the lump-sum reporting process.

So, here are the states that are

currently reporting or using the lump-sum reporting

portal. And just briefly to mention, so the Personal

Responsibility and Work Opportunity Act mandated that

states would have an electronic funds transfer option

available for their State Disbursement Unit. All SDUs

do have EFT options available with the exception of

South Carolina that does not have an SDU at the current


And for EFT and the benefits if you’re

sending your payments through electronic funds

transfer, it helps prevent fraud and theft. You don’t

have to do the actual hard copy mailing. It’s cheaper.

And, ultimately, again, it gets the money to the

families faster.

There are six states that actually

mandated and passed legislation that requires specific

employers to send EFT payments, and I’ve listed them

here on this map, as well as EFT contacts can be found

at this point.

Quick questions?

JIM MEDLOCK: Oh, we still have a lot of

questions, Corrie. The first question I have comes

from John. And John wants to know, “Are we required to

notify employees that an order was received? Wouldn’t

the creditor have already contacted the employee?”

CORRINE FLORES: Great question, John.

So, it depends on the type. But what I would say is it

is a very good practice to notify your employee. I

know for tax levies there is a requirement, as well as

child support there is a requirement to notify your

employee. And for creditor garnishments, in some

states there are very specific requirements.

It’s in your best practice to do so as

if you can automate it and just have it go out

consistently, then to your point, yes. The employee

knows they’re going to be garnished. They probably had

multiple notifications. But just to do your due

diligence, it is in your best interest to notify them,

and in some cases it is a mandatory requirement.

JIM MEDLOCK: The next question I have,

Corrie, comes from Ian, and he says, “We were talking

about Chapter 7 and Chapter 13 garnishments. Which one

were you really talking about as it relates to


CORRINE FLORES: To employees, the ones

that employers would experience the most is the

Chapter 13 because there is a repayment plan with the

Chapter 13.

Chapter 7 is the liquidation of funds,

so employers would not be involved in that, but the

Chapter 13 is actually for repayment. And with the

bankruptcy reform, that repayment plan actually went

from a three-year payment plan to two years longer, to

a five-year repayment plan.

JIM MEDLOCK: And I’ve got a question

from Dawn, and Dawn would like to know, “On a federal

tax levy, if we’ve reached deducting the balance on the

levy, do we stop making the deductions or do we have to

receive that Form 668-D?”

CORRINE FLORES: You need to receive the

Form 668-D. There could be additional interest or

balances due. So, even the instructions on the tax

levy itself, as well as the employer guide that the IRS

provides to employers, indicates to continue to

withhold until you the receive a release.

Now, your employee will be very

motivated to get that release if the IRS has not

already sent it, so many times the IRS agents will

actually fax it in to the employer.

JIM MEDLOCK: And I think we’ve got time

for one more question, Corrie, and this question comes

from Levy. And he’d like to know, “For an employee who

is to receive a lump-sum bonus and has an active child

support in place, what can be done to speed up the

response time from the child support agency before the

bonus is to be processed?”

CORRINE FLORES: Levy, it is a very long

and cumbersome at times process. What I would advise

to do is working through that lump-sum reporting
portal. It makes it very quick, and you can actually

specify how you want to be notified. So, rather than

waiting to receive the order in the mail, some agencies

will actually send you back a spreadsheet as well as

provide the hard copies in the mail, but at least that

way you get prior notification directly from the


JIM MEDLOCK: And we want to know what

you, the participant, thinks about today’s webinar.

You’ll soon receive an e-mal from the APA. And in it

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Your comments are essential to the

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series. In addition, after completing your evaluation

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Now, don’t forget, if you’re a CPA,

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receive your CPE credit in about six weeks.

So, Corrie, do you have some closing

remarks for us today?

CORRINE FLORES: Yes, thanks.

In summary, Ahu took us through the

great experience of the study that was provided for

wage garnishments. We’ve journeyed through the

garnishment landscape of where we started, we reviewed

where we’re going and, ultimately, reviewed the changes

on the horizon.

So, regardless of the garnishment type

that you, as the employer, are receiving, employers

continue to be critical and a key player in getting

these unpaid debts withheld and repaid.

You’re providing a benefit to your

employee, but we understand and the agencies understand

it’s not always an easy process, and standardization is

always best. By partnering with agencies, we can

implement improved processes and increase efficiencies

that assist all and make it a win-win situation.

Jim, do you have any further closing


JIM MEDLOCK: Thanks, Corrie. And I’d

like to thank Corrie and Ahu for sharing such important

information on how we can have a better understanding

of the garnishment process to ensure our organization’s

compliance. And we want to offer special thanks to

ADP, a leading provider of payroll solutions, for

making today’s webinar possible.

Now, to further understand compliance

issues that we face as payroll professionals, that were

discussed in today’s webinar, the essential tool, APA’s

“The Payroll Source” is the resource for your

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