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[Webinar] Navigating Wage Garnishments

2014-05-22 10:00:00

As an employer, garnishments of your employees’ wages can present significant challenges. Are you overwhelmed by the complexity of different filings and notices, new state requirements for EFT and e-IWOs, and evolving requirements for compliance with applicable garnishment laws and regulations? In this session, ADP will cover five of the top things every employer should know, including key industry trends and challenges of which you should be aware. This informative webinar will also highlight some of the biggest mistakes that employers often make – to help you avoid them!

This webinar is eligible for 1 CPE or 1 RCH credit.


MauricioSalinas_lowresMauricio Salinas
Business Consultant, Added Value Services
ADP, Inc.

Mauricio “Morris” Salinas is a Business Consultant for ADP’s Added Value Services division, specifically supporting initiatives around the ADP SmartComplianceSM Wage Garnishments module. Morris has been with ADP for nine years, starting in the Wage Garnishments Solution Center before holding various account management and implementation roles. His long history in wage garnishments and working with clients to help formulate solutions to their challenges has been instrumental in building his expertise on the topic.

Wage Garnishments: Balance Risk, Cost and Efficiencies

Learn more about how you can help lighten the burden of answering emotional calls from custodial parents, employees, attorneys, or payees through ADP’s confidential call center.


Moderator: Kira Lakin
May 22, 2014
10:00 AM PT

Kira Lakin: Hello, everyone . Welcome to today’s webinar, Navigating Wage Garnishment. My name is Kira Lee Lakin, Director of Marketing at ADP. Our presentation today will be presented by Morris Salinas, business consultant for the added value services division here at ADP. Morris specializes in the wage garnishments module from our ADP smart compliance platform and has been working in wage garnishment for many years.
First, let’s review a few housekeeping items. This is one of a number of complimentary webinars that ADP offers to tax, finance, and HR professionals during the year. Today’s webinar will last for 60 minutes, ending at 2 p.m. Eastern Time. I’d also like to mention that today’s webinar is being recorded and you’re currently in a listen only mode. If you’d like to download a PDF of the slides, follow the link provided in the chat window by our event producer. If you have any problems downloading the presentation, please just send a message into the chat window for assistance. Now, during today’s session we will be asking for your feedback via a few polling questions, which will appear on the right-hand side of your screen once the poll has been opened. Please click on the radio button that corresponds to your answer to place your vote. There will also be a post event survey that we’d very much appreciate your input on.
We’ll be answering questions during the Q&A section at the end of today’s presentation. Please feel free to submit your questions at any time during today’s webinar by simply typing your question into the Q&A panel located in the lower right-hand corner of your screen, and then click on the send button to send your question into our queue. We’ll do our best to get to all questions before the end of the program. Finally, once again, if during today’s webinar you experience any issues, please just enter a comment into the Q&A panel and our producer will respond.
First, just a little bit about ADP. We currently have over 600,000 clients worldwide. We pay out one out of six in the U.S. with about 33 million and we’ve actually been processing wage garnishments since 1997. Let’s go ahead and give that polling question functionality a try. If you’d like to receive either RCH or CPE credits for attending today, please let us know what you need by selecting the appropriate button. If you do not make a selection, you won’t receive a certificate for credit. So please make sure you make the right choice. If you’re eligible for credit, meaning you’ve attended for the entire duration of the webinar, answered all polling questions and completed the post-event survey, you’ll receive a certificate via email within the next 30 days. If you change your mind at some point, if you select RCH and you actually need CPE or vice versa, just let us know. Send us an e-mail. We’ll work with you to figure it out.
So with that, I’m going to go ahead and turn it over to Morris. Morris, can you maybe tell us a little bit about yourself and take us into today’s presentation?
Morris Salinas: Absolutely. Thank you, Kira, and I appreciate that and thank you everyone for joining, and taking the time to learn a little bit about garnishment. To give you some background, as Kira mentioned, I’ve been now with ADP several years, going on about nine years now. All that time has been spent in garnishments and so for me, it’s been a fortunate opportunity to learn from the solutions center, learn from client service. learn from our implementation and on boarding, and that’s really helped me to be able to support the AVS organization and be able to leverage best practices and bring value to when we’re looking at information for wage garnishments.
So again, close to 10 years. Most people say unfortunate for me, the fact that I’ve been in garnishments. I’m okay with that. I’ll take that. So again, thank you for taking the time. Real quickly, what we want to cover on today’s session, looking at the agenda, we’ll be looking at the basics of wage withholding. We’ll review some of the types of garnishments. We’ll speak about the fact that there’s garnishments on the rise and so metrics point that volumes are going up. We’ll look at some regulatory and compliance updates and then we’ll also look at the future as well.
So wage withholding basics. At its simplest form, really a wage withholding order is issued or can be issued when an outstanding debt is not paid by an individual. So when this order is actually served on the employer, the employer may be found liable for 100% of the actual deduction amount if it’s processed incorrectly. New programs for child support have also caused or can caused delinquent child support obligors to have their licenses and passports revoked. Those can include driver, professional, and even in some cases, hunting licenses.
So for the types of garnishments, there’s several types. Let’s take a look at what we see as the wage withholding types, the first one being the most complex of all, commonly referred to as a creditor garnishment or writ of garnishment and these are complex because they vary by state and they can vary by court and county, and they can also have different types of requirements, not only with withholding, but also to in regards to actual notification requirement.
So these notification requirements can request additional information to be provided and failure to comply with this type of notification request may result in a penalty, or even worse, it may make you as the employer liable for the full amount of the order. Bankruptcies are another type of actual wage withholding orders that you’ll receive. 98% of all bankruptcies are for personal filings and not business. And it’s not just as easy as sending payments today, either. Employers now may be required to send answers to additional third parties. So for example, a court or an attorney, the court, an employee. Makes it very difficult to know what state needs what, and these responses also can be required to be sent multiple times. And they may even be required to be sent with an actual payment as well.
Another rather different type of garnishment is referred to as wage garnishment and it’s because it’s a voluntary deduction that the employee agrees to. So these are governed by state laws. The employers choose to actually nor these or not and one thing to keep in mind is since these are voluntary deductions, these do not fall under the actual requirements of the Federal Consumer Credit Protection Act.
Taking a look at a few more other types of garnishments, as if there weren’t already that many to begin with, we have student loans and those can be both at a federal and state level. The U.S. Department of Education may contract collection agencies to enforce and collect defaulted federal student loans. The Federal Debt Collection Improvement Act authorizes federal agencies or collection agencies under contract to garnish up to 15% of disposable earnings. The state higher education act authorizes state guarantee agencies to garnish up to 10% of disposable earnings. So even with student loans, you can see that there is some complexity. It’s not as easy as most people may think.
Tax levies as well can be at a federal, state, and local level. What we’ve seen here in the last 10 years, levies that have been issued by the IRS have tripled. So IRS data books have confirmed that these orders are going up and there is a rise in the amount of orders that are actually being issued, and publications that have come out recently have showed that over about three million orders have been issued just last year.
And the last one, looking at the most common, is child support orders. That’s typically the largest volume that’s received by an employer. It used to be that these orders were just advising you to withhold wages. Now, there are medical support orders that an employee is required to actually comply with and return. Even the amounts that can be withheld can vary by state and this makes it difficult for employers to comply and interpret.
Kira Lakin: Thanks, Morris. Well, that actually brings us to our first polling question. So again you should see that window pop up on the right hand side of your screen. Who is liable if a garnishment is processed incorrectly? Your choices are A, the employer, B, the employee, and C, there really isn’t a liability. So we’ll give everyone just about a minute to kind of think about that and select their answer. Morris, any thoughts on kind of what we might see as far as what people’s responses are?
Morris Salinas: I think most people that are in the function of processing garnishments would say that it does fall on them. We’d like to see it, that it falls on the employee to take care of that, but at the end of the day it is on the employer.
Kira Lakin: Interesting. So while we’re waiting for people to kind of think about this question, what do you really see as far as the number of garnishments overall? And I don’t mean to give away any teasers here, but do you feel like that number is going up overall?
Morris Salinas: Absolutely. Absolutely. We’re seeing about 10%, if not more, year to year growth. And the most recent spike that we’ve seen is also too for student loans. I think about several kids coming out of college. They’ve defaulted on loans and so that’s the one that’s improving, or should I say it’s actually increasing the most.
Kira Lakin: Marvin, maybe we’ll go ahead and close this slide out. I’m sure we’ve given folks enough time and Morris, I’ll turn it back over to you.
Morris Salinas: Great. So as you just mentioned and great segue is that U.S. metrics do point that there in fact is an increase in garnishments that are being issued. It’s estimated that in the U.S. about one out of ten employees has a wage garnishment. And employees being garnished are more likely to have more than one order. So they potentially could have child support, write of garnishments, student loan. Just adds to the complexity of processing these garnishment. The fact that federal, state, and local laws are all changing and increasing just simply continues to add on the burden that the employer has to take on. So this puts now the employer at risk for any type of fine or penalty due to noncompliance. And it’s the shift that we’ve been seeing here for some time.
In fact, states require multiple notifications that could be for creditor garnishment, for child support, for tax levies and over 90% of the states require some type of final response or answer for a creditor garnishment. So you have to acknowledge the fact the order has been received. That may be a notification there. You also acknowledge the reason why there’s no money. So there’s different instances where a requirement for an answer is needed. And what you have or what you would want to see in a typical compliance standpoint is roughly about a third of your disbursement volume should be for letters. So if you’re dispersing a thousand payments, you should be generating close to 330 or so letters and that ruling will be more of an average that we’re seeing from terminations, from the fact that there’s certain states that require an actual check to be attached to an answer.
So again, these are all complexities that are on the employer to manage. We’re also seeing that states are mandating electronic funds transfer. There’s about 16 states and territories now that require a payment to be sent electronically and more than 30 states adopt electronic income withholding order for child support.
So we have looked at the foundation of what a wage withholding is. We reviewed the different types of wage withholding and now, what I want to do is review some of the changes that have occurred that have had a major impact to the process. These changes are bankruptcy reform, some of the changes in child support, and also to some of the changes for garnishments.
So effective October of 2005, laws were passed to reform bankruptcy processes. These changes included strict rules for filing chapter 7, which resulted in an increased number of chapter 13 filings, for strict audit procedures an increased fees, and it extended the actual payment from three-year payment plan to five years. So bankruptcies have declined from 1.5 million in 2010 to 1.2 million in 2012. Now, the decrease in filings could be due to more people getting back to work or less credit being available. However, what we see is that those that have filed bankruptcy before the actual reform act went in place have now begun to refile again starting in 2013.
So what this means for employers and the impact that it has for you all is it has increased in actual wage payment or wage repayment plans and it’s having to manage that process for a longer time frame as well. When we talk about child support, it’s really the employers make the difference here. 72% of all monies that were collected were because of an income withholding order being sent to an employer. So this is where we see new hire reporting making a big impact. It’s estimated that 55 million employees were reported last year in fiscal year 2013.
Kira Lakin: I’m going to jump in here again with our second polling question. So where does the majority of child support collected come from? And this one should be an easy one because you just covered it, but the options are, A, federal tax offset, B, state tax offset, C, income withholding, and D, other. So we’ll give everyone about another minute or so to get their answers in. And Morris, I know you talked a little bit about the different states when it came to electronic income withholding orders and then mandating EFPs. So how much do garnishment laws and regulations really vary by state? Are they all fairly consistent or do you see a pretty wide variability there?
Morris Salinas: They vary from state to state, county to county, court to court. So as much as we’d like to say that it’s somewhat similar in process, one state will process and ask for certain specific dollar amount or percentage and the state next to it will ask for a completely different amount and calculation. So again, it just adds to the complexity of not only trying to manage the payment standpoint but also to the interpretation and the analysis of that document.
Kira Lakin: Well, that could quickly become overwhelming for folks who have employees in multiple states or maybe employees who have garnishments from multiple states.
Morris Salinas: Absolutely.
Kira Lakin: All right. Well, we can go ahead and close this polling question out and of course the correct answer there would be C, income withholding. And then I’ll let you pick it back up.
Morris Salinas: Great. So recent changes have been actually made to the income withholding or the form itself for child support. Now, this is an attempt to be able to assist the employer when receiving orders from various centers for child support. One of the enhancements that have been made to the income withholding order is the standard remittance identifier has been added that gets to be used when sending payments. So this remittance ID, in order to be able to make it a little bit easier to identify was actually moved to page one and it’s right above the case and the order ID. That income withholding order as well, some of the changes that have been enacted is it’s now required to direct payments to go to a state disbursement unit. If you get an order that doesn’t direct those payments to go to a state disbursement unit, you should actually reject that order and return it back to the sender immediately. If those payments are not directed to the state, there’s an actual check box that you can mark. That’s on page two of that document and that will now indicate the reason why it’s being returned and additional steps on getting that order back to the sender.
So that you’re aware that there was a form that actually was updated and changed, and that form number has been — I want to provide that form number so that you can see and as you’re processing, you’re aware of the form that you’re using. It’s OMB 0970-0154. So again, OMB 0970-0514. And that’s just, again, as you can reference it and refer to that, and maybe you’ll start noticing as well, hey, I did actually see that it changed a little bit. It’s just again something that’s nice to know that there are at least some type of assistance to the employer to make part of this a little bit easier.
When we talk about actually withholding order, another form that we can see as well and has been trending to be able to receive the order is electronic income withholding. So this is an electronic transmittal of that child support and it’s from participating states, tribes, and territories through a central portal. The Office of Child Support Enforcement is hosting this actual central site and it allows employers to be able to collect it electronically more efficient and as we’ll look at EIWO, you’ll see some of the bigger benefits, including increased security.
Currently, it’s important to know that currently states, although they’re encouraged, it’s not mandated. There’s 31 states right now in production, but I would suspect that in the very near future, similar to most employers being asked to do more with less, states are going to be as well and it’s a matter of time before that really does become a mandate. Now, we’re looking here at the EIWO process and as you see, there’s a couple different things that still need to be set up in order for you to take advantage of that. It’s an internal payroll system development that’s required to be able to accept and process these electronic income withholding orders. There’s an agreement or a profile that needs to be sent to the Office of Child Support Enforcement and the key indicator or the key identifier is federal employment identification number. So these are currently a manual process that’s occurring now, but once you provide that it’s usually about 30 days to be able to add or remove any type of EINs from that process.
Once that’s been done, you’ll begin receiving files via portal from participating states and there’s a two part acknowledgment. So not only do they acknowledge a file itself, but they also acknowledge at an employee record. And so this, again, is something that has to be kept in mind when developing this internally. As any type of order, there’s still notification that should be sent out to the employee letting them know that this a particular order that’s been received.
So the next slide here shows currently the states that we have. As I mentioned, there’s 31 states, Kentucky being the one that at this point in time is in development. And we’ve seen an increase of about an additional eight states that actually went on within the last 10 months. So there is a big push to get this up and running for several states. They know that it’s efficient, it’s easier, and at the end of the day it’s also something that will help them save money from sending out paperwork and having other types of documents needing to be mailed out.
So as I mentioned the benefits, with EIWO you’ll experience increased security of confidential data, faster turnaround time of these orders being processed and set up. It’s an increased accuracy. There’s no longer a person completing that. It’s now all electronic. I think one of the biggest benefits that most employers like is the fact that it reduces the calls — somebody inquiring, a custodial parent or a non-custodial parent on the status of their order. And the payments are actually disbursed faster.
So as we talk about payments being disbursed, important to keep in mind, as I mentioned earlier there are 16 states and territories that require an electronic funds transfer to occur. Now, states will give you the option in some cases to be able to send a check. Those that are not mandated can still send a check, however, the biggest benefit there that most states see and the reason why they’ve embraced the FTE is it’s just the most efficient way to receive payment. The process allows for added security because you’re not sending confidential data such as a Social Security number on a check via the mail, and it reduces unidentified payments. So it’s standard required dates fields that are needed to be able to interface, which don’t exist in a check. This means that payments get attached to an actual case faster and it’s a positive experience for everybody involved.
The next tier slide gives you the state status of where we’re at, and again, this is just a matter of time before more states start trending towards actually making the requirement or mandate. So other agencies are also looking to improve the process with electronic payments. The payments that we see that are most notably on the rise, Wisconsin Department of Revenue and California Franchise Tax Board. Those are two tax levy agencies that have recently passed legislation to be able to make those payments now a requirement to be sent electronically. Trustees and student loan agencies are on the horizon as well. So there is the possibility to be able to send payments for student payments and also to even for IRS payments electronically.
So I think from an up and coming and what’s on the horizon, I think that’s exciting news because it just is going to eliminate checks and eliminate some of the cost. The other side to that, though, is there is also development and internal IT costs that need to be considered in order to be up, taking advantage of that particular technology. And as far as for garnishing payments, one of the recent changes that went into effect late in 2013, Puerto Rico changed their court rules that allows them to actually accept payments at the court level that are not cashier or not money orders. So if there’s any employers out there that have a population in Puerto Rico, I’m sure this is something that is either good news or you have already — were made aware of that and again is just taken as an improvement and a positive response to what garnishment payments are trending to.
Medical support orders. So we’re seeing an increase in the amount of medical support orders that are issued. It’s important to note that these orders require new answers or interrogatories to be, or excuse me, not interrogatories, but answers or responses to actually receiving the order, taking action on it, and returning that back to the agency. These can also result in civil penalties for noncompliance. So very similar to an income withholding order, there’s still some type of work that’s required for the actual client to take and it’s important that you’re on top of that to avoid any penalties, and more importantly, a negative experience for your employee.
All these functions, processing garnishments, sending out payments, they all have a cost. They all affect the bottom line as far as for the business. One of the ways that we’ve been seeing, and as a result of these additional work that is actually being put on the employers, employers are now starting to really consider the ability to collect the administrative fee or that employer fee. And this is just an assistance to offset some of that processing cost for handling garnishments. Those can vary by state and lien type. So again, that’s also something that needs to be — continue to research and look to see what the exact amount is for creditor garnishments, for student loans, and in some cases they may not be assessed. So you definitely want to do your research and your homework on that.
Kira Lakin: We’ve come up on our third polling question. So for systems used to accept and process EI laws, what information is the key identifier? Choices are A, the employee’s Social Security number, B, the employer’s SEIN, or C, the employer’s name and address. This obviously is important because you want everything to be tracked and recorded accurately. So we’ll give everyone about a minute here to think about what their response should be and then get that submitted.
So Morris, as we’re letting people send a little bit of time on this polling question, do you have any tips for folks as far as when it would make sense for a business to start looking at outsourcing their garnishments process? You’ve kind of taken us through some of the regulatory changes here and kind of what’s involved from the employer standpoint. When do you tell a business, you guys should really start looking at outsourcing this?
Morris Salinas: I truly tell them they should start looking at it now. The fact that they’re doing this and they’re taking their folks that oftentimes have multiple responsibilities, so they’re processing payroll, they’re processing garnishment on type of any other types of tasks, really puts an additional burden. So the best time to start looking at it is really now.
Kira Lakin: Well, that certainly makes sense. It could quickly become quite an overwhelming task. So we can go ahead and close this polling question now, and the correct answer here is B, the employer’s SEIN. So you do want to make sure that that’s always accurate when you are responding to any electronic income withholding orders that you as an employer receive. Morris?
Morris Salinas: Thank you. And just a quick recap again, some of the changes. So we’ve seen changes in the federal income withholding form. That again is a push to try to standardize the information, the process for child support orders. We’ve seen continued focus on medical support. So spoke about orders that are now required to be returned to the agency with answers. And then also too, new legislations around lump sum processing, around payment, and e-termination reporting. So these are all items that again are changes that are occurring. Some are good and some just mean additional work for the employer.
Not only is changes in garnishments occurring and in child support, but we also see some additional changes on the horizon that many of you have already been impacted by, healthcare reform. We know that’s something that now is a compliance issue. New hire reporting, that’s also a big push and this again ties into child support, being able to identify that the employee is active in the agency, knowing where they can submit an order to. And verification of employment. So there’s an increased volume there and the focus is really on standardizing that process.
So clients, employers, ultimately they want to do the right thing. They want to be able to have the ability to set up these orders and balance that risk of remaining compliant and balance that with the cost of processing garnishments. That’s from the very beginning when an order is received to accurate disbursement. When we talk about costs, most clients will give us that they’re actually looking at the fact that it’s a labor and they have a person, and that’s pretty much it. Oftentimes what’s forgotten is the additional costs for processing garnishments, which include operational costs such as mailing or postage, having to place a stop payment on a check. There’s hitting (ph) costs. For example, states that require EFTs or maybe development, or wanting to take advantage of EIWO. These’ costs associated with that as well.
And I think the biggest thing that often is overlooked is the opportunity cost. So again, many folks have multiple hats as a payroll person that does garnishments, that does payroll. Begin able to really take a look at having those tasks eliminated from their plate and focus on core competencies to drive the business is something that needs to be considered. We see again that the risk has actually shifted to the employer. Employers are more accountable for processing the garnishment correctly. Oftentimes, we see that this results in fines and penalties for not setting up the order correctly, for sending the payment to the incorrect address. Liable for the full amount if it’s been interpreted incorrectly as well. And all this still has to occur whether your business is growing or in some cases, you may have lost people. Now, it’s a scramble to try to find that garnishment knowledge so that it doesn’t impact your business.
So with those things in mind, again why companies choose to partner with ADP, it’s really them wanting to balance that risk and compliance with cost and efficiency. And so it’s the ability to take advantage of technology such as EIWO that will standardize their processing of orders. It’s that risk that they’re able to now shift. It’s the agency fines and compliance that really scares them and often overlooked, it’s catastrophic backup. We know that we’ve had natural disasters recently. Some clients unfortunately have lost so much data paperwork that they just didn’t consider. And so that’s definitely one of the things that most folks often will tell us when they partner with ADP.
So again, it’s very critical that you stay up to date in this regulatory environment. So some of the things that you absolutely want to keep in mind, do you have the tools that allow you to be able to process your liens correctly? Are you able to participate with state and federal agencies for pilot programs? Do you have an agency relations group or compliance team that’s out there monitoring legislative changes, because we know that’s critical? Do you have that communication with agencies and courts that allows you to be able to be up to date with what’s changing? Do you have the ability, the time to lobby efforts to get these standardized? Again, part of that is looking at income withholding orders. That’s lobbying efforts that you really have to stand back and think, do I have that opportunity.
And then lastly is conferences such as APA that recently occurred last week, Modem (ph), Shurem (ph), do you have the budget, do you have the resources to be able to attend these conferences that will help you stay up to date?
Kira Lakin: Thanks so much, Morris. So we’re now at our Q&A portion of today’s presentation and I know you covered quite a bit of ground here. So for anyone who has questions, again, there is a Q&A window on the right-hand side of your screen. Please feel free to submit your questions into that window. Anyone that we don’t get to today, we will be following up with. So just bear with us here. But let me go ahead and get us started. So our first question here is, so what happens, Morris, if an employer receives a garnishment order and they don’t comply for whatever reason?
Morris Salinas: The risk. There’s potential liability. There’s now the liability to pay potentially 100% of that order for noncompliance.
Kira Lakin: Okay. So it sounds like there could potentially be quite a bit of a liability on the employer’s side in addition to the employee having a garnishment.
Morris Salinas: Absolutely. And if you look at some of these garnishment amounts, some are for several thousands, $20,000, $50,000, $40,000 worth of garnishments for debt. So again that’s a liability that the employer takes on when they choose not to be compliant with an order.
Kira Lakin: So that then brings up another question here, which is that could a business get in trouble then for asking a job candidate if they currently have any garnishments? So let’s say just understanding the kind of liability and responsibility that an employer is taking on when they hire an employee who potentially has a garnishment against them, can they ask them up front as part of that interview process if they currently have any garnishments?
Morris Salinas: And they cannot. There’s laws that were passed that prohibit the actually asking of garnishment deductions and information. So that makes it harder when you take on a new hire or you bring on an employee, you don’t know exactly what they’re bringing and what state they’re bringing it from. And so although you may not have volume in that state now, the moment that that employee comes on, it now becomes a liability.
Kira Lakin: Okay. Now, we have a question her and I’m reasonably sure I know the answer, but I’m going to ask it anyway because I think it’s probably a good thing to clarify. So we can’t ask a job candidate during the interview process if they currently have any garnishments. Once they are hired on, let’s say an employer finds out that they do or let’s say that they have multiple. Can the employer then terminate that employee just on the basis of those garnishment orders?
Morris Salinas: I think most employers want to say yes, but no, you cannot.
Kira Lakin: Which is an important point because again, there is quite a bit of burden that is falling onto these employers.
Morris Salinas: Absolutely.
Kira Lakin: Okay. So here’s another one. What is the employer’s obligation for wage assignments if they are not court ordered?
Morris Salinas: So again because these are voluntary deductions, it’s really up to the client to decide whether they want to honor those or not. Best practice is to not actually take on that liability, especially if it’s a voluntary deduction. You’re taking on that additional risk for a deduction that’s not demand or it’s not required.
Kira Lakin: And do all garnishments, the amounts of the garnishments that an employer has against them, do they have to go to some sort of estate unit or can they be going to a private party, or to a law firm, for example?
Morris Salinas: They go all over the board and that’s again, what adds the complexity. So child support payments should be going to a state disbursement unit. Creditor payments can go to a court. They can go to an attorney. They can go to an individual party. So it’s again really on the employer to identify where that needs to be sent and make sure that they set that up accurately.
Kira Lakin: Okay Now, if an employee has multiple garnishment orders against them, how does an employer go about prioritizing? Which ones come first? Which ones get deducted from the paycheck ahead of others and so forth?
Morris Salinas: And that’s a great question. Oftentimes, that’s the biggest obstacle and that really is now the ability to have to look at the order, determine what actually came in first, what order and what lien type takes priority. So all of the order will tell you most of that information. There’s still some additional research that needs to be done. That’s one of the biggest points why clients look to partner with ADP is because we assist with now having mechanisms in place that make that easier.
Kira Lakin: Okay. From a state to state perspective, I know we said that the rules and regulations do vary by state. What are the best resources for employers when they’re looking for those individual rules for garnishments?
Morris Salinas: The best resources are really publication of the articles from the APA. Resources can include different websites, for example the Office of Child Support Enforcement, and then also too, attending these conferences, such as the AP or Shuren to be able to know what’s going on and what’s happening. It’d be nice to be able to say that there’s one specific resource for clients to turn to, but they can’t. And so that really just now makes it all the more reason why looking to partner is a big point of why it’s less of a headache.
Kira Lakin: I know we talked a little bit about the fact that an employer can technically charge a fee for processing and handling those garnishment orders. Do you have any guidance on how much they can charge? Are there rules that exist around up to a certain amount or is it all kind of still fuzzy?
Morris Salinas: Most states are actually reporting that information on the order. There is some fuzziness around the fact that some states will say there’s no provision. So it’s up to the employer to determine if they want to handle that or not. But really look through the order. The order, it will indicate to you what the amount of that administrative fee is and then it’s a decision that the employer makes on what the amount that they want to withhold.
Kira Lakin: So if an employer hires an employee and it turns out they have an existing wage garnishment order, how does the employer get that information? Does the employee have to voluntarily give that information to the employer in order for it to be processed or is there a different mechanism that happens?
Morris Salinas: Typically, for child support orders that mechanism is new hire reporting. So that’s why it’s so important that that’s occurring the way it is. Because for child support orders, new hire reporting goes out. The states are aware of that and now they issue an order to the new employer. For creditor garnishments or some of these other type of garnishments, it’s really the agency. Once they stop receiving money then they’ll start researching and finding out if that employee still works there. If they don’t then they take the additional steps to find out where their new employer is and have an order issued out under that employer.
Kira Lakin: What does an employer need to do if they receive a garnishment order for an employee who no longer works there?
Morris Salinas: Very good point and that’s a great question. They still need to make sure that they’re responding to that odder, whether it be the court, whether it be the creditor attorney. That’s absolutely one of the biggest mistakes that most clients make is they figure that’s something that they don’t need to respond to. And so you definitely want to make sure that you are responding back to the agency, letting them know what that status of the employee is.
Kira Lakin: Okay. It looks like we’ve actually got a question here about what we here at ADP can do. So if an individual is complying with a support order by paying the other party directly, does ADP somehow process electronic payments that individual if banking information is provided?
Morris Salinas: If the order directs us to pay the individual, we absolutely can. We have the ability to set up direct deposit. But if the order is specific in nature in saying that the funds need to go to the state disbursement unit, we want to make sure that we’re compliant, we’re keeping the liability off of the employer and so we’re using that as a mechanism of payment.
Kira Lakin: Okay. So that’s a good clarifying point for folks as well then. What happens if an employer is in the middle of processing a wage garnishment for an employee? They’ve got the withholding happening on a weekly or a biweekly basis and then the employee quits their job? Does the employer’s responsibility then end?
Morris Salinas: It actually doesn’t. I mean again, the fact that this was an employee at one point and was active during the time that the order is received, it still is on the employer to report that the employee is no longer active. If they had wages earned during that timeframe, make sure that those wages are withheld as well.
Kira Lakin: Okay. So that’s also a very important point for folks to know that the employer can’t simply say, okay, my employee has quit their job. I no longer have to worry about this. We’ve got several questions here. I’m going to lump them all together into one, Morris. Maybe you can just talk a little bit about ADP’s wage garnishment service. We’re getting a lot of questions about various facets of it, so I think this may just be the most efficient way to kind of explain to folks what it is that we here at ADP can do.
Morris Salinas: It’s a great question and really it’s a comprehensive solution that allows us to be able to alleviate administrative tasks from receiving the order, doing the analysis and interpretation, generating notices to your employees, but not only the employees, also to the required parties, generating and disbursing payments in the appropriate manner that need to be, being able to have the ability to take answers with payments that are required in certain states and make sure that we’re complying there.
We also, too, take on the phone calls from employees, custodial parents, and other agencies that are calling in. So that often is something that most employers will say, I just don’t want to deal with. I don’t want to handle calls where an employee is calling and yelling. So when we’re looking at it, it really is an end to end process and a solution where we now can come in, alleviate that administrative task and, burden. More importantly, shift that compliance and ensure that there are no liabilities, no gap potential for deductions or penalties to be assessed.
Kira Lakin: And that’s very helpful. So for garnishments against wages, what constitutes wages? Are bonus payments included in that as well?
Morris Salinas: They can be and it really depends on the type. So for example, if a child support order that asks for a specific dollar amount, if there — that dollar amount is able to be satisfied with regular earnings then that’s where it ends. But some of these creditor garnishments that, I don’t want to say some, all creditor garnishments that actually have a percentage tied to it can be attached to any type of earnings paid out, whether that’s regular earnings, lump sum, or bonus payments, or even vacation payouts.
Kira Lakin: Okay. So if a garnishment order is for a specific amount to be withheld over a certain period of time, what should an employer do once that amount is satisfied?
Morris Salinas: They want to make sure that they follow-up with the agency, letting them know that now these deductions have been satisfied and making sure that on their end, they’ve truly taken into account any additional type of interest or penalties. I think often what most employers will do is they’ll see an order, they’ll put in a goal amount, but forget that there’s additional costs that are associated with processing that payment through a sheriff or through the court. So the courts take a portion of that payment, which means that truly that goal amount continues to grow. There’s additional fees, there’s additional costs that are associated. So really, the best thing there is to make sure that you’re following up with the agencies or even with the employee, getting them to send in a release once it’s been satisfied.
Kira Lakin: Now, what if they don’t do that? They continue to withhold and they realize after the fact that too much has been deducted from the paycheck? Who has the obligation of following up, figuring out how much money to get back and getting that back to the employee?
Morris Salinas: Well, really there, the obligation lies on the actual agency receiving the money. ADP recognizes that there’s several states that have that process, which is continue to send me money until I send you a release. And so once that release has been sent to us and there’s an overpayment that’s recognized, the agency that’s been receiving that money should really be now either returning that fund to the employee directly or returning that money so that it can be processed and recognized by the employer and then given to the employee.
Kira Lakin: Okay. Thank you. So we talked a little bit about what constitutes wages. Well, what constitutes an employee? Do temporary employees or contractors also who have garnishments, does the employer need to worry about that as well?
Morris Salinas: Yes, I mean any time that you’re taking on an associate, whether it’s a temporary that can constitute an actual employee termination. That I think is more of a decision of how the employer chooses to recognize those. If they don’t and have internal practices that say I don’t recognize this as an employee then obviously, you should follow those particular type of guidelines.
Kira Lakin: What about seasonal employees? Let’s say that a seasonal employee has many garnishments over many states. How do you deal with those types of situations let’s say while the employee is on their kind of regularly scheduled temporary layoff?
Morris Salinas: So again, this is also too another opportunity where I think most clients make a mistake in that they think because it’s seasonal, I don’t have to do anything with it and that’s absolutely false. You still need to continue to have the order set up. You still need to set up a response and send that information out. And then again, it ultimately comes back to internal client best practices. Most clients will stay a seasonal employee so once that particular employment is terminated or is already gone through its course then I’m going to terminate them in the system and have them reapply or reactivate when they come back for their next term.
Kira Lakin: How would you recommend that an employer handle, it looks like a U.S. debt to a foreign employee? So the employees is not on U.S. payroll.
Morris Salinas: That’s a little trick there. Oftentimes, when we’ve gotten those orders, if it’s not — the payment is not going to an agency or a company within the U.S. then there really shouldn’t be actually remitted. That’s the practice that ADP stands because, again, we don’t know if those are foreign type of companies that should be receiving funds or not.
Kira Lakin: Okay. Here’s a follow-up from a previous question. So if the employee is terminated and it is the employer’s responsibility to contact the agency and let them know, what’s the best way to do that? Should that be done in writing, by phone call? Is there a different process in place?
Morris Salinas: There are different processes, but the most important is by writing. The different process that I mentioned is there are some states that are moving to electronic notification. So that’s something to keep in mind, but best practice would be absolutely in writing because then there’s something that says here’s the information that I provided you. Phone call can easily turn into a he said, she said and there’s no backup. There’s no data there.
Kira Lakin: Okay. So that paper trail is definitely very important, the documentation.
Morris Salinas: Absolutely.
Kira Lakin: What happens if an employee passes away? What happens to the garnishment orders that they have?
Morris Salinas: So when that occurs, obviously that’s something that’s sensitive in nature. Oftentimes, what we’ll see is the estate or the people that are left behind will now actually work with the agency, let them know that that’s now a person that’s passed away. As a matter of fact, it happened when my wife’s grandfather passed away. We actually contacted the agencies, the banks and let them know the situation and what they did is they went ahead and turned around and provided a relief to these employers. I think that if you, and no pun intended here, but if you send out a notification and you recognize that that employee is termed, and you send out that notice, that should help you alleviate any type of additional compliance issues.
Kira Lakin: Okay. Other types of pay? So we talked about bonuses and lump sums. What about tips? What about employees who work on a per diem basis and have very inconsistent pay?
Morris Salinas: And the question is should those be included or should those be?
Kira Lakin: Should those be included? Do you have any advice for employers who are dealing with that? I mean it sounds like it could get very, very complicated.
Morris Salinas: It absolutely can and the best practice around wages and what we recognize is those are wages, for example, that’s TIP (ph) that are outside of the employer’s control. And so if it’s not in your control, you don’t have the ability to actually count that as disposable earning, then there’s really no way to be able to withhold on that amount of funds. If an employee is paid per diem and those are considered regular earnings then absolutely you want to make sure that you include those in your deduction.
Kira Lakin: Okay. If a garnishment is issued under one federal ID and the employee was moved to an internal alternate federal ID, how should the garnishment be handled? Should it be rejected and request a new one be issued? Or should it simply be honored as is?
Morris Salinas: It’s a great question and that is also, too, one of those where it’s important for the employer to know how or what they recognize when that’s the situation, right. So if you have an employer that moves from one company to another, do you truly recognize as that being a terminated associated in one company? if so, then you would terminate that employee out of one and you wait for a new order to be issued under the actual new company. Some employers will say no, I don’t want to do all — do all of that. I will recognize and transfer from one employer to another or within companies and in that case, if that’s the way that they do it internally, ADP also has the ability to assist there.
Kira Lakin: Great. Thanks. What is the minimum take home money of an employee with garnishments? I would imagine this could get very tricky.
Morris Salinas: And that varies state to state and it varies by lien type. So there’s some states that you don’t have to let the employee take home anything. For example, Kansas State tax levy. Those are 100% of the disposable income and that can take the full amount. So it can vary state by state and that just adds again to the complexity of what the employer needs to be burdened with when trying to figure these out.
Kira Lakin: Great. So I think we had a question earlier about tips and that seems to kind of have spurred some additional questions here. So if an employer is paying their employee credit card tips as part of their check, can those be garnished?
Morris Salinas: Credit card tips, again, fall within that same if it’s outside of the employer’s control then again, there’s no way for that to be able to be included in what is “earnings.”
Kira Lakin: That definitely makes sense. Now, we talked a lot about different states and here’s a good question that’s taking a step back. So when we say states, how is that proper jurisdiction determined? Are we talking about the state that the creditor is in? So where the garnishment order is coming from? Is it where the employee is residing? Is it where the employer is doing business? Which state are we talking about?
Morris Salinas: For the order itself, it’s where it’s originated from. So if an employer is in California and they have debt that was ordered against them to be repaid, that would be issued under California deduction amounts and requirements for California. So again that means that an employee, when you hire them and they move from wherever they’re moving from,. Can potentially be bringing debt or credit, or an order that you may not have had to have worried about before. Now, all of a sudden that’s a new burden that occurs and has to be addressed correctly.
Kira Lakin: Okay. Now, what happens if an employee goes out on leave either short-term or long-term?
Morris Salinas: The most important thing, you want to notify the agency. Again, any type of status change, whether that be term or long or short term disability, you want to let them know because you’re being proactive in that regard to let them know here’s the reason why you’re not getting any money.
Kira Lakin: It sounds like that communication is really key.
Morris Salinas: That exactly is the most important vital part or one of the vital parts, should I say.
Kira Lakin: And again, there — that method of communication, you would recommend that that be in some sort of a format that leaves a paper trail so that there’s documentation of that communicating having taken place?
Morris Salinas: Correct.
Kira Lakin: Okay. Now, when an employer receives a garnishment order for an employee, how quickly do they need to start acting on that?
Morris Salinas: I would say immediately. These are time sensitive documents and so the order will often give you instructions on what the amount of time is that you have to set up the order, as well as what is the amount of time that you have to respond to the order, provide some type of interrogatory or response. So truly, when you get that document, it requires immediate attention.
Kira Lakin: Okay. Now, we’re coming up on the end of our time here so we probably have just a few more questions that we can get through, but again for everyone who submitted questions, and I see quite a few here, if we don’t get to you today, we will be following up. So please, thank you for your patience as far as that goes and we’ll definitely make it a point to get your questions answered for you.
What happens if an employer receives that order, understanding that they should really be responding to it immediately, but they don’t? What if they fail to respond to the order on time?
Morris Salinas: I think and as we’ve covered here, the risk there is that penalty. They could be liable for the full amount of the order. They could be liable for additional penalties and also too, I mean just from a public standpoint, a negative experience to that employee that can result in bad publicity or now that company appearing in the news when they don’t want to be.
Kira Lakin: That definitely makes sense. Let’s see if we’ve maybe got time for one or two more. I’m kind of laughing at this one right here because I think some of these questions, your answers are very, very helpful but no doubt this whole area of wage garnishments can be very complex and resource consuming. And so the question is does ADP handle all questions from the employee if we use your wage garnishment service?
Morris Salinas: Yes, from being able to let the employee know where that order originated from, if the client is utilizing our comprehensive service then that gives us the ability to answer the questions about the order, about payments, and any type of letter that’s associated with it as well.
Kira Lakin: Now, are there some states, Morris, where wage garnishment is technically not allowed at that state level or does that not exist?
Morris Salinas: Really there is one state that is very particular, Pennsylvania, for example, an order can only be issued if it’s in regards to a lease or a rental agreement. But again that just adds to the complexity, as I’ve been mentioning, because each state has its own understanding of what a garnishment is for and how it can be assessed and set up. And so those specific questions about what can I do, how can ADP help I think should really be geared now towards being able to get more information on it, be proactive, maybe get a meeting set up to get a better understanding of what the solution can do and how it can help.
Kira Lakin: Great. Thanks. So this is going to be our last question and then we’ll wrap it up for the day. What happens when that employee with wage garnishment orders files bankruptcy?
Morris Salinas: And that’s an important piece as well. As I mentioned before in my presentation, bankruptcy is one of those that does require it to be set up. So there’s some additional work that needs to be done. Is the order that they’re withholding on currency included in that bankruptcy? Sometimes it may be, other times it may be not. So a call to the trustee is one of those things that would help to be able to clear up should I continue withholding or not.
Kira Lakin: That certainly makes sense. Well, thank you so much, Morris. So let me just share a little bit of extra information here with all of our attendees today. I you’d like to get in touch with us for a little bit more about what we can offer, if you just have questions that you need answers to, you can call us at this number. You can also find us on the website listed below. And then in addition to that, I’d like to encourage everyone to follow our blog, so We actually post very regularly here, tax compliance and financial updates, legislative updates on various topics, including wage garnishments. And I see your picture right up there. So we also list all the upcoming webinars that we will be offering in addition to recordings of past webinars. So if there was something that we talked about today that a few weeks from now kind of you have a little bit of a tickle in the back of your head but you can’t quite recall what was discussed, you will be able to go back to the site and find the recording. So you’ll be able to watch it again and refresh your memory.
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So with that, thank you so much for attending again and then have a great day.
Unidentified Participant: And as mentioned, we have posted the survey in the viewing area. Please take a moment to complete the survey before you log out of the webinar today. But with that, that concludes today’s session and have a great day.

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