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Wage Garnishment: A Story for Illinois

2015-02-24 01:00:00


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.


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.

Wage Garnishment: A Story for Illinois

Corrinne Flores

February 24, 2015

Marvin:                                 And now, without further delay, I’d like to turn today’s program over to your speaker, Corrinne Flores, Garnishment Agency Liaison Director with ADP. And with that, Corri, I’ll hand the floor over to you.

Corrinne Flores:                   Thank you, Marvin. Well, good afternoon, and I’m excited to be here to share with you for the next hour some basic information about wage withholding, the background, and the types of orders that you, as an employer, may be receiving.

As well, I would like to share the introduction to the wage garnishment study that ADP Research Institute recently completed. We’re going to look at the landscape within the wage withholding environment, as well as the impact on employers and employees, and we’re going to wrap up the hour with regulatory and compliance updates.

So, to ensure we’re all on the same page about what a wage withholding order is, a wage withholding occurs when a debt is owed and a wage withholding order can be issued requiring an employer to withhold the wages of the employee. It’s not that simple. You have to know, as the employer, which laws to apply, the rules, the regulations, and it’s a very complex process, at times, for employers. Employers also can be found 100% liable if the garnishment is processed incorrectly, and I’m going to share a case study later in the presentation.

And it’s not just employers that are receiving these wage withholding orders. Financial institutions can, as well. They can receive an order directing them to withhold the money that is in one of their customer’s accounts.

And lastly, your employee can have a denial or revocation of licenses, passports, if there is a delinquent child support obligation. So, imagine this — you’re an employer, you’re going along in your business, and you have drivers that drive for you as part of your regular business.

If one of your employees that is a driver has delinquent child support obligations, their driver’s license can be revoked, ultimately impacting you as the employer, because you no longer have the ability to use that employee as a driver.

And so, with this slide, this is the typical steps that an employer has to go through when they receive a wage withholding order. Regardless of the type of wage withholding order, the various steps, you have to receive it, you have to get it into your payroll system. You have to do the interpretation.

It’s very cumbersome, and I’m not going to go through each and every one of these steps, but whether you’re doing the processing or if you’ve outsourced your garnishment processing to an employer service provider, like ADP, all of these steps need to go– need to be processed at some point when you receive those orders.

It’s critical to stay up to date in this type of environment where regulatory changes are happening. There’s a variety of ways that you, as the employer, can stay up to date with all these changes. It can be participating in conferences. It can be participating with state and federal agencies in pilot programs, and it also requires you to be on the forefront of legislative monitoring. Because the laws are changing, you, as the employer, are responsible for ensuring that you know which laws to apply, based on the type of order that you’ve received, and that your wage withholding is correct from your employee’s wages.

So now, let’s take a quick look at some of the wages that you, as the employer, are most likely receiving in your day-to-day business.

Creditor garnishment — creditor garnishments are the most complex to process, because the laws vary by state, by court requirements. There’s various components that you, as the employer, are responsible for doing, such as responses, answer requirements, different things that you must do in order to be in compliance with state and federal laws.

Additionally, with bankruptcies, there are different types of filings that the employee may be seeking protection of, Chapter 7 or Chapter 13.

Additionally, there are wage assignments that you, as the employer, have the right to either agree to process for your employer– I’m sorry, for your employees, or not. It’s completely voluntary at the employer level. The wage assignment, because it is a voluntary deduction from the employee’s pay, is governed by state laws, and, again, it really is up to you whether you want to honor those types of wage assignments.

The three remaining garnishments that, as the employer, most commonly receive, are student loans and student loans are governed by the federal Debt Collection Improvement Act, and the state Higher Education Act, and essentially, it’s taking 15% of your employee’s wages to repay on delinquent student loans.

Tax levies can be at a federal, state, or local level, and there are notification requirements, as well, with a tax levy.

Now with the federal tax levies from the IRS, many times your employee enters into a voluntary payment plan with the IRS. That removes the requirements that you, as the employer, have to honor, because it now falls into the category of a voluntary wage agreement.

However, if you decide that you do not honor voluntary wage agreements for your employee, then it is your employee’s responsibility to make those payments to the IRS. If at any time your employee defaults on making those payments, that voluntary wage assignment can quickly become a federal tax levy, and the federal tax levy you are mandated to comply with. It is not a voluntary wage assignment.

And finally, the highest volume that you are probably receiving today are child support orders. Child support orders are not just a simple take a flat dollar amount. There’s other components involved with child support such as medical support, the lump sum process, so if you’re paying out bonus or one lump sum to your employee, you have to, in many states, withhold and report that, and we’re going to go into that a little bit later in the presentation.

And child support, it really does vary by state law, so, again, you, as the employer, are responsible for understanding the laws in which you are processing.

But employers do make the largest difference in withholding child support across the nation today, and the federal Office of Child Support really does recognize that. If you look at this chart, it shows that employers are withholding 72% of all monies across the nation for child support is being collected through a wage withholding order from the employer.

That’s $22.9 billion that you, as the employer, are assisting in getting to the families that need those funds. OCSE has done a very good job of trying to create processes and streamline the child support withholding process to make it as easy and seamless for the employer as they possibly can.

And the requirements that employers also have to adhere is the new-hire reporting, and with new-hire reporting, you’re also help– you’re helping the child support agencies to locate delinquent child support obligors, and 55 million employees were reported as new hires in fiscal year ’13. So, kudos to you, employers.

So, all that processing is a lot of administrative work and burden on the employer, and so, Illinois what they have been able to do for their employers that are processing child support, they allow you to withhold and charge your employee $5 per month for the processing of that child support payment. Now, while we understand that, by no means, covers the complete cost of processing that garnishment, it does help offset some of the cost that you, as the employer, are responsible for adhering to.

So, here’s a case in Illinois that I want to share with you. So, did you know that, as an Illinois employer you can incur high penalty and judgment if you fail to withhold child support?

So, there was a specific case that was in the news, and it’s based on the statute that Illinois has that says payers can be penalized an additional $100 per day for failing to withhold, and, additionally, a payer also becomes liable for the total amount that should have been withhold and paid over. Whether that money was withheld from your employee or not, you can still become liable.

So, in a specific case in Illinois, the non-custodial parent was a chiropractor. The insurance company that the non-custodial parent primarily worked for, received the child support withholding order. They failed to implement that order, because, according to the insurance company, it– the non-custodial parent was not an employee, regardless of the fact that they were, in fact, paying money to the non-custodial parent for work performed.

The custodial parent took that insurance company to court, and the appellate court found that the insurance company is considered a payer, as defined in the state’s withholding law, and is subject to the law. This was the first time that the courts actually ruled that someone other than an actual what we consider to be normal employer is a payer.

So, because the statute indicates payer, not employer, it specifically included that the insurance money that was being paid or those monies that were being paid by the insurance company should have been turned over as child support and that withholding order should have been implemented.

This case is continuing to go through the Supreme Court in Illinois, and so, there will be more to come, but I wanted you to be aware as an employer in the State of Illinois, you can not only be penalized the $100 per day, but also the amount that you did not withhold from your employee’s wages.

So, now let’s take a look at the garnishment study that ADP took. So, we actually started to look at what the numbers were for wage withholdings, and there was no information that we could gather readily that had all the information we were looking for.

So, the study was intended to supply an accurate and detailed landscape by type of garnishment, and identify the employees that had specific characteristics from the work force, and this allowed us to better understand the challenges with wage withholding.

So, the ADP Research Institute used aggregate anonymous payroll data from the years 2013, ’12, and ’11, and the data set was comprised of approximately 13 million employees aged 16 or older. We used the categories of state and federal bankruptcy, court-ordered, as well as private support, state and federal tax levies, and we used the general garnishment category for all the miscellaneous types of judgments that you, as the employer could be receiving.

The rate of garnishment was calculated as a percentage of employees having their wages garnished to the entire labor force, and the research evaluated employees along the various dimensions of age, gender, demographic profiles, regions, and state and geographic profiles.

So, our ultimate goal was to paint a picture of the employees whose wages were being garnished, and what we actually found was about 7.2% of all employees in the U.S. had a wage withholding or had their wages garnished, and that’s approximately 9.5 million individuals

Out of that 9.5 million individuals, about 1 million workers had multiple garnishments being withheld from their wages at one time.

So, we looked at the primary reasons for garnishments, and we looked at the categories of child support, tax liens, and other types of garnishments. So, when we looked at child support, there was about 3.4% of the U.S. employees have a child support order, while 1.5% have a tax debt, whether it’s IRS or state, and 2.9% fell into the category of other types of garnishments, which included student loans, consumer loans, and other types of debt.

So, when we looked at the data, what it actually showed was, as we expected, the rates for total garnishments in 2011 were higher than 2012 and ’13, and the overall proportion of employees whose wages were garnished was about 7.6% in 2011, dropping to about 7.2% in 2012 and 2013. We believe that the fact that 2012 and 2013 were static in their total results may be due to the economic recovery that we were experiencing.

So now, looking at the types of garnishments that are being processed, Illinois actually had a higher than the national average for bankruptcy and other types of liens. So, we felt that was interesting, while Illinois was lower in the child support category.

So, we looked at, does the size of the company matter? So, as we expected, as the size of the employer increases, obviously, the volume of garnishments increase. Illinois is pretty much in line with the other large states in their total garnishment processing volume.

Then we focused on, does the rates of income matter. Does that have an impact on those that are being garnished? Garnishment rates were the highest among mid-range wage levels, and the lowest among higher or lower earners.

The highest rates in most garnishment categories were reported among those earning between $25,000 and $40,000 annually. Child support rates were actually highest for those earning $40,000 to $60,000 annually, and that was at a national level.

So, then we looked at what– where does Illinois fall in the range. At the lower and high end of the wage bands, the garnishments rate much lower than the mid-range wage level. This is the same pattern that we observed for the entire nation, and the only difference between the states is the rate of garnishment at each level of their wage tier. So, Illinois has a 9.2% garnishments in the $25,000 to $60,000 wage tier, and starts to decline, as we expected, in the higher earners.

So, then we took a look at does the industry in which the employee is working make a difference in those that have garnishments. The manufacturing industry makes up a higher percentage of the workforce in the Midwest, and, therefore, the Midwest had the highest percentage of total workforce garnishments.

When firms were considered in manufacturing at 48% of the firms had at least one or more employees with a garnishment, and, on the other hand, approximately one in five companies had garnishments in the sectors of professional and business services, education, and health services. The disparity suggests a possible relationship between the garnishment and blue and white collar job categories.

So, then we took a look of the garnishments by employment sector. So, we looked at the historical perspective of the part-time workforce and how the dynamics of that played into account with garnishment processing.

So, if you look at the current chart, Illinois fell in the private sector of manufacturing 24% had a garnishment– I’m sorry, 7.12% had a garnishment in the manufacturing sector. That was higher than the service sector, as anticipated, with a total overall of 6.65%.

Across all the states, except for the other category, garnishment rates in the manufacturing sector are higher than the service sector. In the other category for some of the states, the service sector has a higher garnishment rate than the manufacturing sector.

Illinois has a higher garnishment rate for other category among all categories, and also shows service sector in other category having a higher garnishment rate than the manufacturing sectors.

Then we looked at the garnishment landscape by age. So, does age make a difference or does that come into play when an employee could be potentially garnished? Younger and older employees had lower rates of garnishment compared to those in the mid-range age group. Rates saw a noticeable increase, beginning at about 25, and a notable decrease in the late 50s. The highest garnishment rate was 10.5% for those in the age range of 35 to 44, which is typically the age of peak debt load, child rearing, and divorce.

So, there’s a lot going on in that mid-range, as opposed to when you first enter the workforce, or when you’re getting ready to exit the workforce.

We looked at the data one step further by state, and so, we took the national information, and we broke it down to a state level. Here our research indicates that in Illinois the highest volume of wage withholdings are still within the national pattern of 35 to 54 age range.

We looked at the gender and by state. States in the manufacturing belt have a higher proportion of males in their labor force, and, consequently, have a higher garnishment rate. Across the state, women had a higher slightly bankruptcy rate than the men, and bankruptcy in Illinois is high across both male and female, as well as for the other types of garnishment.

So, you’re an employer in Illinois. What impact does this have on your employees? The impact on the employees due to a wage garnishment can extend really just beyond their paychecks and the money that is being withheld.

Employees can often find it humiliating because the courts have had to intervene, and employers have had to become involved in their otherwise private struggles. Employees in this position may feel that they’re now working for the institutions to which they’re indebted, rather than for themselves for their future, and stress and anxiety are natural outcomes. All that can definitely impact you as that employee’s employer.

The impact to the employer, unfortunately employers can help– and can assist in the process, but it doesn’t help ease the anxiety the employee may be feeling. There could be an overall reduction in the work productivity and lack of motivation.

However, employers can become proactive to help with those being garnished, and potentially decrease future garnishments. Some employers make financial wellness experts available to provide counsel. They offer additional benefits that the employee may be able to utilize such as credit counseling and budget education.

Those things may help minimize the negative effects that a wage garnishment can have on an employee who has to manage their debt. Tax education may also be beneficial to help when they do come into play with the tax obligations that an employee may have.

Employers also are exposed to financial risk when an employee’s wages are being garnished, because, as I mentioned before, if you fail to withhold properly you can definitely become liable for your employee’s debt, as well as additional penalties and judgment.

So, now let’s take a look at the regulatory and compliance update.

So, back in 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act was actually passed, and, basically, what that act did was, it provided reform to those that seek bankruptcy. The reform actually provided for strict requirements and audit procedures, increased filing fees, as well as extended payment plans from three years to five years.

But what did that mean to employers? The effect that this had on the employer community is that those employees that were previously able to seek bankruptcy protection under Chapter 7, which was the absolution of debt, no longer are able to seek that protection and actually have to enter into a Chapter 13 filing, which is the repayment plan.

So, the employers, ultimately, had to become more involved in this process as they received repayment plans that were previously only processed for three years, now for an additional two years for a total of five years.

Also, prior to the act being passed, there was a large increase in the volumes that employers were receiving for bankruptcy protection. When the financial downturn occurred, we also experienced a rise in the national average of bankruptcy filings with Chapter 13.

However, we’re starting to see a decrease, and, as you can see by the chart, for the last four years we’ve actually decreased over the previous years, with the most notable decrease in fiscal year ’13, when many of the employees went back into the workforce.

So, what we looked at when we are processing garnishments and the needs that the employer community had, we needed standardization, and garnishment processing really had no standardization. Many of the laws for garnishment-type wage withholding, which is the category that falls into creditor debt, it really had laws that were on the books for many, many years, and still talked about having neighbors who borrowed money and were negotiating cattle.

So, these laws have been on the books with no additional update, and so, it’s made it very difficult for employers to be able to comply with all the various laws. The American Payroll Association reached out through our Government Relations Task Force, to the Uniform Law Commission, and asked that they take a look at what the garnishment process currently exists at.

The Uniform Law Commission is made up of states with non-partisan well-conceived appointees from their governor’s office. These are legal experts that are appointed to this committee across the states and they come together to create uniform model acts that the appointees then take back to their legislatures in their states and work to get that passed.

So, from a garnishment process, the American Payroll Association did, in fact, reach out to them and ask that they complete a study for how they can improve the garnishment process to better employers, employees, and the agencies that are processing these garnishments.

It does require a two-year minimum to review the entire process and make standardized recommendations, and then, if the act is proposed it can be adopted with a majority of ULC state representatives voting in favor of that act.

We met in March and December of 2014. We’re meeting again at the– in March 2015 in Chicago, and so, as we come together and meet, we work to create a uniform model act that in 2016 will actually be read to the Uniform Law Commission and then voted upon. What we’re hoping that impacts is creating a standardized process across states, whether it’s the responses that you, as the employer, have to turn in, or the processes that you have to go through with notaries in order to streamline many of those functions and make it much easier and less complex for employers.

So, then we took a look, or let’s talk about garnishment payment. So, as agencies are looking to streamline and do additional functions with less resources, agencies were looking to improve processes through electronic funds transfer. And electronic funds transfer works very effectively for child support.

So, many of the agencies that were aware of this said, why couldn’t we receive electronic funds transfer for payments that they have such as tax levies? The bankruptcy trustees also said, why can’t employers send us their payments from their employees’ pay electronically, and student loan agencies?

So, many of these agencies are interested in implementing an electronic means in order to receive those payments. It reduces the cost for employers, as well as improved efficiencies for those agencies.

Currently, there are five agencies from a tax levy processing perspective that have implemented the NACHA-approved third-party payment, or TPP, process, and so, Colorado, Connecticut, Massachusetts, Minnesota, and Wisconsin are all available to receive their tax levy payments for their state electronically.

Minnesota did something unique recently. They are requiring garnishment responses to be filed electronically with their courts. So, if you’re processing a garnishment, creditor garnishment in the State of Minnesota, and it’s going to a specific court, you will need to return that electronically.

Michigan has also followed suit, and is piloting a process to remit orders electronically, and Wayne County was the first to pilot that program.

So, garnishment laws, what is happening with garnishment laws? We know that the Uniform Law Commission is looking to create standardized processes, but that’s going to take two to three years.

So, as early as February of 2015, three states have already proposed legislation to change those old, antiquated laws that they had on their books regarding their creditor garnishments. Alabama, Connecticut, and Nevada recently passed– or proposed, I’m sorry, legislation that would change the maximum withholding amount that you, as the employer, can withhold from your employee’s wages for credit garnishments.

Okay, it doesn’t sound that difficult, right? They changed the limit. It’s going to be lower than what the federal limit allows. But it is difficult. It will be very challenging for employers if these bills are passed because it will require changes to your potential calculations. It will require software and payroll changes and development, as well as it will create– in Connecticut, they actually have a process where it will be 15% for three years, change to 10% for the next two years, and another step down for the remaining years. You, as the employer, it’s very difficult for you to be able to manage that process because you would have to monitor when to change the actual withholding amount.

What it does show, though, that as early as 2015, and we’re only in our second month, that agencies have tried to propose legislation to change that, or to change the process, is that advocates are looking at ways to protect the employee’s wages. We totally get it; we agree with it. However, it does not need to be at the burden of employers having to change their payroll system.

So, from a federal child support income withholding order, what we’ve recently seen is that federal law requires that the form has to be reviewed every three years. So, the new form was finalized in 2014 without any major changes. We went through the review. The federal Office of Child Support asked for comments on the form, and you’re able to provide comments. So, through the American Payroll Association we did provide comments, and, really, it just provides come clarification.

Where the most significant changes were to the employer community was in 2011, and in 2011 two major changes occurred. The first is, if the order does not direct you, as the employer, for child support purposes to send the payment to the state disbursement unit, you can return that order back to the sender.

So, let me elaborate. So, you get an order in. It’s telling you to pay the custodial parent directly, you actually can return the order and say, you know, it’s supposed to be directed to the state disbursement unit. If it’s on the federally approved OMB form, there’s actually a box that you can check and it says, this form is being returned because it does not direct me to pay the funds to the state disbursement unit. Please correct the order and resend to me.

So, that’s the first change. The second significant change that occurred with the 2011 review was that, if it wasn’t on the federally approved IWO Income Withholding Order, you, as the employer could return that order, whatever you received, whether it’s the divorce decree, whatever you received, that was not on the federally approved form you can return that to the sender and indicate, I need to receive this information on a federally approved Income Withholding Order.

If you get push back, the federal Office of Child Support has a contact information on their website. They work very well with the employer community. The whole purpose of these two changes was, again, to make the process streamlined and efficient for employers so you weren’t having to send payments to multiple places, as well as you weren’t having to try to decipher orders. So, OCSE does highly encourage employers to follow this process.

Now, let’s talk about e-IWO, and it’s not a sound a cow makes, EIEIO. It is actually the Electronic Income Withholding Order. And what the Electronic Income Withholding Order is, essentially, it’s receiving the paper Income Withholding Order electronically through a centralized portal.

So, you, as the employer, you sign up for e-IWO, you receive the information electronically rather than a paper copy. You are able to either accept or reject that Electronic Income Withholding Order, and everything about that Income Withholding Order and your process getting set up on this portal is all done through the Federal Employer Identification Number.

So, your Federal Identification Number is key to ensuring that you receive these orders electronically. Now, there’s a variety of options that you can actually implement. You can implement a system-to-system option, or, if you don’t want to do the major development to have these electronic orders loaded directly into your system, you can opt for a very easy no-development-needed fillable PDF or a spreadsheet.

And, essentially, if you get the fillable PDF or spreadsheet, it really is just taking the paper order and making it a soft copy that you, as the employer, can receive.

To implement the IWO with the federal Office of Child Support and the state, has no additional cost to employers. It’s completely free to employers to utilize, and it really does make it an efficient process.

So, let’s take a look at the process flow for Electronic Income Withholding Orders. So, essentially, how the process begins is the Electronic Income Withholding Orders are pulled from the state via a connection that OCSE, the federal Office of Child Support, already has set up with the state. The e-IWOs are pulled in. They’re unbatched from the state and they’re validated to ensure that all the information that you, as the employer, will need are included in the data file.

So, the information, then, is transformed into the employer-specific format. So, if you choose to receive a PDF, the portal does that for you. And regardless of what the state is able to do, that centralized portal will change it to the exact specified file that you prefer, and it’ll be sent to you in the method that you prefer.

The Electronic Income Withholding Orders are then batched by employer. So, if you have employees in 10 different states, then you would be receiving, potentially, orders from 10 different states all sent to you in one electronic file.

Then the information is, then– acknowledgements are returned from the employer. Once they pick up the file, the employer can advise that they are implementing the order or they’re rejecting it. If it’s not your employee, obviously you would reject the order, send that back to OCSE electronically in the portal, and then that information, then, is batched out to the states.

It’s the complete circle of information, all done electronically and seamlessly for the employers and states.

So, on this slide, it shows the states that are currently utilizing Electronic Income Withholding Orders. There are states that are currently in development. There are states– many states that are already using it, and then there are a few states that have not been able to get the resources yet to implement e-IWO.

I can tell you the states that have not implemented, it’s not been for lack of commitment to the process. It really has come down to resource constraints, because it is a project on the state side in order to be able to complete the development. And these numbers, or these states that are listed here are as of February 2015.

So, if you’re an employer, whether you process the orders yourself, or you use a service provider, and you want to participate in the e-IWO process, as I mentioned, there’s no cost to you. It’s as simple as filling out a one-page profile setting up the connectivity, conducting a one-time test, and then you start receiving the acknowledgements and the orders electronically.

As I mentioned, with the one-time test, once you’ve tested your process and the connectivity, as many states that join, you will begin to receive those orders for, and as new states join the service, you begin to receive their orders, as well. There’s no additional testing as states join that you would need to complete.

Once it’s done you’re signed off on, and you’re good to receive any states that add to the process.

Some of the benefits that we have experienced through ADP through implementing e-IWO, ultimately, child support gets to the family sooner, and the states will say that, the employers will say that, and so will the employees.

It ultimately cuts down on the entire process of getting the money to where it needs to go. And, additionally, employers– it’s straightforward. You don’t have to decipher information, because you get the same information in the same place every time, all the time, within that file.

Dependent upon how you or which option of e-IWO you elect to implement, if it’s system to system, it’s mapped directly into your payroll system, and you always will have the same basic information, because it cannot pass through the portal if it doesn’t have the basic required data elements.

It has also been very effective in helping increase the collections that child support has been able to realize. It helps save time, money, and resources, and it helps to ensure that there is uniform information coming to employers from the state.

So, we started in 2012. We had a million orders, and we were very excited. ADP has been part of the process since the inception, and we were actually the first to implement as a service provider. And so, in 2012, we thought it was great that there was a million orders that the portal had processed for all types of employers and service providers, but we are actually at 3 million orders in 2014, and counting.

And the journey continues. So, recently, what we experienced with e-IWO is under House Bill 4980, which is called the Preventing Sex Trafficking and Strengthening Families Act, the president actually signed that on October 1st of 2013, and it actually mandated that states implement e-IWO for employers. I’m sorry, the president actually signed it September 29th, 2014.

But it mandated that these employers would have to implement e-IWO. And so, the states will have to have the option available, and then once the states have the option available, then they can option to elect to have their employers utilize it. What we think will happen is, once the states is implemented e-IWO, they may begin to look at specific types of employers and ask that they also implement e-IWO.

So, just like we experienced with electronic funds transfer, if you’re an employer that receives a certain amount or volume of orders, you would need to send those payments electronically. We do think that there will be a trickle-down effect, and when the states are mandated to implement, they may begin to mandate employers.

If you’d like more information about what’s going on with this bill and what’s the direction of the states are, there’s a link there that you can actually find out, as well as some fact sheets for e-IWO.

Now, let’s take a look at lump sum reporting. So, lump sum reporting, states may have requirements for employers to report payrolls or any kind of lump sum commission, compensation, workers compensation, disability, annuity. It really depends on the state what they consider to be a lump sum. But there are many states that require that employers actually report paying out that lump sum for their employees that have child support.

The problem is, requirements vary by state, and on the map that you see here on the slide, it actually shows the states that have actually passed some sort of legislation requiring employers to report lump sum. There’s about 17 states now, but many other states they highly encourage employers to report the lump sum payroll or they have deemed that they include lump sum, or employers include lump sum, as their normal disposable wages.

So, OCSE took a look at the lump sum process, and said, how can we make it easier for employers? And what they creates was, through very much like the IWO, they created a central portal that employers can go to and report a list of all their employees that have child support that will be receiving a lump sum.

The portal will, then, take that information, and they will filter it out to the various states, and the states are then responsible for checking the employees to determine if they’re in arrears, and if they are in an arrears situation with delinquent child support, then the state is responsible for sending the employer a one-time wage deduction on that bonus or lump sum payroll.

There’s two options that you can participate if you elect to do the lump sum reporting through the portal. There is the information that you can do through a batch upload, or you can do it individually per employee.

Here’s a list or a map of the states that are currently participating in the lump-sum reporting process through OCSE’s portal. So, the majority of all states are using lump sum through that process. So, it saves you, as the employer, time from having to reach out, if you’re in 10 different states, having to reach out to each of those states. You can send it to one place, and then it becomes the portal’s responsibility for filtering that information to those 10 states.

With the states that have specific reporting requirements, there may be a specific amount of time, for example, in Ohio, that you would have to hold the lump sum from being paid out before you can actually pay it to your employee so that allows the child support agency to respond back to you, and it’s 30 days in Ohio, for example.

So, now let’s talk about electronic funds transfer, or EFT, for payments. The Personal Responsibility and Work Opportunity Reconciliation Act established that the state child support agencies must create, number one, a centralized location, generally called the state disbursement unit, for employers to submit payments to. The second major change that PRWORA actually implemented was, it mandated that the state disbursement unit have the option for employers to send their payments electronically.

We, as a service provider, send EFT payments to all states and employers can also set that up with the state disbursement units. All states have an SDU implemented with the exception of South Carolina. They’re trying to get their state disbursement unit up. It is not implemented yet, but they are working towards that.

If you’re an employer that is sending payments to South Carolina, you are still sending it to the various local child support agencies, but if you’re sending it to Spartanburg, which is a large county in South Carolina, you, potentially, could be sending your payments electronically to them if you reach out to them.

The benefits of sending payments electronically, obviously, is safer. Everyone is very focused on keeping private employee data confidential, Social Security Numbers, things of that nature. You know, with child support, the Social Security Number is the key identifier in many states for applying payments, and so, the Social Security Number not having to be sent in the mail and to be able to be sent electronically helps keep that information private. It gets to the families faster. Obviously, there’s no mail delays, because it is being sent electronically, and it’s obviously cost efficient. You’re decreasing the amount of postage, and it saves time and labor.

If you’re interested in sending your payments electronically, OCSE has all the EFT contacts at a state level on their website. So, I highly encourage you to take a look at that.

And there are 16 states, as I mentioned earlier, that have actually passed some sort of legislation that requires employers to send their payments electronically for child support, if you are an employer based on a certain threshold. So, in Illinois, as of 2001, Illinois payers — and, again, it’s payer, not just employer, with 10 or more Income Withholding Orders, must send them electronically. If you don’t, there could be penalties applied, and there are great contacts with Illinois Child Support that will help you get that process up and running.

Here’s the link to OCSE’s website that gives you all the EFT contacts, as well as, as states are passing legislation to mandate EFT, OCSE keeps this map very well updated on those states that have passed specific legislation, and it, again, varies by state, on what the requirements are, and what those thresholds are.

So, we appreciate you taking the time today to talk to– or to listen to our presentation about wage garnishments within Illinois, and if you have any questions, feel free to type those in the Q&A box.

Marvin:                                 Yes, and as a quick reminder, you can type your questions into the Q&A panel located in the lower right-hand corner of your screen. Type your question into the field, and then click on the “send” button to submit that question.

Corrinne Flores:                   Okay, Marvin. Here’s a question. How likely do you think e-IWO will be mandated to employers? So, today, the mandate on the October 1st, 2015 date is specifically for agencies and states to have the ability to have Electronic Income Withholding Orders sent to employers. So, the mandate is applicable to states.

We do believe that as states are implementing and spending the development resources to have the option available, we do believe that they will, ultimately, then, start looking at how they can mandate and increase usage by employers.

Okay. Let’s see. Here is another one. Am I really required to bonus payrolls? Yes, you are required in specific states to report bonus payrolls. I– as I mentioned Ohio– Ohio has, probably, the most stringent guidelines. They would like you to report 45 days prior to the bonus payroll that you have employees that have child support that you will be paying out a bonus or a lump sum payroll to, and then once you have reported it to Ohio, then, as I mentioned, there’s a 30-day waiting period.

The slide that had the lump sum states and which states required it shows you those that have a reporting-specific requirement. If you’re unsure, there was also a link at the bottom of that slide that you can take a look at and get information by state and what the state’s requirement for lump sum is.

Here’s a question specific to Illinois. So, I received garnishments called wage assignments. Are these voluntary? So, Illinois does issue garnishments and the title of the garnishment order is wage assignment. These are not voluntary if they’ve been issued by a court.

The definition of a voluntary wage agreement is a voluntary agreement that your employee is entering into, and so, there will not be a court involved. It really is the employee coming in and saying, either they have a voluntary agreement information, such as an IRS voluntary agreement, or it’s just an authorization for you to withhold wages, but it’s not going to be filed with the court, and so, in Illinois the wage assignments that I have received are issued by courts. And so, they’re called wage assignments but they truly are not voluntary. They’re mandatory.

Well, I think that, Marvin, is the last of the questions unless anyone else has questions. All right. Then you– then we will conclude this presentation.

Marvin:                                 Great. Thanks, Corri, and, ladies and gentlemen, this concludes today’s webinar. Thanks for joining us, and have a great day.

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