Study Group: Involuntary Pay Deductions and Child Support Orders

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Section 9: Other Deductions From Pay

Involuntary Deductions • Employer and employee have no control over the deduction • Employer is required by law to deduct amounts from the employee’s check and remit those funds to satisfy the employee’s debt

Priority of Multiple Orders • Bankruptcy Order (except Child Support Order) • Child Support Order prior to Federal Levy • Federal Tax Levy • Child Support • Administrative Wage Assignment (AWG) including government ordered student loans of 15% • State Tax Levy • Student Loan (state ordered 10%) • Creditor Garnishment • Voluntary Deduction

Tax Levy • Used to collect unpaid taxes after all other means have been exhausted by a state or federal agency • Take precedence over all other garnishments except for child support orders already in effect and bankruptcy • If more than one tax levy, then first come first served

Form 668-W Notice of Levy on Wages, Salary and Other Income Has 6 parts • Part 1 - Employer’s copy • Parts 2-5 send to the employee (Parts 3-4 should be returned to Employer within three days) • Part 6 - IRS • If forms are not returned, employee should be treated as married filing separately with one exemption

Figuring the Amount to Deduct and Remit for Levy Wages exempt from levy • Unemployment compensation benefits* • Worker’s compensation benefits* • Annuity and pension payments under the Railroad Retirement Tax Act * • Certain armed service-connected disability payments • Certain public assistance payments * • Amounts ordered withheld under a previously issued court order for child support Note: * Can now be attached for 15%

Levy Take Home Pay Gross Earnings less: • Taxes • Deductions (voluntary or involuntary) in place before levy is received 3. Increases in pre-existing deductions beyond the employee’s control (medical premiums) 4. Deductions added after a levy is received that are a condition of employment (union dues)

When to Make Payments& Stop Withholding • 668-W says pay same day wages are paid • Penalties – Full amount to be withheld plus interest, and penalty of 50% of the amount recoverable by the IRS • Form 668-D – Release of Levy / Release of property from Levy • Notify IRS when EE terms

Child Support • All initial orders require wage withholding unless both parents or the court & one parent agree to different method but wage withholdings become automatic if non-custodial parent is late one month in paying support • Joint Federal/State responsibility for enforcement • Withholding laws are based on the Consumer Credit Protection Act (CCPA) • Take precedence over all other garnishments except for levies that are already in effect and bankruptcy court orders that include child support obligations. (pg 9-11)

Order/Notice to Withhold Income for Child Support • Standard form (see pg 9-16) • Some information varies by state • One centralized disbursement unit per state • Employer allowed to withhold an administrative fee in most work states • Must withhold for employee and independent contractors

CCPA Limits • 50% if employee is not in arrears and is supporting another family • 55% if employee is in arrears by 12 weeks and is supporting another family • 60% if the employee is not in arrears and is not supporting another family • 65% if the employee is in arrears by 12 weeks and is not supporting another family

Uniform Interstate Family Support Act (UIFSA) (pg 9-19) • Must honor orders from other states that are “regular on its face” • Duration and amount of periodic payments • Person or agency who will receive payments • Medical support (40 business days to state if employee has a plan) • Amount of payment fees and costs for the enforcement agency • Amount of arrears payments and interest

Multiple Orders • Follow the laws in the state where the employee works • Most states require child support to be fulfilled before medical insurance premiums are paid. • Pro-rate • Equal funds • First come first served (currently Montana only)

Child Support Continued… • Employee attempt to avoid withholding • Handling child support for employees serving in the military • Employers must withhold from independent contractors • Medical child support orders (9-25 – 9-28)

Creditor Garnishments CCPA Limits Garnishments cannot exceed the lesser of: • 25% of disposable earnings OR • Amount that the employees disposable earnings for the week exceed 30 times the federal minimum wage ($217.50 weekly) (currently $7.25) • Prohibited from terminating an employee because the employee’s “earnings have been subject to garnishment for any one indebtedness” • One creditor garnishment at a time • State law applies if amount eligible for garnishment is lower

Bankruptcy Orders • Employer must stop withholding on any other garnishments against the employee (if included in the bankruptcy) • Chapter XIII bankruptcy orders take priority over levies • 2005 Act and child support – filing a bankruptcy puts on automatic hold proceedings or judgments against debtor; however, there are some that are exempt (list on pg 9-47)

Student Loans • To repay a loan granted under the Federal Family Education Loan Program • Max amounts • The lesser of 15% disposable earnings • Or the excess of the employee’s disposable earnings over 30 times the federal hourly minimum wage ($217.50) • Multiple student loans the max increased to CCPA limit of 25% of disposable earnings • If terminated and rehired within 12 months, student loan withholding can start 12 months after rehire date

Federal Agency Debt Collection AKA Administrative Wage Garnishments (AWG) • For payment of government, non-tax debts (FHA, VHA, HUD) • If employee involuntarily terminates and is re-employed, deduction can start after 12 months of re-employment • Max amounts • The lesser of 15% disposable earnings • Or the excess of the employee’s disposable earnings over 30 times the federal hourly minimum wage ($217.50)

Voluntary Deductions • Wage Assignments • Voluntary agreement to a deduction • Not covered under the CCPA • Employer can decide to honor or not • Union Dues • In addition to mandatory dues • Need a written signed authorization • Cannot be revoked for one year or until contract expires

More About Deductions Charitable Contributions • $250 threshold for substantiation (single check) Applies separately to each deduction • Substantiate contributions by providing the following: • Pay stub, W2, a pledge card from the charity FLSA Can my net pay fall below minimum wage?

Resources • Payroll Source • Family Support Registry • National Web Site • Actual Support Orders • State Tax Levy

Recordkeeping and Record Retention Section 10

Recordkeeping and Retention • FLSA • IRC • Title VII • IRCA • FMLA • State

FLSA…….Required by DOL • 2 years from last date of entry • Basic employment and earnings records (time cards) • 2 years from last effective date • Wage rate tables and piece rate schedules • Work time schedules establishing hours and days of employment

FLSA…….Required by DOL • 3 years from last date of entry • SS Card Name & home address – Date of birth < 19, gender & Occupation • Beginning of work week • Regular rate of pay for each week & hours worked • Earnings (regular & OT) & total wages paid • Additions to and deductions from pay – Date of payment & pay period covered

FLSA…….Required by DOL • 3 years from last effective date • Collective bargaining agreements • Certificates authorizing employment of homeworkers, minors, students & handicapped • Records showing total sales volume and goods purchased

FLSA…….Required by DOL White Collar/Exempt Employees Hospital Employees Tipped Employees

IRC – TAX 4 years after the due date of the tax, or 4 years after the date the tax is actually paid if later (list of records on Pg 10-5) • Maintenance of Records • Penalties for non-compliance • Penalties for Faulty Recordkeeping IRS Goal: Make it easy for IRS to calculate employer’s correct tax liability

ADEA – Age Discrimination in Employment • 3 years for employee records • 1 year for applicant records Title VII Civil Rights Act IRCA – Immigration Reform & Control Act I9 – Know this one! 72 hours: Time available to produce records for inspection by DOL or EEOC

FMLA • Records in addition to Master Control Items • Exception for Exempt Employees • Medical Records – CONFIDENTIAL • Record format is flexible

State Taxes, Orders and Escheat Wage & Hour: MI 3 yrs, Federal 4 yrs Child Support/Wage Attachments: Preserve for 3 yrs after last withholding from employees wages IRS Levies: 4 yrs from last withholding or until any related legal action is concluded Escheat: MI 10 yrs

HIPAA ● Standards for electronic exchange, privacy & security of health information ● Privacy Rule must be complied with if employer provides health care coverage ● 6 Years ● Penalties – Civil & Criminal

Retention and Storage Obtainable Readable Easy to calculate liability No law dictating form of retention and storage Retrieval and Destruction Have a clear, written policy and implement it

MISC Important Information Direct Deposits: Two years from termination or revocation of authorization Master File – Table 10.4 (pg 10-17) Records needed from new employees: I9 and W4

Cheat Sheet Data ADA = 1 year (1st letter in the alphabet) Time Sheets = 2 years (2 words) HR = 3 years (2 letters + 1) TAX = 4 years (3 letters +1) OSHA = 5 years (4 letters + 1)

Study Group: Involuntary Pay Deductions and Child Support Orders