Child Support Payments & EFT

The Office of Child Support Enforcement published a guide for employers to begin sending child support payments electronically. According to the guide:

All states and territories accept child support payments at their State Disbursement Unit (SDU) by Electronic Funds Transfer (EFT)/Electronic Data Interchange (EDI), the primary method of sending payments electronically. The EDI portion of the transmission includes identifying information so the payment can be properly credited to the payor’s case(s). SDUs centralize the collection and disbursement of all child support payments withheld by employers as well as other types of payments. Using EFT/EDI is well worth the initial effort. Employers that switch from sending paper checks to electronic payments will enjoy lower costs, fewer errors, and faster processing.

Sending child support payments electronically will save an employer time and money

  • Eliminates the cost of printing paper checks and supporting documents
  • Eliminates the cost of postage and delays due to lost or misdirected mail
  • Reduces check handling and processing costs
  • Reduces data entry errors
  • Gets child support payments to custodial parents faster

Getting Started with EFT/EDI

There are several ways to send a child support payment electronically:

  • By using your own payroll software to send Automated Clearing House (ACH) credit payments (similar to direct deposit) through the Federal Reserve’s banking system with EFT/EDI, using the standard child support addendum segment
  • Through a state’s web-based payment service—contact the state child support agency where you send payments for details
  • By using a payroll service provider that is already sending child support payments electronically
  • By using your bank’s online bill-paying serviceThree Steps to Implement

Step 1: Determine whether your payroll/accounting system supports electronic payments for child support.  If it does not, you may want to explore these options:

  • In-house information technology staff may be able to make programming changes so that you can produce electronic payments for child support, including the EDI DED (Deduction) child support addendum record that child support agencies need to identify the payments.
  • Your payroll/accounting software developer may have an enhancement that supports electronic payments for child support. Contact your user’s group or software representative.
  • Your bank may have a software package that will enable you to produce the file formats necessary for electronic payments. Contact your bank and ask for someone in Cash Management, Treasury Management, or Treasury Services.

Step 2: Contact the appropriate child support agency’s SDU.

  • This is not always the child support agency or SDU where you are located. It is the agency or SDU in the state that issued the underlying child support order or where you currently send funds.
  • Find out the EFT/EDI start-up procedures for the child support agency where you send funds. Do not attempt to transmit child support payments electronically without this information.

Step 3: Conduct the EFT/EDI start-up procedures for each of the child support agencies you contacted in Step 2.  These procedures will typically include:

  • An exchange of basic banking information (routing codes, account numbers), Federal Employer Identification Number (FEIN), and locator code information with the child support agency.
  • A reconciliation between child support agency records and employer records of names, Social Security numbers, and case identification numbers so that each employee’s withholdings are properly credited.
  • A transmission of an initial test file, or pre-note, to ensure that the ACH records are formatted and transmitted properly.

Where to go for more information

There are standard record specifications for child support payments.  NACHA (National Automated Clearing House Association) publishes the User Guide for Electronic Child Support Payments (PDF)visit disclaimer page to provide SDUs, employers, and their financial institutions with current formats, definitions, and implementation recommendations to remit child support payments and payment information electronically through the ACH network using current conventions and standards.


DOL Issues New Opinion Letters Including Lump Sums

The Federal Department of Labor (DOL) has been issuing a flurry of opinion letters recently.   But even more  amazing, is that one of the opinion letters actually deals with a subject long been a thorn in payroll’s side and one that some of us have waited years for a ruling.  The basic problem is whether or not lump sum payments such as bonuses are the same as normal wages under the law when it comes to withholding for garnishments.  You see many of the states do not think that lump sum payments fall under the Consumer Credit Protection Act or CCPA.  This is the Act, written in 1970, that sets the limits for what can be deducted from an employee’s pay for such garnishments as child support and creditor garnishments.  The DOL is actually in charge of enforcing the Act, but has always been unclear on their position on whether or not lump sum payments are covered under the Act.  This is especially true for child support, as employers may actually be required to report the pending lump sum payment and wait for instructions on withholding, usually for back child support owed to the state.  For example, according the the Office of Child Support Enforcement’s matrix on states and lump sums, Alabama requires 100% of all lump sums.  California states that it is subject to 50% unless the lump sum payment does “not involve earnings”. while Indiana follows the CCPA, So we have tried to look to the DOL to give a definition ruling on this and low and behold, they finally have.

In opinion letter CCPA2018-1NA the DOL has answered numerous questions on what constitutes earnings by discussing 18 different specific examples of common types of lump sum payments that an employer may issue to an employee.  These include commissions, discretionary and non discretionary bonuses, profit sharing, production bonuses, sign-on bonuses, relocation incentive payments and safety awards.

Child Support Report is In–Payroll Doing a Great Job!

The Office of Child Support Enforcement (OCSE) has submitted its Annual Report to Congress FY 2015.  The report outlines its accomplishments and provides a status for the program. This fiscal year marked the 40th anniversary of the Child Support Program, which was established in 1975.  In total, $32.4 billion  in child support was collected in FY 2015.  Of this $24.3 billion or 75% was collected through income withholding from the employee’s paycheck.  Well done payroll professionals!


PA Child Support Changes–More Problems for Payroll

Pennsylvania has recently passed legislation on collecting fees for withholding child support payments. Normally this is good news for payroll. However, the PA legislature has really gone out of its way to make it tough for payroll to enforce the new rules.  If I can get on my soap box for one moment, this is the reason I dread state legislatures getting involved in enacting legislation that is payroll related before check with payroll professionals, which they never do! This legislation, in fact,  could cause “nightmares” for payroll systems as it goes against the norm for collecting such fees.  Basically it boils down to this, which was distributed by the Office of Child Support Enforcement (OCSE):

On July 1, 2016 Governor Tom Wolf signed Act 64, which amends Section 4348(j) of Title 23 of the Pennsylvania Consolidated Statutes. Section 4348(j) permits employers to charge their employees an administrative fee for withholding income for support.  Employers were previously permitted to deduct up to two percent of the ordered amount per pay period as reimbursement for administrative costs related to withholding support. Effective August 30, 2016, employers may deduct a one-time fee of $50 for reimbursement of expenses related to withholding income for support. The two-percent fee is no longer permitted. There are no other changes to the law. Pennsylvania’s income withholding requirements stipulate that administrative fees cannot be deducted from the withholding amount and that Consumer Credit Protection Act (CCPA) limitations apply to amounts withheld from the obligor’s income.

The Pennsylvania Bureau of Child Support Enforcement is providing the Frequently Asked Questions below to address concerns related to the implementation of the new fee. Additional questions regarding the implementation of Act 64 should be directed to the Pennsylvania State Collection and Disbursement Unit at 1-877-676-9580. 

Frequently Asked Questions:

 1. Can employers assess the fee on subsequent orders?

Answer: The one-time $50 fee applies to each employee, not each order. Therefore, employers may only collect up to $50 in administrative fees for the duration of the individual’s employment, regardless of the number of income attachments received for the employee.

2. How should employers handle employees who left employment and were subsequently rehired? When can the fee be reassessed?

Answer: The $50 one-time fee limitation applies for the duration of the individual’s employment. Seasonal, transient, and other typically low-income employees will be adversely affected by Act 64 if each subsequent rehire with the same company is regarded as a new eligibility period for the $50 one-time fee. Therefore, rehired individuals are only eligible for a new $50 fee when their start date is greater than one year from their previous leave date.

3. What should employers do if they are unable to update their payroll system before the August 30, 2016 effective date?

Answer: Employers may withhold the one-time $50 fee at any time during the income attached employee’s tenure with the company. Employers who are unable to update their payroll systems before August 30, 2016 may elect to withhold the fee after their system updates are complete. Employers may not continue to withhold a percentage fee until they are able to take the $50 one-time fee.

So payroll can only deduct a one-time fee per employee no matter how many income withholding orders are received for that employee.  PA child support has also provided additional clarification after releasing the above information.  One addresses the issue of insufficient funds.  If there are not enough funds to take the entire fee in one pay period, can it be pro-rated and taken over multiple periods?  PA Child Support says yes, the employer may deduct the fee over multiple periods if there are insufficient funds to deduct in a single payment.

There are still a lot of unanswered questions for payroll.  I will keep you posted on any further changes to the PA child support situation as they come in.


OCSE Redesigns Website with Users in Mind

This is a first for us today.  We have a guest blogger.  Tristan Anderson from the Office of Child Support Enforcement (OCSE). OCSE has redesigned and launched their new website.  Her blog post today will help guide users through this new, redesigned OCSE website with all its great new features.  Welcome Tristan:

Here Today, Gone Tomorrow:

Technology moves fast. What once was new can quickly become old and outdated. Although we redesigned and launched a new website in 2012, by 2014 it no longer fit our users’ needs. In September 2012, only 12 percent of the people visiting our website did so on a mobile device. By September 2013, almost 25 percent were mobile users — a 102 percent increase in just 12 months! Each year we see a steady increase in the number of mobile users.

ocse blog picture 2On average, about 35 percent of our visitors are on their mobile device. To keep up with demand, we decided to redesign our website and make it mobile-friendly. That means our site will re-adjust the content to fit the size of any device, whether it is a desktop computer, a smart phone, a tablet, or something else.

Considerations for developers

  • Define your audience — who needs to know what? Our site must meet the needs of a variety of audiences: from parents to child support professionals, employers, and other partners; all groups need accurate information specific to them.
  • Identify top tasks — why are people visiting our site and what do they need? To answer these questions, we went to frequent website visitors.

User testing with employers

User testing with employers gave us insight into why you visit our website and how you navigate it. Based on feedback, we organized the main menus and submenus to accommodate your top tasks.

Here are examples of the most popular reasons you visit our website:

Understand employer responsibilities

Learn about electronic and online services

Find a complete list of federal forms used by employers

Access state contact information and program requirements

Get answers to frequently asked questions on a variety of topics

As more people visit websites using mobile platforms and as technology moves forward, you will see more updates and refinements. If you’d like to help test our site or have suggestions for improvements, contact Tristan Anderson at

If Health Insurance is Mandatory…Is it a Mandatory Deduction (for Garnishments)?

The Affordable Care Act has been in full swing for a couple of years now.  However, there appears to still be one more question that needs to be answered.  If health insurance is mandatory then does it now qualify as a mandatory deduction under garnishment rules? Both payroll professionals and employees have been tackling with this question so let’s see what the actual law requires.  The Consumer Credit Protection Act (CCPA) is the governing law when it comes to deducting for garnishments.  It is enforced by the federal Department of Labor. It states that the employer must take the gross wages and minus out all “mandated deductions” to arrive at the disposable pay. The garnishment percentage (such as 25% for a creditor garnishment) is then taken from this amount.  It states clearly that mandated deductions include taxes such as federal and state income tax, FICA taxes, local taxes, and mandated pension plans such as PERS (Public Employee Retirement System).  401(k)s etc. do not count.  So if I am required as an employee to have health insurance is that now mandated.  The answer is easy…NO.  The DOL has been asked by the APA Government Affairs Manager, Bill Dunn, if they planned to change the definition of mandated deductions to include health insurance.  The answer was no they are not.  Although it is mandated that a taxpayer have health insurance it is not mandated that they have the employer’s insurance. They could buy it through the open exchange and by-pass the employer altogether. So as far as the CCPA is concerned health insurance does not reduce the disposable income.

However, always remember that the states can always do less than the CCPA. It is possible that the state may permit the health insurance as a mandated deduction. Many state legislatures are looking at legislation that will adjust their requirements. It would appear on the garnishment you receive if the state permits the deduction.  You should also be aware that state tax levies might also permit the health insurance deduction. For example, Colorado and Virginia have added the deduction from state tax levies.

So to recap…the federal CCPA is not adding health insurance as a mandated deduction for garnishments.  However, the state legislature may or may not pass legislation to permit it as a mandated deduction, you need to check on each state requirements by reading the garnishment.

Anyone for E-IWO (Except SC)

Well the day has finally come when all the states (except South Carolina) are now offering electronic Income Withholding Orders or e-IWO.  What exactly is an e-IWO and how does it differ from getting cheiwoild support orders on paper?  Very simply, by using the e-IWO employers receive their Income Withholding Orders (IWO) for child support electronically as a pdf file rather than through the snail mail on paper.  This saves a lot of time and expenses on the side of the state.  But the employer also gets to acknowledge the receipt electronically which saves time and money on that side as well.  In addition, the same portal also allows the employer to report terminations and lump sum payments electronically, again saving time and money.

All you need to do to partake in this system is to implement the e-IWO in one of two ways.  For large (I mean really large) employers with thousands of child support orders you could set up a system-to-system process.  This obviously is going to take a lot of programming and time.  But if you are a smaller employer with maybe only dozens of child support orders or less you could set up the No Programming option.  This is just like setting up your phone really. You just set up the port etc. and then begin receiving the IWOs.  Takes just a few weeks but well worth it in terms of time and money saved.

Want more info before making the plunge to electronic then check out the Office of Child Support Enforcement’s website on e-IWO. There you will find all the info you need on setting up the different systems as well as FAQs. Want to speak to someone directly about the program.  By all means contact William Stuart  Bill will be glad to answer your questions, give you back ground info and even give you info on other employers, who are just like you, so you can speak with them about the system.

Electronic is the wave of the future for payroll so don’t be left out and holding the paper form when everyone else is going paperless with their IWOs.  The system is up and running so now is the time to check it out and start using it.

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Child Support Lump Sum Reporting and Terminations Can Now be Done Electronically

Reporting lump-sum payments for child support used to be done online through what was called Debt Inquiry Service. Now using the Employer’s Services Web Application employers can report lump-sums and terminations to states quickly and efficiently. Debt Inquiry Service is now known as Lump-Sum Reporting. eTerm allows employers to report termination to participating states electronically. eTerm can also be used to respond to income withholding orders received for individuals who no longer or never worked for your company. This takes the place of completing page 3 of the IWO and sending it to the child support agency. Employers using e-IWO can do both processes through the e-IWO system. For more info about lump sum reporting or eTerm or to schedule a demonstration contact OCSE Employer Services at


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Child Support in the 21st Century

Child support is going digital.  President Obama has signed into law legislation that now requires all states to provide the option to receive the child support withholding orders (IWO) electronically.  The deadline for the states is October 1, 2015.  The electronic version of the IWO, known as the e-IWO, has been available for a couple of years through the Federal Office of Child Support Enforcement (OCSE).  According to the OCSE’s website currently 32 states offer this option.  These include AL, AZ, AR, CA, CO, CT, DE, DC, FL, HI, ID, IL, IN, ME, MA, MI, MO, NC, ND, NE, NJ, NY, OH, OK, OR, PA, SD, TN, TX, VA, WA, and WV.  Two more states, KY, and MD are currently implementing the process.

This process allows the employer to receive the IWO (as a PDF file) through a portal directly into the employer’s computer.  This is not done through email but rather through either a Secure File
Transfer Protocol (SFTP) or a File Transfer Protocol Secure (FTPS). This process allows the employer to accept or reject the IWOs electronically as well as process terminations.  Large employers can implement a fully automated system.  However, smaller employers can use the no programming option that is easy to implement with limited technical resources.

The OCSE is pushing for employers to sign up now to use this electronic service. For more information check out the OCSE’s webpage on Electronic Income Withholding Orders or contact