navigating wage garnishments morris salinas business consultant, added value services adp, inc
TRANSCRIPT
Navigating Wage Garnishments
Morris Salinas
Business Consultant, Added Value ServicesADP, Inc.
About ADP
Copyright (c) 2014 ADP, Inc. The content may not be reproduced or repurposed without permission from ADP, Inc.2
Revenues of approximately $10 Billion Market capitalization of >$23 Billion
Over 600,000 clients worldwide
Top-rated company by Standard & Poor’s & Moody’s
Pays 1 out of 6 in the U.S. – 33M worldwide
Processing wage garnishments since 1997
45,000 Associates
In 60+ Countries
Electronically movingover $1 Trillion annually
One of the world’s leading providers of technology-based SaaS solutions to employers
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Agenda
Wage Withholding Basics
Types of Garnishments
Wage Garnishments on the Rise
Regulatory and Compliance Updates
The Future
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Wage Withholding Basics
When a debt is owed, a wage withholding order can be issued, requiring an employer to withhold and pay the wages of the employee
Knowing which laws to apply, rules, regulations is difficult for employers
Employers can be 100% liable if garnishment is processed incorrectly!
Denial or revocation of licenses and passports for delinquent child support obligors
– Driver, professional, or hunting licenses
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Types of Garnishments
Garnishment (most complex to process)
– Creditor
– Varying state / court requirements
– Response / answer requirements
Bankruptcy
Wage Assignments
– Voluntary
– Governed by state laws
– Employers choice to honor
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More Garnishments
Student loans
– Federal Debt Collection Improvement Act
– State Higher Education Act
Tax levy
– Federal, state, or local
– Notification requirements
– Voluntary payment plan
Child support (largest volume received)
– Medical support
– Lump sum payments
– Varying state laws
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Garnishments Processing is Constantly Evolving
All states require “unable to deduct”, “unable to locate” and “EE Term” notification for all creditor, child support and tax levies
Over 90% of states require a response and a final answer for creditor liens
Timing of notification requirements has become stringent
More than 30 states ADOPT electronic income withholding order processing (e-IWO)
16 states MANDATE Electronic Funds Transfer / Electronic Data Interchange (EFT/EDI)
Fines and penalties for incorrect calculations, not paid on time/tothe correct party, or deducted based on documents that are not legal
Employers failing to withhold amount specified are liable for the full amount of the support owed, plus a fine
Employers must ensure business continuity, even in the event of a “disaster”
In the U.S., 1 out of 10 employees has a wage garnishment
Employees being garnished are more likely to have multiple orders
Garnishment orders are on the rise some 10% on average year over year
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In Fact. . .
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Regulatory and Compliance Updates & Trends
Bankruptcy Reform
Child Support Trends
– New Federal Income Withholding Order
– Electronic Income Withholding Order (e-IWO)
– Electronic Payments
– Medical Support
– Fees
Wage Garnishment Trends
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Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA)
Reform became effective October 17, 2005
– Strict requirements and audit procedures
– Increased filing fees
– Extended payment plan to five years
The American Bankruptcy Institute reports that 1.2 million bankruptcies filed in FY2012 (ending June 30, 2012)
Sources: http://www.cch.com/bankruptcy/Bankruptcy_04-21.pdfhttp://www.abiworld.org/AM/AMTemplate.cfm?Section=Home&CONTENTID=66471&TEMPLATE=/CM/ContentDisplay.cfm
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Child Support, You Make a Difference!
Payments disbursed via EFT, check, or direct deposit
Costs $5.9 billion to collect child support
72% of all monies collected by employers
New Hire Reporting helps child support – 52 million employees were reported to new hire agencies in FY12 (55 million in FY13
Other Source 17% ($5.3 billion)
Income Withholding 72% ($22.9 billion)
Federal Tax Offset7% ($2.2 billion)
Unemployment Intercept Offset4% ($1.2 billion)
State Tax Offset 1% ($216 million)
Source: http://www.acf.hhs.gov/programs/css/resource/fy2012-preliminary-report
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Federal Income Withholding Order (IWO)
Applies to all child support IWOs issued on or after 05/31/11 (i.e., new IWOs)
Standard “Remittance Identifier” to use when sending payments
Must direct payments to the SDU as required by Federal law [section 454B of the Act]
– Employer should reject the IWO and return it to the sender, effective immediately
Must be on the approved IWO form as required by Federal law (section 466(a)(8) and 466(b)(6)(A)(ii) of the Act)
– Employer should reject the document and return it to the sender, effective 05/31/12
There is a new form for 2014
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e-IWO (Electronic Income Withholding Order)
Electronic transmittal of child support orders from participating states/tribes/territories through a central portal to participating employers or service providers
The Office of Child Support Enforcement (OCSE) hosts the central portal
Applies to child support orders filed through the state child support agencies
States are encouraged to participate, however not federally mandated to adopt e-IWO today
Currently 31 states are in production
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e-IWO Process
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e-IWO State Status
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Developing e-IWO Using e-IWO Not using e-IWO
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With e-IWO, You May Experience…
Faster Turnaround Time for Processing Orders
Increased Security of Confidential Data
Increased
Accuracy
Payments Disbursed Faster
Reduction in Calls for Case / Order Status
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Electronic Funds Transfer Mandates
States are required to allow employers to remit payments via EFT or check
16 states and territories mandated electronic funds transfer (EFT) for child support
– CA, FL, IA, IL, IN, MA, NE, ND, NV, OH, OR, PA, TX, VA,WV, Guam
EFT allows for a more efficient payment process
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EFT State Status
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Has passed legislation or regulations requiring employers to remit their child support payments electronically
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Garnishment Payments
Agencies are looking to improve processes with electronic payments
EFT Payments are fast and efficient, looking into the following:
– Tax Levy Agencies
– Trustees
– Student Loan Agencies
Effective in late 2013, PR changed their Court Rules to allow them to accept payments at the courts that were not a cashiers check or money order
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Medical Support Orders
National Medical Support Order created due to Deficit Reduction Act (DRA) of 2005
Can be sent to the custodial parents employer or the non custodial parents employer
Can direct employers to enroll the child in health insurance
Calculation may be complex for employers
Requires new medical information “Answers” or “Responses”
Civil penalties may apply for noncompliance
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Employer Fees
Employers can charge a fee for processing wage withholding payments to assist in offsetting the administrative costs
Vary by state and lien type
– Child Support
– Creditor garnishments
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Additional Changes for Child Support
New form will be published in 2014
Return the order if not on the approved form
Changes to the IWO may result in changes to the E-IWO
Continued Focus on Medical Support Establishment
Federal Income Withholding Order (IWO)
New Legislations and Mandates
Calculation can be complex for employers
Lump Sum Payments E-Termination reporting
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Additional Changes on the Horizon
Health Care Reform
May cause more changes
Verification of Employments
(VOE) Increased volume Focus on
standardization
New Hire Reporting
Identifying those employers that are not reporting their newly hired employees
Electronic Payments
Child support Tax levies Student Loan
agencies
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You Want To . . .
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What Is The True Cost Of Garnishment Processing
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Cost Categories Direct & Indirect Costs
Capital and Labor Costs
Operational Costs
Hidden Costs
Opportunity Costs
Management / FTE Training Servers / storage Equipment, data centers
Calls (often emotional) Bank fees (checks, wires,
EFT, stop/void) Mailing / postage
Judicial settlements Software updates Legal, counsel Accounts payable
Focus on core competencies
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Risk Has Shifted to the Employer…
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Utilize technology such as e-IWO (electronic income withholding orders) to increase efficiency and accuracy
Wage garnishment collections risk has shifted to employers
State disbursement units have mandated Automated Clearing House (ACH) payments
Agency fines are on the rise for non-compliance
Leverage human capital / eliminate transactional costs
Catastrophic Backup
Why Companies Outsource Wage Garnishments
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It is Critical to Stay Up to Date in The Regulatory Environment
Participating With State and Federal Agencies on Pilot Programs and
Initiatives Helps Employers
Communication With Agencies and Courts
Legislation Monitoring is Critical
Lobbying Efforts
Must Have Tools, Resources and
Contacts for All the Liens You Process
Conference Attendance and Participation Helps
Keep Employers Up to Date
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Thank You for Attending
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