9/16/2019

1

C2

GARNISHMENT TOPICS• BANKRUPTCY

• CHILD SUPPORT

• FEDERAL TAX LEVY-(UNLESS CHILD SUPPORT ISSUED PRIOR TO LEVY)

• STATE TAX LEVY

• LOCAL TAX LEVY

• CREDITOR GARNISHMENTS

• STUDENT LOANS

C2

COMPLIANCE/REGULATORY FACTS• TITLE III OF THE CONSUMER CREDIT PROTECTION ACT (CCPA)

• SETS MAXIMUM AMOUNT OF WAGES TO BE GARNISHED IN WORKWEEK/PAY PERIOD

• 25% OF THE EMPLOYEE’S DISPOSABLE EARNINGS

• EXCESS OF THE EMPLOYEE’S DISPOSABLE EARNINGS THAT ARE OVER 30X THE FEDERAL (OR STATE) MINIMUM

WAGE WHICHEVER IS HIGHER

• CCPA DICTATES AMOUNT WITHHELD FROM EMPLOYEE’S WAGES

• PROHIBITS EMPLOYERS FROM DISCHARGING AN EMPLOYEE DUE TO GARNISHMENTS

US DEPT OF LABOR FACT SHEET #30: FEDERAL WAGE GARNISHMENT LAW, CCPA

9/16/2019

2

C2

COMPLIANCE/REGULATORY FACTS• DEBT COLLECTION IMPROVEMENT ACT

• AUTHORIZES FEDERAL OR COLLECTION AGENCIES UNDER CONTRACT TO GARNISH UP TO 15% OF DISPOSABLE EARNINGS

• HIGHER EDUCATION ACT

• AUTHORIZES THE DEPT OF EDUCATION'S GUARANTY AGENCIES TO GARNISH UP TO 15% OF DISPOSABLE EARNINGS TO REPAY DEFAULTED FEDERAL STUDENT LOANS

• NATION MEDICAL SUPPORT ORDER

• CHECK STATE, LOCAL, OR U.S. TERRITORY AS ADDITIONAL REGULATIONS MAY APPLY

• ADMIN FEES, DISPOSABLE WAGE CALCULATION AND TIME LIMITS TO START DEDUCTING GARNISHMENTS

C2

VIOLATIONS OF THE CCPA• REINSTATEMENT OF A DISCHARGED EMPLOYEE

• PAYMENT OF BACK WAGES

• RESTORATION OF IMPROPERLY GARNISH AMOUNTS

• DOL MAY INITIATE COURT ACTION TO RESTRAIN VIOLATORS & REMEDY VIOLATIONS

• PROSECUTED CRIMINALLY AND FINED UP TO $1,000 OR IMPRISONED FOR NOT MORE THAN 1 YEAR, OR BOTH

• EMPLOYERS CAN BE RESPONSIBLE FOR PAYING ACTUAL GARNISHMENT AMOUNTS

• KNOW THE STATE LAWS – EXAMPLE: PA DOESN’T ALLOW CREDITOR GARNISHMENT (THEY CAN COLLECT OTHER WAYS)

C2

DISPOSABLE WAGES• DISPOSABLE WAGES ARE THE AMOUNT OF MONEY THAT REMAINS FOR GARNISHMENTS AFTER REQUIRED DEDUCTIONS

Gross Wages

Hours Rate

Regular Pay 90 15.00$      1,350.00$  

OT 10 7.50$         75.00$        

Total Gross Wages 1,425.00$  

Pre‐tax Health Deductions ($200.00) ($200.00) Reduces Fed, State, Local, SS and Med

401(k) Ded ‐6% ($85.50) Reduces Fed 

Supp Life ($11.25) ($11.25)

Fed Txble State & Local Txble SS & Med Txble

1,710.50$                                                            1,625.00$                   1,625.00$           

Federal Taxes 21.00% (359.21)

Social Security 6.20% (100.75)

Medicare 1.45% (23.56)

State (PA) 3.07% (49.89)

Local 1.00% (16.25)

PA EE SUI 0.06% (0.98)

Total Net Pay 577.62$     

Employee is paid $15 per hour and worked 90 hours (80 hours Reg & 10 hours OT)

9/16/2019

3

C2

DISPOSABLE WAGES

Gross Wages

Hours Rate

Regular Pay 90 15.00$      1,350.00$  

OT 10 7.50$         75.00$        

Total Gross Wages 1,425.00$  

Federal Taxes 21.00% (359.21)

Social Security 6.20% (100.75)

Medicare 1.45% (23.56)

State (PA) 3.07% (49.89)

Local 1.00% (16.25)

PA EE SUI 0.06% (0.98)

Total Disposable Wages 874.37$     

**** In some States & for some Orders, Health Ins and 401(k) COULD be included in required deductions

Disposable Wages = Gross Pay LESS all REQUIRED Deductions

C2

GARNISHMENT LIMITSGarnishment Type % of

Disposable Wages

Child Support – NOT supporting another family/child(ren) & in arrears more than 12 weeks Up to 65%

Child Support – NOT supporting another family/child(ren) & NOT in arrears more than 12 weeks Up to 60%

Child Support – IS supporting another family/child(ren) & in arrears more than 12 weeks Up to 55%

Child Support – IS supporting another family/child(ren) & NOT in arrears more than 12 weeks Up to 50%

Defaulted Debts owed to the US Government Up to 15%

Defaulted Student Loans Up to 15%

Other than Child SupportLesser of 25% of disposable earning OR the amount by which disposable earnings are greater than 30 times the Federal or State Minimum Wage (Which ever is higher)

Other (like Bankruptcy & Federal Tax Levies) – Read the Orders but….

C2

BANKRUPTCY (CHAPTER 13 &7)• CONTACT THE TRUSTEE TO CONFIRM OTHER CREDITORS ARE RELEASED

• IF THE CREDITOR IS NOT LISTED IN FILING THEY ARE NOT RELEASED

• CREDITOR GARNISHMENT RECEIVED AFTER BANKRUPTCY FILING ARE NOT RELEASED

• CHILD SUPPORT ORDERS CANNOT BE RELEASED BY A BANKRUPTCY

• TAX LEVIES TYPICALLY CAN’T BE RELEASED WITH BANKRUPTCY, BUT PENALTIES & INTEREST CAN BE CONFIRMED BY

THE TRUSTEE

• CHAP 13 BANKRUPTCY ORDERS TAKE PRIORITY OVER ANY OTHER CLAIM OF THE EMPLOYEE’S WAGES. (EXCEPT CHILD

SUPPORT)

• EMPLOYER MUST CONTINUE TO WITHHOLD & PAY GARNISHMENT ORDERS IF THE TRUSTEE DIRECTS

• EMPLOYERS ARE ADVISED TO COMMUNICATE WITH THE TRUSTEE REGARDING ALL WAGE GARNISHMENTS RECEIVED

BEFORE AND AFTER THE ORDER.

9/16/2019

4

C2

CHILD SUPPORT • TAKES PRECEDENCE OVER OTHER WITHHOLDING ORDERS

• UNLESS:

• ORDER WAS ISSUED OR RECEIVED PRIOR TO THE ISSUE DATE OF CHILD SUPPORT ORDER

• ORDER MAY HAVE VERBIAGE TO CONSENT OF CHILD SUPPORT ORDERS TAKING PRECEDENCE

(MOST WILL; GET IT IN WRITING)

• EMPLOYERS ARE NOT RESPONSIBLE IN DETERMINING IF EMPLOYEE IS

SUPPORTING ANOTHER FAMILY

• ISSUING AUTHORITY IS RESPONSIBLE FOR DETERMINING OTHER FAMILY

• IF EMPLOYER IS AWARE OF ANOTHER FAMILY DUE TO OTHER SUPPORT ORDERS,

CONTACT ISSUING AUTHORITY

This Photo by Unknown Author is licensed under CC BY-NC

C2

CHILD SUPPORTUNLESS FEDERAL LEVY OR CHILD SUPPORT ORDER TAKES PRECEDENCE OVER THE CURRENT ORDER, IT SHOULD NOT BE CONSIDERED REQUIRED

& INCLUDED WHEN DETERMINING DISPOSABLE WAGES FOR THE CHILD SUPPORT ORDER RECEIVED.

• ONE-TIME BONUS PAYMENTS

• MUST BE CONSIDERED WHEN COMPLYING WITH CHILD SUPPORT ORDERS

• CONTACT THE AGENCY THAT ISSUED ORDERS AS SOON AS YOU'RE AWARE

• LUMP SUM PAYMENTS CAN ALSO BE REPORTED THROUGH HTTPS://WWW.ACF.HHS.GOV/CSS/RESOURCE/REPORT-LUMP-SUM-PAYMENTS-ONLINE

• EMPLOYEE TERMINATES

• STATE LAW WILL DICTATE TIMEFRAMES OF REPORTING TO THE STATE

• FEDERAL LAW REQUIRES “PROMPT” NOTIFICATION

• CAN REPORT TERMINATION ELECTRONICALLY VIA HTTPS://WWW.ACF.HHS.GOV/CSS/RESOURCE/ELECTRONIC-TERMINATION-ETERM

C2

CHILD SUPPORT

IF THE EMPLOYEE IS NOT ABLE TO WORK BECAUSE OF INJURY/ILLNESS, THE EMPLOYER SHOULD NOTIFY THE

CHILD SUPPORT AGENCY AND PROVIDE THEM WITH CONTACT INFORMATION OF AGENCY PAYING

DISABILITY/WORKERS COMPENSATION (IF APPLICABLE)

PENALTIES FOR NOT COMPLYING WITH CHILD SUPPORT GARNISHMENTS INCLUDE THE LIABILITY OF

PAYMENT OF THE AMOUNT THAT SHOULD BE GARNISHED AND FINE SET BY THE STATE LAW

OFFICE OF CHILD SUPPORT ENFORCEMENT (OFCE)

9/16/2019

5

C2

National Medical Support Orders

Qualified Medical Child Support Orders

Example of calculation:Reasonable Cost Calculation of Medical Insurance

(Dental & Vision coverage are excluded from the National Medical Support Notice)Complete the form based below on the pay cycle of the employee

Weekly Biweekly Bimonthly Monthly Annual

1) Employee’s disposable earnings (if employee is paid hourly, use an 

average for most recent month or last year’s annual income)

$2,085.35 $1,082.50 $1,100.00 $3,000.00 $40,000.020

2) Total Child Support being withheld per pay period

$521.34 $541.25 $495.00 $1,800.00 $6,000.00

3) % of Total Child Support being withheld per pay period 25% 50% 45% 60% 15%

4) What % is the Employee’s current CCPA Limitation? 50% 50% 55% 60% 50%

Continue                          CCPA Limit                   Continue                  CCPA Limit                 Continue

If #4 is equal to #3, stop here – you have met CCPA limitation and will not be able to withhold Health Insurance Premium

5) Current Health Insurance Premium $125.75 $24.75 $0.00 $250.00 $2,400.00

6) Health Insurance Premium for Family (or Parent/Child) as 

applicable

$250.00 $85.00 $125.00 $500.00 $6,000.00

7) Difference between current cost of Health Insurance Premium & 

Additional Health Insurance Premium

$124.25 $60.25 $125.00 $250.00 $3,600.00

8) Total of Health Insurance Premium Difference & Child Support 

(#2&#7)

$651.60 $601.50 $625.00 $2,050.00 $9,600.00

9) Divide #8 by #1 31% 56% 57% 68% 24%

Does #9 exceed #4? True False False False True

C2

National Medical Support Orders

Qualified Medical Child Support Orders

Example of calculation:Affordable Cost Calculation of Medical Insurance

(Dental & Vision coverage are excluded from the National Medical Support Notice)Complete the form based below on the pay cycle of the employee

1) Employee’s disposable earnings per 

Month

$9,036.52 $2,345.42 $2,200.00 $3,000.00 $3,333.33

5% of Net Pay (Disposable Earnings)

$451.83 $117.27 $110.00 $150.00 $166.67

7) Difference between Current cost of 

Health Insurance Premium & Additional 

Health Insurance Premium

$538.42 $130.54 $250.00 $250.00 $300.00

Difference between 5% and Premium ($86.59) ($13.27) ($140.00) ($100.00) ($133.33)

Does the Premium exceed 5% of the Net Pay per 

Month

False False False False False

IF BOTH TRUE = CAN TAKE HEALTH INSURANCE PREMIUMSIF EVEN ONE FALSE = CANNOT TAKE HEALTH INSURANCE PREMIUMS

C2

CCPA LIMITATIONSChild Support-NOT supporting another family in arrears more than 12 weeks Up to 65%

Child Support- NOT supporting another family, NOT in arrears more than 12 weeks

Up to 60%

Child Support – IS supporting another family in arrears more than 12 weeks Up to 55%

Child Support – IS supporting another family, NOT in arrears more than 12 weeks

Up to 50%

9/16/2019

6

C2

The Order may also indicate Health Insurance Premiums must be “affordable”, or 5% of the Monthly Net Pay. You should calculate that amount separately from the above calculations. If your 1st calculation results in a “True”, perform this calculation.

AFFORDABLE

Net pay is $500 per week

Individual coverage is $100; Family is $150 (per

month)

$500 * .05= $25 x 4 weeks = $100

$150 - $100 = $50

NOT AFFORDABLE

Net pay is $500 per week

Individual coverage is $100; Family is $250 (per

month)

$500 * .05 = $25 x 4 weeks = $100

$250 - $100 = $150

Note: If Premiums change, you will need to recalculate again, using revised rates.

C2

FEDERAL TAX LEVIES

• Employer calculates the exempt amount from levy

• Employer will calculate monies the employee keeps (the net pay)

• Deductions that can be subtracted from Employee Gross Wages:

• Federal, State and Local Taxes

• Involuntary/Voluntary deductions in effect before Levy received

• Union Dues

C2

Note: Elective deferrals such as 401(k), uniforms, charitable donations, etc.; can only be considered if the electives and the amount already in place prior to Levy being received. If an employee chooses to increase their electives after the Levy is received, their amount exempt from the Levy will not change. Health Insurance Premiums increased by Employer are not considered “elective”.

Federal Tax Levies not subject to rules/guidelines of the CCPA.1. Employer will receive Form 668-W “Notice of Levy on Wages, Salary and Other Income”2. Form 668-W has 6 parts3. Part 1 is the Employer’s copy4. Part 2 is the Employee’s copy5. Parts 3-5 must be completed by the Employee and provide the Employer their tax filing status and

dependents they claim on tax return1. Employee should not include children covered by a child support order that takes priority over the Levy

6. Parts 3 & 4 MUST be returned to Employer within 3 days of the date the Employer receives the form 668-W

1. If employee does not return/provide Parts 3 & 4, Employer MUST USE Married filing separately 1 exemption7. Part 5 is Employee’s copy8. Back of Part 3 completed by Employer, send to IRS9. Part 4 Employer keeps10.Part 6 is kept by IRS

9/16/2019

7

C2

FEDERAL TAX LEVIES• All amounts paid to employee subject to federal levy

except:

• Unemployment compensation benefits

• Workers’ compensation benefits

• Annuity/pension payments under RRTA/Armed services personnel

• Certain armed service – connected disability payments

• Certain public assistance payments

• Amounts ordered withheld under previously issued court order for child support

• IRS can levy up to 15% on these payments, as well

as:

• Federal payments not based on income/assets of

payee

• Federal Employee wage & salary payments up to the

determined exempt amount

• State or Local public assistance payments

C2

Federal Tax Levies will occur for more than 1 year

• Employee does not need to complete new form 668-W Part 3

• Employer must continue to use same tax table from the year 668-W Pt 3 was received• New tax tables 2020 – Employer

should ask for new 668-W Pt 3• Best practice – place procedure

to request employee complete new 668-W form

• Make copy of Pt 3, original to goes the IRS

Former Employees

• Employer note on back of Part 3 of 668-W

• Provide last known address

Employee terminates employment during levy

• Employer should continue to deduct any non-exempt amount

• Note termination date on back of 668-W part 3

• Provide last known address

C2

FEDERAL TAX LEVIES• Employers’ required to withhold as directed

• Unless IRS officially notifies

• Failure to comply employer is liable for full amount

• Penalty of 50% of the amount recoverable by IRS

• Provide employee with IRS contact information

• Employee/IRS agreement Form 2159• Agreed amount by both employee and IRS

• Employer agrees to participate

WHAT IF I GET A LEVY AGAINST ONE OF MY EMPLOYEES, VENDORS, CUSTOMERS, OR 3RD PARTIES?

2019 IRS PUB 1494 TABLES

9/16/2019

8

C2

STATE TAX LEVIES• Each State determines amounts

• Total of levies, child support and garnishments cannot exceed CCPA rules

• Some states issue liens instead of levies

• Liens are not subject to CCPA limits

• Pennsylvania Tax Wage Garnishment

• PA Dept of Revenue Act 46 of 2003

• Garnish up to 10% of delinquent taxpayer’s gross wages

• Failure to withhold liable for full amount

• Penalty of 5% per month up to maximum of 50% of liability

C2

LOCAL TAX LEVIESBUREAU NOTIFICATION OF UNDERPAYMENT MUST CONTAIN:

• Applicable tax periods

• Tax underpayment amount detailed by tax

period

• The legal basis upon which bureau made

determination

• An itemization of revisions made by a return

by the bureau

INSTALLMENT AGREEMENTS

• Are authorized, if agreement will facilitate collection

• Agreements remain in effect for full term

• Prepayment of tax is also permitted when agreed

• Bureau can terminate agreement if:

• Taxpayer provided inaccurate data

• Bureau views collection of tax is in jeopardy

• If taxpayer’s financial condition changes

• If taxpayer fails to pay any installments or other tax when due

In Pennsylvania, ACT 50 governs Local Tax Collections

C2

WHAT A BUREAU MAY DO TO ENFORCE COLLECTION OF TAXES:

• If a taxpayer, business entity or Employer has not filed a timely, properly, and/or paid tax Bureau may take following actions:

• Bureau may contact taxpayer and attempt to resolve liability

• If a taxpayer owes delinquent/or not filed proper taxes, Bureau may deny issuance of applicable license for any tax this Bureau collects on its behalf

• Bureau may file civil law suit

• Bureau may file a criminal complaint or action against taxpayer, Employer, or business owner etc.

• Bureau may investigate, assess and advance through the Courts of Common Pleas

• Bureau may also prepare/issue a wage attachment to Employers

9/16/2019

9

C2

CREDITOR GARNISHMENTFollowing states do not allow creditor garnishment:

Pennsylvania, New York, North Carolina, South Carolina, Texas

You can choose, as a business, to garnish the wages. If you do so, you must choose to do so for ALL

garnishments that come from these States.

New York does not allow Creditor Garnishments for New York residents regardless of where they are working

unless the Order was issued by a New York Court.

Example: Employee lives in New York and works in Connecticut or New Jersey and the Order is issued

by the New Jersey/Connecticut Court – you are not allowed to garnish the wages for the New York resident.

Notify the Creditor in writing you will not garnish Employee’s wages.

C2

Employer is allowed to deduct no more than the lessor of:

• 25% of the Employee’s disposable earnings

• The excess of the Employee’s disposable earnings that are over 30

times the Federal (or State) Minimum Wage (whichever is higher)

In general, Federal, State or Local Employees’ wages are exempt

from Creditor Garnishments unless the individual State Law says

otherwise. Federally, US Government Employees are subject to

Child Support, Alimony and Tax Garnishments. US Postal Service

Employees are not US Government Employees and therefore

NOT exempt from Wage Garnishments

C2

STUDENT LOANS

• Considered wage assignments/voluntary wage assessments

• Employee must be given 30-days’ notice prior to start of Garnishment

• Employer is allowed to deduct no more than the lesser of:

• 15% Employee’s disposable earnings

• Excess of the Employee’s disposable earnings that are over 30 times Federal (or State)

Minimum Wage (whichever is higher)

*Employee can agree, in writing, to have a higher percentage garnished

9/16/2019

10

C2

If Employee has multiple Student Loan Garnishments:• 25% of the Employee’s disposable earnings• Excess of the Employee’s disposable earnings that are over 30 times Federal (or State)

Minimum Wage (whichever is higher)

If an Employee is terminated and is then rehired within 1 year (12 months) of the termination date, the student loan garnishment cannot begin again until 1 year (12 months) from their date of rehire.

Penalties for not complying with a Student Loan Garnishment:• Liability of payment for amount should have been garnished• Punitive damages, legal fees and court costs• If Employer terminates Employee because of Student Loan Garnishment

• Employer may be required to rehire Employee • Pay Employee back-wages, pay for punitive damages, legal fees and court costs.

C2

e-IWOHTTPS://WWW.ACF.HHS.GOV/CSS/EMPLOYERS/E-IWO

Office of Child Support Enforcement provides e-IWO as a FREE Resource to Employers to assist with Child Support Orders. The system is also electronic and the information sharing is more efficient.

• Gets payments to families quicker

• Speeds the processing time from IWO preparation to Employer processing

• Reduces errors from manual processing

• Eliminates cost of postage and processing paper documents

• Provides ongoing communication between child support agencies and Employers

C2

Electronic Income Withholding Order (e-IWO) OverviewFederal Office of Child Support Enforcement has developed an electronic Income

Withholding Order (e-IWO) process that enables you to:

• Receive your child support Income Withholding Orders (IWO) electronically

• Send acknowledgments to the state indicating whether you are accepting/rejecting the

order

e-IWO process has proven to be cost effective/efficient method of handling IWOs for

Employers. Employers can choose one of two options to implement the e-IWO process.

9/16/2019

11

C2

e-IWOOPTION 1 – SYSTEM- TO-SYSTEM INTERFACE

• Medium to large employers

• Internal IT resources

• Several month of programming/testing

• Implementation takes 3-5 months

OPTION 2 – NO PROGRAMMING OPTION (NPO)

• Receive small number of IWO’s

• Limited internal it resources

• Requires your company it set up STFP

• Implementation takes 2-4 weeks

C2

GENERAL REGULATIONS

• All garnishments MUST begin no later then 1st pay date following 14 days of receipt of

garnishment order. (verify the order & state regulations)

• All garnished wage amounts must be forwarded to the ordering authority with 7 business

days of the date of the garnishment. (verify the order & state regulations)

C2

INTERNAL PROCEDURES & BEST PRACTICES

• Register with e-IWO

• The HR department should provide a copy of all garnishments orders to each employee immediately

• Provide the employee with 1 internal contact regarding questions related to the garnishment

• Provide the contact information or highlight the information on the order for the employees

• Read the order in full

• Notify the employee of any due dates for completion & return of forms, as well as ramification of failure to comply

• Be consistent on the administration of procedures, treat all employees the same

• Store Garnishments Order outside of basic Personnel File

9/16/2019

12

C2

INTERNAL PROCEDURES & BEST PRACTICES CONT.

• If you have questions notify issuing Authority. Get responses in writing (by date,

individual spoken to, and time)

• Follow instructions as received regardless of information from employee

• Do not speak to friends, relatives or attorneys of the employees’ (unless Trustee for a

Bankruptcy). You are required to comply with guidelines provided in the order

• If employee notifies you the order is satisfied or changed, ask the employee to have the

issuing Authority to fax/email you the revised order.

C2

C2

THANK YOU!!

Tracy Cruz, CPP

Tracy.cruz@zausnerfoods.com