CHAPTER 5 Answering Hard Questions: Providing Guidance to IV-D Agencies and Employers on Enforcement Issues

CHAPTER 5
Answering Hard Questions: Providing Guidance to IV-D Agencies and Employers on Enforcement Issues

CHAPTER 5 AT A GLANCE
Not all features are available in this version- See PDF version or hard copy report
INTRODUCTION, 5-1
ENFORCEMENT OF HEALTH CARE PROVISIONS OF CHILD SUPPORT ORDERS, 5-2
    Enforcing Orders to Provide Family Health Coverage, 5-2
        Enforcement Issues in Interstate Child Support Cases, 5-3
    Monitoring and Enforcing Custodial Parent's Responsibility, 5-4
CONSUMER CREDIT PROTECTION ACT (CCPA) LIMITS, 5-5
    Background, 5-5
    Applicability, 5-6
    Amount of CCPA Limits, 5-7
    The Potential for Manipulating the CCPA Limits, 5-8
    Health Care Coverage for the Child When the Withholding Limits are Breached, 5-8
PRIORITY OF WITHHOLDING, 5-9

Theme
Because circumstances of families change, orders often seem out of date before their provisions are even put into place. Sometimes orders have to be changed, but often the issues can be solved by having reasonable and realistic enforcement rules that help IV-D agencies and employers apply the provisions of award over time even though individual fact patterns have changed. This chapter includes recommendations for two of the most difficult enforcement issues-the Consumer Credit Protection Act limitation on wage garnishment and the Priority of Withholding-as well as recommendations for other enforcement issues.

Introduction

Child support enforcement agencies are required to enforce the medical support provisions of child support orders for all IV-D cases.¹ For a number of reasons, however, such enforcement has proven difficult. For example, the parents may live in different States, or neither parent may have access to medical coverage at the time the child support order is originally entered. When it passed CSPIA, Congress instructed the Working Group to examine some of the issues surrounding medical support enforcement, particularly those related to the Federal CCPA and the priority of withholding.² In its examination of these issues, the Working Group also discovered a number of other problems that needed to be addressed and has made recommendations to remedy these issues as well. These recommendations also reflect the need to address new enforcement issues that will arise once the Working Group's recommendations regarding the establishment of orders have been implemented.

Enforcement of Health Care Provisions of Child Support Orders
Enforcing Orders to Provide Family Health Coverage

The Working Group recommends that decision makers take a number of steps when ordering health coverage for children: (1) consider the private family health coverage that is available to both parents; (2) order the coverage that best meets the child's needs; (3) allocate the costs of health care premiums between the parents; and (4) determine how deductibles, co-payments, and other uninsured health care costs will be shared between the parents. In cases where neither parent has access to reasonable private coverage, the Working Group's decision matrix recommends that children should be enrolled in publicly-subsidized programs.³

These changes in policy-looking to the custodial parent for coverage and directing the family to publicly-subsidized programs where the "available" insurance is not accessible or affordable-will result in more custodial parents providing such coverage. It will also require decision makers to order noncustodial parents to make payments to offset the custodial parent's provision of the coverage. Whether this amount is incorporated into the current child support obligation or delineated as an additional sum in the order, it is likely to be collected through income withholding.⁴ The reasons for this include ease of administering the income withholding process, particularly with an increasingly automated child support enforcement system.⁵

The Working Group recognizes that there are additional problems that both IV-D agencies and the private bar struggle with while seeking to secure and enforce medical child support for all children. One issue is how to secure compliance from an individual who has no family health care coverage and who breaches an order for cash support entered either to cover the cost incurred by the other parent or to meet an obligation for unreimbursed medical expenses for the child. While no new remedies are proposed by the Working Group, it is anticipated that implementation of other recommendations in this Report will enable courts or administrative hearing agencies to adjudicate contempt actions in a timely and effective manner. Similarly, the broad enforcement tools granted to IV-D agencies by PRWORA will allow for the expeditious collection of a child support debt created by breach of the medical support provisions of a child support order.

In a similar vein, the Working Group recognizes that implementation of its guidelines recommendations, set out in CHAPTER 3, will be applied to requests by either party to modify an existing support order-including modifications requested primarily to add a medical support provision. States will have to incorporate these guidelines for medical support into laws and procedures related to the standard for modifying a support order (i.e., whether there must be a threshold dollar or percentage change in the cash support amount before a request for modification is granted); and, for IV-D agencies, how its statutory obligation to "review and adjust" child support orders is accomplished.⁶

Enforcement Issues in Interstate Child Support Cases

In approximately 25 to 30 percent of all child support-eligible families, the noncustodial parent lives in a different State from the child.⁷ Interstate child support cases are generally viewed as the most difficult child support cases to enforce, in part because of the difficulty of locating a noncustodial parent across State lines.⁸ While legal efforts have been made to simplify interstate child support case processing, notably with the Uniform Interstate Family Support Act (UIFSA), it is still safe to say that interstate case processing remains more complex than intrastate case processing.

New Hire Reporting requires employers to provide basic wage information about their newly hired employees.⁹ This information has proven vital in locating child support obligors and putting an income withholding order in place with the obligor's new employer to obtain cash child support that is due. A number of States already use their New Hire Reporting procedures to obtain information regarding the availability of medical coverage.

Congress convened the U.S. Commission on Interstate Child Support in 1988. The broad charge of the Commission was to submit a report to Congress with recommendations to improve the interstate establishment and enforcement of child support awards. In its final report to Congress, the Interstate Commission also made a number of recommendations to improve the enforcement of medical support orders. Congress adopted many of these medical support recommendations and included them in OBRA '93.¹⁰

One relevant recommendation enacted in OBRA '93 precludes insurers from denying enrollment of a child because the child does not reside in the insurer's service area.¹¹ Despite the inclusion of this provision in Federal law, the Working Group learned that there are still many geographical barriers to children obtaining health coverage in both the interstate and intrastate contexts. In part, this problem may exist because some insurers and employers are confused about the scope of §1908 and do not know that they are subject to it.¹² HCFA will issue regulations that will undoubtedly clarify the anti-discrimination provisions.

The Working Group has made a number of recommendations to address geographic barriers to coverage. Geographic barriers can be particularly problematic for a family when only one parent has private family health coverage available and that coverage discriminates against a child because of geography. This situation effectively denies the child private health coverage, and unfairly forces the taxpayer to shoulder the burden of public coverage if the child is enrolled in Medicaid or SCHIP when, in fact, one of the parents has coverage available and should provide it.

Monitoring and Enforcing Custodial Parent's Responsibility

If the Working Group's recommendations are implemented, increasing numbers of custodial parents will be ordered to provide health care coverage to their children. Establishing the medical support obligation of the custodial parent will increase the potential for more children being covered by private health insurance, thereby lessening the Medicaid rolls and costs to the State and Federal taxpayers. If the custodial parents do not comply with medical support orders, the IV-D agency will have to enforce them. This raises both ethical and resource issues for the IV-D program.

A threshold concern is the ethical problem, resulting from the IV-D agency's need to enforce a medical support order against the custodial parent. The Working Group examined various States' practices and determined that the vast majority of States do not consider the custodial parent to be their client. Statutes in these States expressly provide that the IV-D agency represents the interests of the State, rather than those of any individual parent or child.¹³ Since the State is interested in ensuring that children have health care coverage, the Working Group concluded that enforcing medical support orders against custodial parents would not create an unethical situation or conflict for IV-D child support attorneys, as long as custodial parents clearly understand that the agency represents the State, rather than the parent.

However, the Working Group concluded that IV-D agencies need to make it absolutely clear to custodial parents that they might be ordered to provide their children's health care coverage. Child support agencies should tell custodial parents that if they do not comply with an order to provide coverage, the State will enforce the order against them.

The Working Group also considered the difficulty that a IV-D agency might encounter in enforcing a medical child support award against a custodial parent, when the reason that the parent was not providing coverage was that the noncustodial parent was not contributing to the cost of coverage as ordered. In that case, the Working group concluded that the State should not enforce the order against the custodial parent. States currently have to decide when and how to enforce child support orders,¹⁴ and we expect them to exercise this discretion.

Moreover, the Working Group agreed that the child support agency should consider modifying an order if the child loses coverage because the ordered coverage is no longer available or because the noncustodial parent failed to pay the custodial parent the ordered portion of the premium. Until a new order is in place, the State should enroll the child in the Medicaid or SCHIP program if the child qualifies.

Recommendation 44 (Federal Legislation)
When the decision maker requires the custodial parent to provide coverage for the children, the parent should verify that the children have been enrolled within a reasonable time, to be determined by the State. When the child support enforcement agency provides enforcement services, and the children are not enrolled as ordered, the child support enforcement agency should take appropriate steps to enforce the order against the custodial parent. However, any notice that is sent to the parent should ask the custodial parent to contact the child support enforcement agency if she did not provide health care coverage because of some financial difficulty, a change in employment, other change in circumstances, and/or the noncustodial parent's failure to comply with an order that required him/her to pay a portion of the premium.

Consumer Credit Protection Act (CCPA)¹⁵ Limits
Background

The Federal CCPA limits the percentage of an obligor's disposable income that may be withheld for child support purposes.¹⁶ Under the CCPA, if the obligor supports only one family the maximum amount that may be withheld for child support purposes is 60 percent of disposable income. If an obligor supports more than one family, the maximum amount that can be withheld is 50 percent. Both of these amounts may be increased by five percent, to 65 percent and 55 percent respectively, if the obligor's child support payments are in arrears for at least twelve weeks.¹⁷

Applicability

There is some confusion about when the lower withholding ceiling for parents who are supporting multiple families actually applies. Some states apply the lower (50 percent/55 percent) limits only when the obligor is living with and contributing to the support of one of his families. Other states use the lower limits when the obligor is living alone but has obligations to more than one family. This can lead to inequities in interstate cases.

The legislative history and case law pertaining to this provision of the CCPA suggest that Congress intended the lower CCPA limits to apply only when an obligor is living with a family that the obligor is helping to support. The CCPA was amended in 1977 to include the child support withholding limits. Remarks offered by Senator Nunn on the Senate floor when introducing the amendment, as well as language in the conference report of the bill that included the amendment, both suggest that the amendment was intended to protect "second families" from financial ruin. While there is very limited case law that makes reference to the child support withholding limits, what little there is generally assumes that the lower withholding limits apply to noncustodial parents who are supporting a second family in their own household.

Therefore, the Working Group recommends that this interpretation be adopted nationally so that practice on this issue is uniform. Since the Department of Commerce has the authority to clarify this issue, the Working Group asks that the Secretaries of Labor and HHS request the Secretary of Commerce to issue such guidance.

Recommendation 45 (Federal Regulation)
The Secretaries of HHS and DOL should request the Department of Commerce to review the current provisions of the Consumer Credit Protection Act, which specifies limits on wage garnishment for family support payments, 15 U.S.C. §167(b)(2)(A) and (B). The Department should clarify whether the lower wage garnishment applies only to individuals who have an order to support a spouse or one or more children outside of their households and are also supporting a spouse and/or child within their household.

Amount of CCPA Limits

The Working Group recognized that under current child support guidelines some noncustodial parents pay a substantial percentage of their income in a combination of cash and medical support. Lower income noncustodial parents are left with too little income to live on. Even at higher income levels, parents who pay more than half of their income in child support may quit their jobs and/or enter the underground economy. Then the children receive neither cash support nor family health coverage.

The CCPA sets the upper limits on the amount that can be withheld. States can set lower withholding limits and at least 18 states have done so.¹⁸ Moreover, decision makers may use their discretion to set even lower limits in appropriate cases. For example, Washington State has established a withholding limit of 50 percent of disposable income. When the obligor owes both current and back support, the obligor can negotiate with the Support Enforcement Officer to collect less than 50 percent by lowering the amount collected on arrears if the 50 percent standard would leave the obligor with too little income for self support. In exchange for this break however, the Washington obligor has to waive the statute of limitations on arrearages. The result is that less will be collected each month but eventually everything will be paid off.

Recommendation 46 (Best Practice)
The current Federal wage-withholding limits should be maintained, but the Federal OCSE should advise the States that they can set lower limits, as long as they are not so low that they make it impossible to order the parent to provide health care coverage, in addition to child support, when it is available at reasonable cost.

One way to address this problem is to reduce the number of cases in which a noncustodial parent is asked to provide private health care coverage that is very costly relative to the noncustodial parent's income. The Working Group believes that its definition of "reasonable cost" will have this result and thereby reduce the number of cases in which excessive withholding is a problem. Nonetheless, even with this change, there will be cases when application of State or Federal wage withholding limits may result in excessive withholding-for example, when the parent has accumulated significant arrears or when the parent has multiple support obligations.

For this reason, the Working Group considered whether Federal law should be amended to set lower limits. After careful consideration, it was decided that the current statute should be maintained since it provides a ceiling on withholding while allowing States to set lower limits if they think this is appropriate. The Working Group noted that many States have done this and more might consider doing so if they were more aware of their options.

Therefore, the Working Group recommends that OCSE remind States that they have this choice. However, the Working Group also suggests that States be advised that it would be inappropriate to set a level so low that noncustodial parents would rarely be contributing toward the cost of their children's health care coverage.

The Potential for Manipulating the CCPA Limits

The CCPA limit is calculated on disposable income. Noncustodial parents can manipulate their disposable income in order to avoid paying the full amount of their cash and medical support obligations. To prevent this from occurring, the Working Group recommends that in any IV-D case where the withholding limits are reached, the agency should examine how the obligor's disposable income was calculated to determine whether it is being manipulated to avoid meeting a child support obligation.

Recommendation 47 (Best Practice)
In any case where the amount of the parent's current child support payments exceeds Federal wage withholding limits, the decision maker should examine the calculation of the noncustodial parent's disposable income to determine whether the parent is reducing their disposable income through excessive withholding or other reductions in gross income that are not contemplated by the Consumer Credit Protection Act (CCPA).

Health Care Coverage for the Child When the Withholding Limits are Breached

The Working Group has recommended a definition of "reasonable cost" that takes into account the premium required to obtain health care coverage relative to the income of the parent who is to provide that coverage. The Working Group has also recommended that when the cost of available coverage is not reasonable under that definition, the tribunal should order the custodial parent to enroll the children in Medicaid or SCHIP if they are eligible for either of those programs. The noncustodial parent might also be asked to help contribute toward the cost of Medicaid/SCHIP coverage. This ensures coverage for children within their parent's ability to pay for such coverage.

The Working Group believes that the rationale which led to these decisions would lead to a similar result when an employee's child support obligation(s) exceed withholding limits. If the combination of cash and medical support that the obligor is required to pay would breach the withholding limits, then the medical child support obligation should be modified, the child should be moved to appropriate publicly-subsidized coverage, and a noncustodial parent contribution toward the cost of that coverage that can be met within the withholding limits should be established.

Recommendation 48 (Best Practice)
If the cost of providing private health care coverage increases a parent's child support obligation so that the amount exceeds Federal wage-withholding limits, the decision maker should have the authority to direct the custodial parent to apply for the Medicaid or SCHIP. If the child is found eligible, the decision maker may require the noncustodial parent to contribute toward the cost of coverage consistent with Recommendation 19.

Priority of Withholding

A typical child support order includes three elements: (1) current support, (2) medical support, and (3) arrears. If the custodial parent is to provide health care coverage, the amount that the noncustodial parent will contribute to the cost of obtaining that coverage will be included in the amount designated as current support. In that case, the order will have one element (current support) or possibly two (if arrears are owed). If an employer receives a withholding order that requires the payment of a sum in excess of the withholding limits, the employer will withhold the maximum amount possible up to those limits and forward the money to the State Disbursement Unit (SDU) for disbursement. Under Federal law, the SDU must first pay current child support and medical support out of the amount withheld, then pay arrears.²⁰

If the noncustodial parent is providing health care coverage, the situation is different. In that case, the order will designate a current cash support amount and arrears (if applicable) and require that sum to be sent to the SDU for disbursement. It will also order the employer to withhold the amount necessary to pay any premium associated with the children's health care coverage. Most employers have plan benefit administrators who determine the employee contribution for the health care premium and forward the information to payroll managers, who then withhold the amounts from employee's salaries. Both benefits are normally not withheld simultaneously by one entity.

The health care administrator cannot know whether the employee's cash and medical support obligations will exceed withholding limits. Even when the problem is identified, there is currently no uniform Federal guidance to employers about how to handle the situation. Employers and plan administrators would like direction about whether to give priority to cash support or to health care premiums. Such guidance would allow them to treat all of their employees equally and would also facilitate decisionmaking in interstate cases where there may be conflicting State laws. For this very reason, Congress asked the Working Group to examine the issue of priority of payment when an obligor lacks sufficient income to pay both the cash child support and medical support premiums without violating the withholding limits.²¹

In addressing this issue, the Working Group faced a fundamental dilemma: to give priority to cash support at the expense of a health care premium means that children could lose private health care coverage. But giving priority to health care premiums over cash support may mean that the children's other basic needs, such as rent payments, cannot be met. Neither is a desirable outcome.

“[T]here should always be discretion to permit … the custodial parent to indicate that they prefer some other priority order for the distribution of funds that are withheld.”

~Cristina Firvida, Counsel, National Women’s Law Center

One way to address this problem is to reduce the number of cases in which a noncustodial parent is asked to provide health care coverage that is expensive relative to disposable income. The Working Group's recommendation regarding "reasonable cost" should have this result and should help to reduce the number of cases in which this priority issue arises.

Even with this change, however, there will be instances where the withholding limits would have to be breached in order to satisfy all of the ordered obligations. Employers and plan administrators will still need guidance about how to stay within the withholding limits, especially in a situation where an obligor has support orders for multiple families. In that situation, even if the individual orders are lower than the withholding limits, they may collectively breach those limits.

To develop guidance in this area, the Working Group looked first at State practice. It found that while most States do not provide explicit guidance in their child support guidelines or State IV-D plans on how to handle this situation,²² a few States do. For example, in California, cash support is given first priority, payments toward family health coverage premiums are second.²³ In New Jersey, when there is insufficient income to pay cash support and family health coverage premiums without eroding the obligor's net income "reserves,"²⁴ the State has specified that child support is paid first.
The Working Group also examined this issue in light of the traditional primary mission of the child support enforcement program, which is to collect cash child support. Moreover, the custodial parent is the one who must meet the children's immediate needs. Reducing or eliminating cash support by giving priority to health care premiums may make it impossible for the custodial parent to do so. Finally, while the children may lose private coverage if premiums are not paid, it may be possible for them to obtain public coverage through Medicaid, SCHIP, or some other program. Since these alternatives are increasingly available, cash support for other needs is primary.

For all of these reasons, the Working Group recommends that when priority of payment becomes an issue, the general rule should be that cash support is withheld first, then private health care premiums, then arrears. Because the Working Group wanted to give flexibility to judges and administrative agencies in varying this priority of withholding when it would be in child's best interest to do so-when for example, a child has such large medical costs that the value of the family health coverage premium outweighs any cash support the child might receive-the Working Group's recommendation also allows a deviation from the general rule on a case-by-case basis regarding priority of payment.

Finally, the Working Group wishes to emphasize that this recommendation applies to the situation in which the trade-off is between cash support, private health care premiums, and arrears. In cases where the issue is whether to pay cash support, noncustodial parent contribution toward Medicaid/SCHIP and arrears, priority should be given to current cash support and arrears owed to the family before any monies are used to pay noncustodial parent contributions toward publicly subsidized coverage.

Recommendation 49 (Federal Regulation)
A Federal policy on the priority of allocation by employers of funds collected through wage withholding should be promulgated. Employers should first attribute withheld funds to current cash support (alimony and child support), then to health care premiums and other current medical support, then to arrears (cash or medical) and then to other obligations. Decision makers should have the flexibility under State law to deviate on a case-by-case basis and provide that health care premiums will be paid first when that is in the best interest of the child.

In this chapter, we looked at the hard questions that face the child support enforcement agency and employers in enforcing medical support provisions in child support orders. Upon careful review of the many obstacles, the Working Group has recommended statutory, regulatory, and implementation practices to improve the health care coverage of America's children.

Endnotes

[1] 42 U.S.C. §652(f) (1999).

[2] Pub. L. 105-200, Title IV, §401(a)(5), 112 Stat. 659 (1998), codified at 42 U.S.C. §658a (note) (1999).

[3] See Chapter 3.

[4] See United States House of Representatives Committee of Ways and Means, “Green Book” (1998), 571.

[5] The Interstate Commission noted the use of income withholding in the medical support context in its report “Blueprint for Reform” (1993), 140.

[6] Pub. L. 100-485 (Family Support Act of 1998).

[7]See, for example, Lyon, Matthew. “Characteristics of Families Using Title IV-D Services in 1995.” U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation (May 1999), 4; U.S. Commission on Interstate Child Support, “Supporting Our Children: A Blueprint for Reform,” xii; Wheaton, Laura. “Noncustodial Fathers: To What Extent do They Have Access to Health Care Coverage?” The Urban Institute (2000), 15.

[8] The New Hire Reporting program should greatly improve locating noncustodial parents in the interstate context.

[9] See Chapter 3.

[10] Pub. L. 103-66, Title IV, Subtitle D, §609(a) (1993), codified at 29 U.S.C. §1169 (1999). The Interstate Commission recommended, and Congress subsequently adopted in OBRA 93, a whole series of anti-discrimination provisions for insurers and employers, prohibiting them from failing to enroll dependents of employees because, for example, the child was born out of wedlock, not claimed as a dependent on the employee’s income tax return, or not residing with the employee or in the insurer’s service area.

[11] Section 1908(a) of the Social Security Act, codified at 42 U.S.C. §1396g (1999).

[12] For example, many insurers limit their provision of coverage within a city metropolitan area, beyond which, even if within the same State, a child would not be covered except under an “emergency exception.”

[13] A 1993 Child Support Enforcement analysis indicates that 26 states have provisions that make it clear that the agency represents the State, not the parent(s) in IV-D cases. (See memo provided to subcommittee members by Susan Notar. Staff updated this memo for the Working Group.) As a result of that update, it appears that, as of now, in thirty States, the IV-D agency represents only the State. OCSE Information Memorandum (OCSE-IM-93-03) on the role of attorneys in the IV-D child support agency is available from OCSE.

[14] Federal guidance makes it clear that States (not parents) decide when and how to enforce an order (45 CFR §303.6). This flexibility could certainly be used in deciding whether to enforce a medical support order against a custodial parent.

[15] Pub. L. 90-321; 82 Stat. 146 (1962), codified at 15 U.S.C. §1601 et seq. (1999).

[16] 15 U.S.C. §1673(b) (1999).

[17] Id.

[18] Alaska, Arizona, California, Idaho. Iowa, Louisiana, Maine, Missouri, Nevada, New Mexico, North Dakota, Oklahoma, Texas, and Washington limit withholding to 50 percent of disposable income. South Dakota limits withholding to 50 percent of net income. Connecticut, New York, and Tennessee vary the limits with income and number of orders.

[19] Federal case law clearly provides that the CCPA limits do not apply to tax refunds. However, this does not prevent the custodial parent’s family from suffering hardship if monthly support payments are reduced because of excessive withholding by the noncustodial parent.

[20] 42 U.S.C. §654, 657 and 45 C.F.R. 302.51 (1999).

[21] 42 U.S.C. §658a note (1999). The Federal Office of Child Support Enforcement has allowed States to set their own policy in this area as long as it was consistent with Federal law and policy.

[22] The States that do address the priority issue in their guidelines are: California, Missouri, New Jersey, and Washington.

[23] Except in the Sacramento County IV-D Kids program—when a child is placed on the IV-D Kids plan, family health coverage is paid first, then cash support.

[24] Defined as below 105 percent of the poverty line for one person after paying child support, or the custodial parent’s net income below 200 percent of the poverty line for the number of persons in the primary household.