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Final Rule: Extension of IV-D Child Support Enforcement Services

AT-91-01

Published: March 8, 1991
Information About:
Other Public Partners, TANF (IV-A), Foster Care (IV-E), State/Local Child Support Agencies
Topics:
Case Management, Medical Support
Types:
Policy, Action Transmittals (AT), Regulations
Tags:
Collection & Enforcement Systems

ACTION TRANSMITTAL

OCSE-AT-91-01

March 8, 1991

TO:STATE AGENCIES ADMINISTERING CHILD SUPPORT ENFORCEMENT PLANS UNDER TITLE IV-D OF THE SOCIAL SECURITY ACT AND OTHER INTERESTED INDIVIDUALS

SUBJECT:Extension of IV-D Child Support Enforcement Services to Non-AFDC Medicaid Recipients and to Former AFDC, Medicaid and Title IV-E Foster Care Recipients.

ATTACHMENT:The attached regulations, published in the Federal Register on February 26, 1991 (56 FR 7988) implement the requirements of sections 9141 and 9142 of the Omnibus Budget Reconciliation Act (OBRA) of 1987 (P.L. 100-203), which amended title IV-D of the Social Security Act (the Act). Section 9141, effective December 22, 1987, amended section 457(c) of the Act to require State IV-D agencies to provide appropriate notice and to continue to provide IV-D services to persons no longer eligible for Aid to Families with Dependent Children (AFDC) under title IV-A of the Act. The final regulations extend this requirement to former non-AFDC Medicaid and title IV-E foster care recipients. The IV-D agency must continue to provide services and pay any amount of support collected to the family on the same basis and under the same conditions as pertain to other non-AFDC families, except that no application, other request to continue services or any application fee for services may be required.

Section 9142, effective July 1, 1988, amended section 454 of the Act to require State IV-D agencies to provide IV-D services to all families with an absent parent who receive Medicaid and have assigned to the State, under section 1912 of the Act, their rights to medical support, and to provide for distribution by the State of medical support collections under section 1912 of the Act.

EFFECTIVEFebruary 26, 1991.

DATE:

REGULATION REFERENCE: 45 CFR Parts 301 through 304.

RELATED REFERENCE: OCSE-AT-88-03, dated April 8, 1988.

OCSE-AT-89-10, dated May 26, 1989.

INQUIRIES TO: OCSE Regional Representatives

____________________________

Allie Page Matthews

Deputy Director

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Family Support Administration

Office of Child Support Enforcement

45 CFR Parts 301 through 304

RIN 0970-AA61

Child Support Enforcement Program - Extension of Services to Medicaid Recipients and to Former AFDC Recipients

AGENCY: Office of Child Support Enforcement (OCSE), HHS

ACTION: Final rule.

SUMMARY: These final rules implement sections 9141 and 9142 of P. L. 100-203, the Omnibus Budget Reconciliation Act of 1987, which amended title IV-D of the Social Security Act (the Act). Section 9141, effective December 22, 1987, amended section 457(c) of the Act to require State child support enforcement (IV-D) agencies to provide appropriate notice and to continue to provide IV-D services to persons no longer eligible for Aid to Families with Dependent Children (AFDC) under title IV-A of the Act. The IV-D agency must continue to provide services and pay any amount of support collected to the family on the same basis and under the same conditions as pertain to other non-AFDC families, except that no application, other request to continue services or any application fee for services may be required.

Section 9142, effective July 1, 1988, amended section 454 of the Act to require State IV-D agencies to provide IV-D services to families who receive Medicaid and have assigned to the State, under section 1912 of the Act, their rights to medical support and to payment of medical care from any third party, and to provide for distribution by the State of medical support collections under section 1912 of the Act.

EFFECTIVE DATE: [DATE OF PUBLICATION]

FOR FURTHER INFORMATION CONTACT: Andrew J. Hagan, Policy and Planning Division, OCSE, (202) 252-5375.

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

Public reporting burden for the collections of information requirements at 45 CFR 302.31(a)(4), 302.33(a)(1), (a)(4), (d)(1)(ii), (d)(5), and (e)(2), 302.51(e), 303.30(a), and combined 303.30(b) and 303.31(c) is estimated to average 0.5, 43, 0.5, 1.0, 0.5, 0.5, 0.5, 5.0, and 0.1 minutes per response, respectively, including the time for reviewing instructions, searching existing data sources, gathering and maintaining thedata needed, and completing and reviewing the collection of information. We have combined the reporting burdens at 45 CFR 303.30(b) and 303.31(c) since they have the same information requirement of informing the individual of the availability of medical support enforcement services. A notice will be published in the Federal Register when OMB approves these information collection requirements under section 3507 of the Paperwork Reduction Act.

Background

Continuation of Services to Former AFDC Recipients. When section 457(c) of the Act was amended by the Child Support Enforcement Amendments of 1984 (P. L. 98-378) to require (rather than allow) provision of IV-D services to families after AFDC eligibility ends, the intent of Congress was that all IV-D services continue to be provided, as in non-AFDC IV-D cases, to families whose AFDC eligibility was terminated, without payment of a fee or filing of an application for services. However, the Act, as amended by P. L. 98-378, provided a transition period of up to five months during which former AFDC cases were treated differently from non-AFDC cases. During the five-month period, States were not given the option to recover costs of providing services as in other non-AFDC cases and distribution of amounts collected was inconsistent with distribution in other non-AFDC cases.

The statute also required authorization for continuation of IV-D services after the five-month period, while prohibiting the necessity of filing an application or paying an application fee. The enactment of section 9141 of P. L. 100-203, effective December 22, 1987, eliminated this temporary category of cases. Without an application or application fee, these cases become non-AFDC cases once AFDC eligibility ends.

Services to non-AFDC Medicaid recipients. Recipients of Medicaid are required under section 1912(a)(1) of the Act to assign to the State their rights to support for medical care and payment for medical care from any third party and to cooperate with the State in establishing paternity and securing support. However, when assignment of rights to medical support was made a condition of eligibility for Medicaid by the Deficit Reduction Act of 1984 (section 2367 of P. L. 98-369), there was no corresponding amendment added to title IV-D of the Act requiring IV-D agencies to provide services to Medicaid recipients who assigned their rights under section 1912 of the Act. Therefore, prior to enactment of P. L. 100-203, IV-D agencies were required to provide services only to Medicaid families who were referred to the IV-D agency because they were AFDC recipients. IV-D services were also available to non-AFDC Medicaid families (those families receiving Medicaid but not AFDC), but only by application (and payment of an application fee), making these cases indistinguishable from non-AFDC IV-D cases.

Effective July 1, 1988, section 9142 of P. L. 100-203 requires that the IV-D agency provide IV-D services to families who have assigned their rights under section 1912 of the Act as acondition of receipt of Medicaid. Under section 1912 of the Act, an individual must assign all rights to support (specified as support for the purpose of medical care by a court or administrative order) and to payment for medical care from any third party. The IV-D agency must provide all appropriate IV-D services to Medicaid recipients referred to the IV-D agency by the Medicaid agency, whether or not they are also eligible for AFDC, without an application or application fee, including IV-D services unrelated to securing medical support, unless the non-AFDC Medicaid recipient notifies the IV-D agency that child support enforcement services unrelated to the securing of medical support are not wanted.

The IV-D agency will provide all appropriate IV-D services including the establishment and enforcement of medical support in accordance with the requirements of õõ303.30 and 303.31. However, the IV-D agency is not required to seek payment for medical care from third parties such as health insurance companies, even though the individual has assigned rights to such payments under section 1912 of the Act. The IV-D agency may pursue payment from health insurance companies if there is a cooperative agreement, made pursuant to Part 306, between the IV-D agency and the Medicaid agency to enforce these rights to third party payments.

Statutory Authority

This regulation is published under the authority of section 1102 of the Act which requires the Secretary to publish regulations that may be necessary for the efficient administration of the functions for which he is responsible under the Act.

Section 9141 of P. L. 100-203, effective December 22, 1987, amended section 457(c) of the Act to require State IV-D agencies to provide appropriate notice and to continue to provide IV-D services to persons no longer eligible for AFDC under title IV-A of the Act. The IV-D agency must continue to provide services and pay any amount of support collected to the family on the same basis as in the case of other non-AFDC families, except that no application, other request to continue services or application fee may be required.

Section 9142 of P. L. 100-203, effective July 1, 1988, amended section 454(4) of the Act to require State IV-D agencies to provide IV-D services to families who have assigned to the State, under section 1912 of the Act, their rights to medical support and payment for medical care from any third party, and have agreed to cooperate with the State in establishing paternity and securing support, unless the Medicaid agency determines that it is against the best interests of the child to do so. Section 9142 also amended section 454(5) of the Act to require that, in any case in which support payments assigned by an individual under section 1912 of the Act are collected, the payments shall be made to the State for distribution under section 1912, except that this requirement shall not apply to payments for any month after the month in which the individual ceases to be eligible for Medicaid.

Changes to Existing Regulations

45 CFR PART 301

Section 301.1 - General definitions.

Section 301.1 contains definitions of terms used in the IV-D regulations. We are revising õ301.1 to include definitions of the terms "assigned support obligation," "assignment," and "non-AFDC Medicaid recipient."

"Assigned support obligation" is defined as, unless otherwise specified, any support obligation which has been assigned to the State under 45 CFR 232.11 (AFDC cases) or section 471(a)(17) of the Act (title IV-E foster care cases), or any medical support obligation or payment for medical care from any third party which has been assigned to the State under 42 CFR 433.146 (which implements assignment of medical support rights under section 1912 of the Act.) "Assignment" is defined as, unless otherwise specified, any assignment of rights to support under 45 CFR 232.11 or section 471(a)(17) of the Act, or any assignment of rights to medical support and to payment for medical care from any third party under 42 CFR 433.146.

By including the definitions of "assigned support obligation" and "assignment" in õ301.1, we are able to simplify IV-D regulations which refer to assigned support obligations or assignments under the AFDC, title IV-E foster care and Medicaid programs by deleting reference to each type of assignment under the various programs. For example, in õ302.31, instead of adding reference to an assignment under 42 CFR 433.146 to require IV-D agencies to establish paternity and secure support for children with respect to whom an assignment under õ232.11, section 471(a)(17) or 42 CFR 433.146 is effective, we merely revised õ302.31 to refer to providing services to children for whom an assignment as defined in õ301.1 is effective. Thus, unless a regulation specifically defines an assigned support obligation as other than that included in the definition in õ301.1, any reference to an assigned support obligation encompasses assignments under the AFDC, title IV-E foster care and Medicaid programs. We address each of these conforming changes later in this preamble.

"Non-AFDC Medicaid recipient" is defined as any individual who has been determined eligible for or is receiving Medicaid under title XIX of the Act but who is not receiving, nor deemed to be receiving, AFDC under title IV-A of the Act. We are including this term to differentiate between individuals receiving both AFDC and Medicaid and individuals receiving only Medicaid. As discussed in more detail under changes to õ302.33, Services to individuals not otherwise eligible for paternity and support services, it is necessary to differentiate between these two types of cases because non-AFDC Medicaid recipients will be treated for the most part as non-AFDC cases. Recipients of Supplemental Security Income (SSI) under title XVI of the Act, aswell as other members of SSI-related groups who are eligible for Medicaid under title XIX of the Act, but not AFDC under title IV-A of the Act, are considered non-AFDC Medicaid recipients.

45 CFR Part 302

We are revising certain sections in Part 302 to clarify treatment of non-AFDC Medicaid and former assistance cases. Section 9141 of P. L. 100-203, effective December 22, 1987, amended section 457(c) of the Act to require State IV-D agencies to provide appropriate notice and to continue to provide IV-D services to persons no longer eligible for AFDC under title IV-A of the Act. We are using our regulatory authority, under section 1102 of the Act, to extend this same continuation of services to former non-AFDC Medicaid recipients and former IV-E foster care recipients. For simplicity, we use the term "former assistance" recipient or case, rather than delineating "former AFDC, former non-AFDC Medicaid, and former IV-E foster care" recipient or case, except where we wish to specify an individual category, as appropriate.

1. Section 302.31 - Establishing paternity and securing support

Former õ302.31, which implements section 454(4) of the Act, required IV-D agencies to undertake to establish paternity and secure support for any individual for whom an assignment is effective under the AFDC or title IV-E foster care program. Section 9142 of P. L. 100-203 amended section 454(4) to require IV-D agencies to establish paternity and secure support for individuals who have assigned their rights under section 1912 of the Act, unless the Medicaid agency determines that it is against the best interests of the child to do so. We are implementing these new requirements in three ways.

First, rather than add reference to assignments under the Medicaid program to õ302.31(a)(1) and (2), we deleted, for simplicity, reference to assignment "under õ232.11 of this title or section 471(a)(17) of the Act" from õ302.31(a)(1) and (2). As previously discussed, the term "assignment" is defined broadly to include, except where otherwise specified, assignment of rights to support under the AFDC, title IV-E foster care, and Medicaid programs.

Second, we included reference in õ302.31(b) and (c) to the Medicaid agency as a source of notice of claims or determinations of good cause for failing to cooperate in establishing paternity and securing support. Sections 302.31(b) and (c) addressed suspension of efforts to establish paternity or secure support if the IV-D agency is notified by the IV-A or IV-E agency that there has been a claim or determination of good cause for failing to cooperate. As revised, õ302.31(b) requires the IV-D agency, upon receiving notice from the IV-A, IV-E, or Medicaid agency that there has been a claim of good cause for failure to cooperate, to suspend all activities to establish paternity or secure support until notified of a final determination by the appropriate agency (i.e., either the IV-A, IV-E or Medicaid agency.)

Section 302.31(c) prohibits the IV-D agency from undertaking to establish paternity or secure support in any case for which it has received notice from the IV-A, IV-E or Medicaid agency that there has been a finding of good cause unless there has been a determination by the appropriate agency that support enforcement may proceed without the participation of the caretaker or other relative.

Third, we added a new õ302.31(a)(4) to require the IV-D agency to notify the Medicaid agency whenever the IV-D agency discovers that a non-AFDC Medicaid recipient has received and retained medical support payments assigned to the State.

2. Section 302.32 - Support payments to the IV-D agency.

Former õ302.32(b) required the IV-D agency to notify a family which ceases to receive AFDC that it will continue to provide services pursuant to õ302.51(e)(1). Former õ302.51(e) addressed required IV-D activities once eligibility for AFDC ends. As discussed in more detail below, we addressed the changes made by P. L. 100-203 to requirements for continuation of services to former AFDC cases by deleting õ302.51(e) and revising õ302.33, Services to individuals not otherwise eligible for paternity and support services. To correspond with those changes, we changed the reference in õ302.32(b) from õ302.51(e)(1) to õ302.33.

3. Section 302.33 - Individuals not otherwise eligible for paternity and support services.

Former õ302.33 set forth requirements for providing IV-D services to any individual not receiving AFDC who files an application for services. We are revising õ302.33 to implement changes made by P. L. 100-203 with respect to providing services to individuals who are receiving Medicaid but not AFDC (non-AFDC Medicaid recipients, as defined in this regulation at õ301.1) and services to individuals once AFDC eligibility ends.

We are treating non-AFDC Medicaid cases and former assistance cases basically as non-AFDC cases because they closely resemble non-AFDC cases, except in the following ways. First, the IV-D agency may not require an application or application fee in either type of case. Second, because non-AFDC Medicaid recipients are required to assign medical support rights and payments from any third party to the State and cooperate in establishing paternity and obtaining medical support as a condition of eligibility for Medicaid, non-AFDC Medicaid recipients may not refuse to cooperate in establishing paternity and securing medical support, unless the Medicaid agency determines that cooperation is not in the best interests of the individuals involved. Third, because the non-AFDC Medicaid recipient may not refuse medical support-related IV-D services, the State may not charge fees or recover the costs of providing services from the custodial parent in these cases, even if it recovers costs from custodial parents in other non-AFDC cases in accordance with õ302.33(d). Finally, in non-AFDC Medicaid cases,collections of support assigned to the State under 42 CFR 433.146 must be distributed in accordance with 42 CFR 433.154, which governs distribution of medical support collections under section 1912 of the Act, as opposed to paying those collections to the family.

a. Changes to õ302.33 to include non-AFDC Medicaid recipients and former assistance recipients.

We revised the title of õ302.33 to more accurately reflect to whom services are available under this section. The section would be entitled Services to individuals not receiving AFDC or title IV-E foster care assistance.

We revised õ302.33(a) to require, in paragraph (a)(1), that IV-D services be made available to any individual who: 1) Files an application for services with the IV-D agency; 2) is a non-AFDC Medicaid recipient; or 3) is no longer eligible for assistance under the AFDC, IV-E foster care, and Medicaid programs. As has always been the case, in an interstate case only the initiating State may require an application for IV-D services.

Section 302.33(a)(2) prohibits the State from requiring an application for services, other request for services or an application fee from any current non-AFDC Medicaid recipient or former assistance recipient. If an individual receiving services under õ302.33(a)(1)(iii) refuses services in response to a notice of continuation of services under õ302.33(a)(4) and subsequently requests services, that individual must file an application and pay the application fee.

Section 302.33(a)(3) prohibits the State from charging fees or recovering costs from any non-AFDC Medicaid recipient. As explained earlier, non-AFDC Medicaid recipients must cooperate in establishing paternity and securing support, unless the Medicaid agency has determined that it is in the best interests of those involved not to proceed. Since the non-AFDC Medicaid recipient may not refuse medical support-related IV-D services, the State may not charge fees or recover costs of providing services from the custodial parent in these cases, even if it recovers costs from custodial parents in other non-AFDC cases in accordance with õ303.33(d).

Section 302.33(a)(4) specifies that, whenever a family is no longer eligible for assistance under the AFDC, IV-E foster care, and Medicaid programs, the IV-D agency must notify the family, within five working days of the notification of ineligibility, that services will be continued unless the IV-D agency is notified by the family that IV-D services are no longer desired. The notice must inform the family of the consequences of continuing to receive IV-D services, including the available services and the State's fees, cost recovery and distribution policies.

Section 302.33(a)(5) specifies that the State must provide

individuals who are eligible to receive services under paragraph (a)(1)(ii) of this section with all appropriate IV-D services, in addition to establishing paternity and securing medical support,unless the individual notifies the State that services not related to medical support are not wanted.

We revised former õ302.33(d), which sets forth conditions under which States may elect to recover any costs incurred in providing services in non-AFDC cases, to clarify that costs may be recovered from either parent in former assistance cases. We substituted the phrase "is receiving IV-D services under paragraph (a)(1)(i) or (iii) of this section" for the phrase "has filed an application for IV-D services" in õ302.33(d)(1)(ii). For the same reason, in õ302.33(d)(5), we replaced the phrase "has filed an application for IV-D services" with the phrase "is receiving IV-D services under paragraphs (a)(1)(i) and (iii) of this section" and the word "applicant" with the phrase "individual receiving services under this section."

b. Changes to õ302.33(e) to reflect changes in the Bankruptcy Code

Section 302.33(e) allows IV-D agencies to take assignments of support rights in non-AFDC cases because some States' laws require the State to be a party to any legal action to pursue support. Former õ302.33(e)(2) prohibited States from making such assignments a condition of eligibility for services and required States to notify families of that fact as well as to inform them that assignments in such cases may have the effect of making the support debt dischargeable in bankruptcy. There was a possibility that debts assigned to the States in non-AFDC cases could be discharged in bankruptcy actions filed prior to October 8, 1984 (ninety days after the July 10, 1984 enactment of P. L. 98-353) because section 553(a)(5)(A) of the Bankruptcy Code only prohibited the discharge of support debts which were assigned to the State as a condition of receiving AFDC. On July 10, 1984, P. L. 98-353 amended section 523(a)(5)(A) to prohibit discharge in bankruptcy of any support assigned to the State (effective as to cases filed ninety days after the July 10, 1984 enactment). Therefore, we deleted the requirement in õ302.33(e)(2) that States which take assignment of support rights in non-AFDC cases must notify the individual that an assignment may have the effect of making the support debt dischargeable in bankruptcy.

We also replaced the reference in paragraph (e)(1) to taking assignments from an individual who "applies for services" with a reference to an individual who is "receiving services" under õ302.33 and the reference in paragraph (e)(2) to the "applicant" with a reference to the "recipient" for consistency with other changes made in this final rule.

As a result of these changes, we revised õ302.33(e) to indicate in paragraph (e)(1) that the IV-D agency may take an assignment of support rights not already assigned to the State from an individual receiving services under õ302.33. However, an assignment by an individual under õ302.33 would not constitute an assignment as defined in õ301.1 and may not be a condition of eligibility for services under õ302.33. Paragraph (e)(2) requires the IV-D agency, before the recipient of IV-D services makes an assignment of support rights, to inform the individualthat the assignment is not a condition of eligibility for services.

4. Section 302.50 - Support obligations.

We made a conforming change to õ302.50, which addresses support obligations assigned to the State, by substituting the phrase "An assignment of support rights, as defined in õ301.1 of this chapter, constitutes" for the phrase "The support rights assigned to the IV-D agency pursuant to õ232.11 of this title or section 471(a)(17) of the Act constitute" in õ302.50(a) to clarify that all support obligations assigned to the State, as defined in section 301.1, and not just assignments under AFDC and title IV-E foster care cases, are included in this provision. In addition, we have revised õ302.50(a) to clarify that medical support obligations assigned under 42 CFR 433.146 may only be established by order of a court or an administrative hearing process, while child support obligations assigned under 45 CFR 232.11 or section 471 (a)(17) of the Act may also be established by any other legal process as established by State law.

The former õ302.50(a)(3) exempted support obligations established prior to July 1, 1975, from the requirements of paragraphs (a)(1) and (2). Since all such obligations were required to be superseded with orders that meet the requirements of paragraphs (a)(1) and (2) no later than January 1, 1977, we deleted this paragraph. In concert with the deletion of õ302.50(a)(3), we deleted the word "or" at the end of paragraph (a)(2) and added the word "or" at the end of paragraph (a)(1).

In õ302.50(e), we substituted the phrase "an assigned support obligation as defined under õ301.1 of this chapter" for the phrase "a support obligation assigned under õ232.11 of this title" to clarify that no portion of child support collected which represents an assigned support obligation defined under õ301.1 may be used to satisfy a medical support obligation unless the support order designates a specific dollar amount for medical purposes.

5. Section 302.51 - Distribution of support collections.

Section 302.51 sets forth requirements for distribution of support collections in AFDC cases. Prior paragraph (e) of that section contained requirements with respect to the transitional five-month period beginning after AFDC eligibility ended and ending when former AFDC cases became non-AFDC cases. To implement section 9141 of P. L. 100-203, which revised section 457(c) of the Act to delete this transitional period, we incorporated certain aspects of the present õ302.51(e) (for example, notice of the consequences of continuing to receive IV-D services) into õ302.33 and deleted the remainder of õ302.51(e), as discussed earlier under changes to õ302.33.

A new õ302.51(e) implements the new section 454(5)(B) of the Act, added by section 9142 of P. L. 100-203, under which amounts collected pursuant to an assignment under section 1912 of the Act shall be made to the State for distribution pursuant to section1912. Section 454(5)(B) of the Act also specifies that this requirement shall not apply to payments for any month after the month in which the individual ceases to be eligible for medical assistance.

Section 302.51(e)(1) specifies that amounts collected by the IV-D agency, which represent specific dollar amounts designated for medical purposes in the order that have been assigned to the State under 42 CFR 433.146, as a condition of eligibility for Medicaid, shall be forwarded to the Medicaid agency for distribution under 42 CFR 433.154. The Medicaid agency is responsible for determining the status and extent of medical assistance provided to the family under the Medicaid program and for distributing the assigned collections in accordance with 42 CFR 433.154, which governs distribution of assigned medical support collections under section 1912 of the Act, as opposed to the IV-D agency distributing those medical support collections to the family.

Distribution under õ302.51(e) is limited to collections which represent a specific dollar amount designated in the support order for medical purposes for the following reasons. Medical support enforcement regulations under õ303.31 require IV-D agencies to petition to include health insurance that is available to the absent parent at reasonable cost in child support orders, unless satisfactory health insurance other than Medicaid is otherwise available to the custodial parent and child(ren). The IV-D agency also must take steps to enforce the health insurance coverage required by the support order if health insurance is available to the absent parent and has not been obtained at the time the order is entered. However, IV-D agencies are required to collect only specific dollar amounts designated in the support order for medical purposes. IV-D agencies are not required to collect medical support in the form of health insurance claims payments but may do so if collections are made pursuant to a cooperative agreement with the Medicaid agency under Part 306.

All support collections in interstate cases are forwarded by the responding State IV-D agency to the initiating State IV-D agency. If a dollar amount which is designated in a support order for medical purposes is collected in an interstate non-AFDC Medicaid case, the initiating State is responsible for distribution in accordance with 42 CFR 433.154. The non-medical portion of child support collections in interstate non-AFDC Medicaid cases would be distributed by the initiating State IV-D agency to the family in accordance with the State's distribution policy in other non-AFDC cases.

We added õ302.51(e)(2) to clarify that when the family ceases receiving assistance under the State's title XIX plan, the assignment of medical support rights under section 1912 of the Act terminates, except for the amount of any unpaid medical support obligation that has accrued under such assignment. The IV-D agency shall attempt to collect any unpaid specific dollar amount designated in the support order for medical purposes. Under this requirement, any medical support collection made by the IV-D agency under this paragraph shall be forwarded to theMedicaid agency for distribution under 42 CFR 433.154.

We made a conforming amendment in õ302.51(f)(4), which required that priority be given to collection of current support for former assistance recipients, to change the citation from õ302.51(e) to õ302.33(a)(1)(iii).

6. Section 302.70 - Required State laws.

We revised õ302.70(a)(3), which requires States to enforce overdue support due in IV-D cases by offsetting State income tax refunds, by deleting the references to support due individuals who are receiving aid under the AFDC and title IV-E foster care programs or who apply for services under õ302.33. Section 302.70(a)(3) now requires States to have in effect and use procedures for obtaining overdue support from State income tax refunds on behalf of individuals receiving IV-D services, in accordance with the requirements of õ303.102. These revisions clarify that IV-D agencies must use State income tax refund offset procedures in any appropriate IV-D case, including non-AFDC Medicaid cases and former assistance cases.

7. Section 302.75 - Procedures for the imposition of late payment fees on absent parents who owe overdue support.

We revised õ302.75(b)(4), which specifies that States opting to impose late payment fees on absent parents who owe overdue support must impose the late payment fee in all cases, to clarify that the State must also impose the late payment fees on absent parents in non-AFDC Medicaid and former assistance cases if the State opts to impose late payment fees.

45 CFR PART 303

We revised several sections in Part 303 to clarify that non-AFDC Medicaid cases and former assistance cases are all included as non-AFDC cases.

1. Section 303.10 - Procedures for case assessment and prioritization.

Section 303.10, which specifies requirements any system implemented by a State for case assessment and prioritization must meet, had required in paragraph (b)(2) that the IV-D agency include all of its cases in the system, including AFDC, non-AFDC, and interstate cases. Rather than expand the types of cases listed to include non-AFDC Medicaid and former assistance cases, we deleted reference to any type of case and simply indicated that all IV-D cases must be included in any case prioritization system in place in a State.

2. Section 303.11 - Case closure criteria.

The final regulations for Standards for Program Operations, published in the Federal Register on August 4, 1989 (54 FR32284), were effective October 1, 1990. Those final regulations include criteria, at õ303.11, for case closure. We revised four provisions in õ303.11 which allow closure of non-AFDC cases to exclude non-AFDC Medicaid cases.

We revised õ303.11(b)(9) to include that a case may be closed upon the request of a non-AFDC custodial parent if there is no assignment of medical support under 42 CFR 433.146 or of arrearages which accrued under a support order. If there is an assignment of rights under 42 CFR 433.146, the IV-D case must be kept open and IV-D services provided. If there is an assignment of arrearages, the IV-D agency must keep the case open and attempt to collect the assigned arrearages, in accordance with õ302.51(e) and (f).

We also revised õ303.11(b)(10) to include that a case may be closed if there has been a finding of good cause by the Medicaid agency under 42 CFR 433.147 and a determination by the Medicaid agency that support enforcement may not proceed without risk of harm to the child or caretaker relative.

Additionally, we revised õ303.11(b)(11) to include that a non-AFDC case receiving services under õõ302.33(a)(1)(i) or (iii) may be closed if the IV-D agency is unable to contact the custodial parent within a 30 calendar day period despite attempts by both phone and at least one certified letter. The August 4, 1989, final regulations required States to send a registered, as opposed to a certified, under this paragraph. However, sending a registered letter is more burdensome and costly than sending a certified letter. We changed the requirement to require a certified letter to avoid these burdens while retaining our purpose of ensuring notice to the custodial parent prior to case closure.

Lastly, we revised õ303.11(b)(12) to include that a non-AFDC case receiving services under õõ302.33(a)(1)(i) or (iii) may be closed if the IV-D agency documents the circumstances of the custodial parent's non-cooperation and an action by the custodial parent is essential for the next step in providing IV-D services.

3. Sections 303.30 - Securing medical support information and 303.31 - Securing and enforcing medical support obligations.

We revised õõ303.30 and 303.31 to clarify that IV-D agencies must provide medical support enforcement services in non-AFDC Medicaid and former assistance cases in accordance with the requirements of õõ303.30 and 303.31.

OCSE revised õ303.30, which requires IV-D agencies to secure medical support information, and õ303.31, which sets forth requirements regarding securing and enforcement of medical support obligations, by substituting the phrase "an assignment as defined in õ301.1 of this chapter is in effect" for "an assignment is in effect under õ232.11 of this title or section 471(a)(17) of the Act" in both õ303.30(a) and õ303.31(b). OCSE also revised õ303.30(b) by replacing the words "applies for" with the words "is eligible for" immediately before the words "services under õ302.33".

We revised õ303.31(c) to clarify when notice and servicesunder õ303.31 must be provided in non-AFDC cases. Section 303.31(c) now provides that the IV-D agency shall inform an individual who is eligible for services under õ302.33 that medical support enforcement services are available and shall provide the services specified in õ303.31(b): 1) If an individual eligible for services under õ302.33 is a Medicaid recipient; or 2) with the consent of the individual who is eligible for services under õ302.33 and is not a Medicaid recipient, except that health insurance information shall not be transmitted to the Medicaid agency.

The IV-D agency may provide required medical support enforcement services, in addition to other services which are not mandatory, as part of a cooperative agreement with the Medicaid agency under Part 306, as long as all program requirements governing medical support enforcement are met. For example, the IV-D agency may collect support designated in a support order as a specific dollar amount for medical purposes (a mandatory service), as well as seek health insurance payments (which is not a required IV-D activity) under a cooperative agreement with the Medicaid agency under Part 306. Therefore, a IV-D agency is not precluded from meeting program requirements through cooperative agreement with the Medicaid agency. However, in accordance with õ304.23(g), Federal funding under the IV-D program is not available for medical support enforcement activities performed under a cooperative agreement with a Medicaid agency under Part 306.

4. Section 303.71 - Requests for full collection services by the Secretary of the Treasury.

We revised õ303.71, which sets forth requirements for requesting full collection services by the Secretary of the Treasury, by clarifying in paragraph (b) that States may request the Secretary to certify the amount of child support owed in any IV-D case for full collection services under section 6305 of the Internal Revenue Code of 1954. Paragraph (c)(5) specifies that only the State that has taken an assignment as defined in õ301.1 or an application or referral under õ302.33 may request full collection services. These revisions clarify that non-AFDC Medicaid cases and former assistance cases are eligible for requests for full collection services by the Secretary of the Treasury if they meet the other requirements delineated in õ303.71.

5. Section 303.72 - Requests for collection of past-due support by Federal tax refund offset.

We revised õ303.72, which specifies requirements governing requests for collection of past-due support by Federal tax refund offset, to clarify that past-due support owed in non-AFDC Medicaid and former assistance cases is eligible for Federal tax refund offset, if the requirements in õ303.72 for submitting past-due support owed in non-AFDC cases are met. Although the Congress, as part of P. L. 100-203, did not amend section 464 ofthe Act governing the Federal income tax refund offset process to include assignment of support rights under section 1912 of the Act, we used our general rulemaking authority, under section 1102 of the Act, to allow States to submit any past-due support which the State has agreed to collect in a IV-D case which meets conditions for submittal in Federal statute and regulations. We believe that these cases should have access to the same establishment and enforcement services as other IV-D cases and are extending access to this particularly effective enforcement technique to ensure equal access for all those in need of IV-D services.

Therefore, we revised õ303.72(a)(1) to specify that past-due support qualifies for offset if there has been an assignment of support rights under õ232.11 of this title or section 471(a)(17) of the Act to the State making the request for offset or the IV-D agency is providing services under õ302.33 of this chapter. We amended the introductory language in paragraph (a)(3), which sets forth the conditions for submittal of past-due support in non-AFDC cases, to refer to support owed in cases where the IV-D agency is providing IV-D services under õ302.33. All other requirements governing the submittal of past-due amounts in non-AFDC cases for Federal tax offset would apply in these cases, e.g., notice of offset and procedures for contesting.

We amended õ303.72(h)(1), which specifies requirements for distribution of amounts received by the IV-D agency as a result of Federal tax refund offset, to include reference to the new õ302.51(e) which provides for distribution by the State of specific dollar amounts which are designated in the order for medical purposes. Past-due support which is designated for medical purposes in a support order and submitted for Federal tax refund offset must be distributed in accordance with the new õ302.51(e). All other past-due support due in non-AFDC Medicaid cases and former assistance cases is to be distributed in accordance with õ302.51(b)(4) and (5).

We made conforming amendments to paragraphs (h)(3) and (4) and (i)(2) as follows. Section 303.72(h)(3) is amended to specify that the IV-D agency must inform individuals receiving (as opposed to just those applying for) services under õ302.33, in advance, that amounts offset will be applied first to satisfy any past-due support which has been assigned to the State in AFDC, non-AFDC Medicaid or title IV-E foster care cases. Section 303.72(h)(4) is amended to require that, if amounts collected are in excess of the amounts required to be distributed under õõ302.51(b)(4) and (5), 302.51(e) or 302.52(b)(3) and (4), the IV-D agency must repay the excess to the absent parent whose refund was offset or to the parties filing a joint return within a reasonable period in accordance with State law. Finally, õ303.72(i)(2) is revised to clarify that the IV-D agency may charge an individual, who is receiving non-AFDC IV-D services under õ302.33(a)(1)(i) (those who apply) or (iii) (former assistance cases), a fee for submitting past-due support for Federal tax refund offset, but must notify the individual in advance of the amount of any fee charged.

6. Section 303.102 - Collection of overdue support by State income tax refund offset.

We revised õ303.102, which sets forth requirements for collection of overdue support by State income tax refund offset, to clarify that non-AFDC Medicaid cases and former assistance cases are eligible for the State income tax refund offset, if they meet the other requirements in õ303.102. We deleted the references to AFDC and title IV-E foster care assignments, as well as reference to an application for IV-D services, and revised paragraph (a)(1) to specify that overdue support qualifies for State income tax refund offset if there has been an assignment as defined in õ301.1 or the IV-D agency is providing services under õ302.33.

We also revised õ303.102(c), which requires notice to the custodial parent in non-AFDC cases of how amounts offset will be distributed, to clarify that, in cases receiving services under õ302.33, the IV-D agency must notify the custodial parent in advance: (1) that, for cases in which medical support rights have been assigned under 42 CFR 433.146, and amounts are collected which represent specific dollar amounts designated in the support order for medical purposes, amounts offset will be distributed under õ302.51(e) of this chapter; and (2) if amounts offset will be applied first to satisfy any past-due support which has been assigned to the State under õ232.11 of this title or section 471(a)(17) of the Act.

We revised õ303.102(f) to clarify that the fee for State tax refund offset which States may charge in non-AFDC cases may be charged only to those who are receiving non-AFDC IV-D services under õ302.33(a)(1)(i) (those who apply) or (iii) (former assistance cases). The State must inform the individual in advance of the amount of any fee charged.

Lastly, we revised õ303.102(g)(1), which specifies the requirements for distribution of amounts received by the IV-D agency as a result of State income tax refund offset, to include in revised õ303.102(g)(1)(i) and new õ303.102(g)(1)(iv) reference to the new õ302.51(e) which provides for distribution by the State of specific dollar amounts which are designated in the order for medical purposes. Past-due support which is designated for medical purposes in a support order and submitted for State tax refund offset must be distributed in accordance with the new õ302.51(e). Reference to the new õ302.51(e) is being added to the distribution requirements for an AFDC case in õ303.102(g)(1)(i). We also are revising õ303.102(g)(1)(iii), which allows States to determine the order of distribution in non-AFDC cases, to exclude medical support collections which have been assigned under 42 CFR 433.146. Distribution of those collections are addressed in õ303.102(g)(1)(iv) under which, for cases in which medical support rights have been assigned under 42 CFR 433.146, amounts collected which represent specific dollar amounts designated in the support order for medical purposes must be distributed in accordance with proposed õ302.51(e).

45 CFR PART 304

We made several revisions to portions of Part 304 to clarify that Federal funding is available for necessary expenditures under a State's IV-D plan for non-AFDC Medicaid and former assistance cases.

1. Section 304.12 - Incentive payments.

Section 304.12(a) contains definitions of terms used in õ304.12, which sets forth requirements governing incentive payments under the IV-D program. We deleted the words "and collections made under õ302.51(e) of this chapter" from the end of the definition of non-AFDC collections because the prior õ302.51(e), governing treatment of former AFDC cases during the five-month transitional period, is deleted in these regulations.

2. Section 304.20 - Availability and rate of Federal financial participation.

We revised õ304.20, governing the availability and rate of Federal funding of IV-D expenditures, by deleting the references to assignment of rights under the AFDC and title IV-E foster care programs in paragraph (a)(1) and referring to assignments as defined under õ301.1. We also deleted paragraphs (a)(2) and (b)(4)(ii) which refer to the availability of Federal funding for collection services pursuant to õ302.51(e)(1) since we deleted prior õ302.51(e) and included services to former assistance recipients under õ302.33, referred to under prior õ304.20(a)(4). We redesignated prior paragraphs (a)(3) and (4) as paragraphs (2) and (3); and prior paragraphs (b)(4)(iii) through (vi) as (b)(4)(ii) through (v). These changes clarify that Federal funding is available for necessary expenditures of providing IV-D services in non-AFDC Medicaid and former assistance cases.

We revised õ304.20(b)(1), which specifies which administrative functions are reimbursable under the State IV-D plan, by adding a new õ304.20(b)(1)(ix) to address the establishment of agreements with Medicaid agencies necessary to carry out required IV-D activities. Paragraph (b)(1)(ix) specifies that Federal funding is available for expenditures incurred in the establishment of agreements with Medicaid agencies necessary to carry out required IV-D activities. Such agreements could establish criteria for: 1) Referring cases to the IV-D agency; 2) reporting on a timely basis information necessary to the determination and redetermination of eligibility for Medicaid; 3) determining if individuals are cooperating adequately; and 4) transferring support collections from the IV-D agency to the Medicaid agency in accordance with the new õ302.51(e).

These agreements are not to be confused with cooperative agreements with Medicaid agencies under Part 306. The agreements addressed in paragraph (b)(1)(ix) should cover only those activities necessary for the IV-D agency to carry out itsrequired functions for non-AFDC Medicaid cases under the IV-D plan.

Finally, we added a new õ304.20(b)(4)(vi) to clarify that Federal funding under the IV-D program is available for costs incurred in making the Medicaid agency aware of amounts collected and distributed to the family for the purpose of determining eligibility for Medicaid.

45 CFR PART 305

We did not revise Part 305, which governs the audit of State IV-D programs, in this regulation since we are in the process of a major revision to Part 305 under separate proposed regulations to incorporate changes as a result of the Family Support Act of 1988 (P. L. 100-485) and to eliminate redundancy in Part 305 as it relates to other title IV-D regulations. We will audit State IV-D program performance in providing services in non-AFDC Medicaid and former assistance cases by measuring compliance with applicable Federal requirements in the title IV-D regulations.

45 CFR PART 306

As mentioned in the discussion regarding õõ303.30 and 303.31, the IV-D agency may provide required medical support enforcement services, in addition to other services which are not mandatory, as part of a cooperative agreement with the Medicaid agency under Part 306, as long as all program requirements governing medical support enforcement are met. For example, the IV-D agency may collect support designated in a support order as a specific dollar amount for medical purposes (a mandatory service), as well as seek health insurance payments (which is not a required IV-D activity) under a cooperative agreement with the Medicaid agency under Part 306. Therefore, a IV-D agency is not precluded from meeting program requirements through cooperative agreement with the Medicaid agency. However, in accordance with õ304.23(g), Federal funding under the IV-D program is not available for medical support enforcement activities performed under a cooperative agreement with a Medicaid agency under Part 306.

Response to Comments

We received 26 comments on the notice of proposed rulemaking publishing in the Federal Register May 23, 1989 (54 FR 22325), including comments from State and local IV-D agencies and child advocacy groups. Comments and our responses are as follows.

Comments Regarding the Desirability and Utility of Information Collection and the Efforts Required To Develop It.

In the proposed regulation, we asked for comments on the types of information collection that would be useful in monitoring medical support enforcement in general and implementation of section 9142 of P. L. 100-203 in particular,since there is presently no dependable data on medical support. We presented one option, to add medical support information and non-AFDC Medicaid caseload data to existing program reports, and asked for comments on the desirability and utility of such data and the effort required to develop it, either through our presented option or any other option that could yield annual, statistically valid data on medical support.

Comment: One commenter suggested that the information should be based on the number of IV-D cases with orders for medical support that have insurance coverage for the dependent children, and include the number of children who become enrolled in health insurance policies due to IV-D agencies activities. Another commenter recommended "only requiring the collection and reporting of data absolutely necessary to monitor the progress of medical enforcement in the different States. This data could include, for example, caseload numbers and amount of medical support ordered that was collected. More sophisticated or detailed (or nice to have) information could be delayed until States have had the opportunity to enhance their automated capabilities."

Still another commenter suggested that the Medicaid agency is the "appropriate source of information" and that "existing third party liability enforcement and reporting requirements should be expanded to track cost avoidance on cases of medical support established or enforced by IV-D."

The same commenter pointed out that the IV-A/IV-D referral data elements listed in the May 18, 1989, list of revised minimum data elements required for certifiable FAMIS and CSE systems interface did not include necessary information, such as the date AFDC terminated or the Medicaid eligibility period, and should be updated.

Several of the commenters requested that any statistical reporting requirements be phased in, with waivers for any States developing automated systems under an approved Automation Planning Document (APD), since it would not be cost-effective to modify existing systems while also developing enhanced systems.

Response: Taking the above comments into consideration, we will continue to work with the States, as well as the Office of Family Assistance and the Health Care Financing Administration, HHS, to develop a reasonable reporting mechanism, which can be used, in addition to program audits, to monitor medical support enforcement activities.

Comments Beyond the Scope of These Regulations.

Comment: Three commenters suggested that Medicaid regulations (42 CFR 433.147) be amended to require Medicaid applicants/recipients to cooperate in pursuing regular support in addition to medical support as a condition of Medicaid eligibility. One commenter suggested that IV-D services only be provided for cases actually referred to the IV-D agency and that Medicaid regulations (42 CFR 433.146 - 433.148) be amended to require referrals.

Response: The Medicaid law requires that individuals assignrights to support for medical care and to payment for medical care from any third party as a condition of Medicaid eligibility, and cooperate with the State in pursuing these rights. The Health Care Financing Administration sees no support in the law for mandating cooperation in pursuing non-medical support, in addition to medical support, as a condition of Medicaid eligibility. Therefore we have not extended the cooperation requirement in this document.

We concur with the comment that IV-D services only be provided for cases actually referred to the IV-D agency. The Health Care Financing Administration is considering proposals to develop a Notice of Proposed Rulemaking to require referral to CSE agencies of all families with an absent parent who receive Medicaid and have assigned to the State their rights to support for medical care and to payment for medical care from any third party, unless the Medicaid agency determined that referral to the IV-D agency would not be appropriate in a particular case because: (1) the Medicaid agency has a cooperative agreement for the enforcement of rights to and collection of third party benefits, including medical support, with an entity other than the IV-D agency; or (2) the child has satisfactory health insurance other than Medicaid; or (3) the child is receiving adequate medical support from the absent parent.

Section 301.1 - General definitions.

1. Comment: Commenters expressed concern that the term "Medicaid-only applicant or recipient" would require the IV-D agency to provide IV-D services to non-AFDC Medicaid applicants whether or not they are determined to be eligible for Medicaid. Other commenters questioned whether our definition of "Medicaid-only applicant or recipient" would also include former AFDC recipients with extended Medicaid eligibility. Another commenter suggested we revise the definition of "Medicaid-only applicant or recipient" to include only those with an absent parent.

Response: We revised the term to "non-AFDC Medicaid recipient" to clarify that the IV-D agency is not required to provide IV-D services to a non-AFDC Medicaid applicant who is not determined to be eligible for Medicaid. However, the term "non-AFDC Medicaid recipient" does include those who have been determined eligible for Medicaid, whether or not they actually are receiving or have received services under the Medicaid program.

Former AFDC recipients, both those who are receiving Medicaid after termination from AFDC because of increased earnings, as provided for under 42 CFR 435.112, and those who are eligible for Medicaid under other eligibility groups, are eligible for IV-D services as non-AFDC Medicaid recipients for as long as they continue to receive assistance under the Medicaid program.

In response to the commenter's suggestion that we revise the definition to include only those with an absent parent, the IV-D agency is responsible for providing services to any non-AFDC Medicaid recipient referred by the Medicaid agency. The Medicaidagency would determine which Medicaid recipients need IV-D services and the IV-D agency must provide the appropriate IV-D services to those referred, whether or not there is an "absent parent," for example, cases where a claim could be made against a deceased parent's estate, or where paternity has not been established in a non-marital household where the putative father is present.

2. Comment: One commenter requested that we require non-AFDC Medicaid recipients to assign all child support rights to the State in order to provide legal authority for the State IV-D agency to act in their behalf.

Response: Previously, õ302.33(e) specified that the IV-D agency could take an assignment of support rights from an individual who applied for IV-D services, but that this assignment did not constitute an assignment under õ232.11 and could not be a condition of eligibility for IV-D services. This practice is allowed because some States' laws require the State to be a party to any legal action to pursue support. As a result of P. L. 100-203, we have revised õ302.33(e) to allow the IV-D agency to take an assignment of support rights not already assigned from an individual receiving IV-D services under õ302.33, which would include non-AFDC Medicaid recipients. Also, we revised õ302.33(e) to clarify that this assignment does not constitute an assignment as defined in õ301.1 and may not be a condition of eligibility for IV-D services. Therefore, IV-D agencies may not require non-AFDC Medicaid recipients to assign all child support rights to the State as a condition of eligibility for IV-D services, but may request an assignment, if an assignment is necessary for the State to take legal action in the case.

3. Comment: One commenter asked whether medical support included health insurance, old judgments, unsettled claims for personal injury, and orders for ongoing expenses for therapy.

Response: For the purpose of the IV-D program, medical support is health insurance coverage required by the support order and specific dollar amounts specified in the order for medical purposes. This could include judgments for medical support, but not unsettled claims for personal injury. Orders for ongoing expenses for therapy can be considered medical support only if there is a specific dollar amount in the order specified for medical-related therapy.

We encourage States to develop procedures to determine when judgments for medical expenses for which the absent parent is responsible under the order should be pursued and to pursue such judgments when appropriate. Federal matching funds are available for these activities.

Section 302.31 - Establishing paternity and securing support.

Comment: One commenter suggested we address the possible problem of non-AFDC Medicaid recipients receiving and retaining assigned medical support.

Response: We are revising õ302.31(a) by adding a new (a)(4) to require the IV-D agency to notify the Medicaid agency whenever it discovers that the non-AFDC Medicaid recipient has directly received and retained medical support assigned to the State under 42 CFR 433.146.

Section 302.33 - Services to individuals not receiving AFDC or title IV-E foster care assistance.

Applications and application fees. -- 1. Comment: Several commenters objected to charging former non-AFDC Medicaid recipients an application fee if they wish to continue to receive IV-D services. They claim it would be administratively burdensome and fiscally unsound to require the closing and re-opening of the non-AFDC Medicaid case. One commenter stated that the application fee is "not required by the law and is an unnecessary burden on the client and the agency for no identifiable public benefit."

Response: OCSE has revised õ302.33(a)(1)(iii) to include former non-AFDC Medicaid recipients as eligible for IV-D services without filing an application or paying an application fee. Paragraph (a)(2) clearly states that the State may not require an application, other request for services or an application fee from any individual who is eligible to receive services under paragraphs (a)(1)(ii) and (iii).

2. Comment: One commenter recommended we revise õ302.33(a)(1)(iii) to include provision of IV-D services to former title IV-E foster care maintenance cases without any application or other request for continuation of services and without any application fee.

Response: When IV-E foster care services cease to be provided, generally the child is returned to an AFDC family (and is eligible to receive IV-D services as part of that family) or has attained majority or been adopted (and is no longer in need of IV-D services). However, for consistency with treatment of former AFDC and non-AFDC Medicaid cases, we have revised õ302.33(a)(1)(iii) to include former IV-E foster care recipients as eligible for IV-D services without filing an application or paying an application fee. Also, we have revised õ302.33(a)(4) to require the IV-D agency to notify the family when the family is no longer eligible to receive AFDC, IV-E foster care and Medicaid that IV-D services will be continued unless the IV-D agency is notified by the family that IV-D services are no longer desired. The notice must tell the family the consequences of continuing to receive IV-D services, including the available services and the State's fees, cost recovery and distribution policies.

3. Comment: One commenter requested clarification about whether the law exempts non-AFDC Medicaid recipients from all fees, including the fees for Federal and State income tax refund offset under õõ303.72 and 303.102, and cost recovery, or just from the application fee. The commenter claimed it would be an administrative burden on the IV-D agency to distinguish non-AFDC Medicaid recipients from other non-AFDC cases for the imposition of fees.

Response: Section 454 of the Act, as amended by section 9142 of P. L. 100-203, requires the IV-D agency to provide IV-D services to non-AFDC Medicaid recipients without requiring any application fee. The legislation did not address whether any other fees may be charged or whether costs of providing IV-D services may be recovered. As explained in the proposed regulations, a State may not charge fees or recover the costs of providing services from the custodial parent in these non-AFDC Medicaid cases, even if it recovers costs from custodial parents in other non-AFDC cases in accordance with õ302.33(d), because the non-AFDC Medicaid recipient may not refuse medical support-related IV-D services. The State may, however, opt to recover costs from the absent parent in these cases, in accordance with õ302.33(d).

4. Comment: One commenter expressed concern that the requirement in õ302.33(a)(1) that "in an interstate case, only the initiating State may require an application under this section" would preclude the State from charging an application fee when a private attorney in another State submits an URESA action to the IV-D Agency in the commenter's State.

Response: In the situation described by the commenter, the State may require an application and charge an application fee when the private attorney from another State submits a URESA action in the State and requests IV-D services. There is no IV-D case in the private attorney's State in the situation described. The requirement that only the initiating State may require an application protects IV-D applicants from paying multiple application fees in interstate cases.

5. Comment: If a former AFDC recipient refuses IV-D services when AFDC eligibility ends, must that person apply and pay an application fee if that person wants IV-D services subsequently?

Response: Yes, if a former recipient of assistance refuses IV-D services when eligibility ends, that person must apply and pay an application fee if that person subsequently wants IV-D services. To clarify this, we have added the following language to õ302.33(a)(2): "If an individual receiving services under paragraph (a)(1)(iii) refuses services in response to a notice under paragraph (a)(4) of this section, and subsequently requests services, that individual must file an application and pay an application fee."

6. Comment: One commenter suggested we revise õ302.33(c)(2), which requires, effective October 1, 1985, that application fees be charged for each individual who applies for services under õ302.33, to clarify that former AFDC families and non-AFDC Medicaid recipients are not included in that requirement.

Response: We believe the requested revision is unnecessary because õ302.33(a)(2) already clearly states that "The State may not require an application, other request for services or an application fee from any individual who is eligible to receive services under (a)(1)(ii) and (iii) of this section."

Availability of Services.--1. Comment: One commenter requested clarification about whether the term "specific cash amounts for medical purposes" could mean either money from the absent parent for payment of past and future medical care or reimbursement by the absent parent to the custodial parent for providing the health insurance. Another commenter asked if, in a non-AFDC case, the support order requires the absent parent to pay medical support but does not contain a specific dollar amount for medical support, must the IV-D agency enforce the medical support provision?

Response: The term "specific cash amounts for medical purposes" includes both money from the absent parent for payment of past and future medical care and reimbursement by the absent parent to the custodial parent for providing the health insurance, but only when a specific dollar amount is included in the order for medical care purposes. For example, if the support order requires the absent parent to pay the custodial parent $50 per month to reimburse the custodial parent for health insurance premiums paid by the custodial parent, the enforcement of such a provision in the support order would be a required IV-D function. However, if the support order required the absent parent to reimburse the custodial parent for health insurance premiums or medical expenses paid by the custodial parent, but did not specify a specific cash amount, the enforcement of such a provision in the support order would not be a required IV-D function. While not a mandatory service, we encourage IV-D agencies to pursue judgments for medical expenses for which the absent parent is responsible under the order.

2. Comment: One commenter requested clarification about whether the collection of "health insurance payments" under optional cooperative agreement with the Medicaid agency means collection from the absent parent of premium payments to the health insurance provider, or collection of claims paid by the health insurance provider.

Response: The collection of "health insurance payments" under an optional cooperative agreement with the Medicaid agency refers to collecting claims from the health insurance provider for the costs of providing medical care to the Medicaid recipient, not to collecting health insurance premiums from the absent parent.

3. Comment: One commenter suggested that, since we used the word "family" in õ302.33(a)(4) to describe who is eligible for services, we substitute the word "family" for the word "individual" in õ302.33(a)(1) through (3) and elsewhere, and define "family" to mean "a dependent child(ren) and the parent or relative with whom the child(ren) reside, where one parent is absent from the home." Response: The term "family" in õ302.33(a)(4) means former assistance recipients whom the State must notify that IV-D services will continue to be provided. Availability of IV-D services in non-AFDC cases is not limited to children and their custodial parents. Section 454(6)(A) of the Act, and õ302.33(a)(1)(i), require IV-D agencies to provide IV-D services to any individual who files an application with the IV-D agency. For example, the IV-D agency must provide services toan alleged father who applies for IV-D services to establish paternity, establish an order and assure payment of child support.

Notice to the Recipient.--1. Comment: The proposed regulations at õ302.33(a)(3) require the State to notify the family leaving AFDC that IV-D services will continue to be provided without the need for an application, other request for continued services, or payment of an application fee, unless the family requests a termination of services. The commenter recommended that States should send the notice only to those families who leave AFDC and are not eligible for extended Medicaid coverage, since those families who are eligible for extended Medicaid coverage are to receive a notice when the extended Medicaid coverage terminates. The commenter also suggests that the AFDC agency or the Medicaid agency should be responsible for the dissemination of the notice.

Response: Section 457(c) of the Act, as amended by section 9141 of P. L. 100-203, requires the State to provide notice to the family leaving the AFDC rolls and to continue to provide IV-D services under the same conditions and on the same basis as provided to other non-AFDC cases. Families who leave the AFDC rolls without receiving extended Medicaid eligibility (estimated to be about 80% of those leaving the AFDC rolls) must be sent the notice within five working days of the notification of ineligibility to the IV-D agency by the AFDC agency. However, we agree that it would be less confusing to the families receiving extended Medicaid after leaving the AFDC rolls to receive a notice only when the family ceases to receive all assistance (both AFDC and extended Medicaid). Therefore, we believe it is within the statutory mandate to delay notice to families leaving the AFDC rolls who continue to receive Medicaid until such time as Medicaid eligibility ends since the family may not refuse medical support-related IV-D services until that time. In this way, only one notice would be necessary in former AFDC cases with extended Medicaid eligibility and notices would be more straightforward and issued at the time the family may choose to terminate services. Similarly, the IV-D agency does need to send the notice regarding the continuation of services for former assistance recipients to IV-E foster care recipients who become AFDC recipients upon termination of IV-E foster care services. Accordingly, we have revised proposed õ302.33(a)(3) (redesignated as õ302.33(a)(4)) to specify that "Whenever a family is no longer eligible for assistance under the State's AFDC, IV-E foster care, and [emphasis added] Medicaid programs, the IV-D agency must notify the family, within five working days of the notification of ineligibility, that IV-D services will be continued unless the IV-D agency is notified to the contrary by the family."

2. Comment: One commenter recommended the regulations specify in proposed õ302.33(a)(3) that the notice to the former AFDC family must be sent within three working days of the termination of AFDC.

Response: Although we are not adopting the suggested three working day timeframe, we have revised proposed õ302.33(a)(3) (now õ302.33(a)(4)) to specify that the notice to the formerassistance family must be sent within five working days from the date the IV-D agency is notified of the termination of eligibility. The five working days requirement is similar to the requirement in õ303.2(a)(2) that information describing available services, the individual's rights and responsibilities and the State's fees, cost recovery and distribution policies must be provided to applicants for IV-D services at the time of application, and to all cases referred to the IV-D agency within five working days of referral to the IV-D agency.

3. Comment: One commenter requested that we revise the notice requirements in proposed õõ302.33(a)(3) and (e)(2) to require written notice to the family of the State's assignment policies, including informing the family that an assignment of support rights cannot be a condition of eligibility when an individual applies for IV-D services.

Response: Section 302.33(e)(1) specifies that the IV-D agency may take an assignment of support rights not already assigned to the State from an individual receiving services under õ302.33, but that such an assignment does not constitute a required assignment, as defined in õ301.1, and may not be a condition of eligibility for IV-D services. Section 302.33(e)(2) requires that before the recipient of IV-D services under this section makes an assignment of support rights, the IV-D agency shall inform the individual that the assignment is not a condition of eligibility for services under this section. States may combine this information with other written notices to be given to the recipient of IV-D services.

4. Comment: One commenter suggested we revise õ302.33(d)(5) to require that the notice of the State's intention to recover costs should only be sent to those applying for IV-D services under paragraph (a)(1)(i) of this section, since those receiving services under (a)(1)(iii) of this section (i.e., former assistance recipients) would have already received notice under õ302.33(a)(4) of the State's recovery policy. The commenter also suggested we revise õ302.33(d)(2) in the same manner.

Response: Section 302.33(d)(5) requires the IV-D agency, if it opts to recover costs, to notify the individual from whom the cost is to be recovered. Although õ302.33(a)(4) requires the IV-D agency to notify the custodial parent in the former assistance family of the State's cost recovery policy, the absent parent would still need to be notified of the State's intent to recover costs from the absent parent, if the State chooses that option, as required under õ302.33(d)(5). If the State opts to recover costs from the custodial parent, the notices required in õõ302.33(a)(4) and (d)(5) may be combined.

Section 302.33(d)(2) requires a State that opts to recover costs under õ302.33(d)(1) to develop a written methodology to determine standardized costs which are as close to actual costs as possible and to make this methodology available to any individual upon request. We are not revising õ302.33(d)(2) to allow States to make the methodology available only to those who apply for IV-D services under õ302.33(a)(1)(i). We believe that the methodology must be available to any individual upon request because States may recover costs in former assistance cases whichcontinue to receive IV-D services, not just in cases in which an application for IV-D services is filed.

Recipient cooperation.--1. Comment: One commenter requested the regulations address what action the IV-D agency must take if the non-AFDC Medicaid recipient does not cooperate in the establishment of support orders. Commenters were concerned about non-AFDC Medicaid recipients refusing to cooperate in non-medical support enforcement efforts and what IV-D agencies' responsibilities would be in such situations absent a mandatory cooperation requirement.

Response: Medicaid recipients as a condition of eligibility are required to cooperate in the establishment of paternity and in obtaining medical support assigned to the State, unless the Medicaid agency determines that it is not in the best interest of the child to do so. If the non-AFDC Medicaid recipient refuses to cooperate in the establishment of paternity and in obtaining medical support, the IV-D agency should notify the Medicaid agency of the failure to cooperate. The Medicaid agency is responsible, under 42 CFR 433.147 and 433.148, for determining whether a waiver of cooperation for good cause is appropriate or whether eligibility should be terminated.

We believe that most non-AFDC Medicaid recipients will cooperate in pursuing non-medical support, as well as medical support. However, if the non-AFDC Medicaid recipient notifies the IV-D agency that services unrelated to securing medical support are not wanted, the IV-D agency should document the recipient's notification and provide only those services related to securing medical support.

2. Comment: Several commenters objected to the requirement that child support collections, as well as medical support collections, in a non-AFDC Medicaid case, must be made through the IV-D agency. One commenter objected to the delay that would occur in a non-AFDC Medicaid case when the child support previously received directly from the absent parent would instead be processed through the IV-D agency.

Response: Unless the non-AFDC Medicaid recipient notifies the State that child support enforcement services unrelated to medical support are not wanted, the IV-D agency is responsible for collecting both non-medical child support and medical support in a non-AFDC Medicaid case. If non-medical support collections are made, the IV-D agency must promptly distribute the amounts collected as non-medical child support in accordance with õ302.51. The amounts collected as medical support must be forwarded to the State Medicaid agency for distribution in accordance with 42 CFR 433.154. It should be noted that, if the IV-D agency does not collect child support obligations in non-AFDC Medicaid cases, the IV-D agency will not be able to monitor the payment of child support (e.g., determine arrearages or track timeliness of payments) which is important for effective enforcement of the support obligation.

Section 302.50 - Support obligations.

1. Comment: One commenter requested clarification of whether the restriction in õ302.50(e), that no child support collected may be used to satisfy a medical support obligation unless the support order designates a specific dollar amount for medical purposes, includes one-time lump sum amounts (i.e., medical support judgments) or only monthly payments ordered in lieu of paying health insurance premiums.

Response: If the support order designates a specific dollar amount for medical purposes, whether it is expressed in monthly increments (e.g., $50.00 per month) or as a lump sum amount (e.g., $1,500.00 to pay for birth expenses), the IV-D agency must collect the medical support. If the support order does not designate a specific dollar amount for medical purposes (e.g., absent parent is ordered to pay for child's orthodontia), enforcement of that aspect of the order is not a required IV-D function. We encourage States to develop procedures to determine when judgments for medical expenses for which the absent parent is responsible under the order should be pursued and to pursue such judgments when appropriate. Federal matching funds are available for these activities.

2. Comment: One commenter requested information as to how specific amounts for medical support designated in the order are to be collected, reported, distributed, and credited for incentive purposes.

Response: The IV-D agency must use all appropriate enforcement techniques to collect specific amounts for medical support designated in the order. Medical support collected in AFDC (and title IV-E) cases must be reported as an AFDC collection and will be credited for incentive purposes as an AFDC collection, while medical support collected in all other cases must be reported as a non-AFDC collection and will be credited for incentive purposes as a non-AFDC collection. Medical support collected in cases in which there is an assignment of rights to medical support under 45 CFR 433.146 must be forwarded to the Medicaid agency for distribution under 42 CFR 433.154. Medical support collected in cases in which there is no assignment of rights to medical support must be distributed to the family in same manner as other non-assigned support collections.

When less than the total amount of the obligation is collected, the IV-D agency should allocate the amount collected between the child support and the medical support specified in the order in proportionate shares. Current support must be given priority over past-due support, except with respect to collections made through the Federal income tax refund offset process.

3. Comment: One commenter requested that õ302.50(e) be revised so that "any amounts collected in excess of child support obligations should be used to satisfy any outstanding medical support obligations even in cases with orders lacking specified dollar amounts."

Response: We are not revising õ302.50(e) to require application of amounts collected in excess of child support obligations to satisfy unspecified medical support obligations because distribution requirements under title IV-D of the Act andFederal regulations at õ302.51 do not provide authority to distribute excess collections to satisfy unspecified obligations.

4. Comment: One commenter expressed concern that OCSE policy does not provide for funding of the IV-D agency for the recovery of cash medical support.

Response: This is incorrect. Federal funding at the applicable matching rate is available for the costs of collecting specific dollar amounts for medical support designated in the order. Additionally, cash medical support collections are included in the calculation of a State's incentive payments.

Section 302.51 - Distribution of support collections.

1. Comment: One commenter suggested we revise the new õ302.51(e) to "allow distribution to the Medicaid agency of any amount assigned to the State and collected by the IV-D agency, even after the Medicaid recipient ceases to receive Medicaid, as is the current IV-A policy."

Response: We agree with the commenter and, for consistency with current policy in former IV-A and IV-E foster care cases, are adding a new õ302.51(e)(2) to clarify that, when a family ceases receiving assistance under the State's title XIX plan, the assignment of medical support rights under section 1912 of the Act terminates, except for the amount of any unpaid medical support obligation that has accrued under such assignment. The IV-D agency must attempt to collect any unpaid specific dollar amounts designated in the support order for medical purposes and forward to the Medicaid agency for distribution under 42 CFR 433.154 any medical support collected.

2. Comment: One commenter expressed concern that because the proposed regulations incorporate only portions of the former õ302.51(e) into õ302.33 and delete the remainder of õ302.51(e), no specific language would require the distribution of current child support collections to the former AFDC recipients. Another commenter specifically requested that we restore the deleted requirement in õ302.51(e)(3) so that current support collected on behalf of former AFDC families would be distributed to the family before any other distribution.

Response: We believe our regulations address both these concerns. Section 302.51(a) specifies that amounts collected shall be treated first as payment on the required support obligation for the month in which the support was collected. This requirement applies to all IV-D cases, whether they have been referred to the IV-D agency for services because they are AFDC cases, non-AFDC Medicaid cases, former assistance cases, or have applied for

IV-D services. Additionally, õ302.51(f)(4) requires that priority be given to collection of current support in former assistance cases.

3. Comment: One commenter requested that we revise the distribution procedures for former AFDC recipients, claiming that statutory revisions require that for purposes of services and distribution of support, IV-D agencies must treat former AFDC recipients exactly like families that never received AFDC andtherefore should receive all of the support collected on their behalf by the IV-D agency.

Response: We do not believe that P.L. 100-203 requires a revision of OCSE's distributions regulations at 45 CFR 302.51(f). While the assignment of rights to support under õ232.11 ends when AFDC eligibility ends, this does not include amounts accrued under the assignment. The IV-D agency must attempt to collect these accrued assigned arrearages. However, the first priority of IV-D agencies is collection and distribution of current support, which goes to the former AFDC family.

4. Comment: One commenter asked whether the absent parent can specify that a collection be applied to medical support ordered in the support order, even if the full amount of the current support obligation is not paid. The commenter also asked whether the absent parent can specify that a $50 payment is for medical support in an AFDC case and preclude the $50 pass-through to the custodial parent. Another commenter questioned whether the distribution requirements would apply only when medical support payments are collected by the IV-D agency on behalf of the Medicaid agency under the optional cooperative agreement provision contained in Part 306 of the regulations.

Response: Requirements in sections 457 and 1912 of the Act and 45 CFR 302.51 and 42 CFR 433.154 specify how collections are to be distributed. Absent parents do not determine distribution of collections under the IV-D program. Distributions requirements apply regardless of whether or not the IV-D agency has entered into an optional cooperative agreement with the Medicaid agency as provided in the regulations in Part 306.

5. Comment: One commenter objected to the requirement in õ302.51(e), as explained in the preamble, that medical support collected by a responding State in an interstate case must be sent to the initiating State IV-D agency, and the initiating State is responsible for distributing the medical support collection. The commenter said that the responding State must send the amount collected to the jurisdiction identified in the order, until the support order itself is revised.

Response: The responding State in an interstate case must forward the medical support amounts collected to the initiating State IV-D agency, which may be the jurisdiction identified in the order.

6. Comment: One commenter asked what the IV-D agency should do if it receives medical support, in the form of claims reimbursement paid by a third party (e.g., insurance company), from the custodial or absent parent?

Response: If there is an assignment of rights to medical support under 42 CFR 433.146, the IV-D agency must forward medical support, in the form of claims reimbursement paid by a third party, to the Medicaid agency for distribution under 42 CFR 433.154. If there is not an assignment of medical support, the IV-D agency must forward such medical support to the individual entitled to the payment from the insurance company.

7. Comment: One commenter requested clarification of the referenced portions of the Medicaid regulations cited in the new õ302.51(e).

Response: The referenced 42 CFR 433.146 and 433.154 are Medicaid regulations implementing section 1912 of the Act. Sections 454(4)(A) and (B) of the Act, as revised by section 9142 of P. L. 100-203, require States to establish the paternity and secure support for those for whom an assignment under section 1912 of the Act is effective. The Medicaid regulations at 42 CFR 433.146 - Rights assigned; assignment method, which implement the portion of section 1912 of the Act dealing with assignment of medical support rights, require the individual to assign to the State the rights of the individual or of any other individual eligible under the plan for whom the assignor can legally make an assignment, to medical support and to payment for medical care from any third party.

Sections 454(4)(A) and (B) of the Act, as revised by section 9142 of P. L. 100-203, require States to distribute medical support collections pursuant to section 1912 of the Act. The Medicaid regulations at 42 CFR 433.154 - Distribution of collections, which implement the portion of section 1912 of the Act dealing with distribution of medical support collections, require the State to reimburse itself and the Federal government for any Medicaid expenditures made for the Medicaid recipient and to give to that individual any remaining amount.

Sections 303.30 and 303.31 - Medical support enforcement.

1. Comment: One commenter requested clarification of whether required IV-D activities, delineated in õõ303.30 and 303.31, if performed under an optional cooperative agreement with the Medicaid agency, as allowed under part 306 of the regulation, would not be eligible for Federal financial participation under the IV-D program, according to õ304.23(g).

Response: In the early years of the IV-D program, medical support enforcement activities were generally performed by the IV-D agency only under an optional cooperative agreement with the Medicaid agency. The Medicaid agency is required to provide full reimbursement to the IV-D agency for all medical support enforcement activities performed under the agreement. As a result of several legislative mandates and regulatory initiatives, the extent of medical support enforcement activities required under the IV-D program has been expanded to include securing of medical support information, as delineated in õ303.30, and securing and enforcing of medical support obligations, as delineated in õ303.31. The State IV-D agency has the choice either to perform the required IV-D medical support enforcement activities delineated in õõ303.30 and 303.31 without an optional cooperative agreement with the Medicaid agency, and seek Federal financial reimbursement under the IV-D program, or to perform the required IV-D medical support enforcement activities, as well as other medical support enforcement activities which are not required under õõ303.30 and 303.31, under a cooperative agreement with the Medicaid agency and receive full reimbursement from the Medicaid agency for the medical support enforcement activities performed under the agreement. In the latter case, Federal financial participationunder the IV-D program is not available, in accordance with õ304.23(g).

2. Comment: One commenter suggested that when the support order requires the absent parent to secure health insurance for the child(ren), the IV-D agency should only be responsible for ensuring that the absent parent does secure the ordered health insurance. Collecting medical care costs should be done only if under a cooperative agreement with the Medicaid agency. The commenter also requested that the regulations define when a cooperative agreement is necessary and how medical support collections should be distributed under the cooperative agreement.

Response: The IV-D agency is responsible for enforcing a requirement in the support order to secure health insurance and for the collection of medical support obligations when the support order designates a specific amount for medical purposes. The IV-D agency is not responsible for collecting medical care costs which are not included as specific dollar amounts for medical support in the order or for seeking health insurance claims payments. The IV-D agency is not required to enter into a cooperative agreement under õ306.2 with the Medicaid agency; this is an optional provision. Finally, if there is a cooperative agreement under õ306.2, õ302.51(e) requires that "amounts collected by the IV-D agency which represent specific dollar amounts designated in the support order for medical purposes that have been assigned to the State under 42 CFR 433.146 shall be forwarded to the Medicaid agency for distribution under 42 CFR 433.154." Collection of specific amounts of medical support is a required IV-D activity, whether or not there is an optional cooperative agreement with the Medicaid agency.

Sections 303.72 and 303.102 - Federal and State income tax refund offset.

1. Comment: Several commenters suggested that the notice given to those receiving services under õ302.33, informing them that amounts offset through the Federal or State income tax refund offset process will be applied first to satisfy any past-due support which has been assigned to the State, should be sent only to those whose cases are submitted for the Federal or State tax refund offset process. The commenters indicated that many of the cases submitted for the offset would not result in a collection and that notice should only be provided at the time that the amounts are offset.

Response: Both õ303.72(h)(3) and õ303.102(c) require that the IV-D agency notify the recipient of IV-D services in advance that the amounts offset will be applied first to satisfy any past-due support which has been assigned to the State. The notices must be sent in advance, not after the refund(s) have been offset. States may meet the notice requirements in õõ303.72(h)(3) and 303.102(c) by informing those receiving IV-D services under õ302.33 of the required order of distribution of amounts offset as part of the information on the IV-D program provided at the time of application or referral to the IV-Dagency. Alternatively, States may inform those whose cases are submitted for offset prior to submittal. We have revised the introductory language in õ303.102(c) by deleting the phrase "When overdue support is submitted for State tax refund offset" to eliminate confusion regarding when the advance notice must be provided to the IV-D recipient and to parallel language in õ303.72(h)(3).

2. Comment: One commenter suggested that non-AFDC Medicaid cases should be referred to the IRS for Federal income tax refund offset using the AFDC criterion that the past-due support is not less than $150 instead of the higher criterion used for non-AFDC IV-D recipients that the past-due support is not less than $500.

Response: Congress, as a part of P. L. 100-203, did not amend section 464 of the Act governing the Federal income tax refund offset process specifically to address past-due

medical support assigned under section 1912 of the Act. Therefore, we used our general rulemaking authority, under section 1102 of the Act, to allow States to submit any past-due cash medical support which the State has agreed to collect in a IV-D case and which meets conditions for submittal in Federal statute and regulations. We believe that these cases should have access to the same establishment and enforcement services as other IV-D cases and are extending access to this particularly effective enforcement technique to ensure equal access for all those in need of IV-D services.

Since we are treating non-AFDC Medicaid cases as non-AFDC cases, the applicable criteria are those specified in section 464(b)(2), which delineates certain requirements for submittal of non-AFDC cases to the IRS for Federal income tax refund offset, and the implementing regulations at õ303.72(a)(3). Therefore, the support must be owed on behalf of a minor child and the amount of the support must be at least $500.

3. Comment: One commenter pointed out that õ303.72(k) specifies a January 1, 1991 sunset provision for the offset of Federal income refunds in non-AFDC cases, and questioned the feasibility of making revisions to the offset process when it would soon not be available.

Response: We expect Congress to extend the sunset provision for submitting non-AFDC cases to the IRS for Federal income tax refund offset, before the December 30, 1990, sunset date.

4. Comment: One commenter requested we expand the availability of the Federal income tax refund offset process to all past-due medical support, regardless of whether a cash amount is specified for medical support in a court order, since this restriction limits the opportunity to recover from the largest portion of the child support caseload.

Response: It is the responsibility of the IV-D agency to take steps to enforce health insurance coverage as required by court or administrative order. Also, if a support order requires that specified amounts be paid for medical support, the IV-D agency must take steps to enforce the order. The IV-D agency is not responsible for enforcing medical support of an unspecified nature, unless this is done under the optional cooperative agreement with the State Medicaid agency. There is no authorityunder the IV-D program for the collection of medical support, through the Federal income tax refund offset process or other enforcement techniques, unless there is a specific dollar amount in the support order designated for the purpose of medical support. If the medical debt is reduced to a judgment for medical support through action under a cooperative agreement with the Medicaid agency, or otherwise outside the IV-D agency, the judgment would then be enforceable in a IV-D case if the judgment designates a specific dollar amount for medical purposes.

Section 304.12 - Incentive payments.

1. Comment: Several commenters asked whether incentives are available for medical support collections in non-AFDC Medicaid cases and former AFDC cases.

Response: Incentives are available for the collection of medical support amounts when the support order includes a specific amount for medical care purposes. Medical support collections in AFDC (and title IV-E foster care) cases are considered AFDC collections for purposes of incentive calculation. Medical support collections in cases receiving services under õ302.33 are considered non-AFDC collections for purposes of incentive calculation.

2. Comment: One commenter requested that collections on behalf of non-AFDC Medicaid cases be considered AFDC collections for purposes of calculating incentive payments.

Response: Section 458(b)(1) of the Act defines AFDC collections for purposes of computing incentives under the IV-D program to include collections in cases in which support is assigned to the State pursuant to section 402(a)(26) or section 471(a)(17) of the Act, and defines non-AFDC collections to be collections in all other cases. Therefore, we lack authority to define collections on behalf of non-AFDC Medicaid recipients as AFDC collections.

Section 304.20 - Availability and rate of Federal financial participation.

1. Comment: One commenter requested clarification of whether certain activities, that the commenter considered related to the establishment of an agreement with the Medicaid agency to carry out required IV-D activities, would be eligible for Federal financial participation. Would there be "restrictions on administrative agreements (for required functions) between the programs?" Would Federal financial participation be available for "actively acquiring referrals from Medicaid rather than passively awaiting a non-mandatory referral by the Medicaid agency?" Would Federal financial participation be available for "planning, developing, and implementing automated systems or changes to Medicaid systems?" Finally, would "costs of litigating or otherwise enforcing cooperation of non-AFDC Medicaid recipients" be eligible for Federal financial participation?

Response: Section 304.20(a)(l) was amended to indicate thatFederal financial participation is available for IV-D services and activities on behalf of non-AFDC Medicaid recipients, made pursuant to the approved title IV-D State plan, that are determined by the OCSE to be necessary expenditures properly attributable to the IV-D program. Section 304.20(b)(l)(ix), which addresses the establishment of agreements with Medicaid agencies necessary to carry out required IV-D activities was modeled upon õ304.20(b)(l)(xiii), which addresses the establishment of agreements with the AFDC and the IV-E foster care agencies.

In response to the question of whether there would be "restrictions on administrative agreements (for required functions) between the programs," agreements must be limited to those functions necessary to carry out required IV-D activities such as those delineated in õ304.20(b)(1)(ix)(A) through (D).

Federal financial participation under the IV-D program would not be available for those activities which are not considered necessary expenditures properly attributable to the IV-D program, including "planning, developing, and implementing automated systems or changes to Medicaid systems" and "costs of litigating or otherwise enforcing cooperation of non-AFDC Medicaid recipients." However, outreach activities to secure referrals from Medicaid would be considered a proper IV-D activity.

2. Comment: One commenter requested clarification whether Federal financial participation is available for the delineated activities in õ304.20(b)(1)(ix) only if they are done under an agreement with the Medicaid agency. The commenter objected to the activities being considered IV-D activities, with IV-D funding, since these expenditures will reduce the State's cost-effectiveness with no resulting increase in incentives.

Response: Section 304.20(a)(1) specifies that Federal financial participation at the applicable matching rate is available for necessary expenditures under the State IV-D plan for the support enforcement services and activities in õõ304.20 and 304.21 provided to individuals from whom an assignment of support rights as defined in õ301.1 has been obtained. This includes the required IV-D activities delineated under õ304.20(b)(1)(ix). Federal matching is not contingent upon these activities being done under an agreement with the Medicaid agency.

In response to the second comment, we remind the commenter that the provision of IV-D services to non-AFDC Medicaid recipients is a legislative mandate. Medical support enforcement is an integral part of child support enforcement and as such is a legitimate function of the IV-D program. Incentives are available for collection of support made on behalf of non-AFDC Medicaid recipients at the same rate as for other non-AFDC recipients of IV-D services.

Regulatory Flexibility Analysis

Comment: Several commenters did not agree that the State IV-D caseload would be minimally increased due to the automatic eligibility for IV-D services for non-AFDC Medicaid individualsreferred by the Medicaid agency and former AFDC families referred by the AFDC agency. One commenter estimated its IV-D caseload will increase by 268 new IV-D cases each month due to referrals of new non-AFDC Medicaid individuals, with no resulting increase in incentives because collections are counted as non-AFDC collections for incentive purposes and the amount of non-AFDC incentives is capped in the State.

Response: Section 9141 of P. L. 100-203 did not impose the requirement that former AFDC recipients be provided IV-D services at the time AFDC eligibility ends; this requirement was part of the Child Support Enforcement Amendments of 1984 (P. L. 98-378). Section 9141 of P. L. 100-203 deleted the transition period of up to five months between AFDC ineligibility and mandatory continuation of services. Therefore, the State IV-D caseload would not be affected by section 9141 because States have been required to continue to provide services in these cases since October 1, 1984.

Section 9142 mandates the provision of IV-D services to non-AFDC Medicaid recipients, many of whom should already have been receiving IV-D services after having applied for services upon the referral of the Medicaid agency. We continue to believe that the impact of the requirements will be minor since most of the affected individuals were already receiving IV-D services, either under the prior provisions for former AFDC recipients or by the Medicaid agency requiring them to apply for IV-D services. The commenter did not indicate how many of the 268 new non-AFDC Medicaid cases would have become IV-D cases under prior practice by application for IV-D service absent the new law. With respect to the comment that the incentives will not increase because collections are counted as non-AFDC collections and the amount of non-AFDC incentives is capped in that State, incentives for collections in these cases will increase as AFDC collections increase. Additionally, under the provisions of the Child Support Enforcement Amendments of 1984 (P. L. 98-378), the cap on the incentive for non-AFDC collections has been raised to 115% of the AFDC collections, effective October 1, 1989. Finally, we would point out that the State share of any Medicaid savings should far outweigh any benefits of increased incentives in these cases.

Regulatory Flexibility Analysis

The Secretary certifies, under 5 U.S.C. 605(b), as enacted by the Regulatory Flexibility Act (P. L. 96-354), that this regulation will not result in a significant impact on a substantial number of small entities. The primary impact is on State governments and political subdivisions and we believe that this impact will be nominal because, as discussed in the last comment, the regulation merely requires the provision of IV-D services to current non-AFDC Medicaid recipients and former Medicaid and IV-E foster care cases, many of whom have applied for and are receiving services from the IV-D agency, and eliminates the requirement that these recipients file an application and pay an application fee. This regulation alsoeliminates the transitional five-month period between the end of AFDC eligibility and transfer of a former AFDC case to non-AFDC status. States have been required since October 1, 1984 to continue to provide services to individuals once AFDC eligibility ends.

This automatic provision of IV-D services to certain families will not increase the IV-D caseloads in the States because most of the affected individuals are already, or would have become, non-AFDC IV-D recipients anyway by applying for services and paying the application fee, or by being automatically converted to non-AFDC status after the transitional five-month period ended.

Executive Order 12291

The Secretary has determined, in accordance with Executive Order 12291, that this rule does not constitute a "major" rule. A major rule is one that is likely to result in:

o An annual effect on the economy of $100 million or more;

o A major increase in costs or prices for consumers, individual industries, Federal, State or local government agencies, or geographic regions; or

o Significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of the United States-based enterprises to compete with foreign-based enterprises in domestic or import markets.

The regulation is expected to have an insignificant impact on State and Federal expenditures because the regulation merely requires the provision of IV-D services to non-AFDC Medicaid recipients without filing an application or paying an application fee and eliminates the five-month transitional period between AFDC and non-AFDC status. This clarification will not significantly increase the IV-D caseloads in the States because most of the affected individuals are already receiving IV-D services or would have become IV-D cases under former procedures. These requirements merely eliminate the need to apply for services and pay the application fee in current non-AFDC Medicaid cases and former Medicaid and IV-E foster care cases and eliminate a transitional five-month period during which services were provided in former AFDC cases before those cases were automatically transferred to non-AFDC status.

List of Subjects

45 CFR Parts 301, 303, 304

Child Support, Grant Programs/Social Programs, Reporting and Recordkeeping Requirements.

45 CFR Part 302

Child Support, Grant Programs/Social Programs, Reporting and Recordkeeping Requirements, Unemployment Compensation.

[Catalog of Federal Domestic Assistance Program No. 13.783, Child Support Enforcement Program]

Dated: August 21, 1990

Jo Anne B. Barnhart

Director, Office of Child Support Enforcement

Approved: October 18, 1990

Louis W. Sullivan, M.D.

Secretary

For the reasons set out in the preamble, 45 CFR 301 through 304 and Part 306 are amended as follows:

PART 301-[AMENDED]

1. The authority citation for Part 301 continues to read as follows:

Authority: 42 U.S.C. 651 through 658, 660, 664, 666, 667, 1302, 1396a(a)(25), 1396b(d)(2), 1396b(o), 1396b(p) and 1396(k).

2. Section 301.1 is amended by adding the definitions of the terms "Assigned support obligation" and "Assignment" after the definition of the term "Applicable matching rate", and adding the definition of the term "Non-AFDC Medicaid recipient" after the definition of the term "IV-D Agency" to read as follows:

õ301.1 General definitions.

* * * * *

Assigned support obligation means, unless otherwise specified, any support obligation which has been assigned to the State under

õ232.11 of this chapter or section 471(a)(17) of the Act, or any medical support obligation or payment for medical care from any third party which has been assigned to the State under 42 CFR 433.146.

Assignment means, unless otherwise specified, any assignment of rights to support under õ232.11 of this chapter or section 471(a)(17) of the Act, or any assignment of rights to medical support and to payment for medical care from any third party under 42 CFR 433.146.

* * * * *

Non-AFDC Medicaid recipient means any individual who has been determined eligible for or is receiving Medicaid under title XIX of the Act but is not receiving, nor deemed to be receiving, AFDC under title IV-A of the Act.

* * * * *

PART 302

1. The authority citation for Part 302 continues to read as follows:

Authority: 42 U.S.C. 651 through 658, 660, 664, 666, 667, 1302, 1396a(a)(25), 1396b(d)(2), 1396b(o), 1396b(p), and 1396(k).

2. Section 302.31 is amended by revising paragraph (a)(1), the first sentence of (a)(2), (b), the first sentence of (c), and the OMB approval statement at the end of the section, and by adding a new (a)(4), to read as follows:

õ302.31 Establishing paternity and securing support.

* * * * *

(a) * * *

(1) In the case of a child born out of wedlock with respect to whom an assignment as defined in õ301.1 of this chapter is effective, to establish the paternity of such child; and

(2) In the case of any individual with respect to whom an assignment as defined in õ301.1 of this chapter is effective, to secure support for a child or children from any person who is legally liable for such support, using State laws and reciprocal arrangements adopted with other States when appropriate. * * *

* * * * *

(4) When assigned medical support payments are received and retained by a non-AFDC Medicaid recipient, the IV-D agency shall notify the Medicaid agency whenever it discovers that directly received medical support payments are being, or have been, retained.

(b) Upon receiving notice from the IV-A, IV-E or Medicaid agency that there has been a claim of good cause for failure to cooperate, the IV-D agency will suspend all activities to establish paternity or secure support until notified of a final determination by the appropriate agency.

(c) The IV-D agency will not undertake to establish paternity or secure support in any case for which it has received notice from the IV-A, IV-E or Medicaid agency that there has been a finding of good cause unless there has been a determination by the IV-A, IV-E or Medicaid agency, as appropriate, that support enforcement may proceed without the participation of the caretaker or other relative. * * *

(Approved by the Office of Management and Budget under control numbers 0960-0385 and 0970-0107)

õ302.32 [AMENDED]

3. Section 302.32 is amended by replacing the reference to "õ302.51(e)(1)" in the last sentence of paragraph (b) with "õ302.33".

4. Section 302.33 is amended by revising the title and paragraphs (a), (d)(1)(ii), (d)(5), (e), and the OMB approval statement at the end of the section to read as follows:

õ302.33 Services to Individuals not receiving AFDC or title IV-E foster care assistance.

(a) Availability of Services. (1) The State plan must provide that the services established under the plan shall be made available to any individual who:

(i) Files an application for the services with the IV-D agency. In an interstate case, only the initiating State may require an application under this section; or

(ii) Is a non-AFDC Medicaid recipient; or

(iii) Has been receiving IV-D services and is no longer eligible for assistance under the AFDC, IV-E foster care, and Medicaid program.

(2) The State may not require an application, other request for services or an application fee from any individual who is eligible to receive services under paragraphs (a)(1)(ii) and (iii) of this section. If an individual receiving services under paragraph (a)(1)(iii) refuses services in response to a notice under paragraph (a)(4) of this section, and subsequently requests services, that individual must file an application and pay an application fee.

(3) The State may not charge fees or recover costs from any individual who is eligible to receive services under paragraph (a)(1)(ii) of this section.

(4) Whenever a family is no longer eligible for assistance under the State's AFDC, IV-E foster care, and Medicaid programs, the IV-D agency must notify the family, within five working days of the notification of ineligibility, that IV-D services will be continued unless the IV-D agency is notified to the contrary by the family. The notice must inform the family of the consequences of continuing to receive IV-D services, including the available services and the State's fees, cost recovery and distribution policies.

(5) The State must provide all appropriate IV-D services, in addition to IV-D services related to securing medical support, to all individuals who are eligible to receive services under paragraph (a)(1)(ii) of this section unless the individual notifies the State that only IV-D services related to securing medical support are wanted.

* * * * *

(d)* * *

(1) * * *

(ii) From the individual who is receiving IV-D services under paragraph (a)(1)(i) or (iii) of this section, eitherdirectly or from the support collected on behalf of the individual, but only if the State has in effect a procedure for informing all individuals authorized within the State to establish an obligation for support that the State will recover costs from the individual receiving IV-D services under paragraphs (a)(1)(i) and (iii) of this section.

* * * * *

(5) If a State elects to recover costs under this section, the IV-D agency must notify, consistent with the option selected, either the individual who is receiving IV-D services under paragraphs (a)(1)(i) or (iii) of this section, or the individual who owes a support obligation that such recovery will be made. In an interstate case, the IV-D agency where the case originated must notify the individual receiving IV-D services of the States that recover costs.

* * * * *

(e) Assignment (1) The IV-D agency may take an assignment of support rights not already assigned to the State from an individual receiving services under this section. However, an assignment by an individual under this section does not constitute an assignment as defined in õ301.1 of this chapter and may not be a condition of eligibility for services under this section.

(2) Before the recipient of IV-D services under this section makes an assignment of support rights, the IV-D agency shall inform the individual that the assignment is not a condition of eligibility for services under this section.

(Approved by the Office of Management and Budget under control numbers 0960-0253, 0960-0385, 0960-0402, and 0970-0107)

5. Section 302.50 is amended by revising paragraphs (a) and (e) to read as follows:

õ302.50 Support obligations.

* * * * *

(a) An assignment of support rights, as defined in õ301.1 of this chapter, constitutes an obligation owed to the State by the individual responsible for providing such support. Such obligation shall be established by:

(1) Order of a court of competent jurisdiction or of an administrative hearing process; or

(2) Except for obligations assigned under 42 CFR 433.146, other legal process as established by State laws, such as a legally enforceable and binding agreement.

* * * * *

(e) No portion of any amounts collected which represent an

assigned support obligation defined under õ301.1 of this chapter may be used to satisfy a medical support obligation unless the court or administrative order designates a specific dollar amount for medical purposes.

* * * * *

6. Section 302.51 is amended by revising paragraphs (e), (f)(4) and the OMB approval statement at the end of the section to read as follows:

õ302.51 Distribution of support collections.

* * * * *

(e)(1) The amounts collected by the IV-D agency which represent specific dollar amounts designated in the support order for medical purposes that have been assigned to the State under 42 CFR 433.146 shall be forwarded to the Medicaid agency for distribution under 42 CFR 433.154.

(2) When a family ceases receiving assistance under the State's title XIX plan, the assignment of medical support rights under section 1912 of the Act terminates, except for the amount of any unpaid medical support obligation that has accrued under such assignment. The IV-D agency shall attempt to collect any unpaid specific dollar amounts designated in the support order for medical purposes. Under this requirement, any medical support collection made by the IV-D agency under this paragraph shall be forwarded to the Medicaid agency for distribution under 42 CFR 433.154.

(f) * * *

(4) For those cases in which collections are authorized under õ302.33(a)(1)(iii), priority shall be given to collection of current support.

(Approved by the Office of Management and Budget under control numbers 0960-0385 and 0970-0107)

7. Section 302.70(a)(3) is revised to read as follows:

õ302.70 Required State laws.

(a) * * *

(3) Procedures for obtaining overdue support from State income tax refunds on behalf of individuals receiving IV-D services, in accordance with the requirements set forth in õ303.102 of this chapter;

* * * * *

8. Section 302.75 is amended by revising paragraph (b)(4) to read as follows:

õ302.75 Procedures for the imposition of late payment fees on absent parents who owe overdue support.

* * * * *

(b) * * *

(4) The late payment fee must be imposed in cases where there has been an assignment under õ232.11 of this title or section 471(a)(17) of the Act or the IV-D agency is providing services under õ302.33 of this chapter.

* * * * *

PART 303

1. The authority citation for Part 303 continues to read

as follows:

Authority: 42 U.S.C. 651 through 658, 660, 663, 664, 666, 667, 1302, 1396a(a)(25), 1396b(d)(2), 1396b(o), 1396b(p) and 1396(k).

2. Section 303.10(b)(2) is revised to read as follows:

õ303.10 Procedures for case assessment and prioritization.

* * * * *

(b) * * *

(2)Include all of its cases in the system.

* * * * *

3. Sections 303.11(b)(9) through (12) are revised to read as follows:

õ303.11 Case closure criteria.

* * * * *

(b) * * *

(9) The non-AFDC custodial parent requests closure of a case and there is no assignment to the State of medical support under 42 CFR 433.146 or of arrearages which accrued under a support order;

(10) There has been a finding of good cause as set forth at õõ302.31(c) and either 232.40 through 232.49 of this chapter or 42 CFR 433.147 and the State or local IV-A, IV-E, or Medicaid agency has determined that support enforcement may not proceed without risk of harm to the child or caretaker relative;

(11) In a non-AFDC case receiving services under õõ302.33(a)(1)(i) or (iii), the IV-D agency is unable to contact the custodial parent within a 30 calendar day period despite attempts by both phone and at least one certified letter; or

(12) In a non-AFDC case receiving services underõõ302.33(a)(1)(i) or (iii), the IV-D agency documents the circumstances of the custodial parent's noncooperation and an action by the custodial parent is essential for the next step in providing IV-D services.

* * * * *

4. Section 303.30 is amended by revising the introductory language in paragraphs (a) and (b) and the OMB approval statement at the end of the section to read as follows:

õ303.30 Securing medical support information.

(a) If the IV-A or IV-E agency does not provide the information specified in this paragraph to the Medicaid agency and if the information is available or can be obtained in a IV-D case for which an assignment as defined under õ301.1 of this chapter is in effect, the IV-D agency shall obtain the following information on the case:

* * * * *

(b) When an individual is eligible for services under õ302.33 of this chapter, the IV-D agency shall inform the individual that medical support enforcement services are available and shall secure the information specified in paragraph (a) of this section:

* * * * *

(Approved by the Office of Management and Budget under control numbers 0960-0420 and 0970-0107)

5. Section 303.31 is amended by revising the introductory language in paragraph (b) and revising paragraph (c) and the OMB approval statement at the end of the section to read as follows:

õ303.31 Securing and enforcing medical support obligations.

* * * * *

(b) With respect to cases for which there is an assignment as defined in õ301.1 of this chapter in effect, the IV-D agency shall:

* * * * *

(c) The IV-D agency shall inform an individual who is eligible for services under õ302.33 of this chapter that medical support enforcement services are available and shall provide the services specified in paragraph (b) of this section:

(1) If an individual eligible for services under õ302.33 is a Medicaid recipient; or

(2) With the consent of the individual who is eligible forservices under õ302.33 and is not a Medicaid recipient, except that health insurance information shall not be transmitted to the Medicaid agency.

(Approved by the Office of Management and Budget under control numbers 0960-0420 and 0970-0107)

6. Section 303.71 is amended by revising the last sentence in paragraph (b) and revising paragraph (c)(5) to read as follows:

õ303.71 Requests for full collection services by the Secretary of the Treasury.

* * * * *

(b) * * * Requests may be made on behalf of families who make assignments as defined in õ301.1 of this chapter and on behalf of families receiving services under õ302.33.

(c) * * *

(5) Only the State that has taken an assignment as defined in õ301.1 of this chapter or an application or referral under õ302.33 of this chapter may request IRS collection services on behalf of a given case.

* * * * *

7. Section 303.72 is amended by revising paragraphs (a)(1) and (3) introductory text, (h)(1), (3) and (4), and (i)(2) to read as follows:

õ303.72 Requests for collection of past-due support by Federal tax refund offset.

(a) * * *

(1) There has been an assignment of the support rights under õ232.11 of this title or section 471(a)(17) of the Act to the State making the request for offset or the IV-D agency is providing services under õ302.33 of this chapter.

* * * * *

(3) For support owed in cases where the IV-D agency is providing IV-D services under õ302.33 of this chapter:

* * * * *

(h) Distribution of collections. (1) Collections received by the IV-D agency as a result of refund offset to satisfy AFDC or non-AFDC past-due support shall be distributed as past-due support as required under õ302.51(b)(4) and (5) and (e) of this chapter.

* * * * *

(3) The IV-D agency must inform individuals receiving services under õ302.33 of this chapter in advance that amounts offset will be applied first to satisfy any past-due support which has been assigned to the State under õ232.11 of this title, 42 CFR 433.146, or section 471(a)(17) of the Act and submitted for Federal tax refund offset.

(4) If the amount collected is in excess of the amounts required to be distributed under õõ302.51(b)(4) and (5) and (e) or 302.52(b)(3) and (4) of this chapter, the IV-D agency must repay the excess to the absent parent whose refund was offset or to the parties filing a joint return within a reasonable period in accordance with State law.

* * * * *

(i) * * *

(2) The State IV-D agency may charge an individual who is receiving services under õ302.33(a)(1)(i) or (iii) of this chapter a fee not to exceed $25 for submitting past-due support for Federal tax refund offset. The State must inform the individual in advance of the amount of any fee charged.

* * * * *

8. Section 303.102 is amended by revising paragraphs (a)(1), (c), (f) and (g)(1)(i) through (iii) and adding (g)(1)(iv) to read as follows:

õ303.102 Collection of overdue support by State income tax refund offset.

(a) * * *

(1) There has been an assignment of the support obligation under õ232.11 of this title or section 471(a)(17) of the Act or the IV-D agency is providing services under õ302.33 of this chapter, and

* * * * *

(c) Notice to custodial parent. The IV-D agency must inform individuals receiving services under õ302.33 of this chapter, in advance:

(1) That, for cases in which medical support rights have been assigned under 42 CFR 433.146, and amounts are collected which represent specific dollar amounts designated in the support order for medical purposes, amounts offset will be distributed under õ302.51(e) of this chapter; and

(2) If amounts offset will be applied first to satisfy any past-due support which has been assigned to the State under õ232.11 of this title or section 471(a)(17) of the Act.

* * * * *

(f) Fee for certain cases. The State IV-D agency may charge an individual who is receiving services under õ302.33(a)(1)(i) or (iii) of this chapter a reasonable fee to cover the cost of collecting past-due support using State tax refund offset. The State must inform the individual in advance of the amount of any fee charged.

(g) * * *

(1) * * *

(i) For an AFDC case, under õ302.51(b)(4) and (5) and (e) of this chapter;

(ii) For a foster care maintenance case, under õ302.52(b)(3) and (4) of this chapter; and

(iii) For a non-AFDC case, except as specified in paragraph (g)(1)(iv) of this section, by paying offset amounts to the family first or using them first to reimburse the State, depending on the State's method for distributing arrearage collections in non-AFDC cases.

(iv) For cases in which medical support rights have been assigned under 42 CFR 433.146, and amounts are collected which represent specific dollar amounts designated in the support order for medical purposes, under õ302.51(e) of this chapter.

* * * * *

PART 304

1. The authority citation for Part 304 continues to read as follows:

Authority: 42 U.S.C. 651 through 655, 657, 1302, 1396a(a)(25), 1396b(d)(2), 1396b(o), 1396b(p), and 1396(k).

2. Section 304.12 is amended by deleting the words "and collections made under õ302.51(e) of this chapter" at the end of the definition of "non-AFDC collections" in paragraph (a).

3. Section 304.20 is amended by revising paragraph (a)(1); deleting paragraph (a)(2) and redesignating paragraphs (a)(3) and (4) as paragraphs (a)(2) and (3); adding paragraph (b)(1)(ix); deleting paragraph (b)(4)(ii); redesignating paragraphs (b)(4)(iii) through (vi) as paragraphs (b)(4)(ii) through (v); and adding a new (b)(4)(vi) to read as follows:

õ304.20 Availability and rate of Federal financial participation.

(a)* * *

(1) Necessary expenditures under the State title IV-D plan for the support enforcement services and activities specified in this section and õ304.21 provided to individuals from whom an assignment of support rights as defined in õ301.1 of this chapter has been obtained;

* * * * *

(b)* * *

(1) * * *

(ix) The establishment of agreements with Medicaid agencies necessary to carry out required IV-D activities and to establish criteria for:

(A) Referring cases to the IV-D agency;

(B) Reporting on a timely basis information necessary for the determination and redetermination of eligibility for Medicaid;

(C) Determining if individuals receiving Medicaid are cooperating adequately;

(D) Transferring collections from the IV-D agency to the Medicaid agency in accordance with õ302.51(e) of this chapter.

* * * * *

(4) * * *

* * * * *

(vi) Making the Medicaid agency aware of amounts collected and distributed to the family for the purposes of determining eligibility for assistance under the State XIX plan.

* * * * *