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Income Withholding for Support (IWO) for Federal Agencies

Published: September 13, 2011
Information About:
Employers
Topics:
Employer Responsibilities, Income/Wage Withholding
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General Information

Income withholding is the court- or administratively-ordered deduction of a specified amount from a parent's income for payment of child support. All federal agencies must honor an IWO for child support. Out-of-state IWOs are valid throughout the country, including U.S. territories. All entities, including state/tribal/territorial child support agencies, courts, tribunals, attorneys and individuals are required to use the standardized withholding form entitled Income Withholding for Support (IWO) (OMB No. 0970-0154) along with Income Withholding for Support - Instructions.

A child support IWO must be paid before all other garnishments, with one exception. The only withholding that takes precedence over child support is a federal (IRS) tax levy entered prior to the underlying child support order. The date that the child support order is established determines precedence, not the date the IWO is served on the federal agency.

Income is defined as any periodic form of payment due to an individual, regardless of source, including wages and salaries, commissions, bonuses, workers' compensation, disability, payments pursuant to a pension or retirement program and interest.

Not only must child support be paid first, a higher percentage of the employee's disposable income may be withheld for child support than for other garnishments. The federal agency deducts the specified amount of child support each pay period and sends it to the state child support enforcement (CSE) agency's state disbursement unit (SDU), which then forwards the payment to the custodial party. In private cases (not enforced by the CSE agency) in which the support order was initially issued on or after January 1, 1994, the federal agency must forward the payment to the SDU. Some states require that all child support payments be sent to the SDU, regardless of date. Child support is withheld from an employee's regular pay, but it may also be withheld from income other than a paycheck. For federal employees, this is the list of federal benefits from which child support may be deducted:

  • Periodic benefits
    1. Pensions
      Per OPM regulations (5 CFR 581), cash awards, including performance-based cash awards, are considered income, as is any payment for accrued leave.
    2. Retirement benefits
    3. Retired/retainer pay
    4. Annuities
    5. Dependents' or survivors' benefits when payable to the obligor
  • Refunds of retirement contributions where an application has been filed
  • Amounts received under any federal program for compensation for work injuries
  • Benefits received under the Longshoremen's and Harbor Workers' Compensation Act
  • Compensation for death under any federal program, including death gratuities
  • Benefits from the Social Security Administration (but not SSI benefits), Veterans Affairs (in certain instances), Railroad Retirement Board, and Black Lung.

For more details, please refer to the OPM regulations on processing garnishment orders for child support and/or alimony in Title 5 of the Code of Federal Regulations.

Processing the Order/Notice

Upon receipt of the Income Withholding for Support (IWO), the agency should:

  1. Document the date and time of receipt.
  2. Determine if the order is "regular on its face." See "Note" in the first box on Page One of the IWO form. If the IWO does not direct payments to the SDU, it is not regular on its face and must be returned to the sender. Page One of the instructions gives additional information on when to return an order that is not regular on its face. If the IWO is not regular on its face for any of the reasons listed, the federal agency must check the box "Return to Sender" on Page Two and return the IWO to the sender.
  3. A copy of the underlying child support order allowing income withholding must be attached if the IWO is not sent by a court or a child support agency. If the child support order should be attached but is not, return the IWO to the sender.
  4. Send a copy of the IWO to the employee within 15 calendar days of the date of receipt.
  5. Follow the terms of the order.

Although federal agency employers follow federal law for new hire reporting, federal law directs federal agencies to follow state law for income withholding.

Follow the law of the issuing state regarding:

  • Duration and amount of child support, both current and arrears
  • Medical support terms
  • Where to remit payments
  • Payment of fees and costs charged (if any) by the child support enforcement (CSE) agency, issuing court or custodial party's attorney

Follow the law of the employee's official duty station state (or "principal place of employment") regarding:

  • When to begin withholding (if longer than 30 calendar days)
  • When to remit payments (this can be from 1 to 7 days after payday)
  • Maximum amount to be withheld (within Consumer Credit Protection Act limits)
  • How to allocate withholding across multiple child support orders
  • Administrative fee that the federal agency is permitted to charge the employee
  • Other terms and conditions that may be set by state law

See State Income Withholding Information

Only the employee has the right to dispute the terms of a child support IWO and can do so by contacting the issuing agency or tribunal. The federal agency cannot contest the IWO; however, the federal agency should contact the issuing CSE agency if unable to implement the withholding order either because the individual named in the order is not an employee or a withholding is already in place for the same child.

Withholding Examples

Allowable Disposable Income

  • Biweekly gross pay is $760
  • Biweekly child support due is $295
  • Mandatory deductions total $201
  • Employee is single and does not owe back child support

Note the following differences between net pay and disposable income in this example. The amount of disposable income, $559, is used to determine child support withholding limits, rather than the net pay, $469.

Withholding Examples Disposable Income Net Pay
Gross pay $760.00 $760.00
Federal income tax (95.00) (95.00)
FICA (45.00) (45.00)
Medicare (11.00) (11.00)
Health insurance (25.00) (25.00)
Union dues   (10.00)
Thrift Savings Plan (25.00) (25.00)
Union pension   (30.00)
Credit union car loan   (50.00)
  $559.00 $469.00

 

  • Gross pay - mandatory deductions = disposable income:
    $760 - $201 = $559.00
  • Disposable income x CCPA % limit = allowable disposable income:
    $559 x 60% = $335.40
    • Note that 60% is the applicable CCPA limit because the employee is not supporting a second family and does not owe any past due child support.

Allowable disposable income is the maximum available for child support withholding. Allowable disposable income (from above) is $335.40.

  • $335.40 > $295.00, so the full $295 is withheld for child support.

If you take the same example but increase the biweekly child support payment to $400, you cannot withhold the full amount due. You may only withhold a maximum of $335.40. This means that the employee will fall behind by $64.60 and will be in arrears. Some states charge interest on the overdue amounts. The employee has the option of paying the underpaid amount directly to the issuing agency if he or she does not want to fall into arrears.

Value of Fringe/Non-cash Benefits

The value of fringe benefits such as a take-home vehicle, a free parking space or other non-cash benefit is subject to taxation but is not considered "income" for the purpose of calculation of disposable income for child support purposes.

In calculating disposable income for child support, the value of fringe benefits must be subtracted from the employee's gross pay before determining the obligated employee's allowable disposable income.

Gross pay $1,000
Add value of take-home vehicle $300
Taxable earnings $1,300
Deduct mandatory deductions ($350)
Net pay $950
Subtract value of take-home vehicle from net pay ($300)
Disposable earnings $650

 

Special Situations

Multiple Income Withholding Orders - Same Employee and Same Child

There should not be more than one withholding order for current support for a child. There may be more than one withholding order for a child if only one order has a current support amount due. The issuing CSE agency, not the federal agency, is responsible for resolving any duplication. The federal agency receiving a duplicate withholding order should follow these steps:

  • Continue to honor the first order received.
  • Give your employee a copy of the second order.
  • Contact the issuing agency that sent the second withholding order and inform it that you are already sending withheld payments for the same child to another jurisdiction. Provide payment information such as the amount of the withholding and where the withholding is being sent.
  • Contact the issuing agency that sent the first withholding order and inform it of the second order.

Multiple Income-Withholding Orders - Same Employee and Different Children

Federal regulations require that some money must be paid to each order for current support if there is more than one withholding order. In addition, states have enacted laws specifying the method for allocating money toward current support due for each order. The orders should not be paid on a "first come, first served" basis. For more information, see Statutory & Regulatory Authority for Income Withholding Allocation.

Not Enough Money to Withhold Full Ordered Amount

If there is enough allowable disposable income to pay multiple orders, the federal agency should pay the full amount of current support due for each order. Sometimes an employee's earnings do not stretch far enough to pay all his or her claimants. If there is not enough allowable disposable income to pay multiple orders, the allocation method of the employee's official duty station state (principal place of employment) must be followed to determine how much to pay on each order.

Example:

  • Order A current support owed: $220/biweekly
    Arrears owed: $50/biweekly
  • Order B current support owed: $200/biweekly
  • Order C current support owed: $185/biweekly
  • Employee's disposable income: $1000/biweekly
  • Assume allowable disposable income is $550

Because the employee is supporting more than one family and is in arrears, the CCPA limit is 55% x disposable income (55% x $1000 = $550).

Withholding:

  • Total current support owed: $605/biweekly
  • Total arrears owed: $50/biweekly
  • The allowable disposable income ($550) is not enough to withhold the entire amount of current support due for these three orders ($605). Nothing may be withheld to satisfy the arrearage.

Allocation Methods:

States use one of two methods to allocate withheld payments among multiple withholding orders:

Method 1: Pro-rate by allocating a percentage to each order based on the total dollar amount of current support orders.

  • Add total current support due on all withholding orders.
  • Divide each order's current support due by the total of all orders to figure each order's percentage of total.
  • Withhold the percentage of allowable disposable income for each order.

    Order A $220.00 ÷ 605 = 36%
    Order B $200.00 ÷ 605 = 33%
    Order C $185.00 ÷ 605 = 31%
    Total $605.00 = 100%
  • Allowable disposable income (maximum that may be withheld): $550

    Order A $550 x 36% = $198.00
    Order B $550 x 33% = $181.50
    Order C $550 x 31% = $170.50
    Total withheld   $550.00

Method 2: Share equally by dividing the allowable disposable income by the total number of orders.

  • Allowable disposable income (maximum that may be withheld): $550
  • 3 orders for the same employee (Orders A, B and C)
  • Dividing by 3 (the total number of orders) would yield $183.33 to be applied to each order
  • 550 ÷ 3 = $183.33 paid to each order

The prorata method is used by 49 states/territories; the equal method is used by 6 states/territories. See the State Income Withholding Information matrix for more information.

IRS Tax Levy and Child Support

An IRS tax levy takes precedence over a child support withholding order only if the tax levy was entered before the child support order was established. The priority determination between a child support withholding order and an IRS tax levy depends on the date that the original child support order was established. Remember that the child support order is the order on which the income withholding order is based.

The federal agency usually is not informed of the original order date. Therefore, the following action is recommended:

  • If a federal tax levy is received for an employee who already has a child support withholding order in place, the child support withholding order takes precedence if the original child support order pre-dates the federal tax levy. Contact the IRS and tell them a child support withholding order is already being honored.
  • If a child support withholding order is received for an employee who already has a federal tax levy in place, and the original child support order was established after the federal tax levy, the federal tax levy takes precedence. Contact the issuing CSE agency about this situation. The CSE agency may then contact the IRS to discuss an alternate payment plan.

A federal tax levy is the only deduction that takes precedence over child support if the original child support order was established after the federal tax levy. If there is any question on how to proceed, contact the CSE agency.

Remember that child support should always be withheld before the following voluntary and involuntary deductions:

  • Assignment of wages
  • State and local tax levies
  • Creditor garnishment

Other Garnishments and Child Support

Guidelines: A child support IWO must be paid before all other garnishments. When you have a child support IWO and a commercial garnishment for your employee:

  1. Deduct the child support withholding.
  2. To determine how much can be paid to the commercial garnishment, take the lesser amount of:
    1. The difference between the biweekly disposable income (before the child support withholding) and 60 times the minimum wage [60 x $7.25 = $435.00]. Note that you would calculate 30 times the minimum wage for weekly disposable income.
      • If the biweekly disposable income is less than $435 (or the weekly income is less than $217.50), no withholding for the commercial garnishment may be made.
    2. 25% of the biweekly disposable income.
  3. For the commercial garnishment, you may withhold the amount above the child support deduction up to the lesser amount figured in step (2) above.

Example A: Tony's child support withholding obligation is $90.00/week (or $180 every biweekly pay period). His biweekly disposable income is $700. Sears serves a garnishment against Tony for a $1,000 debt.

  1. Deduct $180 for child support from Tony's $700 pay (Tony is single and is not in arrears, so up to 60%, or $420, may be withheld for child support.)
  2. Take the lesser of:
    1. Disposable income minus 60 times minimum wage [60 x $7.25 = $435.00]:
      $700 - $309.00 = $265.00
    2. 25% of disposable income: 25% x $700 = $175
      $175 is the lesser of these two amounts.
  3. Difference between allowed amount for a commercial garnishment and the child support deduction taken:
    $175 - $180 = -$5
    The child support deduction of $180 has already exceeded the allowed amount for a commercial garnishment; therefore nothing can be withheld for Tony's Sears garnishment.

Example B: Tony's child support withholding obligation is $70/week (or $140 every biweekly pay period). His biweekly disposable income is $1,000. Sears serves a garnishment against Tony for a $1,000 debt.

  1. Deduct $140 for child support from Tony's $1,000 pay (Tony is single and is not in arrears, so up to 60%, or $600, may be withheld for child support.)
  2. Take the lesser of:
    1. Disposable income minus 60 times minimum wage [60 x $7.25 = $435.00]:
      $1000 – $435.00 = $565.00
    2. 25% of disposable income: 25% x $1000 = $250
      $250 is the lesser of these two amounts.
  3. Difference between allowed amount for a commercial garnishment and the child support deduction taken:
    $250 - $140 = $110
    $110 can be withheld for Tony's Sears garnishment.

Bankruptcy and Child Support

It is a good idea for the Federal agency to notify the child support agency that a bankruptcy order has been received and simultaneously, to notify the bankruptcy court that a child support order is in force. Always follow the payment instructions from the bankruptcy court.

Even if an employee declares bankruptcy, he is still obligated to pay child support. Debts due for delinquent child support are not dischargeable in bankruptcy actions.

Several changes to the bankruptcy law went into effect on October 17, 2005. One significant change related to child support is that the automatic stay provisions under the bankruptcy code no longer apply to the withholding of domestic support obligations from a noncustodial parent's income or wages. This provision means that it is not necessary to ask the court to provide relief from the stay for purposes of withholding the noncustodial parent's support obligation. New income withholding orders must be implemented immediately, and income withholding orders already in place should continue without interruption.

If an employer receives information or notification regarding a bankruptcy filing for an employee, the employer should continue withholding amounts for domestic support obligations. A "domestic support obligation" is defined as a debt or an amount that is in the nature of alimony, maintenance or child support, even if not expressly designated as such. Arrears are included in this definition.

A domestic support obligation includes amounts that are owed to:

  • Spouse
  • Former spouse
  • Child
  • Parent of a child
  • Legal guardian of a child
  • Responsible relative of a child
  • A governmental unit

If there is any doubt about whether a withholding order is a domestic support obligation, please contact the agency, court or entity that issued the withholding order.

A federal agency may be notified that it is no longer responsible for withholding the payments because a trustee of the bankruptcy court has taken over this task. Withholding should continue until official notification from the child support enforcement agency or bankruptcy court has been received.

For more information, contact the Employer Services Team at employerservices@acf.hhs.gov.