Instructions for the Distribution of Child Support Collections and the Payment of Incentives

ACTION TRANSMITTAL

AT-76-05

Date: March 11, 1976

TO: STATE AGENCIES ADMINISTERING A CHILD SUPPORT ENFORCEMENT PROGRAM APPROVED UNDER TITLE IV-D OF THE SOCIAL SECURITY ACT.

SUBJECT: Instructions for the distribution of child support collections and the payment of incentives to States and political subdivisions making child support collections.

ATTACHMENT: Subject instructions

BACKGROUND: Public Law 93-647 added part D to Title IV of the

Social Security Act which provides that, as a condition of eligibility for assistance under the State Title IV-A plan, each applicant or recipient must assign to the State any rights to support the applicant or recipient may have on his own behalf or on behalf of any other family member for whom the applicant or recipient is applying for or receiving aid. Amounts collected under such an assignment must be distributed in accordance with section 457 of the Act unless the amount is sufficient to make the family ineligible for assistance. Section 457 provides for the distribution of child support collections including payment to the family of a portion of the amounts collected and retention by the State of the remainder as reimbursement for assistance payment. Section 458 provides for the payment of incentives to political subdivisions of States (or States in interstate cases) for the enforcement and collection of child support obligations.

Public Law 94-88 modified part D of Title IV to include a new section, 402(a)(28), which provides AFDC families protection against a decrease in grants because of the payment of support directly to the State. Public law 94-88 also provides that support collections made in accordance with an approved child support enforcement program but not pursuant to an assignment under section 402(a)(26) would also be subject to sections 457 and 458 until December 31, 1975, in the case of families receiving AFDC as of August 1, 1975.

DHEW regulations 45 CFR 302.51 and 45 CFR 302.52 contain the policies and interpretations relating to the provisions of section 457 and 458 of the Social Security Act. 45 CFR 232.20 and 45 CFR 302.32 provide for the treatment for child support by the Title IV-A and IV-D agencies.

CONTENTS: This action transmittal promulgates detailed procedures and numerous examples relating to the provisions of 45 CFR 302.51 for the distribution of child support collections and the provisions of 45 CFR 302.42 for the payment of incentives. Some procedures prescribed herein relate to the associated policies in 45 CFR 232.20 and 45 CFR 302.23.

APPLICABILITY: This action transmittal describes in detail the procedures relating to the collection and distribution of child support under Title IV-D of the Social Security Act. The procedures are applicable only for collections of child support which are made pursuant to an approved State plan for child support enforcement under Title IV-D.

INQUIRIES TO: Regional Directors, OCSE

Acting Director
Office of Child Support Enforcement

INSTRUCTIONS FOR THE DISTRIBUTION OF CHILD SUPPORT COLLECTIONS AND THE PAYMENT OF INCENTIVES TO STATES AND POLITICAL SUBDIVISIONS MAKING CHILD SUPPORT COLLECTIONS.

1. Determination of the required monthly Child Support Obligation

a. Child Support Obligation Document Before any distribution of amounts of child support collected can be made, an amount which represents the required child support obligation for one month must be determined. See 45 CFR 302.51(a). In all cases, the amount must be ascertained from the document which established the support obligation -- a court order or other legal process established under State law. See 45 CFR 302.50. In many cases, the amount is taken directly from the support obligation document. For example, if a court order states that the absent parent shall pay $50 per month in child support, $50 is the amount which represents the required monthly child support obligation.

b. Frequencies other than Monthly However, child support payments are often ordered to be paid in frequencies other than monthly and must be converted to an amount which represents the required monthly child support obligation. If the State has an existing system for such conversions, such a system may be used or, as an alternative, the State may use one of the following conversion systems:

Example 1

If the support obligation is to be paid weekly, such as $20 per week, multiply by 4.345 to get the required monthly child support obligation. Some States have existing systems which use 4 1/3 as the multiplier; 4 1/3 is also acceptable, but slightly less accurate.

$20 x 4.345 = $86.90

week month

See Example 10 for the treatment of five weekly payments received in one month.

Example 2

If the support obligation is to be paid every two weeks, such as $25 every two weeks, multiply by 2.173 (2 1/6 is also acceptable) to get the required monthly child support obligation.

$25 x 2.173 = $54.33

2 weeks month

Example 3

If the amount is to be paid in some other frequency, the conversion can be made by expressing the order or agreement in

days and multiplying by 365/12.

$10 x 365 days = $38.02

8 days 12 months month

The conversion can also be made by multiplying the amount required by the number of payments required in a year and dividing by 12.

c. Rounding to Whole Dollar Amounts Once the required monthly child support obligation has been determined, the amount may, at the discretion of the IV-D agency, be rounded to a whole dollar amount. The amount computed to be paid to the family, retained by the State, reimbursed to the Federal Government or paid to a political subdivision or other State as an incentive under 45 CFR 302.52 may also be rounded. See 45 CFR 302.51(a).

d. Multiple Absent Parents in a Single AFDC Case. If in a single AFDC case support obligations are owed by more than one absent parent, the required monthly support obligation is the total of the monthly obligations of each of the absent parents.

Example 4

If for one family with two absent parents, the child support obligation for one absent parent is $20 per week and the child support obligation for the other absent parent is $25 every 14 days, the total required monthly child support obligation is $141.23.

$20 x 4.345 = $86.90

week month

$25 x 2.173 = $54.33

2 weeks month

Total required monthly support obligation $141.23

If one or more absent parents owe child support pursuant to a court order and, in the same case, one or more absent parents owe child support pursuant to a legal process (see 45 CFR 302.50 (a)(2) and (3)) other than a court order, there is still a total required monthly support obligation, but for the purposes of distribution under 45 CFR 302.51(b)(3), the State must also separate the amount of the required monthly support obligation which is paid pursuant to a court order. See Example 6 and 20.

2. Separation of amounts of child support collected in any month

a. Date of Collection The date of collection shall be the date on which the payment is received by the IV-D agency or the legal entity of the State or political subdivision actually making the collection on behalf of the IV-D agency. For example, if a clerk of the court makes collections on behalf of the IV-D agency, the date of receipt by the clerk of the court is the date of collection. If one State makes the collection for another State, the date of collection shall be the date on which payment is received by the IV-D agency of the State in which the family is receiving aid. See 45 CFR 302.51(a).

b. Separation of amounts of child support collected See 45 CFR 302.51(a). After the amount of the required monthly support obligation has been computed, then amounts received in any month are separated into:

1. amounts which represent partial or complete payment of the required monthly support obligation for the current month (see paragraph d)
2. if any excess amounts are collected
   1. amounts which represent payments on the support obligation for prior periods (see paragraph e), or
   2. if all prior period support obligations have been satisfied, amounts owed for future months (see paragraph f), or
   3. if no future obligation exists, invalid payments (see paragraph g)
      
      A State may elect to use a fiscal month rather than a calendar month. For example, a fiscal month might span from the 10th to the next 10th of calendar months.

c. Purposes of Separation of amounts collected Separation of amounts collected is made for the following two purposes.

1. The amount collected which represents payment of the child support obligation for the current month is used by the IV-A agency to determine if the family continues to be eligible for assistance. See Part III.
2. If the family remains eligible, the amount collected which represents payment in the child support obligation for the current month is distributed under 45 CFR 302.51(1)(2) and
3. See Part IV. Whether or not a family becomes ineligible, the amount collected which represents payments of child support obligations for prior periods is distributed under 45 CFR 302.51(b)(4) and (5). See Part V.

d. Separation of amounts collected in any month into amounts which represent partial or complete payment of the required monthly support obligation for the current month.

When the collections for a family are received and totaled at the end of each month, the amounts collected are first applied to satisfy the support obligation for that month. If the amount is equal to or less than the obligation, then the current month's obligation is either full or partially satisfied.

Example 5

Assume the required monthly support obligation is $110 per month, the child support collections are current through December 1975 and then no amount is collected in January, 1976. If in February $110 is received, this $110 shall be considered as payment of February's child support obligation not January's, even if the check is designated as January's payment by for example, the absent parent (the payer) or a court.

If $50 is received it shall be considered as partial payment of February's obligation. If $111 is received it shall be considered as complete payment of February's obligation and a partial payment of $1 toward January's obligation. Only if a full $220 is received shall January's obligation be considered fully satisfied. In no case shall the amount considered as payment of the current month's support obligation exceed the amount of the obligation, again, if an excess is received it must

1. first be considered as payment of an arrearage,

2. and then any remaining excess be considered as payment of a future month's obligation or,

3. if there is no future obligation, be returned to the payer as an invalid payment.

If payments are received from more than one absent parent in a single case, the payment must be separated individually.

Example 6

Absent Current Month's Amount

Parent Support Obligation Received

A $ 80 (Court order) $100

B 95 (Court order) 120

C 20 (Other process) 10

Total $195 $230

The total received which is counted as payment of the support obligation for the current month is $175 ($80 from A, $95 from B) for purposes of calculating the amount, if any, to be paid in accordance with 45 CFR 302.51(b)(3). See Example 20.

e. Separation of amounts collected. Amounts which represent payment on the support obligation for prior periods. If the amount collected is greater than the required monthly support obligation, the excess is first applied as payment of an obligation for a previous month unless the child support obligation for all previous months has been fully satisfied. Amounts collected which represent payment of thesupport obligation for prior periods will be distributed in accordance with 45 CFR 301.51(b)(4)and(5).

Example 7

Assume the required support obligation is $110. If $220 if received in a single payment, it will be considered as full payment ($110) of the current month's obligation and the remaining $110 will constitute payment for a prior period unless the support obligation for all prior periods have been satisfied.

Example 8

Assume the required support obligation is $110 to be paid (as stipulated in the court order) on the 25th of the month. If the payments are current through December 1975, no payment is received in January, and then $110 is received on February 11, it shall be considered for distribution purposes as fully satisfying February's obligation, leaving January's obligation unsatisfied, even if the payer (absent parent) or a court has designated the payment as the January payment. If an additional $110 is received on February 25th (perhaps designated as February's payment), a total of $220 will have been received in February, fully satisfying both February's and January's obligations.

f. Separation of amounts collected - amounts owed for future months In any month in which amounts are received which are in excess of the required support obligation (the current month and all previous month's obligations have been satisfied, see 45 CFR 302.51(c)), these amounts will be first applied as early payment, partial or complete, of the next month's obligations and will be treated for distribution purposes under 45 CFR 302.51(b) as if the amount had been received in the next month and following months.

Example 9

Assume that the payments are current (all the child support obligations for preceding months have been satisfied) and that the required monthly child support obligation is $110. If $220 is received in February then the $110 designated as March shall be treated exactly as if it has been received in March.

Even if there is no designation of the excess as payment of a future month's obligation, if the future obligation exists, excess payments should be applied against that obligation.

Example 10

Assume the payments are current and the required monthly child support obligation is $110. If more than $110 is received, whether or not there are instructions from the payer that the excess over $110 constitutes prepayment of a future month, the excess shall be held and considered as having been received in the applicable future month. This can be a common occurrence under the following circumstances. If a payment is due and is made every Monday, there will be many months in which there are five Mondays and a portion of the last Monday's payment will constitute early payment of the support obligation for the month and this portion should be treated for distribution purposes under 45 CFR 302.51(b) as if it had been received in that month.

g. Separation or amounts collected - invalid payments

It is within the realm of possibility, but highly improbable, that amounts are received which are in excess of all current and prior obligations and are nor early payment of a future month's obligation. The support obligation may cease when the child reaches the age of majority, for example. If there is no unpaid child support obligation and no future obligation exists and excess amounts are received, then these amounts should be returned to the absent parent as invalid payments. There are many other causes for unusual amounts to be received, for example, an un-notified change in court ordered amount, an incorrect case identification number or absent parent etc., which will result in an amount collected being improperly treated or applied.

All these cases should be investigated and resolved before the decision is made that the amount is invalid.

h. IV-D Agency's Options The State may either (1) wait until the end of the month to separate all amounts received into: (A) amounts which satisfy the current month's support obligation (B) excess amounts (if the current month's obligation is fully satisfied); or (2) apply the payments as they are received into (A) amounts which satisfy the current month's support obligation (B) excess amounts (if the current month's obligation is fully satisfied).

Example 11

In example B, a total if $220 was received, $110 on February 11 and another $110 on February 25th.

Under Option 1 above, the IV-D Agency could wait until March 1, total the two amounts and then perform the separation or, under Option 2, it could assume February's obligation fully satisfied upon receipt of the first $110 on February 11 (and notify the IV-A Agency under Section 302.32) and assume January's obligation satisfied upon receipt of the second $110 on February 25th.

3. Redetermination of eligibility

a. As soon as possible, but not later than 30 days after the end of the month, the IV-D agency will inform the agency administering the State's Title IV-A plan of the amount of the collection which represents payment on the required support obligation for that month as determined in 45 CFR 302.51(a). See 45 CFR 302.32(b). This amount is not necessarily the amount of the collection; it is only that portion of the collection which represents payment on the support obligation for that month.

Example 12

In both examples 8 and 9 $220 was collected in February, but only $110 represented payment on the support obligation for the current month (February). It is this $110 that the IV-A agency is informed of in order to determine eligibility (not the entire $220 collected).

b. Method of Informing The State Title IV-D agency may each month notify the Title IV-A agency of the amount collected which represents payment on the child support obligation for the current month for each AFDC case for which a child support collection has been made, or the IV-D agency may adopt some other equivalent procedure. For example, the IV-D agency may provide the IV-A agency with an up-to-date listing of the amounts which represent the support obligation for the current month. If the amount in any case would be sufficient to make the family ineligible, the IV-A agency would then have to be informed if payment of the amount was actually received. As another alternative, the IV-D agency might inform the IV-A agency of the amount when the first collection is made and then, in future months only inform the IV-A agency of any changes in the amount.

No standard procedure for informing is required. The State may adopt any procedure it finds best fits its individual requirements so long as the IV-A agency can properly determine eligibility based upon the amounts collected which represent payment on the child support obligation for the current month.

c. Redetermination

The title IV-A agency will compare the amount collected which represents payment on the current month's support obligation and the amount which, if received and counted as income, would make the family ineligible to receive assistance under the State's Title IV-A plan. See 45 CFR 232.20(a)(1). The decision as to whether support income makes the entire AFDC family, or only certain members of the family, ineligible to receive assistance will be made in accordance with the State's existing IV-A plan and procedures for the allocation of support income. This comparison is made during the budget period for the Title IV-A program to which the payment is applied. It is not made for any month or other assistance payment period for which an assistance payment has either already been made or the payment will very shortly be made and cannot be stopped. There must be sufficient time such that, if the amount collected is sufficient to make the family ineligible, the amount collection which represents payment on the current month's support obligation can be given to the family in lieu of the projected assistance payment in accordance with 45 CFR 302.32(b). This includes time for the IV-A agency to inform the IV-D agency of ineligibility and the time required for the recipient to request a fair hearing.

Example 13

Assuming the required monthly support obligation for February, 1976 is $110 and this amount is received in late February. It will be too late to compare against the amount which would make the family ineligible for a payment on March 1st. Therefore, the amount collected must be considered in the budget period for the April assistance payment (or possibly, under unusual circumstances the May assistance payment). If the $110 is sufficient to make the family ineligible for the April assistance payment, then the $110 collected should be paid by the IV-D agency to the family in lieu of the assistance payment (allowing sufficient time for the recipient to request a fair hearing) on the same date that the April payment would have been made and the family should be notified of these facts. However, the $110 might have been received early enough in February so that it could be considered in the budget for the March assistance payment, and, if the $110 is sufficient, it should be paid to the family in lieu of the March assistance payment.

d. Provisions for Fair hearings If it is determined that the recipient is no longer eligible, provisions must be made to permit the recipient the right to request a fair hearing and to continue to be eligible pending the results of such a hearing. A case should not be treated as ineligible until the time within which a fair hearing might be requested has expired unless the recipient waives his right to a hearing. See 45 CFR 302.32(c) and (d).

e. Determination of Continued Eligibility If the Title IV-A agency finds that the amount collected which represents payment on the support obligation for the current month is insufficient to make the family ineligible, the family, remains eligible, the IV-A agency informs the IV-D agency of this determination, and the IV-D agency distributes the amount collected in accordance with 45 CFR 302.51(b)(1), (2) and (3).

Example 14

Assume that $110 is received in February and that, in the next budget period, the amount which if collected would make the family ineligible is $200 (the payment or need standard). In the absence of other income of $90 or more, the family is eligible since the $110 (plus other income, if any) is less than the $200.

4. Distribution in accordance with 45 CFR 302.51(b)(1)(2) and (3) of amounts collected which represent partial or complete payment of the support obligation for the current month (and which are insufficient to make the family ineligible under 45 CFR 232.20).

(a) Payment to the family of 40% of the first $50 collected (which represents partial or complete payment of the support obligation for the current month) in accordance with 45 CFR 302.51(b)(1). No payment shall be made to a family under 45 CFR 302.51(b)(1) before August 1, 1975, or for amounts collected which represent the required monthly child support obligation for months after September 30, 1976. No payment shall be made to a family under 45 CFR 302.51(b)(1) for any month in which there is no collection. Payment shall not be made on the expectation of receiving a collection.

Payment is not computed on the (1) amount which represents the required monthly support obligation but rather on (2) the amount actually collected which represents payment, either partial or complete, on the required monthly support obligation. Payments are made on amounts collected and applied to future months.

Example 15

Assume the required monthly support obligation is $25 a month and no payment is received in January 1976 and then $50 is received in February. The family receives $10 (40% of the $25 which constitutes payment of February's obligation) under section 45 CFR 302.51(b)(1). The family does not receive 40% of the $25 payment for January because the payment was not received in January. If the amount which represents payment on the support obligation for the current month is $50 or greater, the family receives $20 under this section. If the amount received is less than $50, then 40% of the amount is paid to the family.

Example 16

Assume $10 is collected which represents payment on the child support obligation for the current month. $4 is paid to the family under 45 CFR 302.51(b)(1).

If payments are received from two or more absent parents for a single family, the family receives only 40% of the first $50 of the total amount collected.

Example 17

If in a single case one absent parent pays $10 a week (which converts to $43.45 a month) and another pays $30 a month, the family receives only $20 (40% of the first $50) under 45 CFR 302.51(b)(1).

Any payment made under 45 CFR 302.51(b)(1) should not be included in any future determination of eligibility for assistance under Title IV-A. See 45 CFR 232.20(b)(2).

The State is required to identify payments to the family under 45 CFR 302.51(b)(1), and also 302.41(b)(3) and (5). See 45 CFR 302.51(d). This should avoid problems of fair hearings when the amounts decrease or terminate.

Example 18

In example 13, if the $110 collected which represents complete payment of the required child support obligation for February is sufficient to make the family ineligible for the March or April assistance payment (or conceivably the May assistance payment) then $20 is not paid to the family out of the $110. The payment to the family under 45 CFR 302.51(b)(1) is made by the IV-D agency after the IV-D agency has been informed by the IV-A agency of the results of the eligibility determination or that a request for a hearing has been received.

When a hearing is requested, distribution of child support amounts pursuant to § 302.51(b)(1) will continue to be made until the result of the hearing is known. At that time, either distribution under § 302.51(b)(1) will continue or the family will be ineligible for assistance and will be paid any amounts it would have received if the family were ineligible for assistance from the time of the eligibility determination that is under appeal. See 45 CFR 302.32(e).

(b) Under Section 402(a)(28) of the Act, payment to the family of child support as a protection against a reduction in the total income available to the family in a month.

Section 402(a)(28) of the Social Security Act provides for the payment to the family of child support collected by the State as a protection against reduction in the total income available to a family in a month. This section applies to those States whose State title IV-A plan, in July, 1975, permitted a portion of the monthly child support payment after application of appropriate disregards to be retained by a family receiving AFDC without causing a dollar-for-dollar reduction in the AFDC payment made to the family; and, in any subsequent month continues to have such policies in effect with respect to income other than child support and to child support income not collected by the IV-D agency. Until such time as final regulations are published prescribing the manner in which the State must make these payments, any procedure the State adopts which reasonably complies with the law is acceptable.

(c) Retention by the State in accordance with Section 302.51(b)(2) of the amounts collected (which represent partial or complete payment of the support obligation for the current month) to reimburse the State for the assistance payment made in the current month or the next month (with appropriate reimbursement to the Federal Government to the extent of its participation in the financing of the assistance payment). Of the amount that is collected and determined to constitute payment on the current month's support obligation, the State pays the amount to the family under 45 CFR 302.51(b)(1) and retains the remainder as reimbursement for the assistance payment made for the current month (the month of collection) or the next month (but not the assistance payment for the month following the budget period in which the State title IV-A agency made a redetermination of eligibility).

Example 19

Assume $110 is received in February, 1976, and the $110 is considered in the budget period following receipt of the payment. If the amount is insufficient to make the family ineligible, the next assistance payment is made (the family might for example receive $200 on April 1) and the State pays $20 to the family and retains the remaining $90 as reimbursement for the $200 assistance payment made. The $90 retained by the State may be used either as reimbursement for the February payment or the March payment. It cannot be used to reimburse the April payment.

(d) Payment to the family in accordance with 45 CFR 302.51(b)(3) of an amount (which represents payment on the required support obligation for the current month) up to the amount to be paid to the family in accordance with 45 CFR 302.51(b)(1) and the amount retained to reimburse the current assistance payment in accordance with 45 CFR 302.51(b)(2). This payment occurs very infrequently; it will occur only when there is a court ordered support obligation (not a voluntary agreement or other legal process established by State law) and only when the State makes, under its title IV-A State plan, assistance payments which are less than the established need standard (payments which are a percentage of need or limited by a statutory maximum, for example). The payment will never occur in:

1. any State which under the title IV-A State plan pays assistance payments which meet the full need standard. If an account was received which constituted payment on the current month's support obligation and this amount was equal to the need level, the family would be considered ineligible and the amount would be paid directly to the family without going through the distribution procedures of 45 CFR 302.51(b). If the amount was insufficient to make the family ineligible, there would be no excess remaining after the payment to the family under 45 CFR 302.51(b)(1) has been made and the State had reimbursed the current assistance payment under 45 CFR 302.51(b)(2);
2. any case in which there is no court order under 45 CFR 302.51(b)(1), no amount shall be paid to the family under 45 CFR 302.51(b)(3) if the support obligation was created by administrative process under State law or a voluntary agreement or any other process other than a court order. See 45 CFR 302.50(a)(2).
3. any case in which the court ordered amount (converted to a monthly obligation) is less than the total of the assistance payment and the amount to be paid to the family, if any, under 45 CFR 302.51(b)(1).

A basic principle of the IV-D program is that no amount of child support collected shall be paid to the family either as replacement for a portion of an assistance payment that would otherwise have been made or as an addition to an assistance payment except:

1. when the entire amount of child support collected (which represents payment on the support obligation for the current month) is paid to the family in lieu of an assistance payment;
2. when payments are made to the family under 45 CFR 302.51 (b)(l), (3), and (5);
3. in certain States under specific circumstances as prescribed in Section 402(a)(28) of the Act to prevent a decrease in total disposable income available to a family due to retention of child support collection by the State.

In other words, the consideration of (and payment to the family of) child support collections as income, filling the gap between the assistance payment and the need standard is not permitted (except as prescribed in Section 402(a)(28) of the Act). This prohibition results from the fact that child support is not income until it is received by the family. Child support collections can only be paid to the family if they are sufficient to make the family ineligible for an assistance payment, if they are paid under Section 402(a)(28), or if they are distributed pursuant to 45 CFR 302.51(b)(1), (3), and (5).

There are many different methods by which a State computes the assistance payment to a family when the State is paying less than the need standard. One example will be shown here.

Example 20

In the budget period following the current month, assume the need and payment standard is $200, the family has no income, and the State pays 70 percent of the need. If the amount collected pursuant to a court order which represents payment on the current month's support obligation is $175, (1) the family receives an assistance payment of $140 (70 percent of the $200 need standard), (2) the family is paid $20 (40 percent of the first $50 of the $175 child support collection under 45 CFR 302.51(b)(1), (3) the State retains $140 as total reimbursement of the $140 assistance payment under 45 CFR 302.51(b)(2), and (4) the family is paid $15 of the child support collected under 45 CFR 302.51(b)(3). The amount must be considered as income in the next budget period and paid with or at the same time as the next assistance payment.

5. Distribution of amounts collected which represent payment of the child support obligation for periods prior to the current month in accordance with 45 CFR 302.51(b)(4) and (5)

(a) Retention by the State under 45 CFR 302.51 (b)(4) of amounts collected (which represent payment on the support obligations for periods prior to the current month) to partially reimburse (up to the amount of the support obligation) past assistance payments. In any month in which the amount of child support collected is greater than the required support obligation for the current month, the excess will normally be payment of an arrearage. There are two exceptions to this. The excess could be payment of an obligation for future periods or the excess could be an invalid payment. For either of these exceptions to apply, it is necessary that the current and all past support obligations have been satisfied. If child support payments are owed for prior periods and the amount collected is in excess of the current month's support obligation, the excess shall be retained by the State as partial or total payment of the support obligation for these prior periods even if the amounts collected would have been paid directly to the family under the State plan had the amounts been received in the prior periods.

Example 21

Assume the monthly assistance payment is $200 and the amount which represents the monthly support obligation established in January 1976 is $110. If there is no collection in January and then in February $220 is received, this $220 shall be divided for distribution purposes into two sections. $110 shall be distributed as an amount received as full payment of the support obligation for the current month (the family is paid $20 and the State retains $90 as reimbursement of the assistance payment).

See example 19. The remaining $110 is considered full payment of January's obligation and the State retains this $110 as reimbursement, in part, for January's $200 assistance payment. In those instances where there is more than one past month in which there is an unpaid support obligation, the State is not required to apply amounts retained as reimbursement for past assistance payments to months in a particular sequence. The State has the option of selecting which month's or months' assistance payments will be reimbursed in whole or in part.

Example 22

Assume the monthly support obligation is $110 and the monthly assistance payment is $200. If no payment has been received in the months of July and August, 1976, and in September $220 is received, $1109 may be applied as reimbursement for either July or August, or $55 to July and $55 to August, or any other combination totaling $110.

Not only may the State select the month to which to apply amounts which are retained as reimbursement of past assistance payments, but most States are also not required to maintain a month-by-month accounting of which month's assistance payments have and have not been reimbursed. It is only required that amounts of unreimbursed months of assistance payments be separated by periods which have identical rates of Federal financial participation in the assistance payments. The state may lump all months of unreimbursed assistance payments at equal FFP and keep a single running total.

If the State is using the Federal Medical Assistance percentage (as an option in section 1118 of the Act and as defined in section 1905 of the Act) and this percentage changes every two years, then months of unreimbursed assistance payments should be accounted for in these two-year pools of common percentages.

If the State is using the formula in Section 403(a) of the Act to compute the Federal financial participation in assistance payments each month, then unreimbursed assistance payments must be accounted for on a month-by-month basis. If amounts of child support are retained as reimbursement for past assistance payments, the State may apply these amounts to any month that has not yet been reimbursed. All of this pooling of unreimbursed assistance payments is subject to the following restriction:

The maximum amount that can be retained as reimbursement for the child support obligation in any month is the amount of the child support obligation for that month with the exception that, if a support obligation was owed and unpaid for months before the family applied for assistance (this unpaid obligation had to be assigned the State as a condition of eligibility under Section 402(a)(26) of the Act) and, if amounts are subsequently collected which represent payment on the obligation owed for these months before the family started receiving assistance, then these amounts may be retained by the State and applied so as to fully reimburse it for any or all assistance payments made. The restriction is illustrated in Examples 23, 24 and 25 and the exception to the restriction in Examples 26, 27 and 28.

Example 23

Assuming the assistance payment is $200 and the support obligation is $110, if the family starts receiving assistance on January 1 (and there is no unpaid support obligation at the time of application and the first collection of child support and is made in February, the maximum amount that can be retained by the State as reimbursement for January's assistance payment is $110, the child support obligation for January.

Example 24

Assume there is no unpaid support obligation upon application, the monthly assistance payment is $200, the support obligation is $110, the child support collections are current until January 31, 1976, when there are no collections for six months, February through July, 1976. If the State collects $770 in August, it shall retain $660 as reimbursement for the assistance payments made from January to June and it shall reimburse the Federal government at the rate that is applicable for each of these months. If there is a common FFP rate (and in most States there is), the State's accounting system at the beginning of August need only show $660 unreimbursed past assistance payments. If an amount less than $770 is collected, say only $440, $110 is considered as payment of August's obligation and the remaining $330 is retained to partially reimburse the $660.

Example 25

Use the same conditions as in Example 24. If no collection has been made for the 18 months from January 1, 1975, to June 30, 1976, and the FFP rate (Federal Medical Assistance percentage) changed on July 1, 1975. On July 1, 1976, the State's accounting system would show two pools of unreimbursed assistance payments, the same $660 as in Example 24 and an additional pool of $1320 ($110 x 12 months) unreimbursed assistance payments at a second FFP rate. If amounts in excess of $110 are collected in July 1976, the State may retain the excess up to $1980 ($1320 plus $660) and reimburse either or both pools or unreimbursed assistance payments. Note that the total of the assistance payment made in the 18 month period of $3600, but the limit on the amount which can be retained for the reimbursement is $1980 because, under the conditions of the case (there is no child support owed for prior periods upon application), the maximum amount that can be retained to reimburse any month's assistance payment is the amount which represents the required support obligation for that month.

(b) Retention by the State under 45 CFR 302.51(b)(4) of the amounts collected (which represent payment of support obligation for periods prior to the current month) to either fully reimburse past assistance payments or partially reimburse past assistance payments to a greater extent than the amount of the support obligation for the period of the assistance payments. This retention only occurs when a support obligation was owed for periods prior to the first month in which the family received assistance under the State Title IV-A plan and this unpaid support obligation was assigned to the State as a condition of eligibility in accordance with 45 CFR 232.11.

Example 26

Assume there is a monthly support obligation of $110 that is paid up through November 1975, but unpaid in December. In January 1976, the family applies for assistance and starts receiving $200 monthly assistance payments. In February, the State collects $330 child support. Of the $330, $110 represents payment on the child support obligation for the current month, February, and $220 payment of support obligation for prior periods.

Of the $110, $20 is paid to the family and $90 is retained to reimburse and assistance payment, either February's or March's. The $220 is retained to fully reimburse the $200 assistance payment in January and the remaining $20 is retained as further reimbursement of the February assistance payment. The difference between the assistance payment and the amount of the support obligation is reimbursable because an amount was collected that represented payment of the support obligations for periods prior to the time the family started receiving assistance.

Example 27

Assume the applicant applied for assistance on January 1, 1975, and started receiving $200 monthly assistance payments. On August 1, 1975, support rights were assigned to the State requiring the payment of $110 of child support each month. The order had been in effect since July 1, 1974, and there had been no payments, hence $660 child support was owed at the time of application. If no collections were made until July 1976, and then a collection is made of the 25 months owed (24 months from July 1, 1974, to June 30, 1976, and 1 month (the current month) July 1976), the $2750 collected would be distributed as follows:

1. $110 is considered as payment of the child support obligation for the current month, July 1976, and distributed under 45 CFR 302.51(b)(1) and (2), $20 going to the family and $90 retained by the State as partial reimbursement for an assistance payment, either the July or August 1976 payment.
2. The remaining $2640 is retained by the State to reimburse assistance payments. $1980 must be applied in the same way as if there had been no amounts owed for prior periods at the time of application. See Example 24. The $660 collected, which represents payment of child support owed at the time of application may be retained to reimburse the difference between the support obligation and assistance payment for any month on a month-by-month basis with the month's selection at the choice of the State or the $660 be retained to reimburse pools of unreimbursed assistance payments with equal FFP rates. If the State uses the computations in 403(b) to determine the FFP for the Assistance Payment payments, it must apply this remaining $660 on a month-by-month basis to any months it selects at the rate of $90 per month ($200-$110, the amount already reimbursed from the $2090). If the State uses the Federal Medical

Assistance percentage, it may reimburse the pool of assistance $1620 that occurred after August 1, 1975, or it may reimburse all or a part of the $540 pool of assistance that occurred before July 1, 1975, with the remainder of the $660 to be applied to the pool of assistance paid after July 1, 1975.

(c) Payment to the family under 45 CFR 302.51(b)(5) of amounts collected (which represent payment of the support obligation for periods prior to the current month) after all past assistance payments have been fully reimbursed.

These payments only occur when both of the following conditions exist:

1. a support obligation was owed for periods prior to the first month in which the family received assistance under the State Title IV-A plan and this unpaid support obligation was assigned to the State as a condition of eligibility in accordance with 45 CFR 232.11, and
2. an arrearage is collected which is sufficient to pay any amounts prescribed in 45 CFR 302.51(b)(1) and (3) to the family and to reimburse all assistance payments.

Example 28

This example is identical to Example 27 except that the child support obligation started on July 1, 1973, not July 1, 1974. Assume the applicant applied for assistance on January 1, 1975,and started receiving $200 monthly assistance payments. On August 1, 1975, support rights were assigned to the State requiring the payment of $110 child support each month. The order had been in effect since July 1, 1973, and there had been no payments, hence 1980 child support was owed at the time of application. If no collections were made until July, 1976, there would be an additional arrearage of $1,980 for a total arrearage of $3,960. A total of $3,600 assistance payments would be reimbursed and the excess would be paid to the family under 45 CFR 302.51(b)(5) and considered as income for the next eligibility determination.

6. Payment of Incentives to Political Subdivisions and other States.

a. Conditions

Incentives may be paid only when:

1. Collections are made pursuant to an approval State plan for child enforcement under Title IV-D. See 45 CFR 302.52(a).
2. Collections are made for a current recipient of aid under the State's Title IV-A plan and (after December 31, 1975) for whom an assignment under Section 232.11 is effective (see 45 CFR 302.51(b)) or, in the case of a terminated family for whom an assignment of support rights to the State under 45 CFR 232.11 was effective prior to termination, collections are made of unpaid child support obligations that accrued under the assignment prior to or during the period when the recipient was receiving aid.

b. Eligible Payees.

Incentives may be paid to:

1. A political subdivision when the political subdivision makes the enforcement and collection for either the State of which it is a political subdivision or another State (see OCSE-AT-75-5). The collection may be made by a legal entity of the political subdivision, such as a prosecuting or district attorney or a friend of the court. If the legal entity of the political subdivision is a law enforcement official (see 45 CFR 302.34), incentives may be paid for child support obligations collected on or after the first day or the calendar quarter in which a written cooperative agreement was executed. When enforcement and collection is made by a legal entity, the incentive is paid to the governing authority of the political subdivision. When a political subdivision of a State makes the enforcement or collection of child support, the entire incentive is paid to the subdivision; no State plan may provide for a portion of the incentive to be paid to the State.
2. A State making the enforcement and collection for another State.

c. Amount of child support collected which is used to determine incentive payment. The incentive is paid as a percentage of the full amount retained by the State to reduce or repay assistance payments in accordance with 45 CFR 302.51(b)(2) and (4). The incentive is not paid as a percentage of the total amount collected nor as a percentage of the Federal share of the amount retained to reduce or repay assistance payments.

Example 29

Assume the rate of Federal financial participation in a $200 assistance payment is 50%, that is, the State makes the payment of $200 and the Federal government reimburses the State $100. If in February 1976, $110 is received, the family is paid $20 under 45 CFR 302.51(b)(1) and the State retains $90 as reimbursement for the current assistance payment, either February's or March's, under 45 CFR 302.51(b)(2). The incentive is computed as a percentage of this $90. The incentive is not computed as percentage of the $110 collected nor as a percentage of the Federal share, $45 of the $90 retained by the State.

d. Percentages

(1) Incentives are paid at a rate of 25% for amounts collected (and retained by the State to reimburse assistance payments) which represent the child support obligation owed for 12 months, even if the months are not consecutive. See 45 CFR 302.52(a)(1) and 45 CFR 302.52(b).

Example 30

Assume the required monthly child support obligation is $110. If, starting in August 1975, $110 is collected every other month until June 1977, the total collected would be $1,320 and incentives would be paid at the 25% rate for the amount retained by the State to reimburse assistance payments for each of the 12 months of collections.

Paid to Retained by Family under State under

Month §302.51(b)(1) §302.51(b)(2) Incentive

Aug,1975 $20 $ 90 $ 22.50

Oct,1975 $20 $ 90 $ 22.50

Dec,1975 $20 $ 90 $ 22.50

Feb,1976 $20 $ 90 $ 22.50

Apr,1976 $20 $ 90 $ 22.50

Jun,1976 $20 $ 90 $ 22.50

Aug,1976 $20 $ 90 $ 27.50

Oct,1976 0 $110 $ 27.50

Dec,1976 0 $110 $ 27.50

Feb,1977 0 $110 $ 27.50

Apr,1977 0 $110 $ 27.50

Jun,1977 0 $110 $ 27.50

12 months $140 $1180 $295.00

Note the payment to the family under 45 CFR 302.51(b)(1) is not paid for amounts collected after September 30, 1976.

(2) Incentives are paid at a rate of 10% for amounts collected (and retained by the State to reimburse assistance payments) which are in excess of the amount which represents the child support obligation owed for 12 months, even if the 12 months are not consecutive. See 45 CFR 302.52(a)(2).

Example 31

Assume the same conditions as in Example 30. If in July, 1976, a collection of the amounts owed from September, 1975, to July, 1976; is made (there is an amount still owed for every other month) an incentive payment would be computed at the rate of 10% of the amount retained by the State to reimburse assistance payments under 45 CFR 302.51(b)(2) and (4),

Example 32

Assume the required monthly support obligation is $110 and that an arrearage of $660 is owed for the six-month period from April 1, 1975, to September 30, 1975. Assume further that collections of $110 per month are made in the eight-month period from October 1, 1975, to May 31, 1976, and that incentives at the 25% rate are paid each month during this eight-month period. If in June, 1976, a collection of $770 ($110 for June and the $660 arrearage) is made, incentives can be paid at the 25% rate for the amount retained by the State to reimburse assistance payments for four months of this seven-month collection. The total months to be paid at the 25% rate is 12. The incentive for the remaining three months of this seven-month collection, is paid at the 10% rate.

e. Effective Date

The effective date for paying incentives is August 1, 1975. Incentives may be paid for amounts collected which represent payment on the child support obligation which accrued for period prior to August 1, 1975.

f. Restarting the 12-month period.

For the identification of those amounts of child support collected which are eligible for a 25% incentive, a new 12-month period starts or restarts every time the family applies for assistance under the State's Title IV-A plan and makes an assignment of support rights to the State pursuant to 45 CFR 232.11. See 45 CFR 302.52(b). See Example 32.

g. Payment of Incentives for amount collected after a Family ceases to receive assistance.

If a family ceases receiving assistance, the assignment of support rights terminates, except with respect to the amount of any paid child support obligation that has accrued under the assignment prior to or during the period when the family was receiving aid. If the IV-D agency collects this support obligation to reimburse past assistance payments, incentive can be paid at the applicable rate, 25% or 10%.

Example 33

Assume a required monthly support obligation of $110 and a $200 monthly assistance payment. The family makes an assignment under 45 CFR 232.11, starts receiving assistance on January 1, 1975, and ceases on December 31, 1975. The family makes a new application and assignment on April 1, 1976, starts receiving assistance and ceases on March 31, 1977. No child support collections are made in the period January 1, 1975, to March 31, 1977. If in June, 1977, the State collects the support owed, $2,640, for the two 12-month periods in which the family was receiving assistance, a $660 incentive (computed at 25% of $2,640) can be paid since the entire $2,640 is retained as reimbursement for assistance payments under 45 CFR 302.51(b)(4).

h. Deadlines

The jurisdiction making the collection shall transmit the entire amount of the collection to the appropriate IV-D agency no later than 10 days after the month of collection. The collecting jurisdiction shall never deduct the incentive from the collection transmitted. The IV-D agency receiving the collection shall calculate and pay the incentive, if any, within 60 days after the month in which the collection was made by the collecting jurisdiction.

i. Identification of the Collection

In forwarding the collection to the appropriate IV-D agency, the collecting jurisdiction shall include, either (1) a two digit code identifying the collecting State when one State collects for another, or (2) a five digit code identifying the collecting county; (the first two digits identify the State; the last three identify the county) when the county (or a legal entity of the county) makes a collection for its State or another State.

This five digit code shall be those derived from the Federal Information Processing Standards Publication (FIPS) issued by the Bureau of Standards and also promulgated in Worldwide Geographical Location Codes published by the General Services Administration.