DATE: March 19, 2010
TO: ALL STATE AND TRIBAL IV-D DIRECTORS
RE: TANF Emergency Fund for Noncustodial Parents
I am delighted to provide you with information regarding the Temporary Assistance for Needy Families (TANF) Emergency Fund authorized under the American Recovery and Reinvestment Act which will provide up to $5 billion to TANF programs in states, tribes, and territories through September 30, 2010.
TANF funds, including TANF emergency funds authorized under the Recovery Act, can be used to pay a benefit to a noncustodial parent to reduce or pay off child support arrearages owed to the family. Other examples of services that may be provided to either parent or other adult include job skills training or re-training activities, employment placement services, subsidized employment, employment counseling services, mentoring and tutoring services, pre-marital and marital counseling, parental counseling or mediation services, teen pregnancy prevention services, and financial counseling services.
Below is the information pertaining to the use of these funds to reduce or pay off child support arrearages owed to the family. For complete information regarding the TANF Emergency Fund, please see www.acf.hhs.gov/programs/ofa/recovery/tanf-faq.htm for guidance issued by OFA. OCSE is distributing this information to you because of its relevance to child support programs and in case you may be interested in exploring collaboration with your TANF program.
May federal TANF or state maintenance-of-effort (MOE) funds be used to reduce, pay off, or offset child support arrearages or debts owed by noncustodial parents?
Yes, under certain circumstances, it is permissible to use federal TANF, including TANF Recovery Act funds or state MOE funds to pay a benefit to a noncustodial parent to reduce or pay off child support arrearages owed to the family. While the state may also waive debt owed to the state, the state may not reimburse itself for the waived debt through TANF funds or count a waiver of debt owed to the state as a MOE expenditure.
The state may use TANF or MOE funds to pay all or part of the child support debt owed to the custodial family in two ways: the state can directly pay off the arrearage in the form of a child support payment; or the state can pay a benefit to a custodial parent that the custodial parent accepts in lieu of unpaid child support owed to the family. For example, the state (or a third-party such as a community-based organization) could offer the custodial parent a payment equal to all or part of the amount of the debt owed to the family, conditioned on the custodial parent’s waiver of an equivalent amount of child support debt owed to the family. For reasons described below, it will generally be preferable to structure the payment as a benefit in lieu of child support. Note that any compromise of child support debt owed to the custodial family must be a voluntary choice by the custodial parent.
A state may have a number of objectives for reducing child support debt, including increasing the income of a custodial family and offering a noncustodial parent a “clean slate” to improve future employment and child support outcomes. Emerging research from the University of Wisconsin suggests that reduction of large child support debts may increase child support payments. A state might structure a program in which the state will pay all or some of the arrearage owed to the family in return for the noncustodial parent’s participation in specified employment or training or other activities. Under the Recovery Act, a state may receive 80 percent reimbursement for increased costs for basic assistance, nonrecurrent short term benefits, and subsidized employment, and could provide any of these forms of help to a needy noncustodial parent, either in conjunction with or separate from a program of arrearage reduction.
However, in order to use TANF or MOE funds to pay for debt reduction, either the noncustodial parent or the custodial parent and children receiving the benefit must be “needy” as defined by the state in its State Plan and meet the other eligibility requirements specified by the state for this benefit. Note that payment in full or partial satisfaction of child support owed would not constitute “TANF assistance,” and the custodial parent receiving the benefit would not need to meet the requirements to be eligible to receive TANF assistance. ACF cautions that as a matter of prudent use of TANF or MOE funds, although it is technically permissible, it would be inadvisable to use such funds to pay debts unless both parties are needy.
ACF recommends structuring a payment as a benefit in lieu of child support rather than as child support because of the consequences that follow if the payment is treated as child support. If the state structures the arrearage payment as child support, then any funds paid as child support must be distributed in accordance with section 457 of the Social Security Act, including the requirement that assigned support, once collected, is retained and shared between state and federal governments. Under section 457, a custodial family will be able to receive the full amount of child support payment only if none of the family members ever received TANF assistance or federally-funded foster care maintenance payments and the noncustodial parent has no other children. However, if the noncustodial parent has children living in more than one family, or if any member of the custodial family has a history of assistance receipt, child support payments will be distributed across families, and potentially to pay assigned arrearages. In those circumstances, the state will not be able to assure that the benefit is used only to benefit a needy family.
For these reasons, we recommend that the processing and payment of a nonrecurring benefit to a custodial family be made outside of the state’s child support enforcement program, and not treated as a child support payment. This will prevent any confusion over whether or not the funds will be distributed to multiple families or used to repay state-owed debt.
States also have the authority under existing law to write off or reduce state-owed child support debt. A number of states have implemented child support “debt leveraging” approaches which condition reduction of assigned arrearages on the noncustodial parent’s participation in work activities and payment of ongoing support. As explained above, the amount of the state debt that is written off does not constitute an expenditure of TANF or MOE funds.
The federal fiscal interest in arrears does not arise until a collection is made; thus, no federal share is owed on uncollected arrearages, whether or not they are waived. OCSE PIQ-99-03 (March 22, 1999) states that “federal law does not prohibit state (or private) settlement of a judgment obligation, consistent with state law governing settlement of any other money judgment…. The federal interest does not vest until support is available for distribution.”
Interested states may consider combining debt reduction with other strategies to improve the ability of a noncustodial parent to maintain employment and pay regular child support payments. For example, the state should review and adjust the underlying support order at a realistic level that the noncustodial parent can afford to pay. In addition, states are encouraged to urge both parents in appropriate circumstances to work out a co-parenting plan, participate in mediation or parenting classes, or otherwise agree to improve their co-parenting relationship. Both parents may be more receptive to developing a positive co-parenting relationship given that the custodial parent has received a substantial benefit (a payment that was unlikely to be received) and the noncustodial parent has received a waiver of a substantial debt.
Please contact your ACF Regional Office if you have any questions.
Office of Child Support Enforcement
cc: ACF/OCSE Regional Program Managers