Bonus/Lump Sum Reporting – Answers to Employers’ Questions

Publication Date: February 5, 2019

What is a lump sum payment?

A lump sum is a one-time payment to an employee.  Examples are bonuses, commissions, severance, and vacation payouts.

Where do I find each state’s requirements for reporting upcoming lump sum payments?

The Department of Labor (DOL) issued Opinion Letter CCPA2018-1NA (PDF) Visit disclaimer page  to address 18 specific types of lump sum payments and identify which ones qualify as earnings subject to the 50% to 65% withholding limits under the CCPA. Of the 18 types of payments, 15 are subject to the CCPA limitations on child support withholdings. Only three types of lump sum payments do not qualify as earnings:

  • Buybacks of company shares
  • Workers’ compensation for medical reimbursement
  • Wrongful termination insurance settlements for compensatory or punitive damages

Please review the Opinion Letter (PDF) Visit disclaimer page to ensure your company follows the guidance provided by DOL.

Can an employer withhold 100% of a lump sum payment?

Yes, an employer can withhold 100% of a lump sum that is not subject to the CCPA limits. See question #3 above to learn which three types of lump sum payments are not subjects under the Act.

Is there a quick and easy way to report upcoming lump sum payments to all states?

Yes, employers can report upcoming lump sum payment to employees using the online bonus/lump sum application on the Child Support Portal. OCSE compares the employees who are receiving lump sum payments to individuals who owe child support and sends matches to most state child support agencies.

Must child support agencies send an Income Withholding for Support (IWO) order/notice to garnish a lump sum?

No, child support agencies do not always send an IWO to garnish a lump sum. Some states use another document to garnish a lump sum.