Final Rule: Withholding of Unemployment Benefits for Support Purposes

Final Regulation - Withholding of Unemployment Benefits for Support Purposes

REGULATION AND REVISED

PROGRAM INSTRUCTION

ACTION TRANSMITTAL

OCSE-AT-84-02

March 27, 1984

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

SUBJECT: Final Regulation - Withholding of Unemployment Benefits for Support Purposes and a revision of the program instruction for this mandatory procedure.

ATTACHMENT: Attached are final regulations which implement section 2335 of P.L. 97-35, the Omnibus Budget Reconciliation Act of 1981. This regulation requires IV-D agencies to determine on a periodic basis whether individuals receiving unemployment compensation owe support obligations that are not being met, and to enforce unmet support obligations by obtaining a voluntary agreement or using legal process to withhold unemployment compensation.

Also attached is a change to the program instruction issued in OCSE-AT-82-02, dated March 30, 1982. The "Background" section, page 2 of the AT, and paragraph "D", pages 4 and 5 of the AT, are revised to clarify that the State must intercept unemployment benefits using either voluntary agreement or legal process. This change is necessary because of a revision to the regulations as a result of comments received on the proposed rule.

REGULATION REFERENCE: 45 CFR 302.65

RELATED REFERENCE: OCSE-AT-82-02, dated March 30, 1982.

SUPERSEDED MATERIAL: OCSE-AT-83-4, dated February 3, 1983, and OCSE-AT-82-16, dated November 4,1982.

INQUIRIES TO: OCSE Regional Representatives

Deputy Director

Office of Child Support Enforcement

Read the complete regulation published in the Federal Register March 9, 1984  (PDF), on pages 8924-8928 (PDF pages 46-50).

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Child Support Enforcement

45 CFR Part 302

Withholding of Unemployment Benefits for Support Purposes

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

ACTION: Final rule.

SUMMARY: These regulations implement section 454(19) of the Social Security Act as amended by section 2335 of Pub. L. 97-35, the Omnibus Budget Reconciliation Act of 1981. (Redesignated as part. (19) by section 171(b) of Pub. L. 97-248.) Section 2335 requires child support enforcement (IV-D) agencies to determine on a periodic basis whether individuals receiving unemployment compensation owe support obligations that are not being met. It further requires IV-D agencies to enforce unmet support obligations in accordance with State-developed guidelines for obtaining an agreement with the individual to have a specified amount of support withheld from unemployment compensation otherwise due the individual or, in the absence of an agreement, by bringing legal process to require the withholding. The IV-D agency must reimburse the State employment security agency (SESA) for the administrative costs attributable to enforcing support obligations by withholding unemployment compensation.

EFFECTIVE DATE: March 9, 1984.

FOR FURTHER INFORMATION CONTACT: Carol Jordan, (301) 443-5350.

SUPPLEMENTARY INFORMATION:

Statutory Provisions

Section 2335 of Pub. L. 97-35, which provides for withholding of unemployment compensation for support purposes, contains provisions affecting both IV-D agencies and SESAs. These regulations implement only those provisions of section 2335 that affect IV-D agencies The remaining provisions have been implemented under instructions issued by the Department of Labor. (See Unemployment Insurance Program Letter No. 15-82, dated

April 8, 1982.) Although these regulations affect only the Child Support Enforcement Program under title IV-D of the Social Security Act (the Act), all of the provisions of the statute are discussed here to provide a complete picture of the roles of the IV-D agency and the SESA in relation to the withholding of unemployment compensation for the purpose of paying unmet support obligations.

With respect to the Child Support Enforcement program, section 2335 amends section 454 of the Act by adding a new paragraph (19). The new subparagraph 454(19)(A) provides that, under the IV-D State plan, the IV-D agency must determine on a periodic basis whether any individuals receiving compensation under the State's unemployment compensation law (including amounts payable under any agreement under a Federal unemployment compensation law) owe support obligations that are being enforced by the IV-D agency. This periodic determination is to be made from information supplied by the SESA under section 508 of the Unemployment Compensation Amendments of 1976. The information available to the IV-D agency under section 508 is discussed later in this preamble under the heading "Regulatory Provisions." Also discussed below is the related requirement in section 2335 that the SESA notify the IV-D agency if an individual discloses to the SESA that he or she owes child support.

The new subparagraph 454(19)(B) provides that, under the IV-D State plan, the IV-D agency must enforce support obligations that are not being met by individuals receiving unemployment compensation. In enforcing an obligation under this process, the IV-D agency must obtain an agreement with the individual to have a specified amount withheld from the unemployment compensation otherwise due the individual, or, in the absence of an agreement, must bring legal process in appropriate cases, pursuant to State or local law to require the withholding of unemployment compensation. If a voluntary agreement is obtained, the SESA is entitled to receive a copy of it. The applicable legal process is defined in paragraph 462(e) of the Act as a writ, order, summons, or other similar process in the nature of a garnishment.

With respect to the Department of Labor's unemployment insurance program under title III of the Act, section 2335 amends paragraph 303(e) of the Act to impose several requirements on SESAs. Subparagraph 303(e)(1) is amended to specify that the provisions for withholding unemployment compensation for support purposes are applicable only to "child support obligations" being enforced pursuant to the IV-D State plan described in section 454 of the Act. Because section 454 now permits collection of certain spousal support obligations, the withholding of unemployment compensation is permissible for child support and for spousal support that has been included in the same support obligation, if the State IV-D agency elects to collect spousal support. However, section 2335 does not require the SESA to collect spousal support or to inquire whether the individual owes spousal support.

A new subparagraph 303(e)(2) specifies that the SESA will (i) ask each new applicant for unemployment compensation whether he or she owes a child support obligation being enforced under the IV-D State plan; (ii) notify the State or local IV-D agency when an eligible applicant discloses that he or she owes support being enforced under the IV-D State plan; (iii) withhold an amount from unemployment compensation when asked to do so by the applicant, or when notified to do so by the IV-D agency as a result of an agreement the IV-D agency has obtained from the individual or as a result of legal process; and (iv) pay any amount withheld to the appropriate State or local IV-D agency.

Subparagraph 303(e)(2) also defines unemployment compensation as any compensation payable under State law (including amounts payable pursuant to agreements under any Federal unemployment compensation law). Finally, subparagraph 303(e)(2) requires the IV-D agency to reimburse the SESA for the administrative costs incurred in the withholding process which are attributable to support obligations being enforced by the IV-D agency.

Under the new subparagraph 303(e)(3), the Secretary of Labor, after giving the SESA reasonable notice and opportunity for hearing, may cease to certify payments to the States under section 302 of the Act if the State fails to comply with subparagraphs 303(e)(1) and (2).

Section 2335 requires both IV-D agencies and SESAs to engage in activities resulting in the withholding of unemployment compensation for support purposes beginning October 1, 1982.

Regulatory Provisions

OCSE believes that care must be taken to ensure that this new program activity is implemented in a cost-effective manner in order to avoid situations in which administrative costs outweigh collections made. These regulations specify that IV-D agencies shall agree to pay only for SESA activities they believe will be cost-effective (i.e., cost-effective in relation to the collections that will result from the process) and to periodically review overall program operations and costs in relation to collections for the purpose of identifying modifications to improve program and cost effectiveness.

These regulations at 45 CFR 302.65 begin at paragraph (a) with three definitions that are applicable to this regulation section. The first, legal process, is based on the definition paragraph 462(e) of the Act. Legal process is defined as a writ, order, summons or other similar process in the nature of a garnishment, which is issued by a court of competent jurisdiction or by an authorized official pursuant to an order of such court or pursuant to State or local law. We believe this definition is broad enough to encompass the pertinent legal processes in all States, since it does not require garnishment action per se, but permits legal action by "similar process." The second term, State employment security agency or SESA, is defined as the agency with the administration of State unemployment compensation laws in accordance with title III of the Act. The third and final definition characterizes unemployment compensation an any compensation payable under State unemployment compensation law (including amounts payable in accordance with agreements under any Federal unemployment compensation law) and lists, by name, the specific categories of benefits that qualify as unemployment compensation.

Paragraph (b) of § 302.65 specifies that the State IV-D agency shall enter into a written agreement with SESA in its State to carry out the process of withholding unemployment compensation from individuals with unmet support obligations that are being enforced by the IV-D agency. The agreement may specify direct contacts between the SESA and local IV-D agencies, as permitted by the statute. To keep requirements at the absolute minimum, we have not specified what the agreement must contain, although we suggest that States include the functions to be performed by each agency, the SESA's charges as agreed upon, and the duration of the agreement. Because we believe it is important to establish a withholding program that is expected to be cost-effective, we have specified cost-effectiveness as a key consideration in negotiating IV-D/SESA agreements under paragraph (b) of the regulations.

Paragraph (c) of § 302.65 contains the functions that the IV-D agency must perform with respect to the process of withholding unemployment compensation. Three of these functions are set forth in section 2335 of Pub.L. 97-35 and four have been developed by OCSE to improve the administration and management of the withholding process.

The statutorily imposed functions are the following. First, under paragraph (c), the IV-D agency must periodically determine whether individuals applying for, or receiving unemployment compensation own support obligations which are being enforced by the IV-D agency. This determination is to be made from information available from the SESA under section 508 of Pub. L. 94-566, the Unemployment Compensation Amendments of 1976. Under section 508, the IV-D agency may obtain (1) information about whether an individual is receiving, has received, or has made a application for, unemployment compensation and the amount of any compensation being received; (2) the individual's current or most recent home address; and (3) information about whether an individual has refused an offer of employment and, if so, a description of the employment offered, including terms, conditions and rate of pay.

The second statutory requirement incorporated in paragraph (c) is that the IV-D agency must enforce unmet support obligations via the process of withholding unemployment compensation through a voluntary agreement with the individual who owes the support or through legal process. The IV-D agency must pursue cases which meet the specific case selection criteria established under paragraph (c)(3) and discussed later. Under section 2335, the IV-D agency must give the SESA a copy of the voluntary agreement.

The third statutory requirement in paragraph (c) is that the IV-D agency reimburse the SESA for the administrative costs that are attributable to the process of withholding unemployment compensation for support purposes. We have added the provision that reimbursement must be made only insofar as the actual, incremental costs have been agreed upon by the SESA and the IV-D agency.

To complement the IV-D functions specified by the statute, OCSE has added four functions in paragraph (c) of § 302.65 that are necessary for proper implementation of the withholding process. First, the IV-D agency must provide a receipt at least annually to an individual who requests a receipt for the amount of unemployment compensation withheld for purposes of support.

Second, the IV-D agency must process its withholding cases through the SESA in its own State or through the IV-D agencies in other States. The SESA will forward all amounts it withholds to the appropriate State or local child support enforcement agency in its own State. If a IV-D agency receives a payment on behalf of an IV-D agency in another State, it must forward that payment to the appropriate IV-D agency in the other State.

Third, States must establish and use written criteria for the selection of cases for withholding. The IV-D agency must design and implement case selection criteria to insure maximum referral of cases and to avoid uncertainty and excessive discretion on the part of the selecting caseworker because of the lack of clear guidance. We are not imposing specific requirements concerning cases the IV-D agency must refer to the SESA under this paragraph, nor are we specifying how often the IV-D agency must make the referrals. Although there is no federally imposed limit on the amount of unemployment compensation which the State may withhold, there may be State laws which impose limits on the amount which can be withheld.

Case selection criteria might include, for example, that the individual whose unemployment compensation will be withheld will be eligible for continued receipt of benefits for a specified period of time, or that withholding of any amount of unemployment compensation should not reduce the amount of benefits below a specified amount per week. Case selection criteria should also address cases which may not be excluded solely on the basis of one particular circumstance, for example, the fact that the individual has a current responsibility to a spouse and additional children.

Fourth, the IV-D agency must review and document, at least annually, program operations, including case selection criteria established under paragraph (c)(3), and costs of the withholding process versus amounts collected. Based on this review, the IV-D agency must modify its procedures and renegotiate the services provided by the SESA, as necessary, to improve program and cost-effectiveness.

Changes to Proposed Regulations

Section 302.65 of the proposed regulations required States to enforce unmet support obligations first by attempting to arrange for the withholding of unemployment compensation based on a voluntary agreement. If a voluntary agreement could not be obtained, the State could then use legal process. In response to comments received, we revised § 302.65 of the regulations to permit States more flexibility in choosing procedures for effecting the withholding process. (See discussion under Response to Comments.) Section 302.65 of the final regulation requires the State to withhold unemployment compensation benefits based on a voluntary agreement or, in appropriate cases, through legal process pursuant to State or local law. We believe this change will permit States to choose the more efficient and effective procedure for withholding based on circumstances which exist within the State. Whether or not the State attempts to obtain a voluntary agreement, any legal process must be pursuant to State or local law.

Response to Comments

We received nine comments, all from State agencies, in response to the Notice of Proposed Rulemaking published in the Federal Register on January 19, 1983. A discussion of these comments and our responses follow.

1. Comment: Three State agencies commented that the use of legal process to withhold unemployment benefits in interstate cases is not always feasible. This is particularly true for situations where one State is paying unemployment benefits to an absent parent who resides in another State and a third State requests the withholding. The State paying the withholding may not have authority to enforce the withholding unless a new court order is established because neither the absent nor custodial parent is a resident of the State. Establishing a court order is a very time consuming and expensive procedure and the individual may have ceased to receive unemployment benefits before the new court order is obtained. In addition, States have various prerequisites for legal process, for example, residency, which an interstate case may not meet.

Response: In the situation described by the commenters, States may be unable to withhold unemployment compensation benefits through legal process because the case does not meet certain prerequisites under State garnishment laws or the State cannot effect necessary legal procedures in a timely manner.

However, § 302.65(c)(3) requires the IV-D agency to establish and use written criteria for selecting cases to pursue via the withholding of unemployment benefits. This permits a State discretion in establishing case selection criteria under which only those cases which are expected to result in withholding are pursued. We expect that States will work together on interstate cases to ensure that withholding is authorized in as many cases as possible and to improve the cost effectiveness of this procedure. In addition, States are encouraged to use expedited judicial or administrative procedures where possible to accomplish this withholding. These procedures may be less costly than the court legal process and would most likely lead to a greater total recovery.

2. Comment: One State agency asked if the use of debt setoff processes is permitted under the definition of "legal process".

Response: The definition of legal process at section 462(e) of the Act is broad enough to include debt setoff processes because the definition does not require garnishment action per se, but permits legal action by "similar process." Therefore, if a State has a debt setoff process which is broad enough to include unemployment compensation withholding, it may be used for that purpose.

3. Comment: One State agency recommended that collections should flow from the responding court to the initiating court in interstate cases rather than from State IV-D agency to State IV-D agency.

Response: Section 302.65(c)(5)(ii) requires that the IV-D agency receive all amounts withheld by the SESA in its own State and forward any amounts withheld on behalf of IV-D agencies in other States to those agencies. The IV-D agency must be responsible for maintaining direct contact with the SESA in its State in order to monitor the SESA activities being pursued under the IV-D/SESA agreement. This precludes the need for interstate IV-D/SESA agreements and costly variations in procedures.

4. Comment: Two State agencies commented that the Unemployment Compensation Intercept (UCI) program should be optional.

Response: Section 2335 of Pub. L. 97-35 is mandatory for States effective October 1, 1982. Both the IV-D agency and the SESA are required under this statute to implement the withholding process.

5. Comment: Two State agencies commented on the treatment of administrative costs incurred by IV-D agencies for interstate cases. One State recommended that the initiating State reimburse the State that does the withholding. The other State asked if a responding State may deduct the administrative cost of withholding from incentive payments due the initiating State.

Response: In order to be in compliance with the State plan requirement at section 454(9) of the Act, a State must cooperate with other States. Neither section 454(9) of the Act nor implementing regulations at 45 CFR 302.36 provide for charging expenses to other States. Under the current regulations, a responding State is entitled to incentive payments in interstate AFDC cases under section 458 of the Act and may recover costs from non-AFDC collections. There are no provisions in the regulations to permit the responding State to deduct costs from incentive payments due the initiating State.

6. Comment: One State agency commented that the establishment of case selection criteria is superfluous because such criteria are already included in its existing State policy and statute.

Response: Section 302.65(c)(3) of the regulation requires States to establish and use written criteria for selecting cases to pursue via the withholding of unemployment compensation for support purposes. The State must provide clear, complete instructions to be used in the selection process. States may use criteria already existing in State policy and statute if these criteria are clearly applicable for selecting cases to pursue via the withholding of unemployment compensation for support purposes and the State can produce, for audit purposes, written criteria for selecting cases to pursue via unemployment compensation withholding.

7. Comment: Two State agencies commented on the requirement to provide a receipt to an individual who requests one for the support paid through withholding of unemployment benefits. One State supports the requirement. The other State asks what constitutes a receipt, why the receipt must distinguish the source of payment, and if a billing statement would satisfy this requirement.

Response: Any statement that provides the individual with verification that support has been paid in the amount of the unemployment compensation withheld would be acceptable. The receipt must specify the amount withheld to guarantee that the individual can verify to appropriate authorities, such as the Court or the IRS, that support has been paid in the amount of the unemployment compensation withheld. The format of the receipt provided to an individual upon request is determined by the State. A billing statement issued showing an aggregate amount of support paid or due would not satisfy the requirement to provide a receipt for the support paid via withholding unless it identified the amount of unemployment compensation withheld.

8. Comment: One State recommended that we delete our requirement that State attempt to obtain a voluntary agreement or conduct face-to-face interviews before using legal process because such a requirement would be unnecessarily costly and burdensome if the State has a statute that allows automatic withholding.

Response: Section 454(19)(B) of the Act requires States to obtain a voluntary agreement for the withholding of unemployment compensation for support purposes, or, in the absence of an agreement, to use legal process. In the proposed regulation, our purpose in requiring States to attempt to obtain a voluntary agreement was to ensure timeliness and cost-effectiveness because, given the length of time unemployment compensation benefits are available, legal process can be more time consuming and costly. However, the statute can be interpreted to allow use of legal process without first attempting to obtain a voluntary agreement. If a State statute authorizes automatic withholding, it would be more costly and time consuming to require attempts to obtain voluntary agreements in that State. As long as the process of automatic withholding is pursuant to State or local law, we believe it would meet the statutory requirement in section 454(19)(B) of the Act.

In order to assist States in implementing an effective and efficient withholding program, we have revised § 302.65(c)(2) of the proposed regulation to require States to withhold unemployment compensation benefits either based on a voluntary agreement or, in appropriate cases, through legal process pursuant to State or local law.

9. Comment: One State asked if the custodial parent has a right to be a party to determining the amount of unemployment compensation that is deducted and about the rights of the current wife of an obligor.

Response: The regulations at § 302.65(b) require the State IV-D agency and the SESA to negotiate an agreement for the purpose of withholding unemployment compensation from individuals with unmet support obligations being enforced by the IV-D agency. Neither the statute nor the regulation requires State agencies to include the custodial parent as a party to determining the amount of unemployment compensation that is deducted.

The regulations do not address the current wife of an obligor. It is the State's responsibility to determine the amount to be withheld from an individual's unemployment compensation benefits. Cases should not be excluded from withholding solely because the individual has a current responsibility to a spouse and additional children. However, this does not preclude the State from establishing criteria for amounts withheld that may include consideration of the number of dependents, particularly if the number of dependents increases the amount of the unemployment compensation benefit. These specifications should be part of the IV-D/SESA agreement to ensure that both agencies are aware of the criteria for determining the amounts to be withheld.

Paperwork Reduction Act

In accordance with the Paperwork Reduction Act of 1980 (Pub. L. 96-511), the State plan amendment that is required by this regulation has been approved by the Office of Management and Budget (OMB) under existing OMB number 0960-0253.

Regulatory Burden

Section 1(b) of Executive Order 12291 states that a major rule is one that is likely to result in:

(1) An annual effect on the economy of $100 million or more;

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

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

This regulation does not meet the criteria for a major rule because the purpose of this regulation is to provide States with an additional process for collecting unmet child support payments and, as a result, increase the effectiveness of the IV-D program. It will not have a significant effect on the national economy.

The Department estimates that implementation of section 2335 of Pub. L. 97-35 will result in an additional $12 million as the Federal share of child support collections for FY '83, net of administrative costs. This is far below the $100 million criteria for a major rule. The other two criteria for a major rule are not met either. The withholding process does not increase costs or prices for consumers or individual industries. Some State and local child support enforcement agencies will increase administrative costs, but the costs incurred will be offset by the amounts collected. This regulation has no effect on competition, employment, investment, productivity, innovation, or the ability of United States-based enterprises to compete with foreign-based enterprises in domestic or export markets. For the above reasons, we have determined that this regulation does not meet the criteria for a major rule and, because it applies to States and will not have a significant economic impact on a substantial number of small entities, does not require a regulatory impact analysis as provided in Pub. L. 96-354, the Regulatory Flexibility Act of 1980.

List of Subjects in 45 CFR Part 302

Child welfare, Grant programs/social programs.

PART 302--[AMENDED]

45 CFR Part 302 is amended by adding a new § 302.65 to read as follows:

§ 302.65 Withholding of unemployment compensation.

The State plan shall provide that the requirements of this section are met.

(a) Definitions. When used in this section:

"Legal process" means a writ, order, summons or other similar process in the nature of a garnishment, which is issued by a court of competent jurisdiction or by an authorized official pursuant to an order of such court or pursuant to State or local law.

"State employment security agency or "SESA" means the State agency charged with the administration of the State unemployment compensation laws in accordance with title III of the Act.

"Unemployment compensation" means any compensation payable under State unemployment compensation law (including amounts payable in accordance with agreements under any Federal unemployment compensation law). It includes extended benefits, unemployment compensation for Federal employees, unemployment compensation for ex-servicemen, trade readjustment allowances, disaster unemployment assistance, and payments under the Redwood National Park Expansion Act.

(b) Agreement. The State IV-D agency shall enter into a written agreement with the SESA in its State for the purpose of withholding unemployment compensation from individuals with unmet support obligations being enforced by the IV-D agency. The IV-D agency shall agree only to a withholding program that it expects to be cost-effective and to reimbursement for the SESA's actual, incremental costs of providing services to the IV-D agency.

(c) Functions to be performed by the IV-D agency. The IV-D agency shall:

(1) Determine periodically from information provided by the SESA under section 508 of the Unemployment Compensation Amendments of 1976 whether individuals applying for or receiving unemployment compensation owe support obligations that are being enforced by the IV-D agency.

(2) Enforce unmet support obligations by arranging for the withholding of unemployment compensation based on a voluntary agreement with the individual who owes the support, or in appropriate cases which meet the case selection criteria established under paragraph (c)(3), through legal process pursuant to State or local law. If a voluntary agreement is obtained, the IV-D agency must give the SESA a copy of the voluntary agreement.

(3) Establish and use written criteria for selecting cases to pursue via the withholding of unemployment compensation for support purposes. These criteria must be designed to insure maximum case selection and minimal discretion in the selection process.

(4) Provide a receipt at least annually to an individual who requests a receipt for the support paid via the withholding of unemployment, compensation, if receipts are not provided through other means.

(5) Maintain direct contact with the SESA in its State:

(i) By processing cases through the SESA in its own State or through IV-D agencies in other States; and

(ii) By receiving all amounts withheld by the SESA in its own State and forwarding any amounts withheld on behalf of IV-D agencies in other States to those agencies.

(6) Reimburse the administrative costs incurred by the SESA that are actual, incremental costs attributable to the process of withholding unemployment compensation for support purposes insofar as these costs have been agreed upon by the SESA and the IV-D agency.

(7) Review and document, at least annually, program operations, including case selection criteria established under paragraph (c)(3), and costs of the withholding process versus the amounts collected and, as necessary, modify procedures and renegotiate the services provided by the SESA to improve program and cost effectiveness.

(Sec. 1102 of the Social Security Act (42 U.S.C. 1302) and sec. 454(20) of the Social Security Act (42 U.S.C. 654(20)) (Catalog of Federal Domestic Assistance Program No. 13.679, Child Support Enforcement program)

Dated: October 17,1983.

Martha A. McSteen,

Acting Director, Office of Child Support Enforcement.

Approved: January 10, 1984.

Margaret M. Heckler,

Secretary.

[FR Doc.84-6478 Filed 3-8-84; 8:45 am]

BILLING CODE 4190-11-M

employment security agency (SESA) and forwarded to the IV-D agency. The amount withheld is to be determined by the IV-D agency through an agreement with the individual or through legal process as defined in section 462(e) of the Social Security Act. This process is explained more fully below. The SESA is required to withhold and forward to the IV-D agency the amount of the individual's unemployment benefits as specified by agreement or as required as a result of legal process. An arrangement to withhold less than the amount of the support obligation does not excuse the individual's legal obligation to pay the remaining amount. Section 2335 also specifies that the IV-D agency must reimburse the SESA for the administrative costs of carrying out its withholding activities.

Under Section 2335 of P.L. 97-35, the withholding of unemployment compensation is required for unmet child support obligations owed both in AFDC and non-AFDC cases. Since section 303 of the Social Security Act (the SESA provisions) defines the term "child support obligations" as including any obligations which are being enforced pursuant to a plan described in section 454 of the Social Security Act, and section 454 of the Act is amended to authorize collection of certain spousal support at the option of the State, States that choose to collect spousal support may do so via withholding of unemployment compensation.

DEFINITIONS:

For purposes of this action transmittal, the following definitions apply: (1) "unemployment compensation" means any compensation payable under State unemployment compensation law (including amounts payable in accordance with agreements under any Federal unemployment compensation law); it includes extended benefits, unemployment compensation for Federal employees, unemployment compensation for ex-servicemen, trade readjustment allowances, disaster unemployment assistance, and payments under the Redwood National Park Expansion Act. (2) State employment security agency or "SESA" means the agency charged with the administration of State unemployment compensation laws in accordance with title III of the Social Security Act.

monies directly to local agencies, as permitted by the statute. The purpose of this requirement is to facilitate negotiations with the SESA and promote coordinated, cost-effective planning on the part of the IV-D program in the State.

C. Periodic Determination of Whether an Individual Receiving Unemployment Compensation Owes Support

The IV-D agency must determine periodically whether individuals receiving any State or Federal unemployment benefits owe support obligations which are being enforced by the IV-D agency. The interval at which these determinations will be made is left to the discretion of the IV-D agency. The determination is to be made based on information provided by the SESA in accordance with Section 508 of the Unemployment Compensation Act of 1976. Under this act, information required to be supplied to IV-D agencies upon request includes: (a) whether an individual is receiving, has received, or has applied for unemployment compensation and the amount of any compensation being received by the individual; (b) the most recent address of an individual; and (c) whether an individual has refused an offer of employment and, if so, a description of the employment offered including terms, conditions and pay.

It is not necessary for the IV-D agency to request information from the SESA on all IV-D cases at any given time. Depending upon the size of the caseload, case prioritization policies, and so forth, the IV-D agency may wish to limit the cases referred to the SESA for matching against the SESA's records. Since the statute refers specifically to withholding of unemployment compensation to enforce "obligations which are owed... but are not being met", it may be more practical for a IV-D agency to request SESA information only for delinquent cases, although the information is available under Section 508 for any IV-D case and for any IV-D related activity.

D. Enforcement of Support Obligations Owed by Individuals Receiving Unemployment Compensation

The IV-D agency is required to enforce support obligations owed by individuals receiving unemployment compensation based on enforcement criteria established by the State. The IV-D agency may attempt to secure an agreement with the obligor to have an amount withheld from his or her unemployment benefits. The terms of the agreement should be based on the individual's ability to pay. If the individual signs an agreement, the SESA is entitled to receive a copy of it. If the SESA does not need a copy of each agreement, it will probably be more useful and less expensive to notify the SESA by manual or automated report. The agreement or report should contain whatever information is needed by the SESA for processing cases.

As an alternative to securing a voluntary agreement, the IV-D agency may use a legal process to require the withholding of unemployment compensation. The applicable legal process is defined in section 462(e) of the Act as a writ, order, summons, or other result of a legal process in the nature of a garnishment and includes both court and administrative orders. We believe this definition is broad enough to encompass the pertinent legal processes in all States, since it does not require garnishment action per se, but permits legal action by "similar process". The decision to pursue the case via legal process should depend upon sufficient time being available for legal process to result in a withholding and the agency's determination of whether or not the individual possesses sufficient resources to warrant the additional action on the part of the IV-D agency. If, under legal process, an order for withholding is obtained, the SESA may be provided a copy of the order or may be provided with the same type of information in report form as would be provided if an agreement had been reached with the individual. In order to provide maximum flexibility to States with respect to information exchange, OCSE does not plan to impose specific requirements in this area.

The statute at section 454 (20)(B) provides that the IV-D agency "shall enforce any . . . child support obligations which are owed by... an individual but are not being met" through the withholding of unemployment compensation. OCSE interprets this language as permitting withholding to satisfy either current unmet obligations or arrearages that are owed. For AFDC cases, amounts collected must be treated first as payment on the current support obligation (as per 45 CFR 302.51(a)), if it is unmet, and any remainder must be applied to an arrearage. Incentive payments are also available on AFDC collections made via the withholding process.

E. Reimbursement of the SESA's Incremental Administrative Costs

The IV-D agency must reimburse the SESA for the administrative costs associated with the withholding of unemployment benefits for payment of support. The frequency and the amount of the reimbursement must be agreed to in writing by the State IV-D agency and the SESA. The amount of the reimbursement may not exceed the SESA's actual costs of providing services to the IV-D agency. This means that the SESA is to charge the IV-D agency only those actual incremental costs incurred with respect to IV-D related activities and that the SESA's normal "costs of doing business" are not to be absorbed by the IV-D agency.