Bonus/Lump Sum Reporting – Answers to Employers’ Questions
Frequently Asked Questions
- What is a lump sum payment?
- Where do I find each state’s requirements for reporting upcoming lump sum payments?
- Which lump sum payments are subject to the limits of the CCPA?
- Can an employer withhold 100% of a lump sum payment?
- Is there a quick and easy way to report upcoming lump sum payments to all states?
- Must child support agencies send an Income Withholding for Support (IWO) order/notice to garnish a lump sum?
A lump sum is a one-time payment to an employee. Examples are bonuses, commissions, severance, and vacation payouts.
Employers may find more information about each state’s requirements on the State Lump Sum Requirements matrix. State contact information is also available on the matrix.
The Department of Labor (DOL) issued Opinion Letter CCPA2018-1NA 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 to ensure your company follows the guidance provided by DOL.
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.
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.