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Electronic Payment Withdrawal as an Alternative to Income Withholding


Published: August 22, 2003



DATE: August 22, 2003

TO: State IV-D Directors and Regional Program Managers

FROM: Sherri Z. Heller, Ed.D.
Office of Child Support Enforcement

SUBJECT: Electronic Payment Withdrawal as an Alternative to Income Withholding

This PIQ addresses questions raised by the passage of legislation in South Dakota authorizing the IV-D program to withhold child support payments directly from a noncustodial parent’s bank account, rather than having the employer withhold the payment.

QUESTION 1: Is the alternative to electronically withdraw payments from a noncustodial parent’s bank account, rather than having the employer withhold the payment, contrary to the income withholding provision in PRWORA [Section 466(b)(3)(A) of the Social Security Act]?

RESPONSE 1: No, this alternative payment mechanism is not contrary to Section 466(b)(3)(A) of the Act. A state could develop criteria under which a good cause exception could be granted by a court (or administrative process) if the noncustodial parent authorizes automatic monthly bank withdrawal with the agreement of the IV-D agency or if a written agreement is reached between both parties for this alternative arrangement.

QUESTION 2: What criteria must be met to implement an alternative process?

RESPONSE 2: Should a state choose to use this type of an alternative payment process, the state would develop its own criteria. Things to consider when developing criteria might include: the noncustodial parent has a proven positive payment history; use of this process for in-state orders; the noncustodial parent would designate the date by which the withdrawal will be made; amounts of the withdrawal would be based on actual child support obligations, established through the state’s normal use of guidelines, and arrears payment policies, as included in the agreement; CCPA limits apply; the state may want to use this as an exception-based option; payments must not be delayed. If the state were unable to complete the withdrawal (in the instance of insufficient funds), the state would then immediately issue an income withholding order to the employer, or in the case of a self-employed noncustodial parent, take the appropriate steps necessary to secure payment by other means.

A state may also want to consider providing a mechanism, through policy or procedure and/or as a condition specified within the written agreement between the noncustodial parent and the IV-D agency that the noncustodial parent agrees to provide the IV-D agency with current employment information even though no income withholding order has been issued. In this way, the state may be able to build in an additional assurance that employer information is kept up-to-date within its automated system.

QUESTION 3: Does use of this alternative process affect the use of the National Medical Support Notice (NMSN)?

RESPONSE 3: No, use of this alternative process does not affect the use of the NMSN. The NMSN must continue to be issued to employers in appropriate cases, even if the alternative payment method is in use.

QUESTION 4: What are the benefits of the use of this alternative arrangement?

RESPONSE 4: This alternative arrangement may help reduce some of the lapses in payments that occur when a noncustodial parent changes employers, as well as reduce the number of payments a State Disbursement Unit will have to process and mail to custodial parents due to multiple monthly payroll periods. This would also ensure that a child support payment would be made on a “date certain” and, in turn, reduce the number of calls by custodial parents to customer service centers checking on the status of payments. It would also reduce the burden on the employer when the noncustodial parent opts for this method of payment over income withholding. This would also be a viable alternative payment method to offer self-employed obligors.

All of these would serve to reduce administrative burdens and costs for the state government.

QUESTION 5: Could the bank charge a fee for this automatic withdrawal?

RESPONSE 5: The noncustodial parent that authorizes this alternative payment arrangement does so at his or her option. If fees for these automatic payments are involved, that is a matter between the individual and the financial institution.

Inquiries should be directed to the appropriate Regional Office.

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