DEAR COLLEAGUE LETTER
DATE: February 27, 2013
TO: ALL STATE AND TRIBAL IV-D DIRECTORS
RE: Garnishment of Supplemental Security Income Benefits
On February 23, 2011, the Department of the Treasury, in conjunction with other federal agencies, issued an interim final rule1 regarding the garnishment of accounts containing federal benefit payments. In light of this rule, the federal Office of Child Support Enforcement (OCSE) is emphasizing our policy related to garnishing federal benefits, especially those related to Supplemental Security Income (SSI) benefits. We urge state and tribal child support agencies to implement automated and manual safeguards to ensure that SSI benefits are not garnished. Inappropriate garnishments result in financial hardship for the parties, and are contrary to law. We are reviewing our regulations to determine whether additional requirements are needed to ensure that exempt federal benefits are not garnished.
OCSE’s Policy on Allowable Federal Garnishment
The Social Security Act (the Act) permits garnishment of child support directly from the federal payor of “moneys payable to an individual which are considered to be based upon remuneration for employment.” See Section 459(h)(1) of the Act. These payments include certain federal benefits based upon remuneration for employment, such as:
OCSE’S POLICY ON FEDERAL BENEFITS EXCLUDED FROM GARNISHMENT
The Act and federal regulations specifically identify federal benefits not subject to garnishment for child support purposes. See Sections 459(h)(1)(B) and 459(h)(2) of the Act, as well as 5 CFR 581.104. Additionally, Policy Interpretation Question PIQ-09-01, “Garnishment of Federal Payments for Child Support Obligations,” provides a chart that identifies which federal payments may be garnished directly from the source and which payments must be excluded from such garnishment.
Supplemental Security Income
Because SSI is a means-tested program that is not based on remuneration for employment, SSI benefits authorized under title XVI of the Act are exempt from child support garnishment and income withholding. To qualify for means-tested benefits, the recipient must have a financial need because he or she earns little to no income and has few resources. Additionally, the recipient must also be at least 65, blind, or disabled.
OCSE issued DCL-00-103, “Attachment of Social Security Benefits,” which clearly states that SSI benefits are prohibited from garnishment since they are based on need, not remuneration for employment. As noted in the DCL, some courts have held that SSI is a form of public assistance that is intended to protect the individual recipient from poverty. Additionally, SSI benefits deposited into a bank account retain their character as protected benefits. Philpott v. Essex County Welfare Bd., 409 U.S. 413, 93 S.Ct. 590, 34 L.Ed.2d 608 (1973). Courts have also held that the funds remain exempt from legal process even if they are commingled in a bank account with other funds, so long as they are reasonably traceable to Social Security. NCNB Fin. Servs. V. Shumate, 829 F.Supp. 178 (W.D. Va. 1993), affd. 45 F.3d 427, cert. denied 115 S.Ct. 2616.
An SSI account managed by a representative payee (individual or organization appointed by the Social Security Administration to receive benefits for someone who cannot manage or direct someone else to manage his or her money) is clearly identified by the financial institution as a representative payee account, with the beneficiary having sole ownership of the funds in the account. The representative payee is identified as a financial agent on the account, and does not have an ownership interest in the account. Therefore the SSI beneficiaries with representative payees would be covered by the same protections and safeguards against bank account garnishment as an account held directly by the beneficiary.
State Garnishment Practices and Statistics
Our analysis of state practices shows that all states have a policy against withholding child support from SSI benefits “at the source,” that is, withheld at the time a payment is made. Most states have an automated process to block cases from bank account garnishment when the child support agency has identified the obligor as an SSI recipient. In nearly all states, if the state is unaware that a noncustodial is receiving SSI and the SSI funds in a bank account are frozen, the state has procedures in place to quickly release the funds back to the noncustodial parent. Some states close the case when it is confirmed that SSI is the noncustodial parent’s sole source of income. Regardless of the source of bank funds, a number of states avoid garnishment of accounts held by very low-income obligors to ensure that individuals are not left without the means to meet their own basic needs, or when a parent is paying regularly through an income withholding order.
In 2009, we compared individuals on our Tax Refund Offset Debtor File with SSI recipients and determined these individuals represented about 3 percent of all child support debtors on the file and, for the most part, had very low incomes.
At this time, we do not have information on garnishment practices for tribal child support agencies. However, we are aware that some tribal child support agencies have entered into agreements for enforcement services through state automated systems.
Implementing Safeguards to Prevent Inappropriate Garnishment of Federal Benefit Payments
We urge all states and tribes to evaluate their current policies and procedures, and consult with their own legal counsel to ensure they conform with federal statutes and regulations. Those that have not already done so should develop automated and manual processes and procedures to accurately identify the noncustodial parents in their caseload who are currently receiving SSI and ensure that these benefits are not withheld at the source or garnished when deposited in financial accounts.
In the event someone’s account is inadvertently or erroneously seized, we urge states and tribes to move expeditiously to promptly refund any monies that were inappropriately garnished in order to mitigate any undue financial hardship resulting from delays in accessing their bank accounts and bank fees. We encourage you to work with the financial institutions in your state to ensure that the garnishment process does not result in error or undue hardship for low-income individuals.
Finally, as a general point, states and tribes should develop screening and other safeguards to ensure that noncustodial parents are not left destitute as a result of garnishment. Garnishment should be used judiciously so that noncustodial parents are not deprived of the means to meet basic subsistence needs, regardless of income source.
How OCSE Will Assist States
Currently, states may request information from the Social Security Administration (SSA) about SSI beneficiaries through the Federal Parent Locator Service (FPLS) by making an external locate request. States may also elect to proactively receive SSA information from the FPLS when a noncustodial parent is added or updated on the Federal Case Registry (FCR).
However, the FPLS is not currently set up to proactively notify states when a noncustodial parent is approved to receive SSI benefits. We do not currently receive information from SSA until after the beneficiary starts to receive SSI benefits.
To help states identify those individuals receiving federal benefits that are exempt from garnishment at financial institutions and income withholding at the source, we are working with SSA to obtain timely and more detailed information about beneficiaries. When we obtain this information, we plan to share it with states in an automated FPLS format. Specifically, we would like to establish a proactive match with SSA to compare noncustodial parents on the FCR with individuals who have been approved to receive SSI benefits. By providing this information proactively, we think states will be able to take the appropriate steps to prevent automatic bank garnishment when the noncustodial parent is receiving SSI benefits.
Since it will take some time to set up the proactive match with SSA, we can help states immediately identify individuals who owe past-due child support and are current SSI (title XVI) recipients. If requested, we can compare individuals on the Tax Refund Offset Debtor File for your state with SSI recipients and return the matches in a format that will allow you to take steps to prevent automatic bank garnishment.
Tribal child support programs that have agreements with their state counterparts for access to state automated systems will need to work collaboratively in processing this information.
In closing, we urge states and tribes to review current procedures and processes related to financial institution account garnishment to ensure that the agency has sufficient automated and manual safeguards in place to prevent garnishment of exempt federal benefit payments. States and tribes also should have procedures in place to quickly return funds to the noncustodial parent in any situation where they have been inappropriately frozen or garnished.
Office of Child Support Enforcement
cc: ACF/OCSE Regional Program Managers
1 For the Interim Final Rule on Garnishment of Accounts Containing Federal Benefit Payments, see http://www.gpo.gov/fdsys/pkg/FR-2011-02-23/pdf/2011-3782.pdf.