Elizabeth Sullivan, SHRM CP Accountant/Human Resources Generalist. Regional HR Support

Transcription

1 Elizabeth Sullivan, SHRM CP Accountant/Human Resources Generalist Regional HR Support Regional HR Support is a joint venture between Regions I, II, III, IV and V which includes the following services: 3 time per year newsletter Fall/Winter/Spring 3 time per year user group webinar Fall/Winter/Spring Support your questions regarding human resource topics. You should expect a response within 48 hours. Best Practices/Q&A Discussion Board Topics have already been created, but you can suggest additional topics as well. Documentation can be ed to the support and we will post accordingly to the website. Additional training sessions at conference dates determined by your region. 1

2 Garnishments A wage garnishment is any legal or equitable procedure through which some portion of a person s earnings is required to be withheld for the payment of a debt. Almost all garnishments are made by court order. Other types of garnishment include: IRS levy for unpaid taxes State tax collection agency levy for unpaid state taxes Federal agency administrative garnishments for non-tax debts owed the federal government Federally insured student loan debt Veterans Affairs loan debt Third party levy such as county or creditor levy, which are usually served by a debt collection agency or law firm New Hire Reporting After each payroll, use the SMART system to submit your required New Hire Reporting In the payroll module, under Agency Reporting, select MN New Hire Report. Choose your most recent payroll and then click the Create New Hire Text File button. Then click the Web Page button in the Report section, which should bring you to the New Hire website. You will need to log on and then you can submit your file via the secure file transfer link. Click choose file, select your New Hire file that was created in SMART and then click Upload. You can save your confirmation as a PDF if you would like proof of submission. 2

3 Income Withholding Order (IWO) e-iwo You can sign up for e-iwo, which is an electronic system for sending electronic income withholding orders to employers. Employers can then submit the IWO back to let the SDU know if they will be accepting or rejecting the order. This is especially helpful in larger districts where you may receive multiple IWOs per month. Check out to learn more. 3

4 Employer Responsibility Under the Consumer Credit Protection Act (CCPA), employers are required to: comply with any withholding orders issued by the court of a government agency withhold and remit amount demanded up to the maximum allowed by law The employer should also make reasonably sure that the order is started on the correct employee. Employers are NOT supposed to determine the validity of a garnishment order. Employee Protections The CCPA prohibits an employer from terminating, disciplining or otherwise discriminating against an employee for have a garnishment order. If an employer violates these rules, they may be charged penalties. If an employer does not remit amounts according to the law, they can be charged penalties and be required to pay amounts that should ve been withheld. An employer cannot change a pay cycle to accommodate a child support order. A child support order typically has multiple options for withholding schedules (weekly, bi-weekly, semi-monthly, monthly, etc.), but if you need something different, you can work with the county (state disbursement unit SDU) to send a new order that matches your pay schedule. 4

5 Employer Best Practices Validate the employee is currently employed by you and verify the amounts on the withholding order For example, if an employee makes minimum wage but it states that they are to pay $500 in child support each week, there could be a typo. Validate that the amount in the court order does not surpass the amount allowed by law Contact the employee They should be receiving a notice of the withholding order as well, but it is a good idea to communicate with the employee: That you received an order, That you must comply with the order, Inform them of any exceptions that may apply according to state and federal law, The effective date you will be starting withholding, The effect on their net pay Determine priority with other orders, if applicable Withholding Priorities 1. Child Support 2. Bankruptcy Orders 3. Federally Admin Garnishments 4. Federal Tax Levies 5. Student Loans 6. State Tax Levies 7. Local Tax Levies 8. Creditor Garnishments 9. Employer Deductions 10. Voluntary Employee Deductions All orders that are in place before any federal garnishments are received, including levies, have priority. Child support trumps all orders, with the exception of when an IRS tax levy is already in place. 5

6 What can be withheld? First you must define income. It does not matter what the compensation is called. If it is payment for services rendered, it is considered income. Do not count expense reimbursements. Each type of withholding order has different rules. Consider multiple orders. You may be able to accommodate more than one type of order at the same time, depending on the maximums allowed and order amount. Lump Sum Payments In certain states, you are required to withhold garnishments from any lump sum payments, such as severance or vacation payout upon separation of employment or a union negotiations settlement. For situations where rules differ by state, you should always follow the state where the employee is performing their job duties. In Minnesota, according to State Statute 518A.53, Subd. 11, employers are required to notify the State Disbursement Unit of the pending lump sum if it exceeds $500 gross or more. The SDU should then inform you of how much child support you should withhold from their lump sum payment. There is a provision that states you must hold onto the lump sum payment for 30 days, but MN Statute negates this for school districts. You also must adhere to MN Statute for discharged employees, should they request it. 6

7 Minnesota Child Support Rules Multiple Child Support Orders If more than one person is claiming child support from the same employee, employers must comply with all orders or notices to the extent that the total amount withheld does not exceed the maximum withholding limit. Employers must give priority to current support and allocate amounts as follows: If the total amount in all orders and notices for current support exceeds the maximum amount available for withholding, employers must allocate to each order or notice an amount for current support equal to the amount in the order or notice divided by the total amount for current support in all orders or notices, multiplied by the amount of the income available for withholding. If the total amount in all orders or notices for current support does not exceed the maximum available for withholding, employers first must pay current support and then allocate to each order or notice an amount for past due support equal to the amount in an order or notice divided by the total amount in all orders or notices for past due support, multiplied by the amount of income available after payment of current support. Minnesota Child Support Rules Out-of-State Orders Employers that receive an income withholding notice from another state or territory must withhold and distribute the funds as directed in the withholding notice and must apply the law of the employee's principal place of employment when determining: the employer administrative fee for processing an income withholding notice, the maximum amount permitted to be withheld, and the deadlines for implementing and forwarding child support payments. 7

8 Minnesota Child Support Rules Frequency of Withholding Employers must begin withholding in the first pay period that begins 14 days following receipt of a child support order and must remit withheld amounts to the central collections unit within seven business days of a wage payment. Payment information must include employee Social Security numbers, case type indicators, and dates employees received payments of the remaining income. Employers are considered to have paid the amount withheld as of the date employees receive the remainder of income. Employers can consolidate amounts withheld from more than one employee's wages into a single payment if each employee is separately identified. What can be withheld Child Support For child support, you will calculate disposable pay. Income deductions mandated by law Federal tax, including FICA State tax Local tax (if applicable) State unemployment taxes (if charged to the employee) State disability taxes (if applicable) Statutory pension contributions (TRA and PERA) Do NOT exclude health, dental, vision or life insurance premiums, 403(b) contributions, charitable contributions, etc. 8

9 What can be withheld Child Support Once you ve calculated disposable pay, you will withhold either: the amount on the child support order OR the maximum allowable by the CCPA, if it is less than the order requires, as shown: 50% of disposable earnings if the employee is supporting another spouse or child(ren) 55% of disposable earnings if the employee is supporting another spouse or child(ren) and are at least 12 weeks in arrears in making support payments 60% of disposable earnings if the employee is not supporting another spouse or child(ren) 65% of disposable earnings if the employee is not supporting another spouse or child(ren) and are at least 12 weeks in arrears in making support payments What can be withheld Federal Levy You may receive a Form 2159 Payroll Deduction Agreement. This is voluntary on the employee s behalf to pay off their tax debt before a levy is issued. You do not have to comply with these but you must remain consistent with that policy if you do not. If you do not comply, be prepared that a levy will probably follow. You will receive a Form 668-W, which is the Notice of Levy and has 6 parts: 1. Employer copy 4. Employer completed copy of 3 2. Employee copy 5. Employee completed copy of 3 3. Employer copy to submit to IRS 6. IRS retains Send parts 2-5 to the employee to complete and return to you within 3 days. Parts 3 and 4 includes the Statement of Exemptions and Filing Status to be completed by the employee. 9

10 What can be withheld Federal Levy Unless otherwise directed, only allow for the payroll deductions that were in place at the time the levy was received. Do not allow the employee to take new voluntary deductions while the levy is in effect. Determine take home pay. Gross income taxes, insurance premiums, union dues, previously established child support orders and any voluntary deductions already in effect Once you have received parts 3 and 4 back, you will determine what amount is exempted (the amount you should still pay the employee) on the table in Publication 1494, using take-home pay. If you have not received the exemption back, you should calculate based on Married filing separately (Single) with 1 exemption (not the S-0 you normally default to on a W-4). What can be withheld State Levy Follow the instructions on the online wage levy disclosure each pay period on the Minnesota e-services site to determine the levy amount to withhold (up to 25% of disposable earnings). You will need to enter: The letter ID and letter date Employment status Tax exemptions claimed Payroll frequency Pay period end date # of whole weeks in the pay period # of additional days in the pay period beyond the whole weeks Gross earnings Tax withheld Additional deductions required by law (this is where you would enter PERA or TRA deductions) 10

11 What can be withheld other garnishment types Each garnishment order should provide you with the guidelines for what should be withheld. You ll almost always receive an Administrative Wage Garnishment (AWG) withholding worksheet to fill out and submit with your payment. Federal agency loan maximums are 15% of disposable pay. Student loan maximums are 15% of disposable pay. If there are multiple orders, you may take up to 25% of disposable pay with 15% going to the first order received and the remaining 10% going to the second order received. Commercial debts (e.g. credit card debt) have a maximum of 25% of disposable pay. What can be withheld other garnishment types The Consumer Credit Protection Act excludes from garnishment a floor level of disposable pay per workweek in an amount equal to 30 times the federal minimum hourly wage. As of July 24, 2009, the federal minimum wage is $7.25 per hour. Many states also have minimum wage laws. Some state laws provide greater employee protections. Assuming the current minimum wage, LINE 4 of the AWG would be: $217.50, if the employee is paid weekly ($290) $435.00, if the employee is paid every other week ($580) $471.25, if the employee is paid twice per month ($628) $942.50, if the employee is paid monthly ($1257) Minnesota law is 40 times the federal minimum wage. This does not apply to student loan debt, which stays at 30 * minimum wage. You may only garnish wages above that floor. 11

12 When to start withholding Child support start withholding on the first pay period within 14 days of the receipt of the income withholding order State levies start withholding on the next paycheck. Within 10 days after each pay period ends, you should complete the electronic disclosure through e-services It makes more sense to do this while you re processing payroll though, if it is a variable hour employee and you will need the system to calculate the appropriate amount to withhold Federal levies start withholding on the next paycheck. You should start the process of the Form 668-W as soon as possible. Other garnishments start withholding on the next paycheck. You should complete the employer acknowledgment within 10 days of receipt. The exception is student loans, for which you must give 30 days notice to the employee. Don t forget to remit any acknowledgments within 7-10 days. When to remit payment For child support, submit payment within 7 business days after the pay date For federal levies, submit payment within 7 business days after the pay date For state levies in MN, you can submit your payment at the same time that you complete the electronic disclosure, but pay within 7 business day after the pay date For other garnishments, follow the requirements on the withholding order Many will only require monthly payments, even if your pay frequency is more often. That does NOT mean you should only withhold monthly though. 12

13 You should try to submit payments online whenever possible. This assists with getting the funds to the custodial person more swiftly. Minnesota Iowa North Dakota South Dakota Wisconsin Online Payment Sites for Child Support When to stop withholding Only stop withholding when you receive a notice of release from the wage levy or garnishment or a notice to discontinue child support. Do not stop payment if the employee tells you that their child has turned 18 or that they ve taken care of the debt they owe for a garnishment or wage levy. Even if you ve met the amount that they owe, it could be that additional interest or penalties have accrued in the interim. If you overpay, the collecting agency will refund the employee. 13

14 Other Important Notes Don t forget to remit a worksheet or disclosure even if an employee did not make enough to withhold. An employee cannot increase tax withholdings to avoid child support or other garnishments. Whatever is in place at the time the order is received should continue to be used. As with other legislation, if state and federal law differ, you should follow the most employee-friendly law. You must also withhold for independent contractors. In Minnesota, you can legally charge a $1 per payment administrative fee. For federal wage levies, you may also charge an admin fee, but you cannot reduce the amount of the levy by the admin fee. Other Important Notes Notify the garnishing agency as soon as possible if your employee: is terminated, is called to military active duty, is receiving workers comp benefits, or is placed on disability. If you rehire an employee within 6 months, you should continue to recognize a previous order for child support. An employee cannot voluntarily increase their child support. They may make payments directly to the SDU if they are behind and want to catch up that way. If an employee tells you that they have two jobs and both received order, you must still comply. They should notify the collecting agency and request they send new orders. 14

15 SMART Systems Notes Be careful of using limits on withholdings. You must continue to withhold until you receive a notice of release. Set up deduct codes by vendor. For example: CHILDSUPP1 Minnesota CHILDSUPP2 North Dakota GARN_LEVY1 Federal Wage Levy GARN_LEVY2 State Wage Levy GARNISH1 ECMC GARNISH2 Messerli & Kramer For variable hour employees, you may not want to set up the deduction on the paycheck data tab. Instead use the timecard window. This prevents accidental overdeduction. Medical Support Orders You may also receive paperwork from the county regarding medical support orders: These orders will tell you which child(ren) should be covered under the employee s coverage, the type and description of coverage they are required to carry (e.g. health and dental), when the coverage should be instated, and for how long the coverage needs to remain in effect. You may first receive documentation to verify that the cost of carrying family coverage is affordable to the employee or if the dependent(s) will be covered under Medical Assistance (MA) instead. 15

16 Minnesota s Child Support Laws An Overview Minnesota Courts Child Support U.S. DOL Federal Wage Garnishments Overview U.S. DOL Fact Sheet #30 Federal Wage Garnishment Law, Consumer Credit Protection Act (CCPA) Learning Guide Garnishments Minnesota.gov Administrative Wage Garnishment (AWG) Calculator UIMN Garnishment Worksheet Earnings Disclosure Worksheet Debt.org Garnishment Process Other Resources Questions? 16