Child support collection fees and unemployment benefits

UIPL14-08acc.pdf (https://www.dol.gov/sites/dolgov/files/ETA/advisories/UIPL/2008/UIPL14-08acc.pdf)

                                                         CLASSIFICATION
         EMPLOYMENT AND TRAINING                         Withdrawal Standard – Child
      ADMINISTRATION ADVISORY SYSTEM                     Support Fees
         U.S. DEPARTMENT OF LABOR                        CORRESPONDENCE SYMBOL
              Washington, D.C. 20210                     OWS /DL
                                                         DATE
                                                         March 12, 2008



ADVISORY: UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 14-08

TO:            STATE WORKFORCE AGENCIES

FROM:          BRENT R. ORRELL /s/
               Acting Assistant Secretary

SUBJECT:       Treatment of Fees Collected by State Child Support Agencies


1. Purpose. To provide guidance regarding the application of Federal unemployment
   compensation (UC) law to the mandatory collection of fees related to child support
   collection.

2. References. Sections 3304(a)(4) and 3306(h) of the Federal Unemployment Tax Act
   (FUTA); Sections 303(e)(2), 454(6)(B)(ii), and 457(a)(3) of the Social Security Act (SSA);
   Unemployment Insurance Program Letter (UIPL) No. 45-89; and Section 7310 of the Deficit
   Reduction Act of 2005 (DRA), Public Law 109-171.

3. Background. States have long been required to deduct and withhold certain child support
   obligations from UC. (See Section (303)(e)(2), SSA, and UIPL No. 45-89.) In 2005, Section
   7310 of the DRA amended Federal law to mandate that state child support agencies impose
   an annual fee of $25 for collecting child support obligations under certain circumstances. In
   response to this mandate, some states have chosen to amend their laws and regulations. This
   UIPL is issued to assist the states in assuring that any such amendments are consistent with
   Federal UC law.

4. Federal Law. Section 3304(a)(4), FUTA, requires, as a condition for employers in a state to
   receive credit against the Federal tax, that state law provide that—




Rescissions:                                     Expiration Date:
None                                               Continuing


        All money withdrawn from the unemployment fund of the State shall be used
        solely in the payment of unemployment compensation, exclusive of expenses of
        administration, and for refunds of sums erroneously paid into such fund. . . .

     Section 303(a)(5), SSA, provides a similar requirement as a condition for a state to receive
     administrative grants. These provisions, known as the “withdrawal standard,” mean that
     money may only be withdrawn from the unemployment fund for payment of “compensation,”
     with certain specified exceptions. Section 3306(h), FUTA, defines “compensation” as “cash
     benefits payable to individuals with respect to their unemployment.” One exception to the
     withdrawal standard is found in Section 303(e)(2)(A), SSA, which requires a state UC agency
     to “deduct and withhold from any [UC] otherwise payable to an individual…” amounts to
     pay “child support obligations” pursuant to part D of Title IV of the SSA.

     Section 7310 of the DRA added Section 454(6)(B)(ii) to the SSA, pertaining to state plans for
     child support, to require that, for each case where the custodial parent “has never received”
     Temporary Assistance for Needy Families, the state child support agency is to “impose an
     annual fee of $25 for each case in which services are furnished, which shall be retained by the
     State from support collected, . . . paid by the individual applying for the services, recovered
     from the absent parent, or paid by the State out of its own funds. . . .” (Emphasis added.)
     The amendment also added Section 457(a)(3), SSA, to provide that “the State shall distribute
     to the family the portion of the amount so collected that remains after withholding any
     fee. . . .” (Emphasis added.) The DRA did not amend Federal UC law.

5.    Interpretation. Exceptions to the withdrawal standard are narrowly construed. Section 3 of
     UIPL No. 45-89 explained “that deductions may be made only when authorized by Federal
     law.” Paragraph 4.b of the UIPL added that, with specified exceptions, state law must
     provide that UC benefit payments “be exempt from levy, execution, attachment, order for the
     payment of attorneys fees or court costs, or any other remedy for the collection of public or
     private debts, prior to receipt by the claimant.” Therefore, absent an explicit statutory
     authorization, states may not deduct and withhold a processing fee from UC. Since the DRA
     did not amend Federal UC law, states may not deduct and withhold a processing fee from a
     claimant’s UC when deducting child support.

     The DRA did, however, amend Federal law to provide that “collected” child support
     obligations may be used to pay the mandatory fee. As a result, after the full amount of the
     child support obligation has been deducted from a claimant’s UC and sent to the state child
     support agency, the child support agency may, consistent with Section 7310, DRA, withhold
     the processing fee before sending the balance of the child support collected to the child
     support recipient.

     States are reminded that, when crafting legislation or regulations to implement the provisions
     of the DRA, care should be taken to ensure the requirements of the withdrawal standard, as

   interpreted in this UIPL, are met. In short, a state law or regulation may not authorize the
   payment of the child support fee directly from UC, but it may authorize the payment of the
   fee from child support collected by the state child support agency consistent with Section
   303(e)(2), SSA.

6. Action Required. State administrators are requested to review existing state law provisions
   and agency practices involving the child support intercept program to ensure consistency with
   Federal UC law requirements.