Garnishment Administration Best Practices · 2014-10-31 · Garnishment Administration Best...

Garnishment Administration

Best Practices

Carolinas Payroll Conference

Amorette Nelson Bryant (Amy)

November , 2014

Focus

End to end process for handling wage attachments ◦ Identify receipt location

◦ Tracking documents/correspondence

◦ Initial document review

◦ Document entry/audit/review

◦ Outputs

◦ Scheduling and Timelines

◦ Staffing considerations

© 2014, Amorette Nelson Bryant

Control Document Delivery

Creditor Garnishment Provide Secretary of State address

where legal documents must be delivered

Engage a Registered Agent in each state where doing business ◦ Request electronic delivery

Record legal document delivery address with Sec of State

Refuse delivery if not in compliance with state law ◦ Provide service address to process server



Support Enroll in IWO program (32 states) Identify delivery address with new hire

reporting registration Register 3rd party in states when

required ◦ Texas identifies requirements in employer

handbook

Notify state agency if IWO’s are sent to wrong address ◦ Staff might use information other provide

instead of checking records



IRS Levy Send letter, to regional IRS offices

with mailing correct address ◦ Use stationary with company letterhead



Ongoing

Update address when changed Update address and company name

with acquisition Notify of divesture of subsidiaries Refuse new creditor garnishments if

garnishee name is incorrect ◦ Current garnishee name should be used



Internal

Train mailroom personnel ◦ Types of garnishments received

◦ Document names

For payroll or another department? ◦ Non-wage garnishment - AP

◦ National Medical Support Notice - HR

◦ Plaintiff is the company - Legal

Use distinctive envelopes/bins for interdepartmental garnishment mail


Receipt of Documents

Paper Is this a document the garnishment

department handles? ◦ No, return to mailroom, correct

department, or sender as applicable

◦ Yes, go to next step


Record Documents Received

Paper Record document in log

◦ Log refers to method used to record and

track documents

Primary purposes are:

◦ Record all documents received

◦ Track critical steps from receipt to set up

◦ Verify the attachment is processed on

time



Paper Upon receipt record:

◦ Date, received, defendant name,

defendant identifier, garn type, issuing

party, case ID

Date is the date received at point of entry

Branch office, Registered agent

Record completion of steps during

garnishment processing



Paper Defendant terminated/never employed ◦ No, check with other payers e.g. AP,

pension, retirement account

Yes, forward to other payer

Record in log the date forwarded/where sent

Note: when company is a financial institution certain types of support orders, creditor garnishment or tax debts may require withholding from an account



Paper Defendant terminated/never employed ◦ No and is not paid by another department

◦ No, complete the interrogatory, answer, or acknowledgement and return to sender

All new or modified wage attachments documents require a response if defendant is terminated or never employed

Use letter to answer questions, when document is not provided

Record date returned to sender



Electronic Defendant terminated/never employed ◦ No and is not paid by another department

◦ E-IWO member complete acknowledgement form and send thru portal

◦ 42 states accept e-IWO terminations

◦ E-Term member complete form and send thru OCSE portal

◦ Some courts in several states require response for creditor garnishment be sent electronically


Receipt of Documents for

Employee Review documents to determine: ◦ If the service includes all required items?

◦ Is the garnishment a proper document?

◦ Is the document called something else, but really qualifies as a Garnishment? Income Execution, Trustee Agreement?

◦ Is the employer’s correct legal name identified as the garnishee?

◦ If employee works in a different state than the state where a creditor garnishment is issued, is garnishee name the same?



Paper ◦ Is there sufficient information: complete

name, portion of SSN, age, home address to identify the defendant?

◦ If child support, is the original or amended IWO issued using the federal required form?

Accept both 2011 and 2014 form until 7/31/15

◦ If a 3rd person or attorney issued the IWO is the court order attached?

◦ If child support/family support, is the payment directed to the SDU?



Paper ◦ If support order is for spousal support only

is the correct form use?

◦ If a voluntary form 2159 is delivered, is the document complete and approved by the IRS?

◦ If a Demand Notice for a voluntary wage assignment is delivered, was the Notice of Intent delivered 20 days prior? (Illinois)

◦ If a voluntary wage assignment is delivered, does it meet the requirements of the state where the employee works?


Review Following Acceptance of

Attachment Do documents require special

handling? ◦ Are there documents that must be sent to

the employee?

◦ Are there documents that must be completed and immediately returned to the attorney and or court?

Some states require immediate response to confirm the defendant is an employee and is due earnings.



Attachment Once documents are accepted are

there situations that may affect withholding? ◦ Has the employee filed for bankruptcy

or have a Ch13 repayment plan?

◦ Does the employee work in the state that issued the creditor garnishment, support order, state tax levy, state non tax debt or voluntary assignment?



Attachment When the live and work states differ: ◦ What administrative laws must be followed?

◦ What withholding laws must be followed?

If another attachment is in place, which attachment has priority?

If the employee receives a 2nd creditor garnishment or state tax levy does the state allow aggregation of the state/federal limit or allow only one attachment be deducted at the same time? © 2014, Amorette Nelson Bryant

Required Information

Each type of wage attachment must follow specific laws/rules and may be unique to that attachment e.g. IRS levy

The answers to the questions asked in preceding slides are found in federal and/or state laws

Only federal laws apply to:

◦ IRS tax levies

◦ Chapter 13 repayment agreements

◦ Federal administrative wage garnishments

◦ Student loans issued by guaranty agencies


Required Information

State and federal laws apply to: ◦ Child support

◦ Family support

◦ Spousal support (alimony, maintenance)

◦ Creditor garnishment

◦ State non tax debts

◦ Voluntary wage assignments

State laws apply to: ◦ State tax levy


Requirements Documentation

Each type of wage attachment requires separate documentation

Documentation includes spreadsheet and narrative instructions ◦ A document for support would include

requirements that apply to all support orders plus requirements unique to each state



◦ Federal law/rules only Document for federal law by type of

attachment

◦ State law/rules only Document for laws of each state where

you do business

◦ Federal and state law/rules Document for federal law for type of

attachment

Document for laws of each state where you do business by type of attachment



◦ Documentation/procedures must be updated when a federal or a state law (in the states where persons are employed) changes ◦ Review at a minimum once a year to

ensure all changes were made ◦ Person signing off should have some

understanding of the process


What Does the Employer Need

to Know? (Federal) Using creditor garnishment as an

example the employer must know Federal CCPA definition of: ◦ Earnings

◦ Deductions required by law

◦ Disposable earnings

◦ Withholding limit

◦ Aggregated withholding limit



to Know? (State) Creditor garnishment state where

employees work: State requirements for: ◦ Employer documents

◦ Employee documents/deadline for delivery

◦ Answer/Interrogatory requirements e.g. date(s) due, notary requirement, send to whom



to Know? (State) State requirements for: ◦ When to begin withholding

◦ Priority of garnishment

◦ Exceptions to federal disposable earnings

◦ State statutory exemption e.g. 40 * SMW

◦ Withholding Limit/aggregation limit

◦ Employer fee



to Know? (State) • State requirements for: ◦ When to send money/attachments if

required

◦ When to stop withholding

Expiration, balance collected in full

◦ Employee termination notification

◦ Employee return to work requirement

◦ Additional information comments

Sample spreadsheet provided in materials folder


Vender (Payee)

Is the vendor set up and active? Is the vendor address up to date? If the same vendor name is used for

multiple sites such as IRS, is the address set up?

Does your company require a W-9 from attorney’s collecting debts?

Are payments made by EFT rather than by mail?

Must EFT payments be identified during data entry?


Vender (Payee)

Is there a procedure to request a new vendor code?

Does another department set up the vendor code to reduce fraud?

How long does it take to set up a new vendor code?

If the garnishment cannot be entered because the vendor code is required, may a dummy code be used?

If a dummy code is used, are procedures in place to ensure payment is made on time?


Software Requirements to

Support Data Entry Software systems differ on how data must be

entered to obtain the required outcome

◦ Software configuration and requirements must be

understood as well as garnishment laws

Some systems use rule codes

◦ Instead of entering the withholding limit for

support, a rule that corresponds to the limit must

be selected

Some software programs are configured so that the exempt amount must be entered instead of the withholding limit


Data Entry

Documents should be entered within one to two days or receipt

Following are examples of special requirements to consider

◦ Use start date to control future deduction

California – 1st PP that ends 10 days following

receipt

◦ Enter expiration requirement if applicable

◦ Use priority to control which attachments to withhold first

Adjust priority of attachments in place if necessary


Data Entry

◦ Flag to suspend amount deducted if cannot be sent until a future date or event


Data Entry Audit

Data entered should be received before payroll cutoff

Data for new or modified cases should be reviewed by a second person to confirm accuracy

Corrections should be made when error is identified ◦ If unable to make correction before payroll

cutoff, make correction between program calc and final run


Processing Audit

After payroll is calculated, all attachments entered should be reviewed to determine:

◦ Attachments that were released did not deduct

◦ Multiple garnishments withheld in correct order

◦ If garnishment deduction amount must be entered manually

Some states require if garnishment was received

within x days of payday, it must be withheld


Processing Audit

After payroll is calculated, all attachments entered should be reviewed to determine:

◦ If an employee changed work states were the

appropriate state rules updated

◦ If results of system “quirks” must be fixed

PeopleSoft has a situation: when an employee transfers

to a different company, the garnishment deduction does

not move with the record and must be re-entered


Audit/Review Reports

Special reports or queries are helpful in identifying common errors ◦ SUI code state is the same as the rule

state for attachments using state law

◦ All support orders for an employee use the same limit code

◦ Priority code incorrect

◦ States that require a percent of gross should be reviewed to make sure disposable or net disposable was not selected


Supplemental Payroll

Supplemental checks should be reviewed to make sure correct amount is deducted if must be aggregated ◦ Attachments for fixed amount are

generally okay unless full amount was not deducted on regular check

◦ IRS Levies, not entitled to exemption if receive on regular payroll

◦ Creditor, student loan, fed admin wage garnishment not entitled to the statutory exemption if met on regular payroll


Output

Interrogatories Each state has different requirements for

interrogatories for creditor garnishments, tax levies and state non tax debts

Requirements include when an interrogatory must be sent

◦ Immediately – Is debtor employed?

◦ Before deduction takes place – general idea of earnings

◦ After the deduction taken – amount deducted

Some states require an interrogatory be sent each pay period


Output

Interrogatories Some states require an interrogatory

be sent identifying this the last deduction

Some states require an interrogatory be notarized o Must send original signature, not a copy

A few counties or courts within the state require electronic answers ◦ Iowa, Michigan


Output

Interrogatories IRS levy 668W requires the employer

complete the back side of Part 3 and return with the first deduction ◦ If money is not withheld for the levy, Part

3 must be completed and include an explanation as to why there is no deduction

Student loans and federal administrative wage garnishments require an answer be sent


Output

Checks Several states require deductions, for

creditor garnishments, be held for a specific number of days or receipt of another document

Some states require an interrogatory, for a creditor garnishment, be sent with the check


Output

Checks Each type of wage attachment has its

own requirement as to when payment must be sent ◦ Child support – federal law is no later than

7 business days of pay date

◦ Child support – each state has its own law e.g. Texas is same day as pay date

State laws differ as to when deductions must be sent for creditor debt, tax levies and non-tax debts


Output

Checks IRS requires payment be sent same

day as pay date Student loans from guaranty agencies

should be send the same day as pay date

Federal administrative wage garnishments must be sent at least once a month


Output

Electronic Payments 16 states require electronic payments

for support state thresholds are met Minnesota passed a state law

requiring tax levies be paid electronically, however there are difficulties with their system

A committee has been formed to look into standardization of electronic payments for tax levies to all states

Federal government has no plans for levies or non-tax debts


Returned Checks

When checks are returned, the reason for return must be investigated immediately and appropriate action taken

The most common reason for a check to be returned are: ◦ Payee address is incorrect

◦ Payee cannot identify the payment

◦ Case is closed

◦ Payment was sent earlier than it should have been sent


Follow up

Situations that may prevent immediate set up must be monitored to ensure the issue/problem is resolved by payroll close or at the latest before final payroll run

Necessary actions such as completing an interrogatory should be monitored using a tracking other than monitoring deductions taken


Prioritizing Data Entry

What if all the wage attachments received cannot be entered before payroll close? ◦ Prioritize by legal deadlines

◦ Enter releases

◦ Enter reductions

◦ Chose documents that can be entered quickly

◦ Identify any “misses” and schedule to handle before final payroll run


Timeline/Calendar

Prepare an annual calendar and populate all known dates which limit or prevent activities

Continue to add as information becomes available ◦ Specific days and or times when system

cannot be updated

◦ Specific days or times when system cannot be viewed

◦ Holidays or other non work days

◦ Employee scheduled time off


Timeline/Calendar

Coordinate with other departments to identify special events ◦ Bonus payments may result in lump sum

reporting requirements and withholding support from bonus checks

◦ Annual health plan enrollment may affect changes to deductions required for some disposable earnings calculations

◦ Software updates so testing is conducted


Timeline/Calendar

Identify all regular pay cycles Identify payroll cut off Identify when supplemental cycle(s)

run Identify when system is available for

correction/additions before pay run ◦ Adjust for holidays that affect payroll

close, pay run, pay date


Timeline/Calendar

Identify date(s) a significant task must be completed ◦ Work backwards to fill in dates when sub

tasks must be completed

◦ Adjust staff schedules to ensure each sub task and significant task can be completed and are completed in sequential order

◦ Use a checklist to verify all pay period tasks were completed, before payroll cutoff


Timeline/Calendar

Weekly payrolls are most time intensive

Example: Friday is pay period end; data entry must be completed; many payee checks and interrogatories for previous pay period must be completed and mailed by COB Friday while others may be handled on following Monday

◦ Biweekly and Semi monthly payrolls reduce the number of critical tasks that must be performed on the same day


Staffing

There is no magic number for staffing the garnishment department

Take into consideration: ◦ Total number of active documents

◦ Weekly average of documents received

◦ States where employees work

Texas employers have no creditor garnishments or tax levies

Arizona, Colorado, Ohio creditor garnishment requirements are very time intensive


Staffing

The fewer wage attachments that are administered require a proportionately greater number of staff to handle ◦ 500 garnishments 1.5 FTE

◦ 2,500 garnishments 2 to 2.5 FTE

◦ 5,000 garnishments 3 to 3.5 FTE

At least 2 persons must know all the activities involved to fill in if primary person is absent, or requires assistance


Staffing

Manual handling requires more time E-IWO reduces work load for child

support and subsequent reporting data to participating states

Be creative with schedules ◦ If the heaviest work load is on Thursday

and Friday, create a 4 day schedule of two 8 hour days and two 12 hour shifts


Summary

Administering garnishments is the most difficult job in the payroll department ◦ Job grade should reflect the complexity

Budget for periodic training Failure to handle time sensitive

garnishments can be costly Failure to audit or review reports can

be costly Creditors do not make allowances for

employer internal issues


Summary

Refer to materials folder for: ◦ Sample spreadsheet for creditor

garnishment to record state requirements

Links to Office of Child Support Enforcement materials for employers

Links to other helpful sites


Speaker Disclaimer

The topics covered in this presentation touch on

significant activities a garnishment department will

handle but are not all inclusive

Recommendations are based on years of exposure to

various corporate garnishment departments but as

every company is different it is prudent for the audience

to pick and choose or add what they feel best covers

their situation

Ms. Bryant is not an attorney and is not attempting to

practice laws and recommends involving your legal

representative when making critical decisions


Speaker Information

Amorette Bryant (Amy) is recognized by the payroll industry as an

expert in the area of wage garnishment. She is a member of and

previous chair of the APA GRTF for Child Support and Non Support

Garnishments. She was an advisor to the Uniform Law Commission in

1996 regarding employer needs that were adopted in the Uniform

Interstate Family Support Act. Currently she is an observer to the ULC

Wage Garnishment group. Her book was used as the primary source of

information to document garnishment variables from state to state

Amy is a consultant, author and speaker. She is the author of the

Complete Guide to Federal and State Garnishment, 2015 Edition,

Aspen Publishers. She is also a contributing author to other Aspen

Publications. She may be contacted at [email protected]


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