The Tasks, Big and Small, of Wage Garnishment

Part of a series | Wage Garnishment Insights

Do you meet all requirements when garnishing wages? This checklist will help you stay in compliance.

Most employers know the basics of wage garnishment: Receive a garnishment order; enter the information into the payroll system; and submit the withheld money to the appropriate agencies and courts.

Those are the fundamental pillars of wage garnishment, but employers have additional obligations beyond complying with the garnishment order. Complying with these additional obligations requires additional oversight. Below is a snapshot of some of the various issues that can land on your desk—and that you should consider when designing and reviewing your internal processes.

New hire reporting

Before an employer receives a garnishment order, they already have compliance obligations. The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996 mandates that employers report specific information on newly hired employees to state new hire agency(ies). Also, 21 states/territories have passed legislation requiring companies to do the same for many newly hired independent contractors.

This data is critical to child support programs. States enter the data into the State Directory of New Hires; they also forward it to the National Directory of New Hires, which is accessed by other states and agencies—including child support programs.

This is how child support programs locate those who have an outstanding child support obligation—and how they issue withholding orders to employers.

Verification of employment

Some agencies or third parties may ask you to verify an employee's income or employment status. Should you receive such a request from a federal or state government agency, you may be obligated to provide the appropriate information. Check your state's requirements for specific guidelines.

In the case of child support, you may be held liable if you fail to respond to a government agency request.

National Medical Support Notices

Federal Law requires that every child support order include a provision that requires parents to provide medical support for their child(ren). The support can be in the form of health insurance, cash payments, or both.

Child support agencies send a National Medical Support Notice when notifying you to enroll an employee's child(ren) in your health insurance program. You are required to acknowledge receipt of the notice and advise as to whether you are able to comply. If complying, you'll need to forward the information to your health benefits provider. (Note that the federal Office of Child Support has implemented an electronic format for the National Medical Support Notice. Some states have also adopted this protocol.)

Child support agencies send an Income Withholding Order (IWO) when notifying you to garnish your employee's wages for cash medical support. In such a situation, the protocol is the same as that of other wage garnishment orders.

Remitting payment

Employers often ask how long after processing a withholding order they are required to remit payment.

For child support garnishments, state requirements vary and are based on your employee's pay date.

States follow different methods for non-child support garnishments. Some direct that you withhold funds from each paycheck but wait for instructions on when to remit. Others advise that you remit payments monthly or within a specified timeframe after each pay date.

The best practice is to follow the instructions that accompany the withholding order and applicable laws.

Notifications and responses

Many states require you to notify employees when a wage garnishment order is received. Others require or recommend that you provide employees with copies of the orders. Consider this a best practice. By sharing this information with your employees, you're giving them a chance to understand how their pay will be affected. You're also giving them time to contact the garnisher, discuss potential modifications to their wage garnishment, claim a household exemption (if applicable), etc.

Some withholding orders also require that you provide specifics regarding an employee's income. You may be asked to furnish these details on a monthly or paycheck-to-paycheck basis. Note that certain agencies require electronic responses instead of hard copies. You may often be required to provide this as well as additional information formally, e.g., as answers to interrogatories, and to file a signed and, in some cases, notarized document with courts of law, under penalty of perjury.

Also, some agencies require that you notify them when an employee leaves your company. Be sure to follow this directive; it is how agencies and other garnishers keep track of where an employee is working—and where to send withholding orders.

Withholding duration

Once you start garnishing an employee's wages, a new question arises: When should you stop?

In the case of child support, the requirements vary by state and can change if an employee is in arrears.

Other types of garnishment orders—those not related to child support—may be effective until the entire amount of the debt is paid or for a limited time period. These requirements vary by state too. Be aware that a new order may be issued when the previous one expires.

Should you receive multiple garnishment orders pertaining to the same employee, you may be able to handle multiple orders at the same time or required to handle them sequentially—that is, one at a time—prioritizing some over others. Check state requirements.

Generally, you shouldn't stop garnishing an employee's wages unless you've received specific instructions to do so, or the employee leaves your company. (Also, keep in mind that you may have to restart an order when a former employee returns to your company. Again, check your state's requirements.)

Electronic options

Many agencies and third parties are using electronic technology to streamline their processes.

You can opt to receive child support orders electronically, and in some states, you can also choose to receive other types of wage garnishments, such as tax levies, in the same fashion.

When you receive a withholding order, check with the sending agency to confirm your options. If offered, electronic processing will allow you to transmit information more quickly, and handle wage garnishments more efficiently.

Additional inquiries and calls

After you've processed a withholding order, withheld the appropriate amount, sent in or followed payment requirements, and responded with the requested information, your task list may appear substantially complete. Still, an agency or third party may contact you with additional requests or correspondence that require your attention.

Ease your burden and improve compliance

ADP Wage Garnishments, one of the solutions offered in ADP's suite of ADP SmartCompliance^® solutions, provides support for administering withholding orders for earnings paid through payroll.

Download the SmartCompliance^® guidebook to learn how ADP solutions can reduce your administrative burdens while helping you maintain or improve compliance.

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