Payroll Webinar: The A to Z of Garnishments Part 3
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The document outlines best practices for managing employee garnishments within payroll departments, including communication and calculation methods for various types of garnishments such as child support and creditor garnishment. It emphasizes the importance of adhering to state laws and maintaining confidentiality while providing examples of accurate calculations. The document also promotes Ascentis payroll software as a solution for automating complex withholding calculations and managing multiple garnishment scenarios.
Payroll Webinar: The A to Z of Garnishments Part 3
- 1. INTERNAL USE ONLY RESCHEDULED The A to Z of Garnishments Part 3
- 2. Organize. Humanize. Maximize. 2 Recruiting & Onboarding Talent Management HR & Benefits Payroll Time & Attendance Ascentis Ascentis provides: • A-la-carte HR technology • Industry-leading time & attendance • Easy dashboards for actionable insights • Unsurpassed support 30+ Years of experience growing with you as an HR professional throughout unprecedented change in the role of HR and expectations of employees.
- 3. Ascentis Payroll, HR, Time, Talent, Recruiting Ascentis: Extension of your team INTERNAL USE ONLY 3 Education Garnishment Best Practices! Technology Software to help you manage complicated garnishments! You can focus on your employee experience! What you should expect from your HR technology partner
- 5. Organize. Humanize. Maximize. 5 How to earn credit Stay on the webinar, online for the full 60 minutes Be watching using your unique URL sent to you from GoToWebcast Program codes delivered by email, to registered email, approximately 30 days following today’s session
- 7. ©2020 The Payroll Advisor 7 The A to Z of Garnishments: Part 3 Best Practices and Getting the Math Right
- 8. ©2020 The Payroll Advisor 8
- 9. Our Focus For Today Best practices for communicating with employees and issuing parties for all types of garnishments Best practices for responding to garnishments Best practices for processing garnishments in the payroll department Examples for calculating child support when the employee has one, two and more Withholding Orders with and without arrears Calculating the withholding for a creditor garnishment Examples of how to calculate the withholding and prioritize the order of distribution when an employee has more than one type of garnishment Calculating the withholding for a federal tax levy Calculating the withholding for a creditor garnishment Examples of how to calculate the withholding and prioritize the order of distribution when an employee has more than one type of garnishment ©2020 The Payroll Advisor 9
- 10. A Garnishment is Received in Payroll ©2020 The Payroll Advisor Several steps payroll needs to do before processing on the payroll system Should set up written procedures so all in department follow the same methods The following steps should be included 10
- 11. Is It Your Employee? ©2020 The Payroll Advisor Does the employee currently work for you? Does the name and Social Security number match your records? Doesn’t mean you can’t process just need to clarify with issuing party 11
- 12. Is It Legal? ©2020 The Payroll Advisor Need to determine if the garnishment received is legal On the proper form? From the proper source? Completed correctly? Delivered properly? Allowed under law? 12
- 13. What Laws Do I Follow? State law where the employee is located for most items except IRS tax levies Need source on rules and regulations for states you are located in Books, guides, internet are good sources ©2019 The Payroll Advisor 13
- 14. Answer Back ©2020 The Payroll Advisor Form may have response included Time allowed is usually limited Examples: Federal Tax Levy—send in with first payment Creditor Garnishment: Answer backs for Garnishee- sometimes 20 days Child Support: same day 14
- 15. Example: California ©2020 The Payroll Advisor Must give a copy of the withholding order and the employee instructions within 10 days after receiving Must complete the Employer’s Return and send to levying officer within 15 days 15
- 16. Go Tell It To The Employee ©2020 The Payroll Advisor Form may include employee notification Example: Federal Tax Levy May be time limit Again Federal Tax Levy Should include form letter from payroll Should be done regardless if garnishment requires 16
- 17. Payroll Form ©2020 The Payroll Advisor Create templates for each type of garnishment department handles Inform the employee as to: What you have received Payroll it will begin on Amount of deduction if known or IRS chart for tax levies Contact information for deduction questions Disclaimer on responsibility of garnishment 17
- 18. Sample Letter Creditor Garnishment ©2020 The Payroll Advisor NOTE: This notice is not meant to be construed as legal advice but as a sample of the type of letter that a payroll department may send. It is recommended that payroll departments get legal advice before issuing notification letters. 18
- 19. Date: To: From: Payroll Department RE: Creditor Garnishment The attached creditor garnishment (or insert name of garnishment) has been received by the payroll department. To comply with all federal and state regulations concerning the withholding and remittance of creditor garnishments, payroll will begin withholding on __________________ (insert payroll date). The amount withheld will vary from pay day to pay day depending on the amount you have earned on that individual payroll check. The amount deducted is based on the Consumer Credit Protection Act garnishment chart we have enclosed. If you have any questions regarding the processing of this garnishment within the payroll department please contact ______________. However, please be aware that the payroll department has no control over the amount of the withholding to be deducted except to comply with legal federal and state limits under Title III of the Consumer Credit Protection Act. If you have any disputes as to the amount of the garnishment, the legality of the garnishment itself or any other legal matters please contact the issuing court listed on the attached copy of the garnishment. The payroll department cannot delay, suspend or in any way alter the garnishment. ©2019 The Payroll Advisor 19
- 20. Set It Up In Payroll ©2020 The Payroll Advisor Kept in separate files in payroll Each garnishment should have separate file even if multiple for one employee Tracking system separate from payroll system for reconciliations and questions 20
- 21. Setting It Up Always date stamp the garnishment Discuss security later Process on the same day as received – Do not let sit in your in-box Determine pecking order if employee has more than one garnishment Seek legal advice ©2019 The Payroll Advisor 21
- 22. Setting It Up Cross years, and even systems over the life of the garnishment For example child support can last 18 to 20 years or more Federal tax levies 5- 7 years Line item on payroll pay stub for child support But blank line item for other garnishments? ©2020 The Payroll Advisor 22
- 23. Tracking System ©2020 The Payroll Advisor Basically an excel spreadsheet One for each garnishment processed Use for life of garnishment Include amounts and dates of payments Current balance due if levy or creditor garnishment Track child support arrears Of course, reconciliation spreadsheet for all garnishments processed matches payroll totals 23
- 24. Reconciling Make sure you reconcile the G/L account each month Spread sheet you created for tracking comes in handy now Reconcile spreadsheet to payroll before releasing payments ©2019 The Payroll Advisor 24
- 25. Paying It Out Different types of garnishments have different due dates If you can do by pay date to make sure you comply with all garnishments and state requirements Creditor may have to hold until all monies withheld or time is up EFT may be required ©2019 The Payroll Advisor 25
- 26. Security Confidentiality is a must Anything that may be a garnishment should come to payroll first Only payroll has access NO Human Resources does not need to know Watch out for processing through A/P ©2019 The Payroll Advisor 26
- 27. Security Never discuss garnishments over the phone Payroll personnel need to be secure as well ©2019 The Payroll Advisor 27
- 28. Security for Payroll Personnel A must in this day and age Blind mailboxes for e- mail Voice mail for phone Fake name for payroll personnel handling garnishments/lawsuits Physical security of building or office Face to Face by manager ©2019 The Payroll Advisor 28
- 29. Let’s Do Some Examples 29 ©2020 The Payroll Advisor
- 30. Federal Tax Levy Calculations Our Example: Employee Charlie receives $2,300 every two weeks. A tax levy of $15,000 is received. Charlie claims married filing jointly with 2 dependents. He has the following deductions: ©2019 The Payroll Advisor 30
- 31. ©2019 The Payroll Advisor 31 Deductions for Charlie Deduction Amount FIT $345.00 FICA $175.95 SIT $ 40.00 401(k) plan 3% $ 69.00 Health Ins. $ 50.00 Total $679.95
- 32. ©2019 The Payroll Advisor 32
- 33. Tax Levy Would Calculate ©2019 The Payroll Advisor 33 Take Home Pay ($2,300 - $679.95) $1620.05 Exempt from Levy $1284.61 Amount subject to levy ($1620.05 - $1284.61) $335.44
- 34. Creditor Garnishment Calculation ©2020 The Payroll Advisor 34 Tony has a creditor garnishment of $1,000 to honor and has $700 in disposable income and is paid biweekly:
- 35. Creditor Garnishment Calculation ©2020 The Payroll Advisor 35 First check the chart
- 36. Creditor Garnishment Calculation ©2019 The Payroll Advisor 36 Step 2: Determine the lesser of disposable income minus 30 times federal minimum wage or 25% of disposable income: Disposable income minus 30 times minimum wage: $700 - $217.50 = $482.50 25% of disposable income: 25% x $700 = $175
- 37. Creditor Garnishment Calculation $175.00 is the lesser of these two amounts. We can take the $175 to satisfy the garnishment ©2019 The Payroll Advisor 37
- 38. But What if There’s a Child Support Order? ©2020 The Payroll Advisor Tony's child support withholding obligation is 180.00/week. Deduct $180 for child support from Tony's $700 pay Difference between allowed amount for garnishment and the child support deduction taken: $175 - $180 = -$5 The child support deduction of $180 has already exceeded the allowed amount for garnishment; therefore nothing may be withheld for Tony's creditor garnishment. 38
- 39. Let’s Do One Where He Has the Money ©2020 The Payroll Advisor Tony's child support withholding obligation is $140/week. His weekly disposable income is $1,000. A creditor serves a garnishment against Tony for a $1,000 debt. Deduct $140 for child support from Tony's $1,000 pay 39
- 40. Then Do the Garnishment Calculation ©2020 The Payroll Advisor Determine the lesser of: Disposable income minus 30 times minimum wage: $1000 - $217.50 = $782.50 25% of disposable income: 25% x $1000 = $250 $250 is the lesser of these two amounts. Difference between allowed amount for garnishment and the child support deduction taken: $250 - $140 = $110 $110 can be withheld for Tony's creditor garnishment 40
- 41. Child Support Calculation Example (State uses 50%) ©2020 The Payroll Advisor 41
- 42. So If We Do the Calculation ©2020 The Payroll Advisor 42
- 43. Let’s add an arrearage to the equation (state allows only 50%)… ©2020 The Payroll Advisor 43
- 44. Here’s how we fix it… ©2020 The Payroll Advisor 44 Take the $200 CC/S and the $125 health insurance premium but only $6 partial arrears payment. That totals the maximum deduction allowed of $331.00 You can take more if the state law allows for arrearage percentage or has the higher federal limits
- 45. Multiple Order Calculations ©2020 The Payroll Advisor 45
- 46. Same Disposable Income But… ©2020 The Payroll Advisor 46
- 47. Percentages Made Easy ©2020 The Payroll Advisor 47 To satisfy the orders you need to determine the percentages for each order of the entire amount owed. Then use those percentages to determine how much of the allowable deduction of $331.00 each order will get. (watch out for states that still use the equal split rule. That would then apply) Finally… a use for algebra!!!
- 48. Here’s How It Is Done… 48 ©2020 The Payroll Advisor
- 49. Let’s Apply the Percentages… ©2020 The Payroll Advisor 49
- 50. Don’t Forget to Communicate! Always remember to send along a letter of explanation when forwarding less than the order designated amount. Include an explanation of the other support orders and amounts in the letter. Don’t forget to explain why the arrearages were not taken as well. ©2020 The Payroll Advisor 50
- 51. Let’s try one with arrears included… ©2020 The Payroll Advisor 51
- 52. We can take all the current support but only partial on the arrears… ©2020 The Payroll Advisor 52
- 53. We go back to the percentages… ©2020 The Payroll Advisor 53
- 54. Calculate the Arrearages… ©2020 The Payroll Advisor 54
- 55. Forward the Following… ©2020 The Payroll Advisor 55
- 56. Final Questions ©2020 The Payroll Advisor 56
- 57. Organize. Humanize. Maximize. 57 How Ascentis Payroll Can Help Garnishment calculations, different state maximums, and multiple garnishment and child support scenarios getting you down? Ascentis can help. Our payroll software can automate many of the complex withholding calculations including: • Multiple orders with different maximums by employee • Different pro-ration methods by employee • Vendor payments via check or EFT • Automated or on-demand vendor payment processing Get rid of those spreadsheets and harness the power of Ascentis today!
- 58. Organize. Humanize. Maximize. 58 Learn More If you are interested in Ascentis Payroll, or our other HR technology like HR, Time, Talent, Recruiting, please indicate your interest if you haven’t done so already with the following poll.
- 59. Organize. Humanize. Maximize. 59 How to earn credit Stay on the webinar, online for the full 60 minutes Be watching using your unique URL sent to you from GoToWebcast Program codes delivered by email, to registered email, approximately 30 days following today’s session
- 60. Organize. Humanize. Maximize. 60 Share with your colleagues
- 61. Organize. Humanize. Maximize. 61 Contact Us info@ascentis.com www.ascentis.com