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U.S. Department of Health and Human Services
Administration for Children & Families
Office of Child Support Enforcement

PIQ-00-03

DATE:             September 14, 2000

TO:                  State IV-D Directors

FROM:           David Gray Ross
                        Commissioner
                        Office of Child Support Enforcement

SUBJECT:     State IV-D Program Flexibility with Respect to Low Income Obligors -- Imputing Income; Setting Child Support Orders and Retroactive Support; Compromising Arrearages; Referral to Work-Related Programs and Other Non-traditional Approaches to Securing Support

Our goal in issuing this PIQ is to clarify for State IV-D agencies the flexibility that exists under Federal IV-D requirements in setting support obligations and securing collections from low-income obligated parents.

The HHS Office of the Inspector General (OIG) recently released the results of a study entitled The Establishment of Child Support Orders for Low Income Non-custodial Parents, OIG-05-99-00390, which can be found on OCSE's website at:  /programs/cse/extinf.htm   The major findings of the study were:

• Retroactive Support: Most sampled States routinely charge non-custodial parents for retroactive support. The longer the period of retroactivity, the less likely it is that the parent will pay any support.

• Income Imputation: Most sampled States impute income when the non-custodial parent is unemployed or income is unknown. Income imputation appears ineffective in generating payments.

• Minimum Orders: Six of the sampled States routinely establish minimum orders when the non-custodial parent has limited payment ability. Minimum order cases exhibit lower payment compliance than other cases.

• Debt Owed to the State: Most sampled States will not reduce debt owed to the State by the non-custodial parent except in rare cases. Median debt on 1996 cases was over $3,000.

• Job Programs: Few sampled child support agencies formally link with job programs. Non-custodial parent participation in such programs is minimal.

The findings of the OIG study and the President’s June 17, 2000 Memorandum to HHS and other Federal Departments requiring the development of Joint Guidance on Supporting Responsible Fatherhood, provide an important opportunity for OCSE to clarify the extent to which States can develop child support policies and practices to more effectively serve low-income fathers. We have previously issued policy guidance on the authority of States to compromise arrearages owed to the State. (See PIQ-99-03 and OCSE-AT-89-06 containing the preamble to final regulations at 45 CFR 303.106 for Procedures to Prohibit Retroactive Modification of Child Support Arrearages, which are both available on the above website.) This policy guidance provides further information about how States currently have the flexibility to substantially address all the issues identified in the OIG study.

Retroactive Modification of Arrearages vs. Compromising Arrearages Owed to the State.

Under section 466(a)(9) of the Social Security Act (the Act) and 45 CFR 302.70(a)(9), a child support order is a judgment on and after the date due with the full force, effect, and attributes of a judgment of the State, and it is not subject to retroactive modification. States must have laws prohibiting retroactive modification of arrearages, which prevent a court or administrative body from taking action to erase or reduce arrearages that have accrued under a court or administrative order for support, in effect, altering the obligor's obligation without the concurrence of the obligee (or the State, in the case of arrearages permanently assigned to the State). Compromising arrearages, on the other hand, involves the satisfaction of arrearages by specific agreement of both of the relevant parties in accordance with State law or on the same grounds as exist for any other judgment in the State.

Child support arrearages that have been permanently assigned to the State under title IV-A, or assigned to the State under titles IV-E and XIX of the Act, may be compromised by an agreement between the obligor and the State (as assignee of the obligee). Any compromise of child support arrearages that have not been permanently assigned to the State would require the agreement of the obligee. State law may further require that the court or administrative authority must endorse any agreement affecting child support orders to ensure that the best interests of the child are protected.

There may be circumstances involving low-income obligors that warrant consideration of compromising arrearages in accordance with State law. For example, Maryland recently initiated a pilot collaborative project in Baltimore between the IV-D program and three fatherhood programs under which a portion of arrearages owed to the State could be compromised for unemployed non-custodial parents who enroll and complete a responsible fatherhood project where they go to work and complete certain activities. Additional portions of the State debt may also be compromised after the non-custodial parent has completed one year, then another year, of paying current support. The goal of the project is to relieve these fathers of what is largely an uncollectible debt owed to the State so they can focus on current support payments.

An amnesty program could be one way to address the problem of high arrearages for low-income obligors. State amnesty programs for arrearages tend to fall into one of two categories: those that compromise part of the arrearages owed to the State and those that halt or postpone an enforcement action.

• Compromise of Arrearages. Some States have proposed amnesty programs that would compromise arrearages assigned to the State if the obligor keeps current on a payment plan for a specific period of time. Iowa's pilot program allows a percentage satisfaction of assigned support for obligors who pay full support on time for a certain period (15% satisfaction for 6 consecutive months of full payment; 35% for 12 consecutive months; 80% for 24 consecutive months). Montana implemented a program targeted to parties with an outstanding debt of $5,000 or more, asking them to contact the CSE agency to work out an agreement to settle the debt. The State was willing to reduce the AFDC or TANF debt in certain cases where a lump sum payment was made or the obligor agreed to make regular payments.

• Postponement of Enforcement. Virginia has an ongoing amnesty program that, coupled with a round-up of unresponsive delinquent obligors, has collected over $114.6 million from parents since 1997. If appropriate, good-faith payment plans were arranged, the non-custodial parent would receive amnesty from enforcement techniques. The case would not be referred to court and the State would recommend that the parent not go to jail. North Carolina's program couples a publicity campaign with mail notification to obligors who are delinquent for 60 days or longer. County offices remain open for 12 hours a day during the period of the amnesty project. Counseling is available from community colleges and jobs-related agencies to assist underemployed and unemployed parents. Maryland, the District of Columbia and Northern Virginia are participating in an amnesty program aimed at cases with active bench warrants. The program offers amnesty from arrest.

States also may have the authority under State law to compromise or forgive penalties or interest charges on arrearages. States may choose to compromise penalties or interest alone or in conjunction with the compromise of the principal unpaid child support obligation. West Virginia's new law, effective January 1, 2001, will allow obligors who pay arrearages off within a 24-month period to have the interest dropped, if all parties agree.

Many States have laws, sometimes referred to as "laws of general obligation," under which a debt to the State is established equal to the amount of assistance provided to the family for the period when there was no support order in place. States may not collect these State debts through the IV-D program, because child support obligations must be set using the State's mandatory guidelines. However, if the State were enforcing an order that included arrearages based on assistance paid to the family prior to the requirement for mandatory child support guidelines in October of 1989, the State may continue to enforce these debts through the IV-D program. See policy guidance in OCSE-AT-93-04 and 93-08. States that assess State debt in addition to child support obligations may want to consider compromising State debt in consideration of the obligor's payment of the child support obligation.

While allowable under title IV-D of the Act, States should apply these policies carefully and only in those circumstances that warrant consideration of compromising permanently assigned arrearages. There is a danger in sending a message that obligors can ignore support obligations because of the possibility that a State may eventually accept less than the full amount owed in satisfaction of the debt. States may benefit from having uniform written policies that set forth the circumstances under which the State will compromise arrearages.

Imputing Income and Setting Child Support Awards.

States are required to use mandatory child support guidelines in establishing support obligations. However, they have discretion to design their guidelines within the parameters of Federal requirements at 45 CFR 302.56. For example, the guidelines must take into consideration all earnings and income of the non-custodial parent. The NCSL and CLASP (page 7 herein) cite two mechanisms States use to accommodate very low income obligors in their guidelines: 1) adopting a guideline which provides a self-support reserve for a non-custodial parent with the obligation set based on income above the reserve amount; and 2) excluding certain payments - such as means-tested public assistance - from the definition of income.

States may also impute income, based on the parents' earning capacity or previous work experience. The OIG's findings, however, show that support orders based on imputed income often go unpaid. This could be the result of the non-custodial parent being unemployed or underemployed. The OIG report notes that a causal relationship between the use of income imputation and lack of payments cannot be assumed. However, it appears self-evident that child support obligations that are based upon actual income, rather than imputed income, are generally likely to be more accurate and fair to the obligor. States may want to take steps to limit the imputation of income, for example, to cases in which the non-custodial parent has apparent assets and/or ability to pay, but is uncooperative. And, most importantly, States should make the maximum use of improved methods of determining income and resources of non-custodial parents, including the State and National Directories of New Hires as well as the Financial Institution Data Match (FIDM) and Multistate Financial Institution Data Match (MSFIDM).

Review and modification policies that seek to ensure that child support orders reflect the current ability of the non-custodial parent to pay support can help to avoid cases where large amounts of arrearages accrue. For example, some States have avoided the accumulation of large arrearages while obligors are incarcerated. North Carolina automatically modifies a support order once a father is incarcerated. Colorado's IV-D program writes newly incarcerated fathers to explain the procedures for modifying their support orders. In addition, Puerto Rico and the Virgin Islands do outreach to individuals who may be able to request downward modifications. For example, Puerto Rico does outreach in prisons and in industries and government offices expecting layoffs to advise people of their rights to adjustments. We encourage States to regularly publicize to obligated parents the opportunity to request review and possible adjustment of a support obligation based upon a significant change in circumstances, such as incarceration. States are required to have procedures in place which provide for modification (both upwards and downwards) at the request of either parent. (See 42 U.S.C 666(a)(10)). Appropriate State responses to these requests will ensure that support orders, once they are established, continue to be based on an obligor's current ability to pay.

States are allowed to use minimum orders, but only if the minimum amount is rebuttable under criteria established by the State.

The OIG found that some States routinely set minimum orders, even when the obligor has limited, or no, ability to pay and that minimum order cases exhibit lower payment compliance than other cases. While States are allowed to use minimum orders, the minimum amount must be rebuttable.

Section 467(b)(2) of the Act provides:

In response to comments, the preamble to final guidelines regulations stated that:

Setting Support for Prior Periods.

Any support awards for prior periods must be based on the State's child support guidelines. However, support for prior periods could be set as a deviation from the appropriate guidelines amount, if there is a written finding or specific finding on the record that the application of the guidelines would be unjust or inappropriate in a particular case. See 45 CFR 302.56(g). Since States have flexibility in setting support for prior periods, States may choose not to seek awards for prior periods from low-income obligors in public assistance cases.

Determining how far back to set support for prior periods may also impact upon payment of support, according to the OIG study. Some States limit the time an order can be retroactive. Kentucky prohibits a retroactive support order unless paternity is established within four years. Maine only allows six years of retroactive support.

Referral to Jobs and Welfare-to-Work Programs and Other Nontraditional Approaches.

As the use of automated enforcement techniques increases, States can concentrate on the more difficult cases involving low income, underemployed or unemployed obligors. Some States are using case management or nontraditional approaches to reach these obligors. Almost all States indicate that they make some referrals to job search or employment and training programs, but much more could be done in this area to increase participation rates with job programs.

States, such as Louisiana, have provided customer service training to caseworkers to help change attitudes to encourage outreach and referral of nonpaying obligors to appropriate and needed services. Los Angeles County child support workers and local service providers conduct intake at the courthouse for fathers who are behind in child support payments, providing help and appropriate referrals for needed job and other services. Georgia operates a similar program, the Fatherhood Initiative, using child support agencies as connection points to refer fathers to employment-based services and skill-building classes. First year results show that 80% of the 450 obligors who completed job skills training are now employed and paying child support. The program expanded Statewide into 36 technical schools in November 1998. The program has formed partnerships with the Georgia Department of Labor and the State Board of Pardons and Parole.

Other States' efforts with job-related programs include: Delaware, making referrals through the Parents Seek Work Project; California, operating a demonstration project in seven counties to determine whether providing these types of services will improve support payment, increase parent involvement or reduce public assistance to the children of these parents; Missouri's Parents' Fair Share program, which offers jobs and job training; Idaho's "career enhancement" services; and New York's Westchester and Ontario Counties collaboration with Welfare to Work programs. Washington's offices have been working directly with local resources such as private industry councils, employment security, public assistance, and tribes for 2 years to make referrals. Each office has a process to identify potential participants or judges may order participation. Outreach includes prisons for screening of inmate obligors who are close to release for welfare to work eligibility. Many of these programs involve a mixture of funding streams for maximum flexibility.

In light of recent efforts to identify obstacles to compliance with support orders faced by low-income obligors, such as the OIG study, OCSE encourages States to scrutinize policies that may contribute to nonpayment by these obligors. States should carefully examine their policy choices for setting current support and support for prior periods, particularly with respect to underemployed or unemployed obligors to avoid problems with compliance as evidenced by the OIG study. Careful policy choices up front in establishing obligations should improve the obligor's incentive and ability to support his or her children, as well as improve a State's ability to enforce its orders.

Several non-HHS publications have additional information about innovative legal and policy choices States have made to address the issue of setting support for low-income parents.

The National Conference of State Legislators has recently published "Connecting Low-Income Families and Fathers: A Guide to Practical Policies." In addition, the Center for Law and Social Policy, in February 1999, published a paper, available on the CLASP website at www.clasp.org/pubs/childrenforces/supaward.htm, which discusses State choices within the context of title IV-D requirements and highlights innovative State practices in setting current support awards and arrearages as well as compromising arrearages owed to the State. These publications are not to be considered as official policy documents of the Department of Health and Human Services or its agencies and do not necessarily reflect the views of HHS or its interpretation of federal law, but States may find useful information in the discussion of state flexibility and innovative practices. We will continue to identify and share examples of allowable State practices that may improve non-custodial parents' ability and willingness to support their children.