Income Withholding for Employers
Employers have long asked Congress to enforce standardized child support Income Withholding Orders (IWO) forms as well as having one central location in every state for remittance of income withholding payments. The Federal Office of Child Support Enforcement (OCSE) in conjunction with Office of Management and Budget (OMB) issued new rules regarding these two issues and slightly modified the standardized federal Income Withholding forms.
The Two Most Important Changes
1. All child support income withholding orders must be issued on the new OMB-approved IWO form (OMB 0970-0154). This form cannot be modified.
2. Payments must be directed to each State’s statewide disbursement unit (SDU). Indiana’s SDU is the Indiana State Central Collection Unit (INSCCU).
To make this transition easier, the Child Support Bureau (CSB) of the Indiana Department of Child Services has created an Indiana-specific version of the new IWO for use by courts, private attorneys, and pro se litigants. This version is a “fillable” PDF of the OMB-approved IWO form. CSB has created additional tools such as a document with simplified instructions for pro se litigants. Additionally, we will be creating a Frequently Asked Questions document.
The following includes more detail on the new rules depending on whether the IWO was issued before or after May 31, 2011.
On IWOs issued on or after May 31, 2011 - New IWOs:
- The IWO must direct payments to INSCCU. If the IWO does not direct payments to INSCCU as required by federal law, then the employer must reject the IWO and return it to the sender, effective immediately.
- The IWO must be on the revised federally approved form. If the employer receives a document to withhold income that is not issued on the OMB-approved IWO form as required by federal law then the employer must reject the document and return it to the sender, effective May 31, 2012.
- If an IWO is received after May 31, 2011, but issued before May 31, 2011 and directs payment to INSCCU but is not on the federally approved OMB form, the employer should honor the order and contact the sender
of the IWO to request a revised IWO on the new OMB-approved form. The employer or income payor should honor the order until the revised IWO is received.
On IWOs issued before May 31, 2011 - IWOs already processed by the employer:
- If the IWO does not direct payments to INSCCU, then the employer or income payor
should contact the sender of the IWO to request a revised IWO directing payment to
INSCCU. The employer or income payor should continue to send payments to the
non INSCCU address until the sender issues a revised IWO directing payment to INSCCU.
- If the IWO is not issued on the federally approved IWO form as required by federal law
and the order presents a problem for the employer or income payor, such as having insufficient information
to process the IWO, or the order has been modified, then the employer or income payor should
contact the sender to request an OMB-approved IWO form.
The employer or income payor should continue withholding income until a new OMB-approved IWO form is received.
An employer can reject an IWO under the new federal regulations for the following reasons:
- If on May 31, 2012, or thereafter, the sender of the IWO has not used the OMB-approved form;
- If a newly issued IWO instructs the employer to send a payment to an entity other than INSCCU;
- If the form does not contain all the information necessary for the employer to comply with the withholding;
- If the form is altered or contains invalid information; or
- If the amount to withhold is not a dollar amount.
- One exception to an employer rejecting an IWO is that if the new IWO is related to an initial child support order
that was issued prior to January 1, 1994, never modified, has no arrearages, and is not associated with a IV-D case;
then the employer must follow the payment instructions on the IWO form it receives.
Electronic Income Withholding
The Federal Office of Child Support Enforcement (OCSE), in partnership with states, public, and private sector employers,
payroll processors, and related organizations developed the electronic Income Withholding Order (e-IWO) process.
Begun in 2004, it has resulted in:
- Reduced processing and handling costs for employers
- Improved communication between child support agencies and employers
- Withholding information provided in a consistent and uniform format
- Increased child support collections
- Reduced administrative expenditures for states (e.g. postage, paper, handling)
The first step was a "system to system" interface with electronic formats enabling:
- States to transmit Income Withholding Orders (IWOs) electronically
- Employers to acknowledge IWOs and to report terminations and lump sum payments electronically
A centralized federal internet portal enables states and employers to easily and securely exchange files with just one entity.
The portal picks up the Income Withholding Orders (IWOs) from each participating state daily. Then, edits them,
formats them according to each employer's preferences, bundles them for each employer from all participating states,
and delivers them to the employers. The portal then picks up the Acknowledgement from participating employers, edits them,
formats them, bundles them for each state from all participating employers, and delivers then to the states.
You can save $3.00 to $4.00 per IWO and be up and running in as little as two weeks with no programming required.
Use a simple, no programming alternative that automates the mandatory IWO Acknowledgement.
This option uses a pre-filled Acknowledgement in either a spreadsheet or PDF file format. Samples of each are located here.
Either a pre-filled spreadsheet with the list of IWOs or separate PDF Acknowledgements are delivered to the employer along with a PDF of each IWO document.
The spreadsheet or PDFs are completed by the employer with minimal data entry and saved to a directory.
The portal picks up the completed documents, processes the acknowledgements, and delivers them to the appropriate state.
The process uses Secure File Transfer Protocol (SFTP) or uses a File Transfer Protocol (FTP) server with a Virtual Private Network (VPN).
For more information or assistance regarding transmission/connectivity options please contact Pat Snodgrass from the Administration of Children and Families at email@example.com or at (410)200-4695.
For More Information
For a copy of the Income Withholding Order Document, Instructions, and other IWO tools click here.