Family support. Child and spousal support
is governed by Title IV-D of the federal Social Security Act.
The law is administered by the states. Generally, states require a provision
for immediate income withholding by obligers' employers (although it may not
be activated). Income withholding covers current obligations and past due
Administrative wage garnishment. The Debt
Collection Improvement Act of 1996 (DCIA) (31 USC 3720D) authorizes federal agencies or collection
agencies under contract with them to garnish up to 15 percent of an employee's
disposable earnings to repay defaulted debts owed the federal government.
Debts must be for delinquent nontax arrearage to the federal government and
must be delinquent for 180 days or more. The federal agency must notify the
employee well in advance that the action is going to take place and provide
the person with the opportunity to dispute the debt. The Higher
Education Act (HEA) authorizes the Department of Education's guaranty
agencies to garnish up to 10 percent of disposable earnings to repay defaulted
federal student loans. This withholding is also subject to the provisions
of the federal wage garnishment law but not state garnishment laws. Unless
the total of all garnishments exceeds 25 percent of disposable earnings, questions
regarding such garnishments should be referred to the agency initiating the
Consumer debt. Title III of the federal Consumer
Credit Protection Act (15
USCS 1671et seq.) governs most garnishments, other than child
support or alimony and tax levies. It limits the amount of an employee's earnings
that may be garnished and protects an employee from being fired if pay is
garnished for only one debt. Title III is administered by the Wage and Hour
Division (WHD) of the Department of Labor's Employment Standards Administration.
The WHD has no other authority with regard to garnishments. Questions over
issues other than the amount being garnished or termination should be referred
to the court or agency initiating the withholding action. A state law that
allows a greater exemption to employees (money they can retain) before garnishment
supersedes the federal Act. On the other hand, some state schemes are tied
to gross income. In such states, because the federal law is more restrictive
(permits a smaller amount to be garnished), the federal law would apply.
Important. The statute that is more generous
to the employee always prevails.
The law protects everyone receiving personal earnings such as
wages, salaries, commissions, bonuses, or other income--including earnings
from a pension or retirement program. Tips are generally not considered earnings
for the purposes of the wage garnishment law.
Consumer debts. Garnishment restrictions
do not apply to bankruptcy court orders and debts due for federal or state
taxes. For orders other than for federal taxes, family support, and Chapter
13 bankruptcy, the maximum amount of wages available for garnishment is the
• 25 percent of disposable weekly earnings.
• The amount by which disposable weekly earnings exceed 30 times
the federal minimum hourly wage in effect at the time the earnings are payable.
Some states use 40 percent of the federal minimum wage--which would supersede
the federal figure--so check your state law.
When the garnishment is for child or spousal support, a Chapter
13 bankruptcy, or for state or federal taxes, the 25 percent limitation does
Family support orders. The maximum amount
of wages available for family support garnishment is:
• 50 percent of disposable earnings, when an individual is already
supporting another spouse or dependent child
• 60 percent of disposable earnings, when an individual is not
already supporting another spouse or dependent child
If the employee is more than 12 weeks behind in payments, the
percentages may increase to 55 percent and 65 percent, respectively.
Tax liens. The order itself should state
the amount owed by the employee, the kind of tax, and instructions for calculating
the amounts to be withheld. Certain moneys are exempt from levy, including
unemployment benefits, workers' compensation, money that the worker must contribute
to support for minor children and certain disability benefits (26 IRC 6334).
Federal agency nontax debt. Any federal
agency that is owed any nontax debt may now administratively garnish employee
wages to recover the debt. State laws that prohibit or otherwise govern garnishment
are preempted. Employers will receive an administrative order, and the regulations
suggest that the amount be sent within 10 days of payday.
The most that may be withheld is the lesserof:
• The amount shown on the garnishment order up to 15 percent of
the employee's pay; or
• The amount by which disposable pay exceeds 30 times the federal
However, if an administrative order is not first in time or if
a child or family support order is served at any time, the maximum amount
changes to the following:
• The amount that could be withheld if there were no prior order, and then
• The amount equaling 25 percent of disposable pay, less the amount
withheld under the prior order.
Example. Assume a state child support
withholding order and a consumer debt garnishment. The child support order
must be honored first. If it takes 50 percent of the debtor's disposable earnings,
the consumer garnishment may not be honored because it is subject to a 25
percent limit, which has already been passed. If, however, the child support
takes only 15 percent of disposable earnings, there will be 10 percent available
for the consumer debt (up to 25 percent). If the second order is a state or
federal tax levy, the order itself will state the amount that must be withheld.
Handling several garnishments, support orders, and tax levies
is a complicated task. In most cases, employers should seek the advice of
an attorney, and/or have a specialist handle the calculations and priorities.
Garnishments are to be made in the following order:
1. Child support or alimony orders. These
orders have priority over other garnishments. The federal Child
Support Enforcement Act requires each state to have garnishment
laws that ensure collection of child support orders issued from all courts
throughout the United States (42
USCS 666et seq.).
2. Federal tax levy. In most circumstances
a federal levy for nonpayment of federal taxes generally takes precedence
over all other debts except family support. Called a “levy of wages,” it will
come from the Internal Revenue Service to the employer and should state the
amount the employee owes, the kind of tax, instructions on calculating the
amount to be withheld, and the amounts that are exempt (26 CFR 301.6631-1et seq.).
3. Guaranteed student loans. The HEA allows
the U.S. Department of Education to garnish up to 10 percent of an employee's
disposable income to repay a student loan. No judicial order is needed. The
HEA preempts state law regarding garnishment and requires the employee receive
30 days' written notice before garnishment action is taken. Employers that
don't comply with guaranteed student loan garnishments risk being sued for
the owed amount. Student loans are handled under the Administrative
Wage Garnishment Act (20
USCS 1095et seq.).
4. Federal agency/nontax. The DCIA allows
the Secretary of the Treasury to collect any debt that has been delinquent
for a period of 180 days owed to the federal government. Debts may be collected
without court order. These include child support orders and student loans.
5. Creditor garnishment. Title III of the Consumer
Credit Protection Act (15
USC 1671et seq.) does not address the issue of priority of garnishments,
so state law may govern this aspect. Generally, when an employer receives
multiple garnishment orders, the creditors are paid one at a time in the order
in which the documents are received. For example, if there is $25 per week
available for garnishment, and the first garnishment is for more than $25
per week, the first creditor receives payment, and the second receives nothing
until the first claim is fully satisfied. Check the laws of your state. If
a state law differs from Title III, the law resulting in the smaller garnishment
or otherwise protecting the employee more should be observed. An order from
a bankruptcy court should be honored before other consumer debts because creditor
claims are consolidated.
6. First come, first served. Despite these
priorities, if an order is under way, continue it until its conclusion, honoring
the first order in full before turning to the priority list.