To determine whether or not it can apply a qualified medical child support order (QMCSO) issued against an employee when that employee is also subject to an outstanding child support order, a company will need to look to both federal and state law and pull out its calculator.

According to guidance from the Department of Labor and the Department of Health & Human Services, the total amount to be withheld for both child support and medical support – the amount of cash child support plus the amount of health insurance premium or an amount ordered for medical support – must fall within the Consumer Credit Protection Act ("CCPA") limits.  Thus, a company should calculate the total maximum amount that can be withheld for both cash and medical support, and then determine whether both obligations can be met out of this total amount.  If the total amount to be withheld for both child and medical support purposes exceeds the amount allowed after applying the limits, the company must follow certain prioritization rules under the applicable state law to determine if cash or medical support should be paid first.

The CCPA limits are as follows:

  1. 50% – supports a second family, with no arrearage or less than 12 weeks in arrears
  2. 55% – supports a second family, and more than 12 weeks in arrears
  3. 60% – does not support a second family, with no arrearage or less than 12 weeks in arrears
  4. 65% – does not support a second family, and is more than 12 weeks in arrears

For purposes of the CCPA limits, a "second family" means there is a spouse and/or child for whom the employee has responsibility. "In arrears" means there is past due, unpaid support owed by the noncustodial parent.  Note that some states have exceptions to the federal CCPA limits that place a cap on the maximum amount of an employee's earnings that can be withheld to satisfy support orders, so it is important to check the state laws regarding withholding when making support order calculations for an employee.

The two basic steps to determine the maximum amount that can be withheld under the CCPA limits are:

1. Determine the employee's aggregate disposable weekly earnings ("ADWE").  Under CCPA, an employee's ADWE is the employee's gross pay less any mandatory deductions.  Each state has its own rules and regulations regarding what is considered a "mandatory deduction," so the law of the state where the employee works determines which deductions are mandatory.  It is important to note that ADWE does not necessarily mean the same thing as net pay, because there may be other voluntary deductions taken out of an employee's pay to determine net pay.  There are also additional calculations to use when an employee has pre-tax deductions and/or imputed income.  Pre-tax deductions, such as 401(k) plan contributions, must be added back in to the employee's taxable wages before determining the obligated employee's ADWE.  In contrast, imputed income, for things such as personal use of a company car, or non-deductible moving expense reimbursements, must be subtracted from the employee's gross pay before determining the employee's ADWE.

2. Multiply the ADWE by the CCPA limit (or applicable state maximum limit) in order to determine the maximum amount that may be withheld.  This maximum amount is generally referred to as the "allowable disposable income."  If the "allowable disposable income" is enough to satisfy the employee's cash child support obligations and his medical support obligations, both should be paid up to that limit.  However, if the total amount to be withheld for both child and medical support purposes exceeds the amount allowed after applying the limits, the company must follow the prioritization rules under state law to determine if cash or medical support should be paid first.  If the cash child support order must be paid first, and the remaining balance cannot satisfy the medical child support order, the company may need to respond to the issuing agency and inform it that State or Federal withholding limitations and/or prioritization prevent the withholding from the employee's income of the amount required to obtain coverage under the terms of the plan, as permitted on item 5 of the Employer's Response on the National Medical Support Notice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.