Electronic wage garnishment has become an unfortunate reality for many employers and employees. A study by the ADP Research Institute® revealed that 7.2 percent of employees had wages garnished in 2013. According to the U.S. Department of Labor, most garnishments occur by court order. Other types of legal or equitable procedures for garnishment include IRS or state tax collection agency levies for unpaid taxes and federal agency administrative garnishments for non-tax debts owed. Many of those, like creditor garnishments, child support and tax levies, fall under legal requirements that vary by state.
And in such states as California, Michigan and Missouri, garnishment regulations recently changed in ways that intensify employers' responsibilities regarding wage garnishments. If you miss garnishment deadlines or fail to garnish the proper amount, you can face penalties or even become responsible for the debt yourself.
Regarding wage garnishment in general, the advantages of electronic processes are slowly being explored: speed, efficiency, reduction of human error and overall greater safety of data are all motivating factors. Though most firms still report tracking their garnishments with paper records, electronic communication is poised to increase dramatically in wage garnishment in the years to come, from monetary payment to the acceptance of electronic signatures on responses.
Many New Letters
Electronic funds transfer (EFT) for garnishment payments helps increase efficiencies, streamline processes and reduce cost. State child support agencies are increasingly looking to incorporate the ability to accept child support payments via EFT, and some have even already mandated employers to send payments electronically, according to research from ADP. Similarly, some tax levy agencies, trustees and student loan agencies are also implementing electronic payment capabilities.
Many state revenue agencies already receive tax withholdings electronically, such as Colorado and Minnesota. California offers an electronic option for garnishments that stems from Earnings Withholding Orders for Taxes (EWOTs).
No End of Growth in Sight
According to the Office of Child Support Enforcement, one increasingly popular form of electronic wage garnishment, especially for child support, is electronic income withholding orders (e-IWOs). With this technology, states can send IWOs and employers can accept or reject them electronically. The number of e-IWOs increased to 1.6 million last year, almost double the number from just two years before, according to ADP.
Electronic IWOs also took a legislative step forward when President Obama signed House Bill Number 4980, the "Preventing Sex Trafficking and Strengthening Families Act," an amendment of which mandated states to implement the e-IWO option for employers by last October.
Wage garnishment will no doubt follow the historical track of other business processes — straight into almost full automation and largely online. It will be important to frequently check for developments in this changing field, so you'll be able to stay in compliance with this critical payroll function.
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