Liability of Employers and Payors of Funds in Child Support Matters
When a child support order is entered, unless the parties opt out of income withholding, those child support orders require employers and “payors of funds” to automatically withhold basic support, medical support and child support from an obligor’s pay. Every child support order is required to addre
Who is a Payor of Funds for Child Support?The term "payors of funds" in the child support statute is important. It is broadly defined as "any person or entity that provides funds to an obligor, including an employer as defined under chapter 24 of the Internal Revenue Code, section 3401(d), an independent contractor, payor of worker's compensation benefits or unemployment benefits, or a financial institution as defined in section 13B.06." Minn. Stat. 518A.53, Subd. 1(b) and 518A.26, Subd. 16.
This encompasses trustees, self-employed people, financial institutions, unemployment insurance, worker's compensation insurers, unions, individuals or companies paying independent contractors and others who make periodic payments. These payors of funds may also be required to withhold other financial obligations such as spousal support and child support arrears. This would include withholding from lump sum payments. To offset the administrative cost of withholding, employers may charge the employee up to $1 for each payment withheld.
When Must a Payor of Funds Withhold?A payor of funds under the law must implement income withholding upon receipt of an order for or notice of withholding. This is true regardless of the source of income of the person obligated to pay the support or maintenance. 518A.53, Subd. 3.
A Notice of Withholding. It is a form authorized by the Commissioner of Human Services and may look like the Income Withholding for Support (IWO) that is authorized by the Office of Management and Budget (OMB). The form is the standard format prescribed by the Secretary in accordance with USC 42 ?666(b)(6)(A)(ii).
When does withholding begin?An order for or notice of withholding is binding on a payor of funds upon receipt. However, withholding must begin no later than the first pay period that occurs after 14 days following the date of receipt of the order for or notice of withholding. The amount indicated to be withheld must then be submitted to the payment authority within seven business days of the date the obligor is to be paid.
Minn. Stat. 518A.53, subd. 5
What are Penalties for non-compliance?The penalties for failing to comply with an Order or Notice for Withholding can be extremely harsh. The employer or payor of funds can be penalized as follows:
(1) Amount that Should have been Withheld. A Payor of funds may be obligated to the oblige for any amounts that were to be withheld.
(2) Interest. A payor of funds that fails to withhold or transfer funds in accordance with this section is also liable to the obligee for interest on the funds at the rate applicable to judgments under Minn. Stat. 549, computed from the date the funds were required to be withheld or transferred.
(3) Attorney Fees. A payor of funds is liable for reasonable attorney fees of the obligee or public authority incurred in enforcing the liability.
(4) Contempt. A payor of funds that has failed to comply with the requirements is subject to contempt sanctions under Minn. Stat. ?518A.73. Under that section, the payor of funds is presumed to be in contempt:
Are there Limitations on what can be garnished?There are limits on garnishments. Some types of property or proceeds are exempt from garnishments or levies under Minn. Stat 550.37. This may include some amounts received through life insurance policies or personal injury settlements amount others.
What if an employer or payor of funds withholds money and then finds out it was not proper?There is an indemnity for withholding funds pursuant to a child support directive. Specifically, Minn. Stat. 518A.73, subd. 17 provides that a payor of funds who complies with an income withholding order or notice of withholding that appears regular on its face shall not be subject to civil liability to any individual or agency for taking action in compliance with the order or notice.