FINAL REGULATION

ACTION TRANSMITTAL

OCSE-AT-89-15

August 4, 1989

TO: STATE AGENCIES ADMINISTERING CHILD SUPPORT

ENFORCEMENT PLANS UNDER TITLE IV-D OF THE SOCIAL

SECURITY ACT AND OTHER INTERESTED INDIVIDUALS

SUBJECT: Standards for Program Operations

ATTACHMENT:The attached final regulation implements the requirements of sections 121 and 122 of the Family Support Act of 1988 (P.L. 100-485) by revising current regulations to specify standards for processing child support enforcement cases and timeframes for distributing child support collections under title IV-D of the Social Security Act.

EFFECTIVE

DATE: October 1, 1990

REGULATION

REFERENCE: 45 CFR Parts 301 through 304, 306 and 307

SUPERSEDED

MATERIAL: OCSE-AT-89-05, dated April 19, 1989

INQUIRIES TO: OCSE Regional Representatives

Robert C. Harris

Associate Deputy Director

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Child Support Enforcement

45 CFR Parts 232, 301, 302, 303, 304, 306, and 307

RIN 0970-AA16

Standards for Program Operations

AGENCY: Office of Child Support Enforcement (OCSE)/FSA/HHS

ACTION: Final rule.

SUMMARY: This final regulation implements the requirements of sections121 and 122 of the Family Support Act of 1988 (Pub. L. 100-485) by revising current regulations to specify standards for processing child support enforcement cases and timeframes for distributing child support collections under title IV-D of the Social Security Act (the Act). By imposing requirements and timeframes for taking appropriate actions and clarifying or updating existing or vague timeframes and requirements, the regulation would ensure that child support services are effectively and expeditiously provided and that children receive the services they need and the support to which they are entitled. States are required to meet these standards by October 1, 1990.

In addition, this regulation implements sections 103(e)(3) and 127 of the Family Support Act of 1988 by revising regulations to exclude certain costs from administrative costs when computing incentive payments.

EFFECTIVE DATE: October 1, 1990.

FOR FURTHER INFORMATION CONTACT: Joyce Allred, Policy and Planning Division, OCSE (202) 252-5369.

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

Public reporting burden for the collections of information requirements at 45 CFR 302.32(b), 303.2(b), 303.2(c), 303.4(e), 303.5(c), 303.6(c)(3), 303.6(c)(4), 303.11(c) and 303.11(d) is estimated to average 5, 5, 5, 5, 5, 5, 5, 5, and 5 minutes respectively, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to the Office of Child Support Enforcement. Family Support Administration, 370 L'Enfant Promenade, SW., Washington, DC 20447; and to the Office of Information and Regulatory Affairs, Office of Management and Budget, Washington, DC 20503.

Background

Since the inception of the Child Support Enforcement (IV-D) program in 1975, States have been required to locate absent parents, establish paternity, obtain support orders and collect support payments. However, despite Federal and State efforts in the 13 years since the inception of the IV-D program, the child support problem continues to grow. On October 13, 1988, the Family Support Act of 1988 (Pub. L. 100-485) was signed into law. This new law addresses the injustice of parents failing to assume responsibility for their children's support. Section 121 of Public Law 100-485 requires the Secretary of Health and Human Services (HHS) to establish time limits within which States must accept and respond to requests for assistance in establishing and enforcing support orders, including requests to locate absent parents, establish paternity and initiate proceedings to establish and collect support awards. Section 121(b) requires the establishment of an advisory committee with which the Secretary must consult prior to issuing any regulations establishing standards. Section 122 of Public Law 100-485 requires theSecretary of HHS to establish time limits governing the period within which a State must distribute amounts collected as child support.

Based on the analysis of Federal program audit and program review results, input from State IV-D agencies, early discussions with experts in child support enforcement case processing and program operations and recommendations of the advisory committee mandated by section 121, we developed standards set forth in this regulation which should ensure appropriate and expeditious processing of IV-D cases. States must meet the standards for case processing contained in this final rule as one facet of the determination of whether they are in substantial compliance with the requirements of Title IV-D of the Act. We believe the standards are realistic and focused in areas where increased effectiveness and efficiency are necessary for an enhanced IV-D program.

Statutory Authority

This regulation is published under the authority of sections 452(a)(1) and (a)(2), (h) and (i), 454(13), 458(d) and 1102 of the Act.

Sections 452(a) (1) and (2) require the Secretary to establish such standards for State programs for locating absent parents, establishing paternity, and obtaining child support as he determines to be necessary to assure that such programs will be effective, and to establish minimal organizational and staffing requirements for State units engaged in carrying out such programs. Section 452(h) of the Act, added by section 121 of Public Law 100-485, requires the Secretary to establish time limits governing the period or periods within which a State must accept and respond to requests for assistance in establishing and enforcing support orders, including requests to locate absent parents, establish paternity, and initiate proceedings to establish and collect child support awards. Section 452(i) of the Act, added by section 122 of Public Law 100-485, requires the Secretary to establish time limits governing the period or periods within which a State must distribute amounts collected as child support. Section 454(13) of the Act requires States to comply with such requirements and standards as the Secretary of HHS determines to be necessary for the establishment of an effective IV-D program. Section 458(d) of the Act, as amended by section 127 of Public Law 100-485, requires States to exclude for purposes of computing incentives, the amounts expended by the State in carrying out a special project assisted under section 455(e) of the Act. Section 1102 of the Act requires the Secretary to publish regulations that may be necessary for the efficient administration of the functions for which he is responsible under the Act.

Regulatory Provisions

This regulation prescribed standards for program operations which the IV-D agency must meet, including minimal organizational and staffing requirements, and requirements governing: maintenance of case records; location of absent parents; establishment of support obligations; establishment of paternity; service of process; enforcement of support obligations; conditions under which cases may be closed; distribution of support payments; and incentive payments. In addition, this regulation makes technical changes and adds new sections for clarity and consistency with the above mentioned changes to parts 302 and 303. States are required to meet these standards by October 1, 1990.

Changes with respect to excluding costs of interstate grants when computing incentives would be effective January 1, 1990, and changes with respect to excluding costs of demonstration projects on model procedures for reviewing child support awards are effective when the costs are incurred.

Treatment of Child Support Collections Made in the Child Support Enforcement Program as Income and Resources in the Title IV-A Program-Section 232.20

Section 232.20(d) requires that the Aid to Families with Dependent Children (IV-A) agency, on behalf of the IV-D agency, must pay to the family the sum disregarded under õ302.51(b)(1) within 20 calendar days of the date of initial receipt in the State of the first $50 of support collected in a month, or, if less than $50 of support is collected in a month, within 20 calendar days of the end of the month in which the support is collected.

Collection and Distribution of Support Payments by the IV-D Agency-Section 302.32

Section 302.32 is revised to reduce the time within which IV-D agencies must report collections to IV-A agencies and to add specific timeframes for distribution of collections in both AFDC and non-AFDC cases to help ensure that child support collections reach the intended recipients as expeditiously as possible.

Section 302.32(b)-Informing the IV-A Agency of Collections

Section 302.32(b) requires that the IV-D agency inform the State's IV-A agency of the amount of the collection which represents payment on the required support obligation for the month, as determined in õ302.51(a), within 1O working days of the end of the month in which the support is received by the agency responsible for final distribution.

Section 302.32(f)-Timeframes for Distribution of Amounts Collected

1. Section 302.32(f)(1)-Timeframes for distribution of amounts collected in interstate IV-D cases. Paragraph õ302.32(f)(1) requires that in interstate IV-D cases, amounts collected by the responding State on behalf of the initiating State must be forwarded to the initiating State within 15 calendar days of the date of initial point of receipt in the responding State, in accordance with õ303.7(c)(7)(iv).

2. Section 302.32(f)(2)-Timeframes for distribution of collections. Paragraph (f)(2)(i) requires that, if the IV-D agency sends payments to the AFDC family under õ302.51(b)(1), payments must be sent to the family within 15 calendar days of the date of initial receipt in the State of the first $50 of support collected in a month, or, if less than $50 is collected in a month, within 15 calendar days of the end of the month in which the support was collected. When the IV-A agency sends payments to the family under õ302.51(b)(1), the IV-D agency must forward any amount due the family under õ302.51(b)(1) to the IV-A agency within 15 calendar days of the date of initial receipt in the State of the first$50 collected in a month, or, if less than $50 is collected in a month, within 15 calendar days of the end of the month in which the support was collected.

Paragraph (f)(2)(ii) requires that, except as specified under paragraph (f)(2)(iv), collections for the month after the month the family receives its last assistance payment and collections distributed under õ302.51(b)(3) and (5) of this part must be sent to the family within 25 calendar days of initial receipt in the State of a collection for the first month of ineligibility.

Paragraph (f)(2)(iii) requires that except as specified in paragraph (f)(2)(iv) of this section, collections in title IV-E foster care cases under õ302.52(b)(2) and (4) of this part must be distributed within 15 calendar days of the date of initial receipt in the State.

Paragraph (f)(2)(iv) requires that collections as a result of Federal or State income tax refund offset paid to the family under õ302.51(b)(5) of this part or distributed in title IV-E foster care cases under õ302.52(b)(4) of this part must be sent to the AFDC family or IV-E agency, as appropriate, within 30 calendar days of the date of initial receipt by the IV-D agency, unless State law requires a post-offset appeal process. In this instance, if an appeal is filed timely, the IV-D agency must send any payment to the AFDC family or IV-E agency within 15 calendar days of the date the appeal is resolved.

3. Section 302.32(f)(3)-Timeframes for distribution of amounts collected on behalf of non-AFDC individuals. To ensure timely distribution of amounts collected on behalf of individuals receiving services under õ302.33, section 302.32(f)(3) sets forth timeframes within which States must distribute collections on behalf of non-AFDC families

Under õ302.32(f)(3)(i), amounts collected which represent payment on the current support obligation must be paid to the family within 15 calendar days of the date of initial receipt in the State.

Paragraph (f)(3)(ii) adds a timeframe to current policy by requiring that, except as specified in paragraph (f)(3)(iii), if the amount collected is more than the amount required to be distributed in paragraph (f)(3)(i) discussed above, the State may, at its discretion, either opt to send such amounts to the family to satisfy non-AFDC past-due support within 15 calendar days of the date of initial receipt in the State or retain such amounts as have been assigned to satisfy past assistance paid to the family which has not been reimbursed.

Paragraph (f)(3)(iii) requires that collections due the family under õ302.51(b)(5) as a result of Federal or State income tax refund offset be sent to the family within 30 calendar days of the date of receipt in the IV-D agency, except: if State law requires a post-offset appeal process and an appeal is filed timely, in which case the IV-D agency must send any payment to the family within 15 calendar days of the date the appeal is resolved, or as provided in õ303.72(h)(5) of this chapter.

Since timeframes for distribution of all IV-D collections regardless of the collection mechanism, (e.g., Federal or State income tax refund offset, wage withholding, etc.) are governed by õ302.32(f), reference to timeliness of distribution in other regulations is unnecessary. Accordingly, õ302.51 is amended by deleting in paragraph (a) the last sentence that reads "in any case in which collections are received by an entity other than the agency responsible for final distribution under this section, the entity must transmit the collections within 10 daysof receipt" and by deleting in paragraphs (b)(3) and (5) the sentence that reads "This payment shall be made in the month following the month in which the amount of the collection was used to redetermine eligibility for an assistance payment under the State's title

IV-A plan". Similarly, õ303.100(e)(2) is amended to delete reference to distributing "promptly" amounts collected through wage or income withholding. Finally, we are deleting from regulations governing distribution of State tax refund offset collections the words "Within a reasonable time period in accordance with State law" in õ303.102(g)(1).

Establishment of Cases and Maintenance of Case Records-

Section 303.2

1. Application Process. Section 303.2(a)(1) requires that the IV-D agency must make applications for child support services readily accessible to the public.

Section 303.2(a)(2) requires that when an individual requests an application or IV-D services, the IV-D agency must provide applications on the day an individual makes a request in person or send an application to the individual within no more than 5 working days of a written or telephone request for services. In addition, information describing available services, the individual's rights and responsibilities and the State's fees, cost recovery and distribution policies must accompany all applications for services and must be provided to AFDC, Medicaid and title IV-E foster care applicants or recipients within no more than 5 working days of referral to the IV-D agency.

Paragraph (a)(3) requires that the IV-D agency must accept an application as filed on the day it and the application fee are received. An application is a written document provided by the State which indicates that the individual is applying for child support enforcement services under the State's title IV-D program and is signed by the individual applying for IV-D services.

2. Opening cases. Section 303.2(b) requires that, for all cases referred to the IV-D agency or applying for IV-D services under õ302.33, the IV-D agency must, within no more than 20 calendar days of receipt of referral of a case or filing an application for services, open a case by establishing a case record, and based on an assessment of the case to determine necessary action: solicit necessary and relevant information from the custodial parent and other relevant sources and initiate verification of information, if appropriate; and, if there is inadequate location information to proceed with a case, request additional information or refer the case for further location attempts as specified in õ303.3.

Location of Absent Parents- Section 303.3

1. Definition. Section 303.3(a) defines "location" as information concerning the physical whereabouts of the absent parent or the absent parent's employer(s), other sources of income, or assets, as appropriate, which is sufficient and necessary to take the next appropriate action in a case.

2. Location sources. Section 303.3(b)(1) requires the IV-D agency touse appropriate Federal, interstate and local location sources and to use appropriate State agencies and departments as authorized by State law.

Paragraph (b)(2) requires that States establish working relationships with all appropriate agencies in order to utilize locate resources effectively.

3. Actions required within 75 calendar days. Paragraph (b)(3) requires that the IV-D agency, within no more than 75 calendar days of determining that location is necessary, access all appropriate location sources, including the Federal PLS, and ensure that location information is sufficient to take the next appropriate action on a case.

Paragraph (b)(4) requires that the IV-D agency refer appropriate cases to the IV-D agency of any other State, in accordance with the requirements of õ303.7 of this part. To correspond with this requirement, õ303.7(b)(2) requires that the initiating State refer any interstate case to the responding State's central registry for action within 20 calendar days of determining the absent parent or putative father is in another State. The IV-D agency of the other State must follow the procedures in paragraphs (b)(1) through (5) for such cases, as necessary, except that the responding State is not required to access the Federal PLS under paragraph (b)(3).

4. Continued location attempts. Paragraph (b)(5) requires that the IV-D agency periodically repeat location attempts in cases in which previous attempts to locate absent parents or sources of income and/or assets have failed, but adequate identifying and other information exists to meet requirements for submittal for location. Attempts must be repeated quarterly, or immediately upon receipt of new information which may aid in location, whichever occurs sooner. Quarterly attempts may be limited to automated sources but must include accessing State employment security files. Repeated attempts because of new information must meet the requirements in paragraph (b)(3).

Paragraph (b)(6) requires that at least annually, States must submit to the Federal PLS cases in which location is needed and previous attempts to locate have failed and which meet the requirements for submittal to the Federal PLS.

Paragraph (c) requires that the State must establish guidelines defining diligent efforts to serve process. These guidelines must include periodically repeating service of process attempts in cases in which previous attempts to serve process have failed, but adequate identifying and other information exists to attempt service of process.

Establishment of Support Obligations- Section 303.4

Section 303.4(d) requires the IV-D agency, within 90 calendar days of locating the absent parent or of establishing paternity, to establish an order for support, or complete service of process necessary to establish a support order (or document unsuccessful attempts to serve process, in accordance with the State's guidelines defining diligent efforts under õ303.3(c)). To correspond with the requirement in paragraph (d), õ303.101(b)(2) states that actions to establish or enforce support obligations in IV-D cases must be completed from the time of successful service of process to the time of disposition with the required timeframes.

Section 303.4(e) requires that in situations where a support order isdismissed without prejudice, the IV-D agency must, at the time of the dismissal, examine the reasons for dismissal and determine when it would be appropriate to seek an order in the future, and seek a support order at that time.

Establishment of Paternity- Section 303.5

1. Paternity establishment process timeframe. Section 303.5(a)(1) requires that the IV-D agency, within no more than 90 calendar days of locating the alleged father, file for paternity establishment or complete service of process to establish paternity (or document unsuccessful attempts to serve process in accordance with the State's guidelines defining diligent efforts under õ303.3(c)), whichever occurs later in accordance with the State's procedures for paternity establishment. Under paragraph (a)(2), paternity must be established or the alleged father excluded as a result of genetic tests and/or legal process within one year of the later of (i) Successful service of process; or, (ii) the child reaching 6 months of age.

Paragraph (a)(3) requires that, in any case where an alleged father is excluded but more than one alleged father has been identified, the IV-D agency must meet the requirements set forth in paragraphs (a)(1) and (2) for each alleged father identified.

2. Use of laboratories which perform genetic testing at competitive rates. Paragraph (c) requires that the IV-D agency identify and use through competitive procurement laboratories which perform, at reasonable cost, legally and medically acceptable genetic tests which tend to identify the father or exclude the alleged father. The IV-agency must make available a list of such laboratories to appropriate courts and law enforcement officials, and to the public upon request.

To correspond with these changes, õ304.20(b)(2) is revised by changing the reference to blood tests to genetic tests and the reference to õ303.5(b) to õ303.5(c).

Enforcement of Support Obligations- Section 303.6

This final regulation revises õ303.6 by deleting the enforcement techniques listed in paragraphs (a) through (f) and adding monitoring and enforcement requirements in new paragraphs (a) through (c).

1. Monitoring compliance with orders and identifying delinquencies. Section õ306.6(a) requires that the IV-D agency maintain and use an effective system for monitoring compliance with the support obligation. This monitoring includes monitoring of all provisions of support orders, including health insurance for the child(ren).

Additionally, paragraph (b) requires that the IV-D agency maintain and use an effective system for identifying those cases in which there is a failure to comply with the support obligation on the date the parent fails to make payments in an amount equal to the support payable for one month or earlier in accordance with State law.

2. Enforcement actions. Paragraph (c)(1) requires that the State initiate wage withholding in accordance with the requirements of õ303.100. Paragraph (c)(2) requires that the State take any appropriate enforcement action (except income withholding, and Federal and State income tax refund offset) unless service of process is necessary, within no more than 30 calendar days of identifying delinquency or othersupport-related non-compliance with the order, or location of the absent parent, whichever occurs later. If service of process is necessary prior to taking an enforcement action, the IV-D agency must complete such service (or document unsuccessful attempts to serve process in accordance with the State's guidelines defining diligent efforts under õ303.3(c)) and take the enforcement action, if process is served, within no more than 60 calendar days of identifying a delinquency or other support-related non-compliance with the order, or location of the absent parent, whichever occurs later.

This requirement includes taking appropriate enforcement action within the above timeframes upon notification of non-compliance with an order requiring health insurance coverage. In accordance with current medical support requirements, States must attempt to enforce a requirement in a support order that an absent parent obtain health insurance in cases of non-compliance with such an order.

With regard to Federal and State income tax refund offset, paragraph (c)(3) requires that States submit all cases which meet the certification requirements for State tax refund offset once a year, in accordance with õ303.102 and State guidelines developed under õ302.70(b), and for Federal tax refund offset in accordance with õ303.72.

Paragraph (c)(4) requires that in cases in which enforcement attempts have been unsuccessful, the State must, at the time an attempt to enforce fails, examine the reason the enforcement attempt failed and determine when it would be appropriate to take an enforcement action in the future, and take an enforcement action at that time.

Because of the changes discussed above, we deleted the list of enforcement techniques in former õ303.6(a) through (f). There is no reason to list some enforcement actions or to try to list all techniques since States are required to take whatever enforcement action is warranted in a particular case.

Procedures for Case Assessment and Prioritization- Section 303.10

Section 303.10(a) requires that, if a State adopts a case assessment and prioritization system, the IV-D agency must continue to meet the timeframes and case processing standards contained in part 303.

Section 303.10(b)(5) requires a State, in implementing a case assessment and prioritization system, to prioritize cases after reviewing all intake information for accuracy and completeness and, if review indicates that additional information is needed, prioritize only after attempting to verify or secure the information. A cross reference to õ303.2 is added to õ303.10(b)(5) to ensure that cases are prioritized only after the requirements for establishment of cases and maintenance of case records in õ303.2 are met.

Finally, we are tying the case processing requirements in part 303 to the requirement for periodic review of low priority cases contained in õ303.10(b)(6). Paragraph (b)(6) is amended to require that periodic review of low priority cases must be in accordance with the standards set forth in part 303, such as quarterly location attempts and diligent efforts to effect service of process.

Case Closure Criteria- Section 303.11

Section 303.11 establishes criteria States must use to determine whether child support cases may be closed. If a case does not meet at least one of the following criteria, it must be kept open and worked. However, because current regulations at õ303.10 allow States to establish procedures for case prioritization, States may distinguish between those cases with current success potential and those which do not now, but may in the future, have potential for success. This latter group could include the cases which do not meet the criteria for closure but in which the next required case processing step cannot as yet be taken. Requirements for periodic review in õ303.10 governing case prioritization systems, and elsewhere in part 303, would apply in these cases.

Section 303.11 is entitled "Case closure criteria." Paragraph (a) requires States to establish a system for case closure. Paragraph (b) establishes the criteria for case closure eligibility.

Paragraph (b)(1) allows closure of a case where the child has reached the age of majority, there is no longer a current support order, and either no arrearages are owed or arrearages are under $500 or unenforceable under State law.

Paragraph (b)(2) allows case closure where the child has not reached the age of majority, arrearages are less than $500 or unenforceable under State law, and there is no longer a current support order.

Paragraph (b)(3) allows a State to close a case upon the death of the absent parent, or putative father, if no further action, including a levy against the estate, can be taken.

Paragraph (b)(4) states that the IV-D agency may close cases in which, either the child is at least 18 years old and the action is barred by a statute of limitations which meets the requirements of õ302.70(a)(5), or a genetic test or court or administrative process has excluded the putative father and no other putative father can be identified. In addition, paragraph (b)(4) specifies that, in accordance with õ303.5(b), the IV-D agency need not attempt to establish paternity in any case involving incest or forcible rape, or in any case where legal proceedings for adoption are pending, if, in the opinion of the IV-D agency, it would not be in the best interests of the child to establish paternity.

Paragraph (b)(5) allows case closure where the IV-D agency has been unable to locate an absent parent despite having made repeated location efforts using multiple sources, including those listed under õ303.3, over a three-year period.

Paragraph (b)(6) allows case closure if the absent parent cannot pay support for the duration of the child's minority

because the parent has been institutionalized in a psychiatric facility, is incarcerated with no chance for parole, or has a medically-verified total and permanent disability with no evidence of support potential. The State must also determine that no income or assets are available to the absent parent which could be levied or attached for support.

Paragraph (b)(7) allows a case to be closed when the absent parent is a citizen of, and lives in, a foreign country, does not work for the United States government or a company which has its headquarters or offices in the U.S., and has no reachable domestic income or assets; and the State has been unable to establish reciprocity with the country.

Paragraph (b)(8) allows a case to be closed if the resident parent, legal guardian, attorney, or agent of a child only requested the Stateparent locator service (PLS) to submit a request to the Federal PLS under the provisions of õ302.35(c)(3) and the location services have been completed.

Paragraph (b)(9) allows case closure in a non-AFDC case or in a former AFDC, Medicaid or foster care (title IV-E) case when the custodial parent requests that the case be closed and there are no arrearages assigned to the State.

Paragraph (b)(1O) allows the IV-D agency to close a case when it has been notified by the IV-A or IV-E agency, in accordance with õ302.31(c) that there has been a finding of good cause for the recipient's failure to cooperate in obtaining support and the IV-A or IV-E agency has determined that paternity establishment or support establishment and enforcement may not proceed without risk or harm to the child or caretaker relative.

Paragraph (b)(11) allows case closure in non-AFDC cases if the IV-D agency is unable to contact the custodial parent over at least a 30 calendar day period despite attempts to contact the parent by both phone and letter, including at least one registered letter.

Paragraph (b)(12) allows case closure due to non-operation of the custodial parent when the State documents both the circumstances of the noncooperation and that an action by the custodial parent is essential for the next step in providing support enforcement services.

Paragraph (c) requires the State, 60 calendar days prior to any case closure because of criteria in paragraphs (b)(1) through (7) and (11) and (12), to notify the custodial parent in writing of the State's intent to close the case. The case must be left open if the custodial parent supplies information in response to the notice which could lead to the establishment of paternity or a support order or enforcement of an order or re-establishes contact with the agency in the case of paragraph (b)(11). If a case is closed, the custodial parent may request at a later date that the case be reopened if there is a change in circumstances which could lead to the establishment of paternity or a support order, or enforcement of an order.

Paragraph (d) requires the IV-D agency to retain all records for cases closed pursuant to this section for a minimum of three years, in accordance with 45 CFR part 74, subpart D.

Minimal Organizational and Staffing Requirements- Section 303.20

Section 303.20(c), Minimal organizational and staffing requirements, requires that there must be an organizational structure and sufficient resources at the State or local level to meet the performance and time standards contained in Part 303 and to provide for the administration or supervision of support enforcement functions listed in paragraphs (c)(1) through (8).

Paragraph (c)(7) is revised to state that the activities to enforce collection of support must include wage withholding and other available enforcement techniques.

To further ensure effective child support programs, a new paragraph (g) is added which states that, if it is determined as a result of an audit under Part 305 that a State is not in substantial compliance with title IV-D of the Act, the Secretary will evaluate whether inadequate resources was a major contributing factor and, if necessary, may set resource standards for the State.

Incentive Payments to States and Political Subdivisions- Section 303.52 and Proposed Section 304.12

Because regulations for incentive payments, for the most part, govern a financial aspect of the program and do not therefore properly belong in Part 303, which establishes program standards, õ303.52(a), (b) and (c) are transferred to 45 CFR Part 304, Federal Financial Participation. Accordingly, current 45 CFR 303.52(d) is being redesignated as õ303.52. Furthermore, the section title, Incentive payments to States and political subdivisions, is changed to Pass-through of incentives to political subdivisions, since this is the only requirement remaining in this section.

To implement the provisions of sections 103(e) and 127 of Pub. L. 100-485, regulations governing incentive payments are amended in two ways. First, to implement section 127, which amends section 458(d) of the Act to exclude the costs of interstate grants when computing incentive payments, paragraph (b)(4)(v) is revised to state that, effective January 1, 1990, in calculating the amount of incentive payments, amounts expended by the State in carrying out a special project under section 455(e) of the Act shall not be included in the State's total IV-D administrative costs. In addition, to implement section 103(e) of Pub. L. 100-485, a new paragraph (vi) is added which states that the costs of demonstration projects for evaluating model procedures for reviewing child support awards under section 103(e) of Pub. L. 100-485 shall not be included in a State's total IV-D administrative costs for purposes of computing incentives.

For consistency with the redesignation of most of õ303.52 as õ304.12, all references to õ302.52(a) through (c) in other regulations are changed to refer to õ304.12.

Medical Support Enforcement- Part 306

Previously, Part 306 was divided into two Subparts. Subpart A contained requirements governing optional cooperative agreements and Subpart B contained required IV-D medical support activities. The requirements under current Subpart B (õ306.50, Securing medical support information, and õ306.51, Securing medical support obligations) are moved to Part 303, redesignated as õõ303.30 and 303.31, respectively. The regulations under current Subpart A remain as Part 306 without the heading of Subpart A.

For consistency with the changes and redesignations within Part 306, all references in program regulations to regulations in current Part 306 are changed to reflect the transfer of the contents of Subpart B to Part 303 and the redesignation of Subpart A of Part 306 as Part 306.

Response to Comments

We received comments on the notice of proposed rulemaking from over 150 commenters representing national organizations, State and local IV-D agencies, child advocacy groups, and private citizens. Comments and our responses are as follows.

Effective Date of Requirements and Corresponding Audit Standards

1. Comment: We received many comments on the proposed effective date of these requirements. The preponderance of commenters indicated that they could not meet the timeframes without Statewide and comprehensive automated information management systems. These commenters urged that the effective date for timeframes be tied to such a level of automation. Some suggested that the timeframes not be effective until October 1, 1995, when States are required by the Family Support Act of 1988 to have operational automated child support enforcement systems in place, or even until one or two years after that date. One State with an automated support enforcement system requested, for example, that timeframes be phased in as part of a State's responsibilities to have automated systems in place by 1995, arguing that in their own situation, modification of State law and regulations as well as change to current system processing methods would be necessary. Others asked that implementation be delayed until two or three years after publication of the final rules, as opposed to the October 1, 1990 date set forth in the proposed rule.

Some commenters suggested a phase-in of timeframes between October of 1990 and October of 1995. One suggestion was that new IV-D cases be subject to the timeframes in 1991 and existing

IV-D cases become subject to the timeframes in 1996. Others suggested that more liberal requirements be effective in 1992 (suggesting double the proposed timeframes for each action) and the proposed timeframes be effective in 1993. Still others suggested implementing timeframes one at a time or letting State IV-D agencies set their own timeframes.

A number of commenters asked that States not be subject to a determination of substantial compliance with the program standards as a result of an audit until there has been a period of evaluation of State performance with respect to the proposed standards. One commenter requested 100 percent Federal funding of the cost of implementation for a period of time prior to the effective date of the requirements and evaluation of the results achieved before such date. Some State agencies asked for technical assistance in meeting the timeframes established.

Response: The Congress, in requiring the Secretary to publish, within 10 months of the effective date of the Family Support Act of 1988, final regulations requiring States to provide IV-D services, including prompt distribution of collections to families, did not intend that the effective date of those regulations be inordinately delayed. Several commenters noted that many of the requirements set forth in the proposed rule reflected good management and were achievable in a well-run child support operation today.

Therefore, while we are sympathetic to the demands placed upon States by the new requirements, we believe that the approach most consistent with Congressional intent with respect to

implementation of the timeframes and with the pressing need for performance improvement is to retain the October 1, 1990, effective date. We have, however, extended or revised many of the proposed timeframes to take into consideration the concerns of commenters and believe the revised timeframes to be indicative of alternative timeframes suggested by many States. We intend to consider concerns about how to assess compliance in developing audit requirements for these standards (see response to next comment).

2. Comment: Commenters requested that we change the current auditstandard of 75 percent compliance with program requirements to begin with a lower percentage and increase the percentage of cases which must be processed in accordance with the timeframes between 1991 and 1995. One example given was 50 percent compliance in FY 1991, increasing by 5 percent a year until 75 percent compliance would be required in FY 1996. Alternatively, 40 percent compliance initially was suggested with an increase of 10 percent a year until a 75 percent compliance rate was reached in a later year. Other commenters, by the same token, requested a more stringent compliance standard (for services other than paternity establishment), suggesting between 90 and 98 percent rather than 75 percent, depending on the services needed in the case.

Response: Given the impact of these regulations, we are convinced by the commenters that the best way to ensure that States work all cases and provide all necessary services in accordance with the new program standards and timeframes would be to assess State compliance over a period of time. We are in the process of revising the audit regulations to address the new program standards and intend to publish a proposed audit regulation as soon as possible after publication of this regulation. Final revised audit regulations are scheduled to be published before the October 1, 1990, effective date for program standards. Specific suggestions for assessing State compliance with the new requirements will be considered in revising the audit regulation.

3. Comment: We solicited comments on what steps we should take to reflect improvements in case processing over time. Options presented in the preamble to the proposed rule were: (1) Wait to decide whether and how to change timeframes; (2) write into the final regulations a date by which the regulations must be reviewed and updated; and (3) write into the regulations shorter timeframes for years after 1990. We received preferences for each of the three options by those who responded. The majority of those who commented indicated that we should wait until after the standards are effective and State compliance has been evaluated before making any decisions with respect to revisions. States and localities wondered how we could plan to change standards before we have any experience with their impact. Some commenters preferred the regulations to include a date by which standards will be reviewed and revised. Suggestions for the timing of reviews ranged from 18 months to 4 years. It was suggested that revised standards be submitted to the Congress and that IV-D agencies and the courts have an opportunity to comment on the proposed standards.

Response: As a result of these comments, we have decided to wait until there is some base of experience with full implementation of the timeframes before we determine how or whether to revise them. However, we plan to look at operational experience with the timeframes and institute any necessary changes or other action within no more than 4 years of the effective date of October 1, 1990.

4. Comment: Several States stressed the need for clear and precise program standards which are not subject to interpretation by the auditors. They indicated that regulations are sometimes interpreted differently by auditors and any discretion on their part should be removed. They requested that changes to the audit regulations and audit guides to evaluate State compliance with the time standards be issued at the same time as the final regulations. A number of commenters were concerned about the need for, and how to, document compliance with each of the standards. They requested that documentation to prove compliancewith case processing requirements be explicitly stated in regulations. States were concerned that documentation of each timeframe would be time consuming and take time which could otherwise be spent working cases. Commenters were concerned about documentation as the only way to prove action had been taken on a case.

Response: We have revised the proposed regulations to attempt to remove any ambiguity which might be subject to varying interpretation. In addition, as discussed previously, we are currently revising audit regulations to address the requirements to this regulation. Those regulations will be published for comment as soon as possible after publication of these regulations in final form. With respect to concerns about documentation, States have always been, and will continue to be, responsible for proof, for purposes of an audit, that they are meeting program requirements or have met them with respect to a particular case. Necessary documentation is not specified in regulations because to do so would be overly prescriptive and it would be impossible to specify every type of documentation which would indicate compliance with each regulatory requirement. Elimination of an auditor's professional judgment is neither possible nor desirable, but a variety of internal quality controls ensures national consistency in the conduct of the audit function. Finally, we believe that the revisions to the proposed rule to eliminate unnecessary interim timeframes are responsive to States' concerns that documentation will be too time consuming.

Overall Alternative Approaches

1. Comment: We received a number of alternatives to our approach to ensuring prompt response to requests for IV-D services. One State suggested that we recommend, rather than require, specific timeframes for case processing, and establish audit requirements based on end results, such as those in place for expedited processes for establishing and enforcing support orders. Specifically, the State recommended that actions taken to open cases, initiate absent parent or putative father locations, and where location of the parent is known, file petitions for paternity and/or support be required to be completed in 60 percent of the cases within three months, 70 percent within six months, and 75 percent within one year. Another alternative was to establish standards similar to the paternity establishment standard established by the Family Support Act, under which a State's performance is evaluated based on the percentage of actions taken out of the total actions needed to be taken, with a specific improvement in performance required each year. Finally, a commenter suggested that we mandate timeframes for major functions of the IV-D program, not each step of the process.

Response: We believe that changes made to the proposed rule to eliminate certain specific timeframes are consistent with the broader approach requested by some States. We disagree with the suggestion that we implement expedited processes-type timeframes for processing cases. We received a number of comments requesting that individual timeframes be imposed to control specific actions taken by different entities administering one or more facets of a State's overall IV-D program. Given the extent of comments about how many different entities are involved in the IV-D process, lack of adequate case management processes in many IV-D programs and delays in providing services, we believe that setting specific timeframes for each step of the process will ensureStates provide necessary services on a timely basis. Finally, a standard based on the percentage of actions taken out of the total actions needed to be taken is not a measure of prompt response to requests for services.

2. Comment: A number of commenters suggested that we convert proposed timeframes so that all timeframes of over 9 days are calendar day timeframes and all timeframes of 9 or fewer days are work days.

Response: While we believe that looking back at case records and determining work days for audit purposes will necessitate additional effort, a State could be seriously disadvantaged in trying to meet calendar day timeframes of less than 10 days because of intervening weekends. Therefore, we have changed proposed timeframes by clarifying that those between 1 and 10 days are working days and timeframes of 11 days and above are calendar days. Furthermore, we have converted proposed timeframes of between 11 and 30 workdays to an approximate equivalent number of calendar days, for example, 15 workdays becomes 20 calendar days and 30 workdays becomes 40 calendar days.

3. Comment: We received many comments on each of the timeframes requiring IV-D agencies to, within 2 working days of completing one action initiate the next necessary action or service. For example, when there is adequate location information to proceed with the case, the State must initiate an appropriate service within 2 working days of determination of the next appropriate action or service. Commenters were concerned that the requirement was too vague; they wanted us to define "initiate," "appropriate" and "determination." They were also concerned that 2 working days is not adequate to prepare all the documents necessary to take an action, for example, request service of process or prepare a petition for paternity establishment. They requested the timeframe be extended to anywhere from 5 to 45 working days. Commenters were unsure about whether the

requirement was to start to take an action or to finish It. They indicated that the 2-day timeframes are unrealistic and don't account for illness, vacation, training or loss of staff. A number of commenters suggested that we eliminate these interim timeframes and include the actions required under an overall timeframe.

Response: In response to these comments we have removed the proposed requirements to initiate the next appropriate action or service under proposed õõ303.2(c)(3) and 303.3(b)(6). Our intent is that cases move forward to the next step in case processing just as soon as an action is completed. However, we believe that since each timeframe begins with the accomplishment of the previous task, i.e., the timeframe for support order establishment begins with location of the absent parent or paternity establishment, there is no need for these work-initiation timeframes. Commenters convinced us that they are too burdensome to document, too vague to ensure consistent application or interpretation with respect to compliance, and truly unnecessary given the encompassing structure of other timeframes.

4. Comment: A number of commenters indicated that, if these timeframes are effective before 1995 when States must have operational automated systems, modifications to current automated systems will be necessary and Federal funding should be available for those modifications.

Response: Federal funding under the IV-D program is available for modifications to automated systems necessary to ensure compliance with these requirements.

Suggestions Beyond the Scope of These Regulations

1. Comment: Commenters requested that the incentive funding structure be changed to remove the cap on incentives paid on non-AFDC collections because it acts as a disincentive to providing services in non-AFDC cases. Commenters also were concerned that Congress not adopt a minimum cost to collections ratio for States to qualify for incentive payments. They argue that necessary changes to comply with new requirements will be costly and States should not be penalized by the fact that cost to collection ratios slip.

Response: The incentive funding structure is specified in the statute and changes to it are, therefore, beyond the scope of this regulation. States which implement effective case management procedures and aggressively use available enforcement techniques can and do operate a cost effective IV-D program.

2. Comment: A number of States also requested that the $50 disregard and pass-through provisions of the statute be repealed and alternatively AFDC grants be increased across the board. Commenters argued that the $50 pass-through provision is cumbersome to administer, discriminates against children whose absent parents cannot be made to pay support, and doesn't result in greater cooperation from the custodial parent or compliance by the absent parent, as intended by the Congress.

Response: As the commenters recognized, any change in the $50 disregard and pass-through provisions would require a change in the statute governing the IV-A and IV-D programs.

3. Comment: Some commenters requested specific changes to the regulations governing the IV-A program. Specifically, they asked that IV-A agencies be required to determine AFDC eligibility within 2 rather than 47 days and to notify the IV-D agency within 2 days of application for AFDC, as opposed to the current requirement of notice within 2 days of determination of eligibility. Similarly, commenters requested a 2-day timeframe for notice by the IV-A agency to the IV-D agency of AFDC ineligibility or termination. Another commenter requested that standards be established for referral and processing of cases within the IV-A system and that applicants for AFDC be required to provide minimal information elements as a prerequisite to AFDC eligibility.

Response: The requested changes to AFDC program regulations are beyond the scope of these regulations, which is to establish standards for prompt response to requests for services under the IV-D program, including prompt distribution of collections to families's. However, the Family Support Administration is committed to considering ways to strengthen those IV-A program requirements governing AFDC applicant and recipient cooperation so as to improve the quality and timeliness of information transfer between the IV-A and IV-D programs.

Support Payment to the IV-D Agency- Section 303.32

Title of Section

1. Comment: One commenter suggested that since õ302.32 now contains requirements for distribution of collections, the title of the section should be changed to reflect this additional content.

Response: We agree and have changed the title to "Collection andDistribution of Support Payments by the IV-D Agency."

Section 302.32(b)- Informing the IV-A Agency of Collections

1. Comment: We received a number of comments on the proposed requirement that IV-D agencies report the amount of any support collection to the IV-A agency within 10 working days of the collection. Commenters indicated that daily notice serves no practical purpose and would unnecessarily complicate the recordkeeping process because nothing can be done to redetermine AFDC eligibility until all collections for a month have been received. Alternatives suggested included keeping the current requirement that IV-D agencies report the amount of the collection "as soon as possible but not later than 30 days after the end of a month," or requiring notice to the IV-A agency within 10 days of the end of the month or 10 calendar days from the date of initial receipt in the State. The alternative suggested by the most commenters was 10 working days from the end of the month of collection.

Response: In retrospect and in light of the comments received, we agree that requiring notice to the IV-A agency within 10 calendar days of initial receipt in the State would be unduly stringent. We have revised õ302.32(b) as suggested by many commenters, to require the IV-D agency to inform the IV-A agency of the amount of the collection which represents payment on the required support obligation for the month within 10 working days of the end of the month in which the support is received by the IV-D agency responsible for final distribution of the collection.

2. Comment: One commenter asked if notice to the IV-A agency included notice of collection of past-due support or just notice of current support collected.

Response: Under 302.32(b), the 10-working day reporting requirement applies only to the amount of collection which represents payment on the required support obligation for the month.

3. Comment: A number of commenters asked whether direct, on-line access by IV-A agencies to IV-D collection data meets the requirements for notice to the IV-A agency required under õ302.32(b).

Response: Direct, on-line access to IV-D collection data meets the requirement for notice under õ302.32(b).

4. Comment: One commenter asked why the proposal for reporting collections to the IV-A agency was inconsistent with the requirement for AFDC recipients to report collections within the first and fifth of each month.

Response: We believe the commenter is referring to the requirement at 45 CFR 233.36 for AFDC recipients to report earned income monthly to the IV-A agency. There is no Federal requirement to report income within 1 to 5 days of the end of the month. Because the timeframe for the IV-D agency to report collections to the IV-A agency is now linked to a full calendar month, it is consistent with the requirement for AFDC recipients to report earned income.

Section 302.32(f)- Timeframes for Distribution of Collections

General Comments

1. Comment: A few commenters questioned use of the term"distribution," and whether it was being confused with disbursement. They defined distribution as a process to identify the elements of a payment and to allocate the payment among those elements, i.e., $50 pass-through, current AFDC reimbursement, current support payment to family, past AFDC reimbursement, arrearages payment to family. They view disbursement as the sending of the payment itself and suggested that we either establish timeframes for disbursement of payments to families or establish one timeframe for the entire distribution process.

Response: While we agree with the commenter's characterization of disbursement versus distribution, because Congress referred, in the Family Support Act, to "distribution" of collections to families, "distribution" is generally used in these regulations. We have, however, in response to comments addressed later, revised the proposed requirements to establish timeframes for sending (disbursing) collections to families. We are not establishing one timeframe for the entire distribution process in AFDC cases because, while distribution to families of amounts in excess of the $50 pass-through payment depends on whether or not the family continues to be eligible for AFDC, the $50 pass-through payment itself does not, and may be sent to the family without waiting for eligibility redetermination.

2. Comment: We received a number of comments on the start date of timeframes for distribution of collections. One commenter wanted us to clarify "initial receipt in the State."

Response: We clarified the meaning of initial receipt in the State in response to comments on the final regulation on the $50 pass-through in AFDC cases published June 9, 1988 (53 FR 21643). "Initial receipt in the State" for distribution purposes means when a collection is received by the first entity or agency of the State, whether or not the agency or entity is under cooperative or other agreement with the IV-D agency. This includes a clerk of the court, an employment security agency in cases of unemployment compensation withholding or a bank handling collection responsibilities under contract with a government agency.

3. Comment: One commenter wanted the distribution timeframes to start with the date a payment is identified because, when payments are received without identifying information, it takes time to determine for whom the payment is intended.

Response: We believe that unidentified payments can be identified within the required timeframes for distribution. For example, we received comments from a State which indicated that even if a payment lacked identifying information, the State could determine to whom it was owed within the timeframe. In any event, if a payment is made without information which links it to a specific IV-D case and the State documents that it is unable to determine to whom the payment is owed, the State would not be penalized for failing to meet the timeframe for distribution in that case.

4. Comment: A number of States, especially those which do not have cooperative agreements with the courts which receive and/or distribute collections, requested that we start the timeframe for distribution of collections from the date of receipt in the IV-D agency. They argue that they have no control over the courts and cannot make them meet the timeframes. Some States which have State-supervised, county-administered IV-D programs indicated that they could not meet the 15 working day timeframes for distribution because of the structure of their programs. Some of those States, as well as States in which the courts collectsupport, urged us to retain the requirement that collections must be forwarded within 10 days of receipt by any agency not responsible for final distribution of the collection. They argued that the 10-day requirement is the only leverage they have to ensure collections are forwarded timely. Another commenter urged that we require any entity other than the agency responsible for final distribution to transmit the collection within 5 working days of receipt. Still another suggested 3 working days was sufficient.

Response: Congress expressed its concern about the delays in forwarding collections to families who are in need of them by requiring the Secretary to publish timeframes for prompt distribution of those collections. They indicated the urgency of establishing timeframes by requiring publication of final regulations within 10 months of enactment of the Family Support Act. State IV-D agencies are responsible for sending collections to families in IV-D cases, regardless of whether or not they have cooperative agreements with the courts that collect support obligations. State-supervised, county-administered IV-D programs are no less responsible for timely distribution of collections to families than State-run IV-D programs. Families should not suffer delays in receiving the support they need because of the structure of IV-D programs.

Federal funding of States' IV-A and IV-D programs depends on compliance with Federal IV-D requirements, regardless of whether or not there are cooperative agreements between courts and IV-D agencies or whether the program is State-supervised and county administered. The designated single State IV-D agency is responsible for ensuring that all program requirements are carried out within the State; to this end, it can certainly apportion appropriate segments of the overall timeframe for distribution among the entities involved in program administration.

In keeping with our response to comments requesting that we not impose excessively detailed timeframes for each step of the process and because States need flexibility commensurate with their responsibility for ensuring compliance with title IV-D requirement, we have not added the 10-day timeframe within which each entity other than the agency responsible for final distribution must forward the collection.

5. Comment: Some commenters asked that we require States to establish a grievance process to resolve disputes with respect to timely and accurate distribution of collections. Several commenters requested that the process be extended to resolve disputes over adequate provision of all services to ensure that the program standards requirements are followed by States. They suggested that States be required to establish toll-free numbers for custodial parents to call for information or to discuss how collections were distributed. In addition, they requested that States be required to pay custodial parents any interest earned on collections.

Response: There is nothing to preclude a State from setting up such a system to resolve disputes. However, there is no evidence that such a system is warranted in all States. Furthermore, State compliance with program requirements, such as these performance standards, is measured by program audits and other less formal reviews conducted by Federal staff. We believe that most States are distributing collections accurately and that grievance procedures are unnecessary. Finally, States are permitted to pay interest earned on non-AFDC collections paid to families to those families.

Section 302.32(f)(1)- Interstate Collections

Comment: Commenters requested that the timeframe for forwarding interstate collections, like other distribution timeframes, be reduced from 10 working to 10 calendar days. Alternatively, several State and local agency commenters requested that the timeframe for forwarding collections in interstate cases be changed to 15 working days to avoid any distinction between distribution timeframes for interstate and intrastate cases.

Response: We agree that there should be consistent interstate and intrastate distribution timeframes and have changed the proposed 10 working day timeframe for the responding State IV-D agency to forward collections to 15 calendar days from the date of initial receipt in the responding State. This is consistent with the requirement in õ 302.32(f)(3)(i) to send collections to non-AFDC families within 15 calendar days of the date of initial receipt in the State. However, reducing the timeframe to 10 calendar days would be unduly restrictive at this time.

Section 302.32(f)(2)- AFDC Collections

a. $50 Pass Through Payments to Families

1. Comment: Almost every comment we received from a State or local IV-D agency objected to the proposal that payments to the AFDC family under õ302.51(b)(1) be made within 15 working days of the date of initial receipt in the State. Commenters strongly urged that IV-D agencies not be required to pay multiple pass-through payments until $50 is collected in cases in which payments are made weekly. Commenters suggested the timeframe for sending the $50 pass-through to families be tied to the end of the month of collection or the date at least $50 is collected. In addition, commenters indicated that, if finalized, the proposal would require daily distribution of collections which has proven in at least one State to be confusing to AFDC recipients and difficult to administer.

Response: It was never our intention that States make multiple incremental payments of less than $50 to the AFDC family until the $50 limit on the pass-through of child support is reached. Recognizing that support may be paid weekly or bi-weekly, we have revised õ302.32(f)(2)(i) to make clear that one payment per month of up to $50 be passed through to AFDC families under õ302.51(b)(1) within 15 calendar days of the date of initial receipt in the State of the first $50 of support collected in a month, or, if less than $50 is collected in a month, within 15 calendar days of the end of the month in which the support is collected. The only instance where multiple pass-through payments are required would be when timely payments were made but not received by the agency responsible for final distribution until a later month in accordance with õ302.51 of this part.

2. Comment: Almost every commenter suggested alternative timeframes for passing through the first $50 of support collected in a month. Suggestions included 5, 7, 10, 15, 21 working days, or 15, 17, 21, 60 calendar days after the end of the month of collection. Others suggested keeping the current requirement at õ302.51(b)(3) and (5) fordistribution by the end of the month following the month in which the amount of the collection is used to redetermine AFDC eligibility. Another alternative was to pay the $50 pass-through to the family within 15 working days after the total monthly obligation is collected or a minimum of $50 is collected, or when the next AFDC benefit check is mailed. A State IV-D agency argued that tying payment to the family to the next benefit check was unacceptable because the next month's check is produced at the end of the previous month (the month of collection) to allow mailing on the last working day of the previous month.

Many State and local agencies based their argument for longer timeframes on the need for enhanced automation or the need to assure that checks cleared before paying the family. One commenter argued that the date of receipt should be changed to the date the check clear because out-of-State checks take 25 days to clear and in-State checks take 3 working days, or 15 working days if resubmitted, to clear.

In response to anticipated State comments that checks have to clear before payments may go to the family, other commenters referenced Federal banking requirements which require in-State checks to be cleared within 4 working days and out-of-State checks to be cleared in 7 working days. These commenters argued that States, not custodial parents, should run the risk of checks not clearing because that is the purpose of the IV-D program.

Commenters requesting stricter timeframes suggested the proposed timeframe was much too long and 2 working days should be sufficient for any automated system. Other commenters argued that 15 calendar days from the end of the month of collection was adequate in automated States but 30 to 45 working days was more reasonable in States which are not fully automated. Still other commenters argued that, while 15 days for the first or last payment to be made to the family is understandable given the need to redirect payments in new or recently terminated AFDC cases, 2 to 3 working days should be adequate to pay collections to the family in regularly paying cases.

Finally, a number of commenters urged that the timeframe for payment of the $50 pass-through to AFDC families be required in regulations governing IV-A agencies because the IV-A agency frequently is responsible for making the $50 pass-through payment for the IV-D agency.

Response: Given the many comments we received on this provision of the proposed regulations, we have carefully reconsidered our proposed requirement. We agree with advocates who argue that Federal banking requirements prohibit financial institutions from holding checks for extended periods to ensure clearance. In response to comments, we are revising regulations governing the IV-A program at õ232.20(d) to require the IV-A agency to pay to the family the sum disregarded under õ302.51(b)(1) within 20 calendar days of the date of initial receipt in the State of the first $50 of support collected in a month, or, if less than $50 is collected in a month, within 20 calendar days of the end of the month in which the support is collected. Some State IV-A agencies enter into agreements under which the IV-D agency sends the $50 payment to AFDC families. In those States, the IV-D agency must send the pass-through payment to the family within the 15-calendar day requirement in õ302.32(f)(2)(i) because there is no need to transfer the collection from the IV-D to the IV-A agency. In the majority of States in which the IV-A agency sends the pass-through payment to the family, õ302.32(f)(2)(i) requires that the IV-D agency forward the collectionto the IV-A agency within 15 calendar days of the date of initial receipt in the State of the first $50 of support collected in a month, or, if less than $50 is collected in a month, within 15 calendar days of the end of the month in which the support was collected.

We believe that these timeframes are adequate for any State, whether fully automated or not, to distribute the $50 pass-through payment to AFDC families.

b. AFDC collections in excess of the first $50- 1. Comment: We received comments on our proposal to require the IV-D agency to distribute collections in excess of the $50 pass-through payment under õ302.52(b)(1) to the IV-A agency with 15 working days of notice of AFDC eligibility redetermination. Commenters argued that there was no need to regulate prompt distribution of amounts to be retained by the State and Federal governments, either in AFDC or title IV-E foster care cases as proposed in õ302.32(f)(2)(ii) and (iii), because it would be administratively complex and costly and would serve no practical benefit to do so. They argued that the Congress, in Pub. L. 100-485, only instructed the Secretary to regulate prompt distribution of collections due to families, not to be retained by States.

Response: Section 122 of Pub. L. 100-485 requires the Secretary to establish time limits for distributing child support collections, and the Conference Report (H. Rep. 100-998) on page 99 requires time limits within which child support payments must be distributed "to the families to whom they are owed." Because we agree that the intent of Congress was expeditious distribution of collections owed to families, rather than those collections assigned to, and retained by, the State in AFDC cases, we have revised õ302.32(f)(2)(ii) to require distribution only of collections in excess of the pass-through which are paid to families in AFDC cases. We have made similar revisions with respect to collections in title IV-E foster care cases to ensure timely payment to the agency responsible for the child's needs of any collections to be used to serve the child's best interests.

2. Comment: A number of commenters expressed concern about delays of up to five months in forwarding payments to families after AFDC eligibility terminates. They stressed that such delays are untenable because the former AFDC family must rely on the support collection as a substitute, or partial substitute, for the amount the family previously received under the AFDC program. Alternatives to the proposed 15-working day timeframe ranged from 10 calendar days of notice of eligibility redetermination to 20 days from the end of the month of collection. Other commenters required that the support collection be paid to the family no later than the date the family would have received the next AFDC check. Other commenters pointed out that IV-A agencies are not requested to notify IV-D agencies of a family's continued AFDC eligibility; they are only required to notify the IV-D agency of the effective date of the family's ineligibility.

Response: In response to comments, and because we are imposing timeframes only for distribution of amounts paid to families, we have revised õ302.32(f)(2)(ii) to require that, with the exception of Federal and State income tax refund offset collections which are dealt with separately, collections for the month following the month in which the family receives its last assistance payment and any collections paid to the family under õ302.51(b)(3) and (5) must be sent to the family within 15 calendar days of initial receipt in the State of a collection for thefirst month of ineligibility. We are not requiring States to send payments to the family by the date that the family would have received their next AFDC benefit check had benefits not been terminated, because that date may occur too soon to allow the IV-D agency adequate time to meet the timeframe. However, we strongly urge States to attempt to forward collections to the family as close to that date as possible.

c. Non-AFDC collections- 1. Comment: We received many comments on the timeframe for distribution of collections in non-AFDC cases. Suggested alternatives ranged from 5 calendar days to 35 days from initial receipt in the State. Commenters also suggested a separate timeframe of 2 working days for non-AFDC cases in which no AFDC arrearages are owed, as well as 10 days initially, to be shortened when States are automated and upon reassessment of the timeframe in 2 years. A number of commenters indicated that 15 working days was sufficient if mailing the payment to the last known address of the custodial parent meets the requirement. Some commenters wanted a longer timeframe to account for unusual circumstances which may preclude timely distribution while others urged that we not establish a standard based on time necessary to distribute support in difficult cases.

Response: In response to concerns for prompt payment of collections to families in non-AFDC cases, we revised the proposed 15-working day timeframe to require IV-D agencies to send current support payments to non-AFDC families within 15 calendar days from the date of initial receipt in the State. We do not believe a standard should be set based on the time it takes to distribute collections in difficult cases which are the exception and not

the rule. Mailing the payment to the last known address of the custodial parent would meet the requirement. If such payments are returned, however, States should attempt to promptly determine a new address for the custodial parent. We did not establish separate 2-day timeframes for distribution in non-AFDC cases in which there are no AFDC arrearages because we do not want to make distribution, complicated by its very nature, unduly so by requiring a myriad of different timeframes for each type of case.

2. Comment: We also received a number of comments on proposed

õ302.32(f)(3)(ii) which would allow States to determine whether to pay arrearage collections to the family first or reimburse itself for unreimbursed past assistance paid to the family. Commenters were divided between wanting us to require payment to the family first or to require that State's retain amounts to reimburse unreimbursed past assistance first. Those in favor of paying the family first argued the family should receive arrearage payments to help them remain self-sufficient. One commenter urged that at least those arrearages which accrue after the family leaves the AFDC rolls should be paid to the family before the State retains its share of what it is owed. Those in favor of reimbursing the government for unreimbursed assistance paid to the family first argued that paying the family first violates section 457(b)(4) of the Act and 302.51(f).

Response: Section 457(b) sets forth the distribution scheme for AFDC cases: section 457(c) governs services to former AFDC recipients and requires State IV-D agencies to continue to provide IV-D services to former AFDC cases subject to the same conditions and on the same basis as in the case of non-AFDC cases receiving services under 454(6) of the Act. Since section 454(6) is silent regarding the distribution ofamounts collected in non AFDC cases, our longstanding policy has been to allow States flexibility regarding distribution of amounts collected in excess of current support in non-AFDC cases when there are both arrearages owed to the State and arrearages owed to the family. While õ302.51(f) requires States to attempt to collect any unpaid support after the family leaves the AFDC roles to reimburse the State and Federal government for unreimbursed assistance paid to the family, we agree that paying arrearages to a non-AFDC family before reimbursing unreimbursed assistance may impact positively on the family's ability to remain self-sufficient. We are in the process of clarifying distribution requirements in a separate rulemaking effort and will address this issue in more detail in that document. Since this final rule is establishing timeframes for distribution rather than distribution requirements themselves, we retained State flexibility in the final rule under paragraph (f)(3)(ii) but changed the proposed requirement to require IV-D agencies which send amounts to the non-AFDC family to satisfy past-due support to do so within the 15 calendar days, for consistency with paragraph (f)(3)(i).

d. Federal and State income tax refund offset collections.- 1. Comment: Most States requested a longer period of time within which to distribute collections made through offset of Federal and State income tax refunds. Suggested alternatives ranged from distribution within 15 days of receipt by the agency responsible for final distribution to distribution within 180 days of receipt. Most commenters, however, suggested collections be distributed within approximately 30 to 45 calendar days of receipt or within 15 days of expiration of any post-offset appeal or review process required by State law. States requested that the timeframe commence with receipt by the IV-D agency to avoid including receipt by the State Revenue Agency which is responsible for the State income tax refund offset process.

Response: We are convinced by commenters that additional time is needed to distribute these collections because of their volume. Therefore, we require in õ302.32(f)(2)(iv) that IV-D agencies send to the AFDC family or IV-E agency, as appropriate, within 30 calendar days of receipt by the IV-D agency amounts offset in AFDC cases and paid to the family under õ302.51(b)(5) and amounts offset in title IV-E foster care cases and distributed under õ302.52(b)(4), unless State law requires a post-offset appeal process and an appeal is filed, in which case the IV-D agency must send any payment to the AFDC family or IV-E agency within 15 calendar days of the date the appeal is resolved. We also revised õ302.32(f)(3)(iii) to require the IV-D agency to send amounts offset in non-AFDC cases to the family within 30 calendar days of receipt by the IV-D agency, with two exceptions. First, if State law requires a post-offset appeal process and an appeal is filed, the IV-D agency must send the payment to the family within 15 calendar days of the date the appeal is resolved. Second, in accordance with õ303.72(h)(5), if the Secretary of the Treasury, through OCSE, notifies the State that an offset is being made to satisfy non-AFDC past-due support from a refund based on a joint return, the State may delay distribution until notified that the unobligated spouse's proper share of the refund has been paid or for a period not to exceed six months from notification of offset, whichever is earlier. We want to stress, however, that States may not routinely hold tax offset collections in non-AFDC cases for up to 6 months. The IV-D agency must receive anotice that a joint refund is involved before distribution may be delayed in such cases.

4. Comment: A number of commenters asked that we clarify that

õ302.32(f)(3)(iii) requires State, as well as Federal, income tax refund offset collections to be distributed in non-AFDC cases within the specified timeframe.

Response: We inadvertently omitted reference in õ302.32(f)(3)(iii) to State tax refund offset distribution in non-AFDC cases. Distribution of such amounts is required within the same timeframe as distribution for Federal income tax refund offset collections in non-AFDC cases.

5. Comment: A commenter indicated that offset collections can be distributed only after both the collections and the tape specifying from whom the collections were made are received.

Response: The 30-calendar day timeframe should allow adequate time to receive both the collections and the magnetic tape and to distribute the collections.

Establishment of Cases/Maintenance of Case Records- Section 303.2

Application Process- Section 303.2(a)

1. Comment: Commenters requested that IV-A agencies be required to refer AFDC cases immediately or within two working days to the IV-D agency because families applying for AFDC are in immediate need of child support payments.

Response: Section 235.70 requires referral of AFDC cases to the IV-D agency within 2 days of eligibility determination and allows referral earlier at State discretion. Some States refer cases immediately upon application for AFDC or have co-located IV-A and IV-D offices so that IV-D services are provided prior to AFDC eligibility being determined and within the timeframe allowed for the eligibility determination process. Because some families are subsequently determined to be Ineligible for AFDC and may not want to apply for IV-D services, we do not believe immediate referral should be mandatory at this time.

An earlier response noted the Family Support Administration's commitment to strengthen interaction between the IV-A and IV-D programs.

2. Comment: We received many comments on the requirement to provide applications on the day an individual requests an application for services. Commenters asked that we allow a State between 2 and 10 working days to respond to a request for an application to allow for unpredictable personnel events and requests received late in the day. We were asked to require that applications be given to individuals who come into the IV-D agency to request services on the day they come in and that applications be mailed to individuals within 2 to 5 working days of a telephone or written request. Some commenters requested that States be required, if applications are filed in the wrong office, to refer them to the correct office immediately and to inform custodial parents that written applications are necessary.

Response: We revised the requirement in õ303.2(a)(2) to require IV-D agencies to provide an application to an individual who requests an application or services in person on the date of the request and to send applications to individuals within no more than 5 working days of a written or telephone request. We did not require IV-D agencies to forward applications to the correct IV-D office because an applicationmay be filed at any IV-D office.

Although written applications are necessary, we did not add a requirement that States inform custodial parents of that fact because we believe it is obvious. States may include such a statement in information publicizing the availability of services under the IV-D program.

3. Comment: Commenters requested that States be required to explain the rights and responsibilities and distribution policies of the IV-D program to AFDC as well as non-AFDC families because AFDC recipients have a right to, and need to know, this information.

Response: We agree that States should explain the IV-D program and its procedures, as well as the rights and responsibilities of those who receive IV-D services, to any individual receiving IV-D services. Therefore, we have revised õ303.2(a)(2) to require the IV-D agency to provide that information to AFDC, Medicaid, and title IV-E foster care applicants or recipients within no more than 5 working days of referral to the IV-D agency.

4. Comment: A number of commenters requested that IV-D agencies be required to accept an application as filed on the day it is filed and the application fee is paid.

Response: We have revised õ303.2(a)(3) to require the IV-D agency to accept as filed an application signed by the individual applying for IV-D services on the day it and the application fee are received. An application should be accepted as filed if it is completed to the best of the individual's ability, signed, and submitted to the IV-D agency.

5. Comment: Commenters asked that we not require IV-D agencies to accept applications until relevant information is provided which is necessary to determine whether IV-D services are available to the individual. They argued that States must be able to require certain minimal data to determine if a case should be opened, e.g., the name and address of the custodial parent, age of the children, and residence of the custodial parent. States argued that services are only available if there is a minor child or the custodial parent

is a resident of the State. With respect to providing services to non-minor children, a commenter urged that States only be required to provide services in cases in which application is received when the child is a minor. Finally, commenters requested that the IV-D agency not be required to accept applications until an intake interview is conducted.

Response: Accepting applications should not involve any action by the IV-D agency other than recording the date of filing on the application. There are no conditions for receipt of IV-D services other than the requirement to file a written application requesting child support enforcement services under the IV-D program. Anyone may apply for IV-D services who needs help with securing child support; availability of services is not limited to minors or to those who are residents of the State. While States argue that they should not be required to provide IV-D services in cases in which the child is no longer a minor, to limit availability of services to minor children would encourage absent parents to avoid their support obligations until the child reaches the age of majority. States may not work cases in anticipation of being able to close those cases once the child reaches the age of majority.

6. Comment: A commenter requested that we define more specifically what an application for IV-D services is and asked if an endorsed check,a petition for establishment of paternity or support establishment or enforcement, or application by operation of State law meet the regulatory requirements.

Response: In order to comply with Federal requirements of filing an application, the application must be in writing, be signed by the individual, and clearly state that the individual is applying for child support enforcement services under the State's IV-D program. We revised the definition in paragraph (a)(3) slightly to specifically refer to child support enforcement services under the State's IV-D program. A petition with the court or administrative authority responsible for establishing paternity and/or establishing and enforcing support obligations may be considered an application if the petition is signed by the individual requesting services and clearly states that the individual is requesting child support enforcement services under the State's title IV-D program. An endorsement on the back of a support check does not meet requirements for an application for services. Application deemed by operation of State law does not meet the requirement for application for IV-D services because it does not allow the individual the option to choose whether or not to apply for IV-D services provided under section 454(6) of the Act.

Case Opening and Actions Required Within 20 Calendar Days of Receipt of Referral or Application- Section 303.2(b) and (c)

1. Comment: A number of commenters asked if the 2-day timeframe for case opening is intended to include action by the central registry in interstate cases. Otherwise, commenters generally asked that the 2-day timeframe be expanded to between 5 and 10 working days or, alternatively, be eliminated and the required actions be included under the 15-working day timeframe in proposed õ303.2(c). Other commenters wanted clarification that a case is considered "opened" if a record of the application or referral has been created and an identification number has been assigned. Another commenter indicated that she could not meet the 2-day timeframe for opening a case because of her ethical duty under State law to determine whether an applicant has a legally defensible case and a case that she can legally pursue.

Response: The case opening requirement in õ303.2 applies to the initial opening of a IV-D case upon referral or application for services; it does not include taking action upon receipt of an interstate referral. The requirements in õ303.7 for central registries apply to interstate cases.

We did not intend that any substantive action or decision must be made on a case within the 2-day timeframe for case opening. However, we are convinced by States' arguments that we should not impose timeframes for each specific action required but establish timeframes governing broader necessary actions. Therefore, we have deleted the separate 2-day timeframe for opening a case and revised õ303.2(b) to require the IV-D agency to open a case by establishing a case record within the 15-working-day timeframe (which has been converted to 20 calendar days) for taking specific actions to solicit action and refer a case for further location attempt, if necessary.

2. Comment: We were asked to clarify that a case record may be automated, on paper, or a combination thereof.

Response: We moved from proposed õ303.2(b) to õ303.2(c) therequirement that a case record must be supplemented with all information and documents pertaining to the case, as well as all relevant facts, dates, actions taken, contacts made and results in a case. Records of contacts, communications, and other actions in a case may be maintained in a physical or electronic record. Case records, therefore, may be automated, on paper, or a combination thereof.

3. Comment: We received comments which indicated that if necessary forms for case processing are not complete when received by the IV-D agency, the IV-D agency should be allowed to return the forms to IV-A agency or non-AFDC applicant for completion before opening a case.

Response: As required under õ303.2(b), the IV-D agency must open a case and solicit necessary and relevant information from the custodial parent and other relevant sources within the 20-calendar day timeframe.

4. Comment: We received a number of comments in response to the solicitation of views about the possibility of requiring State IV-D agencies to have agreements in place to ensure that all cases are referred within a specified number of working days of an application or determination of eligibility for AFDC, Foster Care or Medicaid benefits. Although a few commenters supported such a requirement, the majority strongly objected to placing an additional burden on the IV-D agency to ensure compliance by IV-A agencies with IV-A requirements. The commenters said that regulations governing the IV-A, IV-E, and XIX programs should require those program agencies to promptly refer cases to the IV-D agency.

Response: While we agree that requiring agreements to ensure that IV-D agencies receive referrals is an indirect, inappropriate method of ensuring prompt referral, we are not addressing prompt referral by other agencies because these issues are beyond the scope of this regulation which governs IV-D agency activities.

5. Comment: A number of commenters requested that we extend to 30 days the proposed 15-working day timeframe for soliciting additional information to allow rescheduling of interviews and to allow group interviews. Others asked that States be required to develop a plan of service within the proposed 15-day timeframe. Some commenters requested that the timeframe be reduced to 15 calendar days while others asked that IV-D agencies only be required to initiate action to solicit information, verification or access to automated location sources within the proposed 15- day timeframe.

Response: We believe that 20 calendar days, as required in

õ303.2 to solicit additional information, including to schedule, and reschedule interviews, if necessary, is adequate in the vast majority of cases. While we have not proposed an explicit requirement that IV-D agencies develop a plan of service within this initial assessment period, actions required within the 20 calendar day timeframe must be based on an assessment of the case to determine necessary action. In addition, while we believe reducing the timeframe to 15 calendar days would be excessive at this time, requiring IV-D agencies only to initiate the required actions during the 20 calendar day timeframe would not ensure the case will be worked promptly.

6. Comment: We received a number of comments expressing confusion about the two separate timeframes for accessing automated versus all other location sources. Commenters asked that we not establish a separate timeframe for accessing automated location sources.

Response: In response to these comments and to avoid confusion, wehave deleted the proposed requirement that IV-D agencies access all appropriate State and local automated sources within the proposed 15-day timeframe from receipt of referral or

application. Section 303.3 now contains all location requirements. Therefore, õ303.2(b) now requires IV-D agencies, within no more than 20 calendar days of receipt of referral of a case or filing of an application for services, to open a case by establishing a case record and, based on an assessment of the case to determine necessary action, to: (1) Solicit necessary and relevant information from the custodial parent and other relevant sources and initiate verification of information, if necessary and (2) if there is inadequate location information to proceed with the case, refer the case for further location attempts, as specified in õ303.2.

Location of Absent Parents- Section 303.3

Section 303.3(a)-Definition

1. Comment: With respect to the proposed definition of location, the majority of the commenters requested clarification of the word "confirmed." Some commenters requested that we not require confirmation of a location if there is every indication that the information is current. Commenters generally agreed that finding an address should not be considered locating the absent parent unless the agency can take necessary action or effect service of process on the individual based on the address. Finally, commenters requested clarification regarding the inclusion of the absent parent's employer, assets and/or income in the definition of location.

Response: As stated in the preamble to the proposed rule, the advisory committee stressed that the location function can only be considered complete or successful when the address received is sufficient and necessary to take the next appropriate action in a case. The definition of location is important because many of the timeframes in the regulation begin with location. While a sufficient address is a prerequisite to effective service of process, to define location as successful service of process would require service of process within the location function, which is not necessarily appropriate in every case. States should determine whether an address is sufficient to proceed with necessary action, which could include service of process. Verification of an address would not be necessary in a situation where the State knows the address is sufficient to take the next appropriate action. At such time as it is determined that service of process cannot be effected because the information is not sufficient to take the next appropriate action, the case would be referred for additional location attempts.

With respect to the request for clarification of why employer and asset information is included in the definition of location, we want to clarify that States must locate the absent parent, the absent parent's employer, income and assets, depending on what information is necessary to proceed with appropriate action on a case. Section 303.3(a) is revised to remove the word "confirmed" and define location as information concerning the physical whereabouts of the absent parent, or the absent parent's employer, sources of income or assets, asappropriate, which is sufficient and necessary to take the next appropriate action in the case.

Section 303.3(b)(1)- Location Sources

1. Comment: We received several comments regarding the list of appropriate State agencies and departments States must use to locate absent parents in proposed paragraph (b)(3). The commenters were concerned about the existing requirement to use departments which maintain records of criminal records. The commenters stated that some States would require legislative changes to access these records. Some commenters suggested that we eliminate the list in this section and require States to develop guidelines determining sources to be used in the State so that States will have the flexibility to use sources allowable under State law and the ability to add new sources to the list which can be accessed in one State but not another (e.g., utility account information, financial institution records, etc.).

Response: The proposed regulation only added wages and employment records to the existing list of State sources; access to criminal records was included in existing regulations. We did not delete specific reference to locate sources and require States to issue guidelines to determine appropriate location sources because we want to ensure States access all appropriate sources. However, because we combined all location sources, the State sources listed in proposed (b)(3), as well as the Federal Parent Locator Service (PLS) and interstate location networks, are included under paragraph (b)(l). States should access any appropriate location source, whether in or out of State, including the Federal PLS. However, because some States may not have access to certain sources because of restrictions in State law, paragraph (b)(1) requires States to use State location sources such as those listed as permitted under State law.

2. Comment: in response to our request regarding whether States should be required or encouraged to use private automated data sources such as credit reporting agencies and the Postal Service contractor's recent mover data base, those who responded favored requiring the use of credit reporting agencies but pointed out that some States may need legislative changes to access this source. Commenters were opposed to requiring use of the Postal Service contractor's recent mover data base unless it could be accessed via the Federal PLS. The majority of the commenters urged a demonstration project to assess the cost effectiveness of this source.

Response: In response to comments, we are not requiring use of these private data sources at this time. However, States should assess the availability of these sources and use them, if available and appropriate. Federal financial participation is available for the cost of using these sources. OCSE will further explore both sources as part of continuing assessment and enhancement of the Federal PLS.

Sections 303.3(b)(3)- Timeframe for Location

1. Comment: The majority of the commenters requested that proposed paragraph (b)(4) require that "appropriate location sources" include the Federal PLS. These commenters were opposed to the exclusion of the Federal PLS from a timeframe, as proposed, and requested thatregulations require that States submit requests to the Federal PLS simultaneously with submittal to State and local sources. In addition, several commenters stated that regulations should require a timeframe within which the Federal PLS must respond.

Response: Since State and local sources often provide more recent and accurate location information, requests to the Federal PLS may not be appropriate in many cases. However, we agree that cases should be transmitted to the Federal PLS in a timely manner if and when a State determines that the Federal PLS is an appropriate source. Accordingly, we have deleted proposed paragraph (b)(5) and revised proposed paragraph (b)(4), which is redesignated as paragraph (b)(3), to require referral to the Federal PLS within the timeframe for accessing appropriate location sources. Cases may be submitted to the Federal PLS and other location sources simultaneously, or to the Federal PLS after accessing State and local sources is unsuccessful, whichever is appropriate given the case information. However, all appropriate sources must be used within the required timeframe.

We did not include a timeframe within which the Federal PLS will respond to requests for location because Federal regulations for the IV-D program apply to States, not the Federal government. However, depending on the sources checked, the Federal PLS responds in one, two or three weeks from request for location from a State or local PLS.

2. Comment: The majority of the commenters requested clarification of the term "access" in proposed paragraph (b)(3). These commenters requested that regulations require that States query sources within the timeframe, rather than require receipt of information from sources within the timeframe, because State agencies often have no control over the time it takes to get a response from sources. One commenter suggested that, rather than require the return of information within a stringent timeframe, States should be encouraged to work with sources to improve turn-around time and be required only to query sources within a timeframe and follow-up within a certain period of time if the IV-D agency has not received a response from the source.

Commenters were also concerned about the 30-working day timeframe. Several commenters requested that we retain the current 60-calendar day timeframe because a 30-working day timeframe would force States to send simultaneous location requests to sources which may have a fast response time but may not have information pertaining to the case. Several commenters stated that 30 working days is not long enough to receive and evaluate responses from non-automated sources. Suggested alternate timeframes were 30, 40 and 45 calendar days.

Response: We believe it is crucial for States to determine which sources are most likely to provide information concerning the absent parent's or alleged father's whereabouts and to access these sources simultaneously, rather than one at a time. With regard to response time, we recognize that States do not have direct control over the response time of some sources. However, many sources respond in a timely manner. As stated in the preamble to the proposed rule, the 60-day timeframe was reduced to 30 working days based on the fact that the 60-day timeframe was set in 1978, prior to automated access. However, as pointed out by commenters, all States do not yet have automated capabilities. While only requiring States to access (i.e., query or request location information), as opposed to receive responses from, location sources would not ensure continuing responsibility for case processing werealize that even the most diligent efforts may not result in accessing and evaluating location information within a 30-working day timeframe. The majority of the commenters believed that 60 calendar days would be adequate to request and receive responses from sources. However, because some States do not yet have automated access to location sources, Federal PLS access is included in the timeframe, and States must ensure that the location information is sufficient, we have revised the proposed paragraph (b)(4) (redesignated as paragraph (b)(3)) to extend 30 working days to 75 calendar days. Within this timeframe, States must access all appropriate locations sources, including the Federal PLS, and ensure the sufficiency of the information received.

3. Comment: One commenter requested clarification of the location requirements with regard to situations in which a State receives information which indicates that an absent parent may be in one of several States.

Response: With regard to these situations, a State may request several States to attempt to locate an absent parent or putative father. However, because the case is not yet an interstate case, the requesting State must take this action within its own timeframe (i.e., the requesting State must request and receive location information from any other States within the 75-day timeframe). Since the States providing location information are not subject to the timeframe, access should be limited to automated sources to ensure a quick response to the request.

4. Comment: A number of commenters were concerned that, if, as proposed, States are required to initiate the next appropriate action within 2 working days of location, they would have insufficient time to complete the necessary forms in interstate cases.

Response: Because we deleted the 2-day timeframe for initiation of the next appropriate action in proposed paragraph (b)(6), we revised õ303.7(b)(2), which requires initiating States to "promptly" refer any interstate IV-D case to the responding State's interstate central registry for action, to require referral within 20 calendar days of determining that the absent parent or putative father is in another State. Under this requirement, the initiating State would prepare the appropriate standard interstate form(s) and forward the case to the responding State's central registry. For example, if the State determines an absent parent or putative father is in another State and the next appropriate step is establishment of an order, the initiating State would prepare the necessary forms and forward the case to the responding State within 20 calendar days from determining that the absent parent is in another State. Upon receipt of the case in the responding State's central registry, the requirements in 303.7(a) apply. Once the case is forwarded for necessary action by the central registry within the 10-working day requirement, the timeframes for taking each necessary action, in this case establishment of a support order, must be met by the responding State. We also corrected references in proposed paragraph (b)(7) (redesignated as paragraph (b)(4)) because of other changes to õ303.3.

Section 303.3(b)(5)- Repeated Location Attempts

1. Comment: We received a number of comments on the requirement in proposed paragraph (b)(8) that States must repeat location attempts quarterly in appropriate cases in which previous attempts to locateabsent parents, or sources of income and/or assets have failed but adequate information exists to meet requirements for submittal for location, in conjunction with quarterly updates of State employment security files. The majority of the commenters requested that this requirement only apply if the State receives new information on a case since the last request for location. Several commenters requested that regulations clarify that this requirement only applies to automated sources and to cases where there is a known Social Security number. One commenter requested clarification regarding the statement that it must be "in conjunction with quarterly updates of State employment security files." Finally, several commenters requested that resubmittal only be required semiannually because not all sources are updated quarterly.

Response: It is essential that cases be resubmitted for location even if the State IV-D agency does not receive new information on the case. Often, the agency would not be aware of the fact that an absent parent has gotten a job or a driver's license. However, we agree that subsequent attempts will not be helpful unless there is sufficient identifying information on the absent parent. We required in the proposed rule that the States repeat location attempts quarterly "in conjunction with quarterly updates to State employment files" to ensure that States re-check this invaluable source after it is updated. Moreover, limiting cases to those with social security numbers (SSNs) is inappropriate because social security numbers are obtainable through the Federal PLS.

For the reasons mentioned above, we have revised proposed paragraph (b)(8) (which is redesignated as paragraph (b)(5)) in several ways. We revised the requirement so that States must repeat location attempts in cases in which previous attempts to locate have failed but adequate identifying and other information exists to meet requirements for submittal for location, either quarterly or upon receipt of new information which would aid in location, whichever occurs sooner. Quarterly attempts may be limited to automated location sources but must include accessing State employment security files. Repeated attempts upon receipt of new information which may aid in location must meet the requirements at õ303.3(b)(3), i.e., the State must access all appropriate sources within the 75-calendar day timeframe.

2. Comment: In response to our request for comments on requiring annual submittal of unlocated cases to the Federal PLS, the majority of the commenters requested that, rather than require annual submittal to the Federal PLS, regulations should require that the FPLS retain cases and check them periodically without the need for resubmittal.

Response: If the Federal PLS were to check cases periodically as suggested without resubmittal, there would be no way to keep the data up-to-date. For example, the Federal PLS would have no way of knowing if information provided to the State was successful in locating the absent parent or if the absent parent had been located using other location sources. The list of cases, would, therefore, continue to grow from year to year.

Since, however, the Federal PLS is such a valuable location source, we believe mandatory annual submittal to the Federal PLS of unlocated cases in which adequate information exists to access the Federal PLS is warranted. Therefore, we have added such a requirement at paragraph (b)(6).

Section 303.3(b)(7)- Referral for Location When Location Becomes

Unknown

1. Comment: The majority of the commenters stated that 5 working days is too short a period of time to refer for location services when location becomes unknown. In addition, several commenters requested clarification of this requirement because it could be interpreted that a State would have to locate the absent parent's assets or income if unknown even if the case is in payment status.

Response: Because we have eliminated all interim timeframes and because the timeframe for the location requirement starts upon determining that location is necessary, we have deleted this section.

Establishment of Support Obligations- Section 303.4

1. Comment: The majority of the commenters were opposed to the working day timeframe to establish a support order or file a petition for establishment of a support order with the court or administrative authority responsible for establishment of obligations. Most stated that 60 calendar days would be more reasonable to allow the State sufficient time to request that the absent parent come in for an interview, attempt settlement, prepare a complete petition and refer the case to the attorney if settlement is not reached. Many commenters pointed out that the 30-day timeframe would force States to file cases without attempting consent.

In addition, many commenters requested clarification regarding the proposed standard and timeframe as it relates to service of process and expedited processes timeframes. Some States indicated their procedures require that legal actions must be filed prior to any negotiations or settlement discussions being taken in the State. Alternatively, some States attempt to obtain consent orders prior to filing a case. Commenters stated that because of differing State procedures, the proposed requirement to establish an order or file a petition for establishment of a support order with the court or administrative authority within 30 days of locating the absent parent should be revised and/or clarified. Some commenters suggested a separate timeframe for consent processes, to encompass the period of time prior to when a case must be filed in the State. Other commenters suggested that the timeframe for filing a case be shortened and that another timeframe be added for the establishment of an order and/or initiation of establishment of an order. Most commenters indicated that filing a case does not bring the absent parent under the jurisdiction of the expedited process system. Rather, it is service of process that must be accomplished to ensure that the absent parent is under the jurisdiction of the State's expedited process system.

With regard to service of process, the majority of the commenters were opposed to the requirements in proposed õ303.9. With regard to proposed õ303.9(b), commenters stated that 2 working days is not adequate time to prepare documents for service and to refer documents to the process server. With regard to the requirement that service of process must be completed within 10 working days of the request, commenters were most concerned with the fact that even service of process by certified mail takes longer than 10 days. In addition, the majority of commenters were concerned with the assumption in the preamble to the proposed rule thatthe percentage of cases where process could not be served would be accounted for in the 25% margin for error in a 75% audit criteria. Commenters pointed out that despite diligent efforts, absent parents successfully avoid service in a sufficiently large percentage of cases to warrant this fact to be taken into consideration in developing a standard. Commenters requested that regulations state that States attempt service within a timeframe and document attempts to show what efforts were taken if an absent parent is not successfully served. Many commenters requested that the 10-day timeframe be extended to allow for due process requirements which may require service by mail to be followed by personal service if necessary. Suggested timeframes included 15, 20, 30 and 45 calendar days. Finally, commenters requested that service of process timeframes be outside of the overall timeframes for action. Rather, these commenters believed that service of process timeframes should be in addition to overall timeframes, and that expedited processes requirements should be revised accordingly.

Response: As required in õ303.101, States must have and use expedited processes to establish and enforce support obligations. Those expedited processes and the timeframes in õ303.101 only apply to cases once they are under administrative or judicial jurisdiction. As stated in the preamble to the proposed rule, the proposed case processing timeframes for establishment of support obligations were intended to encompass all necessary actions up to the point where the expedited processes timeframes begin (i.e., the date a case is filed or the date of successful service of process, depending on which date the State chooses for purposes of computing expedited processes timeframes.) However, as a result of comments, we realize that many States must file a document with the court or administrative process before any action can be taken to establish a support obligation and that cases are not under administrative or judicial jurisdiction until the absent parent has been served with notice. To respond to the commenters' concerns, we believe it is necessary to revise both õõ303.4 and 303.101.

Section 303.101(b)(2) is revised by replacing reference to the time of filing as the starting point for the expedited processing timeframe so that, under expedited processes, actions to establish and enforce support obligations must be completed from the date of successful service of process to the time of disposition within the required timeframes. In conjunction with this revision, õ303.4(d) is revised to encompass the period of time from location of the absent parent or establishment of paternity through establishment of an order, successful service of process, or documented attempts to serve process in accordance with State guidelines defining diligent efforts to effect service of process. To ensure States make diligent efforts to serve process, we added a requirement at õ303.3(c) to require that the State develop guidelines defining diligent efforts for service of process and that the guidelines must include periodically repeating service of process attempts in cases in which previous attempt to serve process have failed, but adequate identifying and other information exists to attempt service of process. Therefore, within the timeframe to be discussed below, States must serve process or document attempts to serve process. In situations where process could not be served because the absent parent is no longer at the address, the State must document this as the reason and the case must be resubmitted for location.

Because State procedures differ with respect to the order in whichactions are taken to establish an order for support, rather than attempt to establish sequential timeframes for each step a State must take, we have extended the timeframe sufficiently to allow a State to attempt to establish an order by consent, or file an action and serve the absent parent in accordance with its procedures. As indicated above, the majority of the commenters stated that 60 calendar days would be adequate for a State to attempt to establish an order by consent or refer the case to an attorney, prepare a complete petition and file the case. In addition, the majority of the commenters indicated that 30 calendar days would be a reasonable period of time in which to accomplish both service by mail and personal service, if necessary. Accordingly, õ303.4(d) requires that IV-D agencies must establish an order for support or serve process necessary to commence proceedings to establish an order or document unsuccessful attempts to serve process within 90 calendar days of location or of establishment of paternity. Therefore, given the 20-day timeframe for case opening, the 75-day timeframe for location and the 90-day timeframe discussed above, support orders must be established or cases must enter the expedited processes system within 185 calendar days of application or referral. We want to point out that this approach allows establishing an order by consent at any time in case processing, whether before or after a case is filed with the Court or administrative authority. With respect to interstate cases, the timeframes in õ303.4 apply upon receipt by the agency in the responding State responsible for the establishment of support obligations.

2. Comment: Many commenters requested that regulations allow States to determine whether cases should be pursued. Examples included: the absent parent is receiving public assistance or SSI; the absent parent is incarcerated or institutionalized without income or assets; and the absent parent's income level is below the minimum set by State law.

Response: While some discretion is necessary, States must have standards for pursuing cases. Those situations mentioned in the comments as set forth above would be accounted for by applying the State's guidelines for setting support awards.

9. Comment: The majority of the commenters requested that regulations specify when and how often States must review dismissals without prejudice as well as what documentation is necessary.

Response: In this situation, we believe States are in a better position to determine when to refile a previously dismissed case or when to seek a support order on a case-by-case basis. However, we have clarified that States must, at the time of dismissal, determine when it would be appropriate to pursue an order in the future. Notations in the case record are sufficient documentation. If a case is dismissed because of unemployment or insufficient income, the State should return the case to the "locate" function for quarterly and annual checks on changes in income and assets.

Establishment of Paternity- Section 303.5

1. Comment: In response to our request for comments whether

there should be separate timeframes and requirements for uncontested paternity cases, commenters stated that this would not be practical because often it is difficult to differentiate between contested and uncontested paternity cases. Commenters pointed out that uncontestedcases could become contested and vice versa at various points in case processing. Most commenter's believed that separate timeframes would only complicate the process or increase Court actions to establish paternity if the deadline for establishment by consent was missed.

Response: While we have not required separate timeframes for uncontested cases, we strongly urge States to attempt to establish paternity by voluntary acknowledgement immediately upon location of the alleged father.

2. Comment: Many commenters were concerned with the statement in the preamble that cases which are difficult or impossible to complete within one year would easily be accounted for within the 25 percent margin allowed as part of the 75 percent substantial compliance audit standard. Commenters requested that regulations allow States to exercise prosecutorial discretion or, at the very least, list categories of cases which should be excluded from the timeframe. Commenters also described unavoidable delays which cause proceedings to extend beyond the one-year timeframe despite diligent efforts on behalf of the IV-D agency (e.g., extensive pre-trial discovery, interlocutory appeals and post-judgment appeals, etc.). Finally, commenters questioned our legal authority to establish an outside limit for completion of paternity establishment since the Congress allowed States to exclude paternity establishment in their expedited processes.

Response: We believe that Congress allowed States to exclude paternity establishment from their expedited processes to ensure that jurisdictions that wanted to have judges hear paternity cases were able to do so. We also believe that setting standards for paternity establishment is well within the Secretary's rulemaking authority.

In response to commenter's concerns, however, we have revised the proposed timeframe to take into consideration the more difficult paternity establishment case and to allow for differences in State procedures with regard to paternity establishment. Rather than outline step-by-step standards and timeframes for when in the process a State must file a petition with the Court or paternity establishment, attempt to establish paternity by consent and serve the alleged father, we have revised the regulations to ensure that all actions necessary to initiate and complete legal proceedings to establish paternity are accomplished in a timely manner.

Section 303.5(a)(1) is revised to require, under paragraph (1), that, within 90 calendar days of locating the alleged

father, the IV-D agency must file a petition for paternity establishment or complete service of process necessary to establish paternity (or document unsuccessful attempts to serve process in accordance with the State's guidelines defining diligent efforts under õ303.3(c)), whichever occurs later in accordance with State procedures for paternity establishment. Paragraph (a)(2) requires that paternity must be established (or the alleged father excluded by genetic tests and/or legal process) within one year of the later of: (i) Successful service of process; or, (ii) the child reaching 6 months of age. Under this requirement, States may establish paternity by acknowledgment or consent and, according to State procedures, a support obligation, at any time during the processing of the case. This expanded timeframe allows States 3 months to serve process or file a petition for paternity establishment and one year to establish paternity from successful service, unless the child is under 6 months old and therefore too youngfor bloodtesting when process is served, in which case the State has one year from the child's 6 month birthday to establish paternity.

We believe the extension of the paternity establishment timeframe addresses commenters' concerns about those contested cases which cannot be completed within one year of locating the putative father. One year from successful service of process or the child being 6 months old is a reasonable amount of time to allow for completion of the great preponderance of paternity cases.

3. Comment: The majority of commenters requested that regulations take into consideration the fact that despite the alleged father being located prior to or immediately after the birth of the child, blood cannot be drawn from infants for certain tests until a child is at least six months old.

Response: In response to comments, we have revised paragraph (a) to state that the one-year timeframe for paternity establishment begins with successful service of process or of the child being six months old, whichever occurs later. This will allow States to serve process on the putative father as soon as possible after the child is born when the putative father is more likely to be responsive because the timeframe for paternity establishment will not begin until the child is old enough for a blood test. However, in the future we intend to reexamine the use of DNA testing which does not require the child to be six months old.

4. Comment: The majority of the commenters were opposed to the proposed requirement that alleged fathers may only be excluded as a result of genetic tests. Commenters pointed out that in many States genetic tests alone are not sufficient to establish or refute paternity. In addition, evidence or lack of evidence may exclude the alleged father without the need for or despite genetic tests.

Response: We recognize that a putative father may be excluded as a result of either genetic tests or court action and we have revised paragraph (a)(1) (redesignated as paragraph (a)(2)) to state that within the timeframe, the State must establish paternity or exclude the alleged father as a result of genetic tests and/or legal process.

5. Comment: Several commenters requested clarification of the term "genetic tests."

Response: We replaced blood tests with "genetic tests" to more accurately reflect the advancements in and increased refinement of, testing methods to determine paternity. We want to point out, however, that "genetic" tests include any blood or tissue testing processes used to confirm or exclude parentage.

6. Comment: The majority of commenters were opposed to the

requirement in proposed paragraph (a)(2) that, in any case in which an alleged father is excluded but more than one alleged father is identified, the IV-D agency must meet the requirements for each alleged father identified. Commenters were concerned because of evidentiary problems with cases involving more than one alleged father. Some States indicated that they are prohibited by State law from bringing action against a second alleged father when the custodial parent has filed a paternity establishment action naming another man. In addition, commenters believed that States should be required to pursue the most "likely" alleged father in order to protect the custodial parent's credibility as a witness.

Response: We have retained the requirement in proposed paragraph (a)(2), which has been redesignated as paragraph (a)(3), because allchildren are entitled to have their paternity established. It is imperative that States establish procedures which permit paternity establishment even if the custodial parent names more than one possible alleged father. Blood tests prior to filing the action, or petitions alleging intercourse with each possible father and naming two or more defendants may minimize the evidentiary programs identified. We also want to clarify that when there is more than one alleged father named, if one alleged father is excluded, the timeframes for paternity establishment would apply for the next alleged father once he is located and served.

7. Comment: We received several comments with regard to the requirement in proposed paragraph (c) that IV-D agencies must identify and use through competitive procurement laboratories which perform, at reasonable cost, tests which tend to identify the father or exclude the alleged father. Commenters requested clarification regarding whether States may contract with more than one laboratory for different tests. In addition, commenters requested that regulations allow States to take into consideration accessibility and timeliness of results in choosing a lab.

Response: As stated in the preamble to the proposed rule, we want to avoid situations where States use laboratories at exorbitant cost when there may be a laboratory available which performs comparable testing at more reasonable cost. Within those parameters, States may evaluate services provided by laboratories, and choose one or more laboratories which provide necessary services at reasonable cost. Accessibility and timeliness may be considered in determining choice of laboratory but not to the degree that costs become exorbitant in comparison to other laboratories.

Enforcement of Support Obligations- Section 303.6

1. Comment: The majority of the commenters were opposed to the requirement that States must identify on the date the parent fails to make payments in an amount equal to the support payable for one month, or an earlier date in accordance with State law, those cases in which there is a failure to comply with the support obligation. Commenters believe that this requirement is too stringent because it entails daily monitoring.

Response: Effective and timely monitoring of compliance is essential in order to trigger income withholding in accordance with statutory requirements and to ensure timely use of other enforcement techniques as appropriate. Because section 466(b)(3) of the Act requires that an absent parent become subject to withholding and that advance notice be sent to the absent parent on the date on which the parent fails to make payments in an amount equal to the support payable for one month, States must identify delinquencies immediately in all cases. Therefore, we have not revised this requirement.

2. Comment: We specifically requested comments on whether the requirement for sending notice to a delinquent absent parent should be amended from "the State must take steps * * * to send notice on the day" to "send the advance notice on the day the delinquency reaches one month's support." The majority of commenters were opposed to tightening this requirement. In fact, many commenters suggested that the requirement be revised to require that States send the notice within alonger timeframe. Suggestions included 3 days, 5 days and one week.

Response: As previously stated, section 466(b)(3) of the Act requires that advance notice of the withholding be sent to the absent parent on the date on which the parent fails to make payments in an amount equal to the support payable for one month. Therefore, we cannot extend this timeframe. However, providing notice on the date the absent parent is delinquent may be impossible in all cases. Therefore, we are retaining the current requirement to take steps to send the notice on that date.

3. Comment: In response to our request for comments, the majority of the commenters believed that regulations should not require that States process uncontested wage withholding cases more quickly than contested cases.

Response: Current requirements at õ303.100(d)(2) require notice to the employer to be sent immediately if the absent parent fails to contact the State within the period specified in the advance notice. Because we are establishing specific timeframes for taking actions in IV-D cases, we replaced "immediately" with "within 5 working days" in õ303.100(d)(2).

4. Comment: In response to our request for comments regarding whether wage withholding notices to employers should inform the employer when enrollment in employment-based medical insurance has been required by the support order, whether the IV-D agency should request the employer to alert the IV-D agency if the absent parent has not enrolled the child(ren), and whether the IV-D agency should request the employer to enroll the child(ren) if the absent parent has not, the majority of commenters indicated that none of the above suggestions are appropriate or within the scope of State laws. Commenters also pointed out that requiring these actions could potentially harm working relationship with employers at precisely the time when cooperation is necessary for effective wage withholding procedures.

Response: Because of possible conflicts with State law, we have not added these requirements. We want to clarify, however, that the requirement in õ303.6 to take appropriate enforcement action includes situations where there is noncompliance with an order requiring health insurance coverage. In accordance with õ303.31(b)(7) (formerly õ306.51(b)(7)), if health insurance is available to the absent parent at reasonable cost and has not been obtained at the time the order is entered, the State must take steps to enforce the health insurance coverage required by the support order.

5. Comment: Commenters stated that the requirement that States must initiate any other enforcement techniques as appropriate within 30 working days of identifying a delinquency would not allow sufficient time to verify an address for service of process, gather enough information to refer the case to an attorney, prepare the case for trial and prepare interrogatories. In addition, commenters requested clarification of "initiate" for purposes of meeting the timeframe when the State uses administrative procedures, such as debt collection agencies and telephone collection techniques. These commenters were concerned that this requirement implies that States must file a petition for enforcement because there would not be sufficient time to allow for calling the absent parent in or using other techniques not included in the mandatory techniques specified in õ302.70(a).

Response: Because States must have and use expedited processes for the enforcement of child support obligations, we believe it is necessaryto revise õ303.6 for consistency with the changes to the expedited processes timeframe starting date discussed previously. It is essential that cases enter expedited processes as soon as the State obtains necessary jurisdiction over the absent parent to allow enforcement of the support obligation. However, we believe it is also necessary to account for situations in which States attempt to enforce obligations by consent or using other administrative enforcement techniques before filing a petition for enforcement of a support obligation. Section 303.6(c)(2) is revised to require that the State take any appropriate enforcement action (except income withholding and Federal and State income tax refund offset) unless service of process is necessary, within no later than 30 calendar days of identifying a delinquency or other support-related noncompliance with the order or location of the absent parent, whichever occurs later. When service of process is necessary prior to taking an enforcement action, service must be completed (or unsuccessful attempts to serve process must be documented in accordance with the State's guidelines under õ303.3(c)) and enforcement action taken, if process is served, within no later than 60 calendar days of identifying a delinquency or other support related noncompliance with the order or location of the absent parent, whichever occurs later. Therefore, within this timeframe, States may enforce support obligations by consent, use of administrative procedures such as debt collection, telephone contact, demand letters, or publication of names, for example, and/or file a petition to enforce by legal action. Accomplishing enforcement by consent would be allowable at any time. The date of successful service of process would then be the date when expedited timeframes commence. We want to point out that States are not required to use a specific enforcement technique if that technique is determined to be inappropriate in accordance with the guidelines allowed in õ302.70(b).

6. Comment: With regard to the requirement that States must submit once a year, all cases which meet the certification requirements for State and/or Federal income tax refund offset, commenters were most concerned about complying with this requirement before States are fully automated. Commenters pointed out that often collections from prior years would not be all received or applied before it would be time to certify again. In addition, commenters were concerned that requiring certification does not give the custodial parent an opportunity to object to the action. Finally, commenters also requested that we clarify which State, in an interstate case, is required to submit past-due support for Federal income tax refund offset.

Response: In response to State concerns that amounts offset from prior years may not be received or applied by the date States are required to submit amounts for Federal income tax refund offset, past-due support submitted for offset must meet the certification requirements for Federal income tax refund offset, under which the State must verify the amount of past-due support. If the State cannot assure that the past-due support is the correct amount owed, submittal is not required. However, given the timeframe for transmission of offset collection information from OCSE to the States and the schedule for submission of the next round of certifications from the States to OCSE, such situations should be the exception rather than the rule. With respect to custodial parents' right to refuse to have past-due support submitted for offset, we reiterate our longstanding position that, whenan individual receives IV-D services, they may not dictate which services they receive. Tax refund offset has proven to be a very successful enforcement technique and its use is essential to ensure children receive the support they deserve.

With respect to the question about which State in an interstate, non-AFDC case may submit past-due support for Federal income tax refund offset, in accordance with õ303.72(a)(4), the State in which an application for IV-D services has been filed pursuant to õ302.33, (i.e., the initiating State), must submit the past-due support for offset. This is consistent with the requirement that past-due support owed in AFDC cases must be submitted by the State in which there is an assignment of support rights to the State under õ232.11, (in interstate cases, generally the initiating State), it is necessary to specify which State must submit past-due support owed in non-AFDC cases for Federal tax refund offset to avoid both States submitting the same arrearages. The initiating State is in the best position to pay the custodial parent any amount offset quickly and to handle any necessary adjustments to the amount of offset based on an amended tax return.

7. Comment: The majority of the commenters requested clarification regarding the requirement in proposed paragraph (c)(4) that in cases where previous enforcement attempts have been unsuccessful, the State must examine the factors quarterly and initiate appropriate enforcement techniques as appropriate.

Response: As stated in the preamble to the proposed rule, this requirement was added to ensure that States keep abreast of case circumstances so that when the potential for resumed enforcement efforts occurs, States would initiate appropriate enforcement techniques. We do not intend that State re-exercise enforcement techniques which are inappropriate given case circumstances or attempt enforcement when circumstances which caused initially unproductive enforcement attempts have not changed. For clarity, we have revised paragraph (c)(4) to require that, in cases in which enforcement attempts have been unsuccessful, the State must, at the time an attempt to enforce fails, examine the reason the enforcement attempt failed and determine when it would be appropriate to take an enforcement action in the future, and take an enforcement action at that time. When a case cannot be enforced because of unemployment or insufficient income, the State should return the case to the "locate" function for quarterly and annual checks on changes in income and assets.

Procedures for Case Assessment- Section 303.10

Comment: We received a number of comments arguing that, because cases must be processed within the required timeframes, States may not prioritize cases.

Response: We disagree with these comments. States may establish a case assessment system which meets the requirements of õ 303.10 and which allows the State to prioritize which cases to work first, within the timeframes for case processing. Case prioritization is not a system to determine which workable cases not to work; case closure criteria in õ 303.11 allow States to close cases which have little or no potential for success either currently or in the future.

Case Closure Criteria- Section 303.11

Section 303.11(b)- Criteria for Case Closure

a. General- 1. Comment: Some commenters asked whether a case must be closed if the case met one or more of the criteria enumerated in paragraph (b) or whether States could exercise discretion in opting not to close some cases which qualified for closure.

Response: A State may opt to continue to work a case that otherwise qualifies for closure under paragraph (b) if it believes that there is potential for success. A State may also elect to establish criteria for closure which make it harder to close a case than those established in paragraph (b).

2. Comment: Other commenters proposed that we add a provision under which States may close a case which does not fit any criterion established in paragraph (b), but in which the State has determined closure is appropriate.

Response: We have not included this proposal in the regulation because it is open-ended and contrary to the purpose of establishing clear and concise standards which preclude premature or inappropriate closing of cases. However we have, elsewhere in this section, modified or expanded the criteria in response to comments which identified specific areas in addition to those proposed where closure is appropriate.

3. Comment: Several commenters asked if a support order or arrearages which accrued under that order are affected when a IV-D case is closed.

Response: Case closure does not affect the support order or arrearages which have accrued under the order; it only means that services under the IV-D program will no-longer be provided. Although the IV-D agency closes a case, the support order remains in effect and arrearages continue to accrue for the life of the order. In accordance with the requirements of section 466(a)(9) of the Act and õ303.106, these arrearages are judgments by operation of law and are subject to enforcement.

4. Comment: Several commenters felt that additional time should be allowed for IV-D agencies to establish a case closure system, review existing cases to determine if closure is appropriate, and close cases which meet one or more of the criteria, since case closure was not previously addressed in regulations.

Response: We believe that States can comply with this requirement by October 1, 1990, since States are not required to close all cases which meet the criteria.

5. Comment: One State asked that, for audit purposes, any open case meeting at least one of the closure criteria be considered closed and not affect the State's performance with regard to substantial compliance. In a related comment on the audit, the State questioned whether the IV-D agency must properly close all cases which meet closure criteria, or that all cases closed must meet the criteria.

Response: The establishment of case closure criteria is designed to limit cases the State may close to those in which there is no reasonable expectation of establishing paternity, obtaining a support order, or collecting child or spousal support, either now or in the future. Any case which meets the criteria for case closure, as demonstrated by the State during the course of the audit, would be considered unworkable andwould not count against the State for purposes of the audit. For purposes of auditing case closure requirements, the auditors will review cases which have been closed to determine if the IV-D agency properly applied the criteria for closure.

6. Comment: Commenters also suggested that the regulations establish a special category of "inactive cases" in order to minimize the administrative costs associated with the closing and subsequent reopening of certain cases.

Response: Since States are not required to close all cases meeting case closure criteria and will not be subject to audit penalties for those in which no action is currently possible, a "de facto" inactive file can be created since the State is not penalized for its failure to work these cases.

7. Comment: One commenter recommended that the regulations require States to submit their proposed criteria to OCSE for approval prior to implementation.

Response: States are responsible for meeting requirements in Federal regulations. While States may work with OCSE Regional Offices in developing case closure systems, we see no necessity for requiring prior approval of case closure systems.

b. No Current Order--õ303.11(b)(1) and (2)--1. Comment: We received many comments which were critical of proposed paragraphs (b)(1) and (2) establishing a $150 ceiling of arrearages below which the IV-D agency could close a case when there was no longer a current support order for cases involving both minor children and children who had reached the age of majority. A number of commenters argued that continued enforcement in arrears-only cases for arrearages of $150 or more was in most instances fruitless and not cost-effective. Several of these commenters recommended an increase in the level below which States could close all cases. Other commenters suggested that a separate $500 limit be applied to arrearages owed to non-minor children. In addition, we also received comments which recommended that closure be allowed in non-AFDC arrearage-only cases involving non-minor children where the arrearages accrued when the child was a minor and before application for IV-D services was made.

Response: Title IV-D of the Act does not limit application for, or availability of, IV-D services to minor children. Therefore, we cannot permit States to close non-AFDC arrearage-only cases involving non-minor children where the arrearages accrued when the child was a minor and before application for IV-D service was made. However, in response to comments, we raised the limit on arrearages to $500 in paragraphs (b)(1) and (2). Therefore, paragraph (b)(1) now allows case closure if a child has reached the age of majority, there is no current support order and arrearages are under $500 or unenforceable under State law. Paragraph (b)(2) now allows case closure if a child has not reached the age of majority, there is no longer a current support order and arrearages are under $500 or unenforceable under State law.

2. Comment: Other commenters maintained that, by not allowing closure of arrearage-only cases for non-minors when arrears were above a certain level, we were mandating a service in these cases when regulations at õ303.1 give the State an option of whether or not to provide services in cases in which there are no minor children.

Response: Section 466(e) of the Act and õ303.1 provide States the option of whether or not to collect overdue support using the mandatorypractices in õ302.70 (wage withholding, State income tax offset, etc.) for children who are not minors. These provisions do not allow States to choose not to provide any services in cases in which there are no minor children. As discussed above, the State may not refuse to enforce past-due court or administratively-ordered support owed to emancipated children in non-AFDC IV-D cases, unless there is no current support order and arrearages are under $500 or unenforceable under State law, as discussed above.

3. Comment: One commenter suggested that arrearages under paragraphs (b) (1) and (2) be expanded to include outstanding medical bills for which the absent parent is responsible.

Response: IV-D agencies are required to collect medical support only if a specific dollar amount for medical support is designated in the order. Past-due cash amounts for medical support would be part of the arrearages accruing under a support order.

4. Comment: One State recommended that we include the death of the child for whom support was owed as an additional criterion for closing.

Response: The death of a child would constitute grounds for the termination of an order for current support. The IV-D agency would then either close the case under õ303.11(b)(1) or (2) if no arrearages were owed, or the arrears were below the established ceiling, or continue enforcement until such arrearages are reduced below the established ceiling. If the arrearages accrued pursuant to an order when the child was alive, the absent parent's obligation under that order for past-due support does not necessarily end with the death of the child.

5. Comment: We also received a suggestion that we include reconciliation of the custodial and absent parent with no arrearages owed the State as grounds for case closure.

Response: As stated in the preamble of the proposed rules, reconciliation is a valid reason for closure under paragraph (b)(2).

6. Comment: Another commenter asked that the regulation address cases in which the fact that there is no current order is temporary condition (i.e., absent parent has no current income) where circumstances may change in the future.

Response: These cases may not be closed under paragraphs (b)(1) or (2), but should be addressed as part of a State's case prioritization system and reviewed periodically for a change in status. If the absent parent attempts to have the order vacated under these circumstances by the court or administrative authority which issued the order, the IV-D agency should argue that the order remain in effect and current payments be held in abeyance or tolled during the period the absent parent is unable to pay.

c. Death of Absent Parent and No Resources Available- õ303.11(b)3)- 1. Comment: Several commenters proposed that cases should be closed if there were no arrearages owed by the deceased parent which had been assigned to the State.

Response: We believe that this approach would not ensure that appropriate services are available to the many non-AFDC cases in the IV-D system where there is no assignment to the State. As we noted in the preamble to the proposed rules, delinquent absent parents may have assets which he or she has protected from collection procedures, and the parent's death may release these assets for collection by the IV-D agency.

2. Comment: One commenter indicated that the law in their Stateprovides that probate can be filed within three years, and the IV-D agency would have to wait that length of time to ascertain that assets were or were not available. Another commenter pointed out that it is difficult in these circumstances for the State to prove a negative proposition (i.e., that assets are not available).

Response: We agree with these comments and have changed the final rule to allow closure if the State has made documented attempts and failed to identify any assets which could be levied. However, if the IV-D agency has identified assets through its search, or the custodial parent has presented information regarding assets which can be verified, the State must keep the case open if it is possible that the assets can be reached for collection.

d. Unable To Establish Paternity- õ303.11(b)(4)- 1. Comment: We received many comments on this issue. Several commenters objected to proposed paragraph (4)(ii) which allows closure if a court or administrative process has excluded the putative father and no other putative father can be identified. Some commenters pointed out that if a genetic test excludes the putative father it would be foolhardy and a waste of public resources to try such cases in court or before an administrative hearing.

Response: We agree with this position and have inserted the phrase "A genetic test or" at the beginning of paragraph (4)(ii).

2. Comment: Another commenter requested that this criterion for closure include test results which do not exclude the putative father but indicate a "low probability" of paternity, since some courts will not determine paternity unless there is more compelling evidence to support the claim.

Response: While such cases are problematic, we do not believe that it is appropriate to use such a subjective standard for closure. These cases should be pursued unless a genetic test or a court or administrative process excludes the putative father and no other putative father can be identified.

3. Comment: Several other commenters pointed out that paragraph (4)(iii), which allows closure when it is in the best interest of the child, only references õ303.5(b) which involves paternity cases involving incest, forcible rape, or where legal adoption proceedings are pending. These commenters pointed out that this definition was inconsistent with the provisions of õ232.42 which defined good cause for AFDC cases as physical or emotional harm to the child, custodial parent or caretaker relative.

Response: Cases which may be closed as a result of a good cause finding under the AFDC program are addressed in õ303.11(b)(10). Section 303.5 includes, for IV-D purposes, a separate definition with respect to paternity establishment cases.

e. Unable To Locate For Three Years- õ303.11(b)(5)-Comment: We specifically requested comments on this provision which would allow a case to be closed when the absent parent's location is unknown, and the State has made regular attempts over a three-year period, all of which have been unsuccessful. Several commenters asked that no time limit be placed in this criterion for closure, and were concerned that the custodial parent would never be able to prove a change in circumstance to reopen a case. Other commenters recommended that the three-year requirement did not allow enough time for location attempts. Another commenter requested that this criterion be deleted and that theregulation mandate that these cases be maintained in a suspense file with annual locate submissions. We received a parallel number of comments that the three-year requirement was too long, and that the IV-D agency would be able to determine if location was futile after one to two years of regular locate attempts. Other commenters supported the three-year requirement if quarterly locate attempts are made.

Response: We have retained the three-year requirement because we believe that if adequate information exists to meet the requirements for submittal for location, quarterly locate attempts, including those listed under õ303.3, over a three-year period are sufficient. Again, States may choose to keep cases open and continue location for more than 3 years.

f. Absent Parent Institutionalized or Incarcerated-õ303.11(b)(6)-Comment: Several commenters maintained that the criterion for closure should include parents who, although not institutionalized or incarcerated, are unable to pay currently or in the foreseeable future because of total and permanent disability. In addition, many commenters felt that the five-year limit for institutionalization and the 12-year limit for incarceration without parole were excessive, maintaining that many cases which were unworkable with extremely low chances for any future collections would be kept open with a resulting negative impact on the best use of the State's resources. Some felt that the time limits were irrelevant, and that the only test should be that the absent parent cannot pay for the duration of the child's minority.

Response: In response to these comments, we are dropping the five- and 12-year time limits and have added a category where the absent parent has a medically verified permanent and total disability with no evidence of support potential. The revised language now reads: The absent parent cannot pay for the duration of the child's minority because the parent has been institutionalized in a psychiatric facility, is incarcerated with no chance of parole, or has a medically verified total and permanent disability with no evidence of support potential. We have retained the second sentence regarding income and assets which may be available.

g. Absent Parent Citizen of and Lives in a Foreign Country-õ303.11(b)(7).- 1. Comment: Two States recommended that the criterion that refers to an absent parent who is a citizen of a foreign country include residents and members of American indian tribes living on reservations. These commenters pointed out that in most cases States do not have legal jurisdiction to establish or enforce child support orders on tribal lands, and for all intents and purposes these cases jurisdictionally resemble a sovereign nation.

Response: While we realize a difficulty of providing services in these cases, we believe that American Indians should not be included in this category. Indians are American citizens and therefore subject to certain legal procedures both on and off the reservation. Federal income tax refund offset is available, and income withholding is required if tribal members work outside of the reservation. We also encourage States to enter into cooperative agreements or other arrangements with Tribal entities which would establish jurisdiction for child support matters by the State, or the Tribe acting for the State. In addition, States are not penalized for these open cases by auditors, where the Indian absent parent is a resident of and works on a reservation and no means exist to obtain jurisdiction over the absent parent to obtain orenforce a support order.

2. Comment: Other commenters felt that if a State was unable to assert personal jurisdiction over the absent parent or the absent parent had no reachable domestic income, the case should be closed.

Response: We believe these cases can still be worked where reciprocity between a State and a foreign jurisdiction has been established.

h. Locate Only Cases- õ 303.11(b)(8)- 1. Comment: One commenter suggested that cases in which a locate only application has been made be closed only when location services have been "successfully" completed.

Response: There is no guarantee that location attempts will be successful.

Suggested New Criteria

i. Unable To Locate Custodial Parent- õ303.11(b)(11)- 1. Comment: We received the greatest number of comments from States who pointed out that they cannot work many cases where the custodial parent who applied for non-AFDC services can no longer be located despite repeated attempts to contact the client by the IV-D agency.

Response: We believe that this is a reasonable criterion for closure, but we are also concerned that such a criterion take into account periodic absences of custodial parents who may be unavailable due to vacations, business travel or family emergencies. Consequently, we are adding a new paragraph (b)(11) which would allow closure in non-AFDC cases if the IV-D agency is unable to contact the custodial parent over a 30 calendar day period despite attempts to contact the parent by both phone and letter, including at least one registered letter. The 60 day notice of case closure required by paragraph (c) will also allow those parents who want continuing services to avoid closure by contacting the

IV-D agency.

j. Failure To Cooperate by the Non-AFDC Custodial Parent (new) 303.11(b)(12)- 1. Comment: We receive many comments by States and other organizations who requested that non-cooperation by the custodial parent (failure to attend hearings, refusal to sign forms, etc.) in non-AFDC cases be addressed.

Response: In response to these comments, we are establishing a new paragraph (b)(12) which allows closure for non-cooperation in non-AFDC cases, but only when the case file documents the circumstances of the

non-cooperation and that an action by the custodial parent is essential for the next step in providing services. We would also point out that the custodial parent may avoid closure by responding with the necessary cooperation during the 60-day notice period required under paragraph (c).

k. Custodial Parent moves out of State- Comment: A number of States requested that case closure be allowed when the custodial parent moves to another State.

Response: This is not an appropriate justification for closing a case. There is no residency requirement for provision of IV-D services in either the Federal statutes or regulations. More specifically, section 454(6) of the Act and õ302.33 require that States must provide child support collection or paternity determination services to any individual not otherwise eligible for such services upon an application filed by that individual. A IV-D agency may close a case in which the custodialparent moves from the State only if the case meets one of the criteria enumerated in paragraph (b) of this section, or when the State is aware that the custodial parent has applied for services in another State.

1. 60-day Notice of Closing To Custodial Parent- õ303.11(c)- Comment: We received a number of comments on this provision. Some commenters felt that such a provision would mean that custodial parents would be entitled to a bearing during the 60-day period to contest the closure. Other commenters wondered why such a 60-day notice was given unless the custodial parent had a chance to contest. Other commenters felt the 60-day period was too long when compared to the case processing timeframes the State must meet.

Response: We have retained the 60-day notice requirement, but added that the custodial parent may, during that time, request that the case be kept open upon the presentation of new information which constitutes changed circumstances or when contact with the custodial parent has been reestablished in certain non-AFDC cases. We believe that hearings would not be justified in these cases because the criteria clearly limits the circumstances qualifying for closure, and the custodial parent's opportunity to provide new information will ensure that all cases with potential will be worked. Conversely, there is no absolute right to IV-D services where basic information is lacking.

m. Retention of Records for Three Years- 1. Comment: One State asked if, instead of destroying case files after one year it could archive such records, and an organization suggested that files be retained indefinitely on microfiche and not destroyed.

Response: As stated earlier, none of the case closure criteria requires the States to take any action if a State decides, under its own criteria, to work or archive cases. The requirement for retaining all records for cases closed for a period of three years is a Federal provision at 45 CFR Part 74, Subpart D. This is a minimum requirement and States may choose to retain records for a longer period, as discussed above. States may want to consider maintaining some type of minimal case record file beyond the 3-year requirement when the IV-D agency closes an active AFDC case.

Minimal Organizational and Staffing Requirements- Section 303.20

a. Organizational Structure and Sufficient Resources- õ303.20(c)

1. Comment: Several commenters felt that this requirement was a critical provision which could be used by State and local jurisdictions to allocate resources and review priorities in a manner which could be most beneficial to the child support enforcement program. Other commenters, while supportive of the overall intention of this provision, felt that OCSE should either establish standards for staffing and resources just as it did for State performance standards, or provide specific guidance on how States and localities should allocate resources.

Response: We believe that States and localities should establish

specific resource or staffing standards. As we emphasized in the preamble to the proposed regulations, this requirement has never been quantified as a national standard. Therefore, while we believe that it is highly beneficial for IV-D programs to establish such standards, OCSE is not establishing universal standards in this regulation because thereare factors which are unique to each State or locality. OCSE will, however, continue to provide technical assistance and disseminate relevant information pertaining to resource or staffing standards.

2. Comment: Several commenters recommended that OCSE commission a new study which would take into consideration the increased staffing requirements which States would need to meet in complying with the timeframes established in the standards for program operations.

Response: OCSE believes that a study of this type is not relevant to the issues at hand. Any study would, by necessity, be focused on a national base which would not be relevant to specific State and local circumstances and organizational differences. Moreover, simply focusing on staffing requirements ignores the need, attested to by program reviews and program audits, to carefully reassess organizational structures, work process flow policies and procedures, priorities and other facets of program management that go well beyond just the number of employees assigned to a task.

3. Comment: Several States felt that this requirement signaled a shift in Federal priorities by emphasizing procedural and organizational standards to the detriment of results-oriented policies previously established through incentive payments and emphasis on cost/benefit ratios. Some commenters suggested that OCSE revise its incentive formulas to take into account that performance as measured by increased collections is no longer a priority. One locality complained that the Federal requirement would force the doubling of staff providing IV-D services.

Response: The requirements of this section are designed, in part, to correct problems in State and local operations identified by both the

previously cited GAO report and OCSE program reviews and audits One of the conclusions which can be drawn from these reports is that many States and localities were not effective in either establishing paternity or establishing and enforcing support orders.

The requirements at issue do not signal a shift in priority; from its

inception in 1975, the focus of the Child Support Enforcement program has been to establish paternity and to collect support. When States are not in substantial compliance with standards for program operations, it is incumbent upon the Federal government to stimulate effective and prompt remedial action. To do otherwise is to ignore both the pressing need for vigorous child support enforcement and allow a perpetuation of the operational deficiencies found in examinations of State and local program performance.

Executive Order 12291

Comment: We received several comments with regard to the statement in the preamble that this rule does not constitute a "major" rule. Commenters believed that it is a major rule because it is likely to result in a major increase in cost for State government agencies. Many commenters were opposed to the statement that States should reallocate existing resources to concentrate efforts on child support enforcement because a transfer of funds would cripple the losing program and be in conflict with employees' union contracts. Commenters requested that we submit the regulation for review under Executive Order 12291.

Response: Given the fact that we have extended the timeframes for action in the final rule, we do not believe that implementation of thisregulation would require a sufficient increase in staff to necessitate the transfer of resources from other programs to IV-D programs unless a State or local jurisdiction, on its own initiative, decided to proceed in this manner. Moreover, the financing structure of the IV-D program itself makes it a very profitable enterprise for State and local government, with great potential to expand upon the direct payoff to government and the cost avoidance value of the program even if an infusion of resources is required to enhance operational performance. We believe that the revised standards and timeframes are within the grasp of any well-managed IV-D agency. However, recognizing that substantial resources will be needed to implement these new standards, we have prepared a Regulatory Impact Analysis (see section below).

Economic Impact

The Child Support Enforcement program was established under title

IV-D of the Act by the Social Services Amendments of 1974, for the purposes of enforcing the support obligations owed by absent parents to their children, locating absent parents, establishing paternity and obtaining child support. The IV-D program collected some $4.7 billion in FY 1988--over $1.5 billion on behalf of children receiving AFDC and the remainder on behalf of children not receiving AFDC. State and local expenditures amounted to $1.2 billion. Collections for AFDC families, after a $50 disregard, are used to offset the costs of assistance payments made to such families. The intent of this final regulation is to improve the efficiency and effectiveness of IV-D programs. Because this final rule strengthens and clarifies existing program operations regulations, it is expected that State performance will improve and cases will be worked more effectively. It is expected that any increase in administrative costs will be more than offset by increase in collections. The principal impact of the regulation will be on State operations. State expenditures may increase initially; however, we believe that the increase will be more than offset by the increase in collections and by the avoidance of governmental assistance costs that would otherwise be incurred and therefore, a net savings to State governments will result.

Executive Order 12291

In accordance with Executive Order 12291, we are required to prepare a Regulatory Impact Analysis for any "major" rule. A major rule is one that is likely to result in:

(1) An annual effect on the economy of $100 million or more:

(2) A major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions; or

(3) Significant adverse effects on competition employment, investment, productivity, innovation, or the ability of United States-based enterprises to compete with foreign-based enterprises in domestic or export markets.

This rule meets none of these criteria with the possible exception of an annual effect on the economy of $100 million or more. Although the fiscal effects of this rule cannot be predicted with precision, anddepend on individual State implementation decisions, it is possible that administrative costs will rise by $100 million or more within the five-year period that we use for analyzing impacts, and likely that AFDC collections will rise by several hundred million dollars annually. Therefore, although the net effect of the rule on both States and society will be positive, we have prepared the following analysis which, together with the remainder of this preamble, meets the requirements of E.O. 12291.

The rule establishes performance standards for processing child support cases. Most of these standards contribute directly or indirectly to increasing the speed or likelihood of payment of child support. Most of them do not inherently require additional resources to administer, either because they affect the timing rather than the amount of work, or because the deadlines involved require changes rather than increases in resource use (e.g., change internal State procedures for accessing records to provide more timely response). And some can reduce administrative costs, depending on how implemented.

Nonetheless, these standards will increase the number of cases successfully resulting in payment of support obligations, and therefore will necessarily entail additional costs for the work performed on cases which would not otherwise have been successfully handled. In particular, we do not expect that a State with large numbers of cases per caseworker will be able to comply with these rules without an increase in caseworker staff.

The real challenge this rule presents most States is the need to review and in many cases radically change existing bureaucratic procedures. For example, a State which relies on sequential, totally manual, multi-agency transfer and review procedures for tracking payments and issuing checks will have difficulty meeting the 15-day deadline for payments to families even if it adds substantial clerical resources to each stage of the process. Substantial changes in handling distribution of collections, service of process, access of data bases used for location of absent parents, and other cross-agency functions and procedures may be needed in many States.

As discussed in detail elsewhere in this preamble, we considered numerous alternatives and made substantial changes in these standards from those originally proposed. In reaching decisions on the final standards we sought to maximize State flexibility wherever possible. For example, we decided to replace a number of more detailed location standards with an "umbrella" standard requiring accessing all appropriate location sources within 75 calendar days. In devising each standard we considered all comments and other information on feasibility and in every case imposed a standard which was clearly implementable at reasonable cost in a well-managed program. Any reasonable standards would necessarily require most States to review and revise procedures.

Of course, nothing in this rule dictates the precise methods by which States achieve these standards. To the contrary, we are well aware that each State has unique administrative structures and implementation procedures now, and expect that future solutions will be almost equally diverse. We have sought to provide maximum flexibility for each State to devise whatever changes it finds most cost-effective.

A final issue concerns timing. As discussed elsewhere in this preamble, we believe Congress did not intend the effective date of this regulation to be inordinately delayed. However, while the effectivedate of these requirements is October 1, 1990, we extended or revised many of the proposed timeframes to take into consideration the concerns and alternative timeframes suggested by many States. Regardless, States have known for many years that reforms were needed, have known for almost a year that changes would have to be made under the Family Support Act requirements, and have more than a year to initiate actions to meet the specific requirements of this final rule. While the requirements are effective on October 1, 1990, in reality, States have time after that date to fine-tune State processes and avoid paying fiscal penalties. A State would not pay a penalty for failing to substantially comply with the new requirements until, at the earliest, the beginning of FY 1993. If however, the State took corrective action in accordance with Federal requirements within a year of notification of non-compliance, the State would pay no penalty at all.

We suggested in the preamble to the NPRM, purely as an example, that transfers of staff from other functions and agencies was one approach that some States might consider to expedite augmenting child support functions (other options include recruitment of new staff, use of contract assistance to clear up backlogs, etc.). To the extent that long lead times are needed (e.g., to plan and implement ADP systems) States can also consider systems which can be implemented more rapidly and leave more ambitious systems for future years. In this regard, this Department commits itself to reviewing required ADP plans with the greatest possible speed, taking into account the deadlines these standards impose.

The case closure criteria contained in õ303.9 should result in improved performance of State IV-D agencies because they will ensure that available resources are focused on IV-D cases in which there is a potential for paternity establishment and support order establishment and enforcement. They will allow States to close unworkable cases and improve the management of their caseloads. Increased efforts focused on workable cases should result in increased collections, greater avoidance of governmental assistance costs and commensurate savings to the State and Federal governments.

In summary, whatever the unavoidable effect of this rule on administrative processes, an effect which each State has maximum flexibility to determine, it has a net beneficial impact on State budgets. Like the overall program, which returns States in excess of $380 million annually (through reductions in AFDC payments, Federal matching of administrative costs, and Federal incentive matching) in excess of administrative costs, the increase of child support payments made is likely to return through AFDC collections alone more than double the amount spent on processing cases. States will retain most of this increment. Therefore, the net effects of this rule will not only be financially beneficial to States, but will simultaneously improve the operation of child support enforcement from every perspective, including especially that of beneficiaries of increased and more timely child support payments.

Regulatory Flexibility Analysis

The Secretary certifies, under 5 U.S.C. 605(b), as enacted by the Regulatory Flexibility Act (Pub. L. 96-354), that this regulation will not result in a significant impact on a substantial number of smallentities. The primary impact is on State governments and individuals, which are not considered small entities under the Act.

List of Subjects

45 CFR Part 232

Aid to families with dependent children, Child support, Grant programs--Social programs.

45 CPR Parts 301, 303 and 304

Child support, Grant programs--Social programs, Penalties, Reporting and recordkeeping requirements, Unemployment compensation.

45 CFR Part 302

Child support, Grant programs-Social programs, Reporting and recordkeeping requirements, Unemployment compensation.

45 CFR Part 306

Child support, Grant program-social programs, Medicaid, Reporting and recordkeeping requirements.

45 CFR Part 307

Child support, Grant programs-social programs, Computer technology, Reporting and recordkeeping requirements.

(Catalog of Federal Domestic Assistance Program No. 13.783, Child Support Enforcement Program.)

Dated: July 14, 1989.

Catherine Bertini,

Acting Director, Office of Child Support

Enforcement.

Approved: July 26, 1989.

Louis W. Sullivan,

Secretary

For the reasons set forth in the preamble, 45 CFR Parts 232, 301 through 304, 306 and 307 are amended as set forth below.

PART 232-[AMENDED]

1. The authority citation for Part 232 continues to read as follows:

Authority: 42 U.S.C. 1302.

2. Section 232.20(d) is revised to read as follows:

õ232.20 Treatment of child support collections made in the ChildSupport Enforcement Program as income and resources in the Title

IV-A Program.

* * * * *

(d) The State plan must provide that the IV-A agency, on behalf of the IV-D agency, will send to the family the sum disregarded under õ302.51(b)(1) within 20 calendar days of the date of initial receipt in the State of the first $50 of support collected in a month, or, if less than $50 is collected in a month, within 20 calendar days of the end of the month in which the support was collected.

PART 301-[AMENDED]

1. The authority citation for part 301 continues to read as follows:

Authority: 42 U.S.C. 651 through 658, 660, 664, 666, 667, 1302, 1396(a)(25), 1396(d)(2), 1396b(o), 1396b(p) and 1396(k).

õ301.1 [Amended]

2. Section 301.1 is amended by removing the paragraph designations; by moving the definitions of "Medicaid agency and "Medicaid" which are currently in õ306.1(b) and (c); by moving the definition of "Political subdivision" which is currently in

õ 303.52(a); and placing the definitions in alphabetical order.

PART 302-[AMENDED]

1. The authority citation for Part 302 continues to read as follows:

Authority: 42 U.S.C. 651 through 658, 660, 664, 666, 667, 1302, 1396a(a)(25), 1396b(d)(2), 1396b(o), 1396b(p), and 1396(k).

2. Section 302.32 is amended by the revising the title and first sentence of paragraph (b) and adding paragraph (f) to read as follows:

õ302.32 Collection and distribution of support payments by the IV-D agency.

* * * * *

(b) The IV-D agency must inform the State's IV-A agency of the amount of the collection which represents payment on the required support obligation for the month as determined in õ302.51(a) within 10 working days of the end of the month in which the support is received by the IV-D agency responsible for final distribution. * * * * *

(f) Timeframes for distribution of support payments. (1) In Interstate IV-D cases, amounts collected by the responding State on behalf of the initiating State must be forwarded to the initiating State within 15 calendar days of the initial point of receipt in the responding State, in accordance with õ303.7(c)(7) (iv).

(2) Amounts collected by the IV-D agency on behalf of recipients of aid under the State's title IV-A or IV-E plan for whom an assignment under õ232.11 of this title or section 471(a)(17) ofthe Act is effective shall be distributed as follows:

(i) When the IV-D agency sends payments to the family under õ302.51(b)(1) of this part, payments to the family must be sent to the family within 15 calendar days of the date of initial receipt in the State of the first $50 of support collected in a month, or, if less than $50 is collected in a month, within 15 calendar days of the end of the month in which the support was collected. When the IV-A agency sends payments to the family under õ302.51(b)(1) of this part, the IV-D agency must forward any amount due the family under õ302.51(b)(1) to the IV-A agency within 15 calendar days of the date of initial receipt in the State of the first $50 of support collected in a month, or, if less than $50 is collected in a month, within 15 calendar days of the end of the month in which the support was collected.

(ii) Except as specified under paragraph (f)(2)(iv) of this section, collections for the month after the month the family receives its last assistance payment and collections distributed under õ302.51(b)(3) and (5) of this part must be sent to the family within 15 calendar days of the date of initial receipt in the State of a collection for the first month of ineligibility.

(iii) Except as specified in paragraph (f)(2)(iv) of this section, collections in IV-E foster care cases under õ301.52(b)(2) and (4) of this part must be distributed within 15 calendar days of the date of initial receipt in the State.

(iv) Collections as a result of Federal or State income tax refund offset paid to the family under õ302.51(b)(5) of this part, or distributed in title IV-E foster care cases under õ302.52(b)(4) of this part, must be sent to the AFDC family or IV-E agency, as appropriate, within 30 calendar days of the date of initial receipt by the IV-D agency, unless State law requires a post-offset appeal process and an appeal is filed timely, in which case the IV-D agency must send any payment to the AFDC family or IV-E agency within 15 calendar days of the date the appeal is resolved.

(3) Amounts collected on behalf of individuals receiving services under õ302.33 of this part shall be distributed as follows:

(i) Amounts collected which represent payment on the current support obligation shall be sent to the family within 15 calendar days of the date of initial receipt in the State.

(ii) Except as specified in paragraph (f)(3)(iii) of this section, if the amount collected is more than the amount required to be distributed in paragraph (f)(3)(i) of this section, the State may at its discretion either send such amounts to the family to satisfy past-due support within 15 calendar days of the date of initial receipt in the State or retain such amounts as have been assigned to satisfy assistance paid to the family which has not been reimbursed.

(iii) Collections due the family under õ302.51(b)(5) as a result of Federal or State income refund offset must be sent to the family within 30 calendar days of the date of receipt in the IV-D agency, except:

(A) If State law requires a post-offset appeal process and an appeal is timely filed, in which case the IV-D agency must send any payment to the family within 15 calendar days of the date the appeal is resolved; or

(B) As provided in õ303.72(h)(5) of this chapter.

õ302.51 [Amended]

3. Section 302.51 is amended by changing all references to "õ303.52" to "õ304.12": by removing the last sentence "in any case in which collections are received by an entity other than the agency responsible for final distribution under this section, the entity must transmit the collection within 10 days of receipt." in paragraph (a); and by removing the sentence "This payment shall be made in the month following the month in which the amount of the collection was used to redetermine eligibility for an assistance payment under the State's title IV-A plan." in paragraphs (b)(3) and (5).

õ302.55 [Amended]

4. Section 302.55 is amended by changing reference to "õ303.52" to "õ304.12" and the reference to "õ303.52(d)" to "õ303.52."

õ302.80 [Amended]

5. Section 302.80 ia amended by removing the words "Subpart A of" in paragraph (a) and replacing the words "Subpart B of part 306" in paragraph (b) with the words "õõ303.30 and 303.31".

PART 303 [AMENDED]

1. The authority citation for Part 303 continues to read as follows:

Authority: 42 U.S.C. 651 through 658, 660, 663, 664, 666, 1302, 1396a(a)(25), 1396b(d)(2), 1396b(o), 1396b(p) and 1396(k).

2. Part 303 is amended as follows:

õ303.0 [Amended]

a. Section 303.0 is amended by removing the words "effective July 1, 1975;" in paragraph (a).

b. Section 303.2 is revised to read as follows:

õ303.2 Establishment of cases and maintenance of case records.

(a) The IV-D agency must:

(1) Make applications for child support services readily accessible to the public;

(2) When an individual requests an application or IV-D services, provide an application to the individual on the day the individual makes a request in person or send an application to the individual within no more than 5 working days of a written or telephone request. Information describing available services, the individual's rights and responsibilities, and the State's fees, cost recovery and distribution policies must accompany all applications for services and must be provided to AFDC, Medicaid and title IV-E foster care applicants or recipients within no more than 5 workingdays of referral to the IV-D agency: and

(3) Accept an application as filed on the day it and the application fee are received. An application is a written document provided by the State which indicates that the individual is applying for child support enforcement services under the State's title IV-D program and is signed by the individual applying for IV-D services.

(b) For all cases referred to the IV-D agency or applying for services under õ302.33 of this chapter, the IV-D agency must, within no more than 20 calendar days of receipt of referral of a case or filing of an application for services under õ302.33, open a case by establishing a case record and, based on an assessment of the case to determine necessary action:

(1) Solicit necessary and relevant information from the custodial parent and other relevant sources and initiate verification of information, if appropriate; and

(2) If there is inadequate location information to proceed with the case, request additional information or refer the case for further location attempts, as specified in õ303.3.

(c) The case record must be supplemented with all information and documents pertaining to the case, as well as all relevant facts, dates, actions taken, contacts made and results in a case.

c. Section 303.3 is revised to read as follows:

õ303.3 Location of absent parents.

(a) Definition. "Location" means information concerning the physical whereabouts of the absent parent, or the absent parent's employer(s), other sources of income or assets, as appropriate, which is sufficient and necessary to take the next appropriate action in a case.

(b) For all cases referred to the IV-D agency or applying for services under õ302.33 of this chapter, the IV-D agency must attempt to locate all absent parents or sources of income and/or assets when location is necessary to take necessary action under this standard, the IV-D agency must:

(1) Use appropriate location sources such as the Federal PLS; interstate location networks; local officials and employees administering public assistance, general assistance, medical assistance, food stamps and social services (whether such individuals are employed by the State or a political subdivision); relatives and friends of the absent parent; current or past employers; the local telephone company; the U.S. Postal Service; financial references; unions; fraternal organizations; and police, parole, and probation records if appropriate; and State agencies and departments, as authorized by State law, including those departments which maintain records of public assistance, wages and employment, unemployment insurance, income taxation, driver's licenses, vehicle registration, and criminal records;

(2) Establish working relationships with all appropriate agencies in order to utilize locate resources effectively;

(3) Within no more than 75 calendar days of determining that location is necessary, access all appropriate location sources, including transmitting appropriate cases to the Federal PLS, and ensure that location information is sufficient to take the nextappropriate action in a case;

(4) Refer appropriate cases to the IV-D agency of any other State, in accordance with the requirements of õ303.7 of this Part. The IV-D agency of such other State shall follow the procedures in paragraphs (b)(1) through (5) of this section for such cases, as necessary, except that the responding State is not required to access the Federal PLS under paragraph (b)(3) of this section:

(5) Repeat location attempts in cases in which previous attempts to locate absent parents or sources of income and/or assets have failed, but adequate identifying and other information exists to meet requirements for submittal for location, either quarterly or immediately upon receipt of new information which may aid in location, whichever occurs sooner. Quarterly attempts may be limited to automated sources but must include accessing State employment security files. Repeated attempts because of new information which may aid in location must meet the requirements of paragraph (b)(3) of this section; and

(6) Submit to the Federal PLS at least annually cases in which location is needed and previous attempts to locate have failed and which meet the requirements for submittal.

(c) The State must establish guidelines defining diligent efforts to serve process. These guidelines must include periodically repeating service of process attempts in cases in which previous attempts to serve process have failed, but adequate identifying and other information exists to attempt service of process.

d. The introductory text of õ303.4 is republished and the section is amended by adding new paragraphs (d) and (e) to read as follows:

õ303.4 Establishment of support obligations.

For all cases referred to the IV-D agency or applying for services under õ302.33 of this chapter, the IV-D agency must:

* * * * *

(d) Within 90 calendar days of locating an absent parent or of establishing paternity, establish an order for support, or complete service of process necessary to commence proceedings to establish a support order (or document unsuccessful attempts to serve process, in accordance with the State's guidelines defining diligent efforts under õ303.3(c)).

(e) If the court or administrative authority dismisses a petition for a support order without prejudice, the IV-D agency must, at the time of dismissal, examine the reasons for dismissal and determine when it would be appropriate to seek an order in the future, and seek a support order at that time.

e. Section 303.5 is amended by revising paragraphs (a) and (c) to read as follows:

õ303.5 Establishment of paternity.

(a) For all cases referred to the IV-D agency or applying for services under õ302.33 of this chapter in which paternity has not yet been established:

(1) The IV-D agency must, within no more than 90 calendar daysof locating the alleged father, file for paternity establishment or complete service of process to establish paternity (or document unsuccessful attempts to serve process, in accordance with the State's guidelines defining diligent efforts under 303.3(c)), whichever occurs later in accordance with State procedures for paternity establishment.

(2) Paternity must be established or the alleged father excluded as a result of genetic tests and/or legal process within one year of the later of:

(i) Successful service of process; or,

(ii) The child reaching 6 months of age.

(3) In any case where an alleged father is excluded but more than one alleged father has been identified, the IV-D agency must meet the requirements set forth in paragraph (a)(1) and (2) of this section for each alleged father identified.

* * * * *

(c) The IV-D agency must identify and use through competitive procurement laboratories which perform, at reasonable cost, legally and medically acceptable genetic tests which tend to identify the father or exclude the alleged father. The IV-D agency must make available a list of such laboratories to appropriate courts and law enforcement officials, and to the public upon request.

f. Section 303.6 is revised to read as follows:

õ303.6 Enforcement of support obligations.

For all cases referred to the IV-D agency or applying for services under õ302.33 in which the obligation to support and the amount of the obligation have been established, the IV-D agency must maintain and use an effective system for:

(a) Monitoring compliance with the support obligation;

(b) Identifying on the date the parent fails to make payments in an amount equal to the support payable for one month, or on an earlier date in accordance with State law, those cases in which there is a failure to comply with the support obligation; and

(c) Enforcing the obligation by:

(1) Initiating income withholding, in accordance with 303.100; or

(2) Taking any appropriate enforcement action (except income withholding and Federal and State income tax refund offset) unless service of process is necessary, within no more than 30 calendar days of identifying a delinquency or other support-related non-compliance with the order or the location of the absent parent, whichever occurs later. If service of process is necessary prior to taking an enforcement action, service must be completed (or successful attempts to serve process must be documented in accordance with the State's guidelines defining diligent efforts under õ303.3(c)), and enforcement action taken if process is served, within no later than 60 calendar days of identifying a delinquency or other support-related non-compliance with the order, or the location of the absent parent, whichever occurs later;

(3) Submitting once a year all cases which meet the certification requirements under õ303.102 of this part and State guidelinesdeveloped under õ302.70(b) of this title for State income tax refund offset, and which meet the certification requirements under õ303.72 of this part for Federal income tax refund offset; and

(4) in cases in which enforcement attempts have been unsuccessful, at the time an attempt to enforce fails, examining the reason the enforcement attempt failed and determining when it would be appropriate to take an enforcement action in the future, and taking an enforcement action in accordance with the requirements of this section at that time.

õ303.7 [Amended]

g. Section 303.7 is amended by adding the word "working" between the words "10" and "days" in paragraphs (a)(2), (b)(5), and (c)(5), (6) and (9); replacing the word "promptly" with the words "within 20 calendar days of determining that the absent parent is in another State" in paragraph (b)(2); adding the word "calendar" between the words "30" and "days" in paragraph (b)(4); and replacing the word "60" with the words "90 calendar" in paragraph (c)(4); adding the word "calendar" between the words "90" and "days" in paragraph (b)(6).

h. The introductory text of õ303.10(b) is republished and õ303.10 is amended by revising paragraphs (a), (b)(5) and (b)(6) to read as follows:

õ303.10 Procedures for case assessment and prioritization.

(a) The IV-D agency may implement a case assessment and prioritization system Statewide or a particular political subdivision of the State to manage its caseload. If a IV-D agency implements a case assessment and prioritization system, the IV-D agency must continue to meet the timeframes and case processing standards contained in this Part.

(b) In implementing a case assessment and prioritization system, the IV-D agency must:

* * * * *

(5) Prioritize cases after reviewing all intake information for accuracy and completeness and, if review indicates that additional information is needed, prioritize only after attempting to verify or secure the information in accordance with õ303.2.

(6) Establish a mechanism for the periodic review of low priority cases in accordance with the standards set forth in part 303, and for notifying the custodial parent in these cases that new information may result in a higher priority for the case.

i. A new õ303.11 entitled "Case closure criteria" is added to read as follows:

õ303.11 Case closure criteria.

(a) The IV-D agency shall establish a system for case closure.

(b) In order to be eligible for closure, the case must meet at least one of the following criteria:

(1) In the case of a child who has reached the age of majority, there is no longer a current support order and arrearages are under $500 or enforceable under State law;

(2) In the case of a child who has not reached the age of majority, there is no longer a current support order and arrearages are under $500 or unenforceable under State law;

(3) The absent parent or putative father is deceased and no further action, including a levy against the estate, can be taken;

(4) Paternity cannot be established because:

(i) The child is at least 18 years old and action to establish paternity is barred by a statute of limitations which meets the requirements of õ302.70(a)(5) of this chapter;

(ii) A genetic test or a court or administrative process has excluded the putative father and no other putative father can be identified; or

(iii) In accordance with õ303.5(b) of this part, the IV-D agency has determined that it would not be in the best interests of the child to establish paternity in a case involving incest or forcible rape, or in any case where legal proceedings for adoption are pending;

(5) The absent parent's location is unknown, and the State has made regular attempts using multiple sources to locate the absent parent over a three-year period, all of which have been unsuccessful;

(6) The absent parent cannot pay support for the duration of the child's minority because the parent has been institutionalized in a psychiatric facility, is incarcerated with no chance for parole, or has a medically-verified total and permanent disability with no evidence of support potential. The State must also determine that no income or assets are available to the absent parent which could be levied or attached for support;

(7) The absent parent is a citizen of, and lives in, a foreign country, does not work for the Federal government or a company with headquarters or offices in the United States, and has no reachable domestic income or assets; and the State has been unable to establish reciprocity with the country;

(8) The IV-D agency has provided location-only services as requested under õ302.35(c)(3) of this chapter:

(9) The non-AFDC custodial parent requests closure of a case and there is no assignment to the State of arrearages which accrued under a support order;

(10) There has been a finding of good cause as set forth at õõ302.31(c) and 232.40 through 232.49 of this chapter and the State or local IV-A or IV-E agency has determined that support enforcement may not proceed without risk or harm to the child or caretaker relative;

(11) In a non-AFDC case, the IV-D agency is unable to contact the custodial parent within a 30 calendar day period despite attempts by both phone and at least one registered letter: or

(12) In a non-AFDC case, the IV-D agency documents the circumstances of the custodial parent's noncooperation and an action by the custodial parent is essential for the next step in providing IV-D services.

(c) In cases meeting the criteria in paragraphs (b) (1) through (7) and (11) and (12) of this section, the State must notify the custodial parent in writing 60 calendar days prior to closure of the case of the State's intent to close the case. The case must be kept open if the custodial parent supplies information in response to the notice which could lead to the establishment of paternity or a support order or, in the instance of paragraph (b)(11) of this section, ifcontact is reestablished with the custodial parent. If the case is closed, the custodial parent may request at a later date that the case be reopened if there is a change in circumstances which could lead to the establishment of paternity or a support order or enforcement of an order.

(d) The IV-D agency must retain all records for cases closed pursuant to this section for a minimum of three years, in accordance with 45 CFR part 74, Subpart D.

j. Section 303.20 is amended by revising the introductory language in paragraph (c) and paragraph (c)(7) and adding new paragraph (g) to read as follows:

õ303.20 Minimum organizational and staffing requirements.

* * * * *

(c) There is an organizational structure and sufficient resources at the State and local level to meet the performance and time standards contained in this part and to provide for the administration or supervision of the following support enforcement functions:

* * * * *

(7) Enforcement. Activities to enforce collection of support including income withholding and other available enforcement techniques.

* * * * *

(g) If it is determined as a result of an audit conducted under part 305 of this chapter that a State is not in substantial compliance with the requirements of title IV-D of the Act, the Secretary will evaluate whether inadequate was a major contributing factor and if necessary, may set resource standards for the State.

õõ303.30 and 303.31 [Redesignated from õõ306.50 and 306.51 respectively]

k. Section 306.50 is redesignated as a new õ303.30 and õ306.51 is redesignated as a new õ303.31.

l. In õ303.52, the definition of "Political subdivision" is moved from paragraph (a) to õ301.1 and õ303.52 is revised to read as follows:

õ303.52 Pass-through of incentives to political subdivisions.

The State must calculate and promptly pay incentives to political subdivisions as follows:

(a) The State IV-D agency must develop a standard methodology for passing through an appropriate share of its incentive payment to those political subdivisions of the State that participate in the costs of the program, taking into account the efficiency and effectiveness of the activities carried out under the State plan by those political subdivisions. In order to reward efficiency and effectiveness, the methodology also may provide for payment of incentives to other political subdivisions of the State thatadminister the program.

(b) To ensure that the standard methodology developed by the State reflects local participation, the State IV-D agency must submit a methodology to participating political subdivisions for review and comment or use the rulemaking process available under State law to receive local input.

õ303.72 [Amended]

m. Section 303.72(g)(8) is amended by changing the reference to "õ303.52 to õ304.12".

õ303.73 [Amended]

n. Section 303.73(a)(1) is amended by changing the reference to "303.7(a)(3)" to "õ303.7".

õ303.100 [Amended]

o. Section 303.100 is amended by replacing the word "immediately" with the words "within 5 working days" in paragraph (d)(2) and by removing the word "promptly" after the word "distributed" in paragraph (e)(2).

õ303.101 [Amended]

p. Section 303.101(b)(2) is amended by replacing the words "from the time of filing" with "from the time of successful service of process".

õ303.102 [Amended]

q. Section 303.102(g)(1) is amended by removing the words "Within a reasonable time period in accordance with State law," and capitalizing the word "a" before the word "State".

PART 304-[AMENDED]

1. The authority citation in Part 304 continues to read as follows:

Authority: 42 U.S.C. 651 through 655, 657, 1302, 1396a(a)(25), 1396b(o), 1396b(p), and 1396(k).

2. Part 304 is amended as follows:

a. A new õ304.12 added to read as follows:

õ304.12 Incentive payments.

(a) Definitions. For the purposes of this section: "AFDC collections" means support collections satisfying an assigned support obligation under õ232.11 of this title or section 471(a)(17) of the Act, including collections treated in accordance with paragraph(b)(4)(ii) of this section.

"Non-AFDC Collections" means support collections, on behalf of individuals receiving services under this title, satisfying a support obligation which has not been assigned under õ232.11 of this title or section 471(a)(17) of the Act, including collections treated in accordance with paragraph (b)(4)(ii) of this section and collections made under õ302.51(e) of this chapter.

"Total IV-D administrative costs" means total IV-D administrative expenditures claimed by a State in a specified fiscal year adjusted in accordance with paragraphs (b)(4)(iii), (b)(4)(iv) and (b)(4)(v) of this section.

(b) Incentive payments to States. Effective October 1, 1985, the Office shall compute incentive payments for States for a fiscal year in recognition of AFDC collections and of non-AFDC collections.

(1) A portion of a State's incentive payment shall be computed as a percentage of the State's collections, and a portion of the incentive payment shall be computed as a percentage of its non-AFDC collections. The percentages are determined separately for AFDC and non-AFDC portions of the incentive. The percentages are based on the ratio of the State's AFDC collections to the State's total administrative costs and the State's non-AFDC collections to the State's total administrative costs in accordance with the following schedule:

__________________________________________________________________

Ratio of collections to total IV-D Percent of

administrative costs collection

paid as an

incentive

__________________________________________________________________

Less than 1.4 . . . . . . . . . . . . . . . . . . . . . . 6.0

At least 1.4 . . . . . . . . . . . . . . . . . . . . . . 6.5

At least 1.6 . . . . . . . . . . . . . . . . . . . . . . 7.0

At least 1.8 . . . . . . . . . . . . . . . . . . . . . . 7.5

At least 2.0 . . . . . . . . . . . . . . . . . . . . . . 8.0

At least 2.2 . . . . . . . . . . . . . . . . . . . . . . 8.5

At least 2.4 . . . . . . . . . . . . . . . . . . . . . . 9.0

At least 2.6 . . . . . . . . . . . . . . . . . . . . . . 9.5

At least 2.8 . . . . . . . . . . . . . . . . . . . . . .10.0

(2) The ratios of the State's AFDC and non-AFDC collections to total IV-D administrative costs will be truncated at one decimal place.

(3) The portion of the incentive payment paid to a State for a fiscal year in recognition of its non-AFDC collections is limited to the percentage of the portion of the incentive payment paid for that fiscal year in recognition of its AFDC collections, as follows:

(i) 100 percent in fiscal years 1986 and 1987;

(ii) 105 percent in fiscal year 1988; (iii) 110 percent in fiscal year 1989; and

(iv) 115 percent in fiscal year 1990 and thereafter.

(4) In calculating the amount of incentive payments, the following conditions apply;

(i) Only those AFDC and non-AFDC collections distributed and expenditures claimed by the State in the fiscal year shall be used todetermine the incentive payment payable for that fiscal year;

(ii) Support collected by one State on behalf of individuals receiving IV-D services in another State shall be treated as having been collected in full by each State;

(iii) Fees paid by individuals, recovered costs, and program income such as interest earned on collections shall be deducted from total IV-D administrative costs;

(iv) At the option of the State, laboratory costs incurred in determining paternity may be excluded from total IV-D administrative costs; and

(v) Effective January 1, 1990, amounts expended by the State in carrying out a special project under section 455(e) of the Act shall not be included in the State's total IV-D administrative costs.

(vi) Costs of demonstration projects for evaluating model procedures for reviewing child support awards under section 103(e) of Public Law 100-485 shall not be included in the State's total IV-D administrative costs.

(c) Payment of incentives. (1) The Office will estimate the total incentive payment that each State will receive for the upcoming fiscal year.

(2) Each State will include one-quarter of the estimated total payment in its quarterly collection report which will reduce the amount that would otherwise be paid to the Federal government to reimburse its share of assistance payments under õõ302.51 and 302.52 of this chapter.

(3) Following the end of a fiscal year, the Office will calculate the actual incentive payment the State should have received based on the reports submitted for that fiscal year. If adjustments to the estimate made under paragraph (c)(1) of this section are necessary, the State's IV-A grant award will be reduced or increased because of over- or under-estimates for prior quarters and for other adjustments.

(4) For FY 1985, the Office will calculate a State's incentive payment based on AFDC collections retained by the State and paid to the family under õ 302.51(b)(1) of this chapter.

(5) For FY 1986 and 1987, a State will receive the higher of the amount due it under the incentive system and Federal matching rate in effect as of FY 1986 or 80 percent of what it would have received under the incentive system and Federal matching rate in effect during FY 1985.

õ304.20 [Amended]

b. Section 304.20(b)(2) is amended by substituting the word "genetic" for the word "blood" wherever it appears and changing the reference to "õ303.5(b)" to "õ303.5(c)".

õ304.23 [Amended]

c. Section 304.23(g) is amended by removing the words ",Subpart A," after the words "part 306".

õ 304.26 [Amended]

d. Section 304.26(b) is amended by changing the reference to "õ303.52" to "õ304.12".

Part 306 is amended by removing the heading of Subpart A,transferring the definitions of "Medicaid agency" and "Medicaid" from õ306.1 to õ301.1, transferring the contents of Subpart B- Required IV-D Activities, which consists of õõ306.50 and 306.51, to Part 303 and redesignating them as new õõ300.30 and 303.31, respectively, and the part is revised to read as follows:

PART 306- OPTIONAL COOPERATIVE AGREEMENTS FOR MEDICAL

SUPPORT ENFORCEMENT

Sec.

306.0 Scope of this part

306.2 Cooperative agreement.

306.10 Functions to be performed under a cooperative agreement.

306.11 Administrative requirements of

cooperative agreements.

306.20 Prior approval of cooperative agreements.

306.21 Subsidiary cooperative agreements with courts and law

enforcement officials.

306.22 Purchase of service agreements.

306.30 Source of funds.

Authority: 42 U.S.C. 652, 1302, 1396a(a)(25), 1396b(d)(2), 1396b(o), 1396b(p), 1396(k).

õ306.0 Scope of this part.

This part defines the requirements for an optional cooperative agreement between the IV-D agency and the Medicaid agency for the purpose of enforcing medical support obligations under section 1912 of the Act.

õ306.2 Cooperative agreement.

The cooperative agreement between the IV-D agency and the Medicaid agency shall be a written agreement for the IV-D agency to assist the Medicaid agency by securing and enforcing the medical support obligation of an absent parent to a child for whom an assignment of medical support rights has been executed under 42 CFR 433.146. The functions that the IV-D agency may perform under the cooperative agreement are set forth in õ306.10. The administrative requirements are set forth at õ306.11.

õ306.10 Functions to be performed under a cooperative agreement.

The functions that the IV-D agency may perform under a cooperative agreement with the Medicaid agency are limited to one or any combination of the following activities. The agency may:

(a) Receive referrals from the Medicaid agency.

(b) Locate the absent parent, using the State Parent Locator Service and the Federal Parent Locator Service, as needed.

(c) Establish paternity if necessary.

(d) Determine whether the parent has a health insurance policy or plan that covers the child.

(e) Obtain sufficient information about the health insurance policy or plan to permit the filing of a claim with the insurer.

(f) File a claim with the insurer; or transmit the necessary information to the Medicaid agency, or to the appropriate State agency or fiscal agent for the filing of the claim; or require the absent parent to file a claim.

(g) Secure health insurance coverage through court or administrative order.

(h) Take direct action against the absent parent to recover amounts necessary to reimburse medical assistance payments when the absent parent does not have health insurance and the amounts collected will not reduce the absent parent's ability to pay child support.

(i) Receive medical support collections.

(j) Distribute the collections as required by 42 CFR 433.154 including calculation and payment of the incentives provided for by 42 CFR 433.153.

(k) Perform other functions as may be specified by instructions issued by the Office of Child Support Enforcement.

õ306.11 Administrative requirements of cooperative agreements.

(a) Organizational structure. The cooperative agreement must:

(1) Describe the organizational structure of the unit or units within the IV-D agency that are responsible far medical support enforcement activities.

(2) List the medical support enforcement functions that are to be

performed outside of the IV-D agency with the name of the organization

responsible for performance.

(3) Provide that the IV-D agency shall have responsibility for securing compliance with the requirements of the cooperative agreement by individuals or agencies outside the IV-D agency performing medical support enforcement functions.

(b) Maintenance of records. The cooperative agreement must specify that the IV-D agency will establish and maintain case records of medical support enforcement activities in accordance with the provisions of õ302.15 of this chapter.

(c) Safeguarding information. The cooperative agreement must provide that the use or disclosure of information concerning applicants for, or recipients of, medical support enforcement services is subject to the limitations in õ303.21 of this chapter.

(d) Fiscal policies and accountability. (1) The cooperative agreement must provide that the IV-D agency will maintain an account system and supporting fiscal records adequate to assure that claims for reimbursement from the Medicaid agency are in accordance with applicable Federal requirements in 45 CFR Part 74.

(2) The cooperative agreements must provide for the establishment of a method for properly allocating those costs that cannot be directly charged to the medical support enforcement effort.

õ306.20 Prior approval of cooperative agreements.

(a) Prior to implementation, the IV-D agency must submit two copies of any cooperative agreement entered into under this part to the Regional

representative for approval.

(b) The Regional Representative will review the cooperative agreement for conformity with the requirements of this part and 42 CFR 433.152.

(c) The Regional Representative will promptly notify the State ofapproval or disapproval. The State may consider the agreement approved if notification is not received within 60 days after the agreement is received by the Regional Representative.

õ306.21 Subsidiary cooperative agreements with courts and law enforcement officials.

The IV-D agency will enter into subsidiary written cooperative agreements with appropriate courts and law enforcement officials to the extent necessary to perform those functions specified in the cooperative agreement between the IV-D agency and the Medicaid agency. These agreements must be made in accordance with the requirements of õ302.34 (Cooperative agreements).

õ306.22 Purchase of service agreements.

The IV-D agency will enter into written purchase of service agreements to the extent necessary to fulfill the requirements of its cooperative agreement with the Medicaid agency.

õ306.30 Source of funds.

The cooperative agreement must specify that the IV-D agency will receive full reimbursement from the Medicaid agency for all medical support enforcement activities performed under the agreement. (See õ306.11(d) for requirements on fiscal policies and accountability.)

PART 307- [AMENDED]

1.The authority citation for Part 307 continues to read as follows:

Authority: 42 U.S.C. 652 through 658, 664, 666, 667 and 1302.

õ307.10 [Amended]

2. Section 307.10 is amended by changing the reference in paragraph (a)(2)(xiii) to "45 CFR part 306" to "õõ303.30 and 303.31".

[FR Doc. 89-18178 Filed 8-1-89; 12:50 pm]

BILLING CODE 4150-04-M

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