Giving Hope and Support to America's Children

Unreported and Underground Income Workgroup

Summary of Innovative State Practices

Following is a summary of some of the ideas that have been identified by the Unreported and Underground Income (UUI) workgroup. UUI workgroup products can be accessed through the PAID Workplace at http://ocse2.acf.hhs.gov/WP_PAID.nsf. To gain access to the OCSE PAID Workplace, please email Alzata Ross at alzata.ross@acf.hhs.gov.

Driver’s license suspension has proven to be an effective enforcement tool. However, many obligors continue to drive with a suspended license.

Massachusetts enhanced this remedy by involving the local police force in the obligor’s community. The State developed a notification program that alerts local law enforcement officials of obligors in their jurisdictions whose licenses have been suspended for non-payment of child support.
New Hire reporting is very useful for identifying income from employers. However, retirement agencies are not considered employers and they do not report retirement benefits to the State Directory of New Hires (SDNH).

Iowa conducts a monthly match with some local municipalities and the State retirement agency to obtain locate and income data on noncustodial parents. Matches are uploaded into the Iowa child support system with verified income and address. Caseworkers use the information to issue an Income Withholding Order when appropriate.

New Mexico has an automated match from its Public Employees Retirement Association (PERA) for State, County and City employees.

Contact: Charissa Saavedra in New Mexico at charissa.saavedra@state.nm.us
When a lawsuit filed against the District of Columbia results in a settlement in favor of an individual, the Office of the Attorney General first ensures the person does not owe child support arrears before issuing the settlement check. Out of thousands of claimants, the DC Child Support office has seized $170,437 to pay child support obligations in 213 cases.

Contact: Adren Harris at adren.harris@dc.gov
Self-employed obligors have proven to be a challenge when it comes to ensuring regular payments on ordered child support obligations.

New York courts order the self-employed obligors to set up an account with a cash deposit to ensure ordered child support obligations are met. The cash deposit can be drawn down if obligors fail to meet their ordered child support payments. If the account falls below an agreed amount, the obligor is notified to replenish it or penalties are imposed.

Tennessee passed legislation last year that permits judges to require a self-employed obligor to set up an account for payment of support.

The obligor must deposit the amount of the ordered child support in the account regularly or be charged with contempt.
Contact: Bill Duffey, Program Director, TN Child Support Policy, (615) 313-4880
Child support agencies struggle to identify the income of contractors, especially in the construction trades industry. Often workers are misclassified as independent contractors, making them exempt from New Hire (W-4) and Quarterly Wage (QW) reporting to the SDNH.

Massachusetts'Governor issued an executive order forming a task force to address the issue of misclassified workers.

California created an Employment Enforcement Task Force to ensure compliance by employers. Informational brochures, a hotline for reporting non-complying employers, and educational materials were developed.

Iowa’s legislature passed laws creating requirements for independent contractors to be reported to Iowa’s Centralized Employee Registry within 15 days of payment.
States have achieved record collections as they automated issuing IWOs on New Hire matches from their own SDNH as well as the NDNH. Given that States are so successful in maintaining employment information, it makes sense to automate an IWO on other employment resources received from the Federal Parent Locator Service, such as QW.

Colorado and Kansas have experienced very good collection results since automating IWOs on QW data.
Contact: FPLS State Technical Support Liaisons
Currently, the following State Workforce Agencies (SWA) will accept a direct IWO from another State’s Child Support Agency for Unemployment Insurance benefits: Delaware, Georgia, Indiana, Louisiana, Massachusetts, Michigan, Minnesota, New York, North Dakota, Ohio, Pennsylvania, Puerto Rico, Rhode Island, Tennessee, Virgin Islands and Wisconsin. Direct income withholding allows States to continue working the case without filing a reciprocal action.
Private collection agencies have effective techniques for collecting monies owed using the telephone as their first contact.

California developed training modules geared towards teaching phone and negotiation skills with a specific module for collection techniques.
Many States are tapping into local resources for data matching, especially sources that might not be available at a national level.

Michigan, New Mexico and New Hampshire have successfully implemented matches with local public utility companies for locate information.

Contact: Kelly Morse in Michigan at (517) 335-0890, Charissa Saavedra in New Mexico at charissa.saavedra@state.nm.us, or Melody Towle in New Hampshire at (603) 271-4751.

North Dakota has taken matches with local utility co-ops to a level beyond obtaining locate data. They successfully intercept dividends paid to members of the co-op resulting in some arrears balances being paid in full.

Contact: Terry Peterson at tpeterson@nd.gov or Paulette Oberst at poberst@nd.gov.
Many people today no longer keep landlines but almost everyone has a cell phone. Cell phone companies require a valid address and employment to approve activating an account, making them a valuable resource for child support agencies.

Virginia, Louisiana and California have implemented matching with cell phone providers.

Connecticut and Massachusetts have plans to implement a match with cell phone providers later this year.

Contact: Kerry Newcombe at (540) 234-0349 or kerry.newcombe@ngc.com
State Verification and Exchange System (SVES) data received from the Social Security Administration (SSA) through the FPLS is a great locate tool. SVES returns retirement, disability, survivors and dependent benefit information as well as prisoner locate information. In May 2008, States gained access to the Social Security Disability Insurance (SSDI or Title II) pending claims file. Matches from the Title II pending file are returned daily. It is a simple process to issue an IWO upon notice of a pending claim and await follow-up from SSA when benefits are approved and issued. This new resource enables child support agencies to be in position to withhold from lump sum retroactive benefit amounts in addition to ongoing current entitlements.

Nebraska, Oklahoma, Iowa, Arizona and New York report great success and have increased collections with the matches they receive from SVES.

Contact: State Technical Support Liaisons
When it comes to imputing income for unemployed obligors, one method is to consider the kind of employment the NCP is qualified to perform, or, alternatively, to impute minimum wage when income information is not available. Another method is to consider lifestyle.

California taxpayers receive a Form 1098 that contains a record of interest paid on a property. Child Support obtains 1098 data from the Franchise Tax Board and uses this information to impute income for NCPs when traditional income reporting sources have fallen short. The interest paid is multiplied by 4, on the assumption that the person would have needed that amount of income to qualify for the home loan.

South Carolina uses Department of Labor statistics found at http://www.dol.gov under occupational employment and wage estimates, in order to obtain salary estimates for a given profession or occupation by State. You can search for specific occupations by specific locations to obtain the mean and median salaries. This site is useful if you know the occupation of the NCP. You may need additional documentation or testimony to use this in court, however. South Carolina always attaches a copy of the information from the website to the proposed order.

Contact: Beverly Butler at (803) 898-8295
States recognize the underground or cash economy creates barriers to child support collection efforts. Child support agencies need sources to identify unreported and unearned income.

Michigan formed a workgroup to address this issue as a collaborative effort including Judicial and CSE representatives.

Contact: Angel Sorrells at sorrellsa@courts.mi.gov.

Massachusetts’ Governor issued a proclamation creating a task force comprised of representatives from several agencies, focusing on misclassified workers.

Contact: Peter Coulombe at coulombep@dor.state.ma.us.

If you have questions or comments about this material, please contact Linda Hudson at linda.hudson@ngc.com or Dee Price-Sanders at dee.pricesanders@ngc.com.

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This is a Historical Document.