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Child Support treated as deduction for Food Stamp eligibility purposes. DCL-9473 December 20, 1994 TO ALL STATE IV-D DIRECTORS Dear Colleague: This will inform you of the recent publication by the Food and Consumer Service (FCS), Department of Agriculture, of a proposed rule, with comment period, implementing the provisions of section 13921 of the Omnibus Reconciliation Act of 1993, Public Law No. 103-66 [(Mickey Leland Childhood Hunger Relief Act) (Leland Act)] which allows a child support deduction for legally-binding child support payments made to a different household. Attached is a copy of the Notice of Proposed Rulemaking (NPRM) published in the Federal Register on December 8, 1994 (59 FR 63265). The rule allows obligors who are Food Stamp recipients to have the amount of child support they pay be treated as a deduction from their income for Food Stamp eligibility purposes, effective September 1, 1994. State Food and Consumer Service agencies (State agencies) may implement the provision on that date. They are required to implement the deduction no later than October 1, 1995. The Leland Act amends the Food Stamp Act of 1977. The purpose of the amendment is to encourage noncustodial parents to meet their child support obligations. This provision will also more accurately reflect a household's ability to buy food after it meets its legal child support obligation. This will result in an increase in the number of potentially eligible Food Stamp recipients and in the benefit level of households entitled to this deduction. The Food and Consumer Service held a public hearing on January 20, 1994, to offer State agencies, advocacy groups, and other interested parties an opportunity for public dialogue on these provisions. The hearing was designed as a preliminary step to obtain input for drafting the NPRM and formal commentary was anticipated as part of the public comment period. Therefore, we encourage State IV-D Directors to review the attached proposed rule and to consult with the State Food Stamp agencies regarding this proposed rule. State and local child support agencies may be contacted by their State and local food stamp agency counterparts to assist them in implementing this provision by verifying the amount of the child Page 2 - State IV-D Directors support obligation and the monthly amounts actually paid. The NPRM specifically solicits comments on how the process for obtaining verification should occur when a food stamp recipient's child support is ordered and paid in another State. We encourage you to forward any comments on this and any other aspects to the FCS at the address listed in the Federal Register, on the proposed rule during the comment period, which ends February 6, 1995. We would appreciate receiving a copy of any comments you submit to FCS. Please send the copy to Marilyn R. Cohen, OCSE Division of Policy and Planning, 370 L'Enfant Promenade, S.W., 4th floor, Washington, D.C. 20447. If you have any questions, or need additional information please contact Marilyn R. Cohen, (202) 401-5366. Sincerely, David Gray Ross Deputy Director Office of Child Support Enforcement Attachment cc: ACF Regional Administrators Child Support Program Managers, Regions I-X Billing Code 3410-30-U UNITED STATES DEPARTMENT OF AGRICULTURE Food and Consumer Service 7 CFR Parts 271, 273, and 275 [Amendment No. 362] RIN 0584-AB58 FOOD STAMP PROGRAM; Child Support Deduction AGENCY: Food and Consumer Service, USDA. ACTION: Proposed Rule. SUMMARY: This rule is being proposed to implement a provision of the 1993 Mickey Leland Childhood Hunger Relief Act establishing a child support deduction. The deduction would increase the benefits of food stamp households that pay legally obligated child support to a nonhousehold member. DATES: Comments must be received on or before (insert date 60 days after publication in the Federal Register) to be assured of consideration. ADDRESSES: Comments should be submitted to Judith M. Seymour, Eligibility and Certification Regulation Section, Certification Policy Branch, Program Development Division, Food and Consumer Service, USDA, 3101 Park Center Drive, Alexandria, Virginia, 22302, (703) 305-2496. Comments may also be datafaxed to the attention of Ms. Seymour at (703) 305-2454. All written comments will be open for public inspection at the office of the Food and Consumer Service during regular business hours (8:30 a.m. to 5 p.m., Monday through Friday) at 3101 Park Center Drive, Alexandria, Virginia, Room 720. FOR FURTHER INFORMATION CONTACT: Questions regarding the proposed rulemaking should be addressed to Ms. Seymour at the above address or by telephone at (703) 305-2496. SUPPLEMENTARY INFORMATION: Executive Order 12866 This proposed rule has been determined to be significant and was reviewed by the Office of Management and Budget in conformance with Executive Order 12866. Executive Order 12372 The Food Stamp Program is listed in the Catalog of Federal Domestic Assistance under No. 10.551. For the reasons set forth in the final rule in 7 CFR 3015, Subpart V and related Notice (48 FR 29115), this Program is excluded from the scope of Executive Order 12372 which requires intergovernmental consultation with State and local officials. Regulatory Flexibility Act This rule has been reviewed with regard to the requirements of the Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Ellen Haas, Under Secretary for Food, Nutrition, and Consumer Services, has certified that this rule will not have a significant economic impact on a substantial number of small entities. State and local welfare agencies will be the most affected to the extent that they administer the Program. Paperwork Reduction Act The reporting and recordkeeping burden associated with the eligibility, certification, and continued eligibility of food stamp recipients is approved under OMB No. 0584-0064. Current burden estimates for OMB No. 0584-0064 include burden associated with collecting and verifying information reported on the application to determine initial household eligibility and also on the change report and monthly report forms. The provision in 7 CFR 273.9 of this proposed rulemaking which allows an income deduction for certain child support payments does not alter burden estimates already approved under OMB No. 0584-0064. The methodologies used to determine the burden estimates assume that all households will report information on each income and resource line of the application form and will be subject to the same level of reporting and verification burden as current levels require. The public reporting burden for the Food Stamp Program application is estimated to average 13.74 minutes per application. The proposed reporting requirements in 7 CFR 273.12 and 7 CFR 273.21 do not alter the burden estimate for reporting already approved under OMB No. 0584-0064. Establishing a quarterly reporting option for the child support deduction will not increase the reporting burden because households are already required to report certain changes when they occur. At State agency option, quarterly reporting would replace change reporting for the child support deduction and would reduce the number of times a year a household would have to complete a food stamp application form. Comments regarding this burden estimate or any other aspect of this collection of information, including suggestions to reduce this burden may be sent to: U.S. Department of Agriculture, Clearance Officer, OIRM, Room 404-W, Washington D.C. 20250 and to Wendy Taylor, OIRM, Office of Management and Budget, Paperwork Reduction Project (OMB No. 0584- 0064) Washington, D.C. 20503. Executive Order 12778 This rule has been reviewed under Executive Order 12778, Civil Justice Reform. This rule is intended to have preemptive effect with respect to any State or local laws, regulations or policies which conflict with its provisions or which would otherwise impede its full implementation. This rule is not intended to have retroactive effect unless so specified in the "Effective Date" paragraph of this preamble. Prior to any judicial challenge to the provisions of this rule or the application of its provisions, all applicable administrative procedures must be exhausted. In the Food Stamp Program the administrative procedures are as follows: (1) for Program benefit recipients -- State administrative procedures issued pursuant to 7 U.S.C. 2020(e)(1) and 7 CFR 273.15; (2) for State agencies -- administrative procedures issued pursuant to 7 U.S.C. 2023 set out at 7 CFR 276.7 (for rules related to non-quality control (QC) liabilities) or Part 284 (for rules related to QC liabilities); (3) for Program retailers and wholesalers -- administrative procedures issued pursuant to 7 U.S.C. 2023 set out at 7 CFR 278.8. Background Regulatory Impact Analysis Need for Action This action is required as a result of the Mickey Leland Childhood Hunger Relief Act which amends the Food Stamp Act of 1977, as amended, to establish a child support deduction for households that pay legally obligated child support to a nonhousehold member. Benefits The child support deduction would increase the number of potentially eligible food stamp recipients and would increase the benefit level of households entitled to the deduction. Costs It is estimated that this action would increase the cost of the Food Stamp Program by less than $1 million in Fiscal Year 1994; $55 million in Fiscal Year 1995; $125 million in Fiscal Year 1996; $130 million in Fiscal Year 1997; and $145 million in Fiscal Year 1998. BACKGROUND On January 4, 1994, the Food and Consumer Service (FCS) published a notice in the Federal Register announcing a public hearing on January 20, 1994. The public hearing was scheduled to provide an opportunity for State agencies, advocacy groups, and other interested parties to engage in public dialogue on issues concerning the regulatory provisions to be published in connection with the Food Stamp Act of 1977 (Act) amendments made by the Mickey Leland Childhood Hunger Relief Act, Chapter 3, Title XIII, Omnibus Budget Reconciliation Act of 1993, Pub. L. 103-66, enacted August 10, 1993 (Leland Act). All provisions of the Leland Act pertinent to the Food Stamp Program (Program), including the child support deduction, were included as topics of dialogue during the public hearing. CHILD SUPPORT DEDUCTION A food stamp applicant's eligibility and coupon allotment are determined, in part, by the amount of income the household has available to spend on food after certain monthly expenses are deducted from the household's total monthly income. Household expenses that are deducted from income in determining food stamp eligibility and coupon allotment include: (1) a standard deduction (which is provided to all food stamp households); (2) an earned income deduction equal to 20 percent of the household's gross earned income; (3) a medical deduction for expenses over $35 a month for elderly or disabled household members; (4) up to a certain limit, a dependent care deduction for the actual costs the household must pay for the care of children or other dependents while household members are seeking or maintaining employment or while they are participating in education or training programs; and (5) the costs for shelter which exceed 50 percent of income after other deductions. There is a limit on the shelter deduction for households without an elderly or disabled member. Section 13921 of the Leland Act (Pub. L. 103-66, Title I, Chapter 3, August 10, 1993) amends section 5(e) of the Food Stamp Act to add a deduction for household members who make legally obligated child support payments to or for an individual living outside of the household. The provision is intended to encourage noncustodial parents to comply fully with their child support obligations. At the same time, the deduction will result in a more accurate reflection of the household's reduced ability to buy food. The legislative history (House Conference Report No. 213, 103rd Congress, 1st Session (1993), p.925) indicates that Congress did not want an undue administrative burden placed on the State agency as a result of this provision. The Department is addressing a number of issues related to the child support deduction in this proposed rule. These issues are discussed below and include: (1) definition of a legal obligation to pay child support and allowable amount of child support deduction; (2) verification; (3) budgeting and reporting procedures; (4) length of certification period; and (5) quality control requirements. Legal Obligation and Amount of the Child Support Deduction To be eligible for the child support deduction, the statute requires that the household must be legally obligated to pay child support. The Department is aware that various arrangements may exist between unmarried, separated, or divorced parents with respect to child support. However, the law is specific that the deduction is allowed only for persons who have a legal obligation, such as a court order that would be upheld by a judge in a court of law, an order issued through an administrative process, or a legally enforceable separation agreement. Accordingly, the Department proposes to amend 7 CFR 273.9(d) to specify that persons who are legally obligated to pay child support to or for an individual living outside the household and who make such payments are eligible to receive a child support deduction. The Department is proposing in this rule to amend 7 CFR 273.9(d) to specify that the child support deduction must reflect the child support the household pays or expects to pay during the certification period, rather than the obligated amount. The legislation states that "... households shall be entitled to a deduction for child support payments made (emphasis added)...." It is clear that the objective of the law is to allow a deduction on the basis of payments actually made, not the amount the household is legally obligated to pay. Current data show that 49 percent of parents who are legally obligated to pay child support either do not pay any support (24 percent) or pay less than the full amount of the support (25 percent). (Overview of Entitlement Programs, 1993 Green Book, Background Material and Data on Programs within the Jurisdiction of the Committee on Ways and Means, Committee on Ways and Means, U.S. House of Representatives, p. 748.) Strengthening the child support system is an important goal of the Department. The Department believes that Congress did not intend to provide a deduction for child support payments that the household member did not actually pay. Such a deduction would simply be a windfall to absent parents who fail to meet their responsibilities to their children. Furthermore, a child support deduction that reflects actual payments would allow the household to include child support payments that were previously unpaid (i.e., arrearages). Most importantly, basing the deduction on amounts paid would most accurately reflect the current food assistance needs of the paying household. The Department also is including a clarification discussed in the legislative history of the Leland Act (114 Congressional Record, S10726, August 6, 1993). The history indicates that legally obligated payments paid on behalf of the nonhousehold member (such as paying rent to a landlord) must be considered as part of the child support deduction for the household making the payments. This would include any additional payments the noncustodial parent is legally obligated to make to obtain health insurance coverage for a child or children. Accordingly, the Department is proposing to specify in 7 CFR 273.9 that the child support deduction shall include payments the household makes on behalf of the nonhousehold member to the extent that the payments represent the household's child support obligation and have been ordered by a court or administrative authority. Alimony or spousal support payments that are made to or on behalf of a nonhousehold member or payments made in accordance with a property settlement would not be allowable as part of the child support deduction. The Department is also proposing to add conforming language at 7 CFR 273.11(c)(1)(i) and (2)(iii) to provide procedures for allowing the child support deduction for households with ineligible members. As proposed, the child support deduction would be handled the same way as the earned income, standard, medical, dependent care, and excess shelter deductions. That is, the entire deduction would be allowed to households with members disqualified because of intentional Program violation or work requirements because the entire income of these household members is counted. In the case of ineligible aliens or members disqualified for refusal to obtain or apply for a social security number, the amount of child support paid or expected to be paid would be divided evenly among the household members, including the ineligible member, and all but the ineligible member's share would be deducted from household income. The Department is proposing to add the provision of section 13921 of the Leland Act authorizing a child support deduction to the allowable deductions in 7 CFR 273.9(d) by redesignating paragraphs (d)(7) and (d)(8) as paragraphs (d)(8) and (d)(9) and by adding a new paragraph (d)(7) following the provisions for the standard utility allowance. In accordance with section 13921 of the Leland Act, the child support deduction must be determined in the food stamp benefit calculation prior to determining the household's excess shelter deduction and it would be preferable to insert the child support deduction before the shelter deduction at 7 CFR 273.9(d)(5). However, redesignating 7 CFR 273.9(d)(5) and subsequent paragraphs would require extensive renumbering of existing policy guidance and regulations in clearance. Therefore, the Department is proposing to place the new deduction following the standard utility allowance provisions. To ensure the correct calculation of allotments, however, the Department is proposing to amend 7 CFR 273.10 by redesignating paragraphs (e)(1)(i)(F) and(G) as (e)(1)(i)(G) and (e)(1)(i)(H) and adding a new paragraph (e)(1)(i)(F) to place the child support deduction before the shelter deduction in the order of allotment calculation. The Department will amend the food stamp application form and the food stamp worksheet to include a space for households to identify child support payments. Verification of Child Support Deduction The Department is proposing that both the legal obligation to pay child support and the actual amount paid be verified. The household would be the primary source of verification of the legal obligation to pay child support, the amount of the obligation, and the amount paid. Any document that verifies the obligation to pay child support, such as a court order, administrative order, or legally enforceable separation agreement would be sufficient verification of the obligation and obligated amount. Acceptable verification of amounts paid would include canceled checks, wage withholding statements, verification of withholding from unemployment compensation, and statements from the custodial parent regarding direct payments or third party payments the noncustodial parent pays or expects to pay on behalf of the custodial parent. However, documents used to verify the household's legal obligation to pay child support would not be acceptable verification of the household's actual payments. If the household fails or refuses to submit required verification, the State agency would determine the household's eligibility and coupon allotment without consideration of the child support deduction. In addition, we are proposing that State agencies enter into agreements with their State Child Support Enforcement (CSE) agencies to obtain verification from CSE of child support payments made to the agency by individuals in food stamp households claiming the deduction. We are proposing that a match with CSE records be conducted at least once prior to the household's next recertification. For households certified for 3 months or fewer, the match would be required at alternate recertifications. The State agency would also be required to verify payments made to courts or CSE agencies in other States to the extent that verification can be obtained electronically. We are not proposing more specific requirements for scheduling the matches at this time because we realize that CSE systems enhancements are currently being developed. We encourage State food stamp and CSE agencies to comment on the feasibility of requiring more frequent matches with CSE information and the potential effectiveness of match data as verification of child support obligations and payments. Of particular concern is the effectiveness of automated verification procedures when the food stamp household and the custodial parent do not reside in the same State. State agencies would be required to notify applicants on the application form that child support information will be checked through computer matching with CSE. The information obtained through the match would be used to enable the State agency to make a more informed decision regarding the household's deduction for the new certification period. If the deduction is allowed prospectively based on an average of past payments and recent data are available from CSE, the CSE data could be used as the basis for anticipating future payments, taking into account any changes in circumstances reported at recertification. However, State agencies would not be required to conduct any month-by- month reconciliation of amounts reported by the household and the CSE data. Because the deduction will frequently be based on an average of past payments, the amount of the deduction would not coincide with the actual payment made. State agencies would not be required to use the information retrospectively to establish claims or provide restored benefits. Information from CSE records is considered unverified upon receipt. Therefore, if there is a discrepancy between information provided by the household and that obtained from CSE records, the State agency would be required to give the household an opportunity to resolve the discrepancy in accordance with procedures at 7 CFR 273.2(f)(9) for handling unverified data obtained through the Income and Eligibility Verification System. Accordingly, the Department is proposing to amend 7 CFR 273.2(f)(1) to add requirements related to verification of child support at initial certification. We are also proposing a conforming amendment to 7 CFR 273.2(b)(2) requiring the State agency to notify applicants that child support information is subject to verification through computer matching. An amendment to 7 CFR 273.2(f)(8)(i) is also proposed to require verification of child support payments at recertification. Changes reported during the certification period would be verified in accordance with 7 CFR 273.2(f)(8)(ii). We are interested in obtaining comments on these verification requirements and suggestions for less burdensome ways of verifying child support payments. Child Support Budgeting and Reporting Procedures The Leland Act and legislative history indicate that the Department may minimize requirements for budgeting and reporting changes in child support payments. Section 13921 of the Leland Act allows retrospective calculation of the support payments. Another option discussed in the legislative history (House Conference Report No. 213, 103rd Congress, 1st Session (1993), p. 925) would permit State agencies to develop an average based on payments made during the last certification period (with appropriate adjustments to account for any changes in the child support order) rather than track the household's monthly payments. The Department is cognizant of the need to minimize the reporting and budgeting burden while also ensuring that households receive a deduction only for payments that are actually being made. Accordingly, the Department is proposing several procedures in this rule that strike a balance between the need to have accurate information and the need to minimize burdens on food stamp households and State agencies. State agencies will have the option to select the procedure(s) which best suits their needs. Option 1 -- Change Reporting and Prospective or Retrospective Budgeting Current rules at 7 CFR 273.12 identify the changes a household must report during its certification period. Households must report certain changes within 10 days of the date the change becomes known. The Department proposes to amend the current reporting requirements at 7 CFR 273.12 to establish reporting requirements for child support payments. The intent is to provide a means of obtaining information about payments being made that is not overly burdensome on the household or the State agency. Because the Department recognizes that some households will have a history of making child support payments while others will not, the proposal includes reporting and budgeting requirements for households with and without a child support payment record. Under this proposal, any household that is subject to change reporting (for the child support payment) under 7 CFR 273.12(a) would be required to report changes in the legal obligation, including but not limited to changes such as a child reaching an age limit at which child support is no longer legally obligated or a change in the legally obligated amount. For change reporting households that have a record of 3 or more months of paid child support, the State agency would average at least 3 months of legally obligated child support and use the average as the household's support deduction, taking into account any anticipated changes in the legal obligation or other changes that would affect the payment. The average would be used to establish a household's child support payment for the certification period. The average would be adjusted during the certification period in accordance with any changes in the payment reported by the household or which otherwise become known to the State agency. At recertification, the State agency would obtain updated information on which to base a new average for the new certification period. For households without a record of at least 3 months of paid, legally obligated child support, the State agency would base the child support deduction on anticipated payments, exclusive of payments toward arrearages. The household would be required to report changes greater than $50 in the amount of legally obligated child support actually paid, excluding any amounts paid toward arrearages. The base from which to measure the $50 change would be the figure used at the most recent certification action to determine the household's allotment. Under current 7 CFR 273.12(a)(1)(i), households have to report a change in gross monthly income when the amount changes by more than $25. The Department considered proposing a $25 change reporting requirement for child support payments, but decided instead to increase the reporting threshold. Using a higher amount would mean that fewer small changes would have to be reported and processed, thereby saving time for both households and the State agency and minimizing the administrative burden. The Department believes the increased efficiency would offset any confusion caused by the inconsistency in the reporting thresholds. Included in the category of households without a payment record would be households with a newly established legal obligation and households that have failed to meet an obligation. These households would be certified initially for a short period, in accordance with 7 CFR 273.10(f)(4), to allow development of a payment history prior to assignment of a longer period with a deduction based on averaged payments. With certain exceptions, households subject to change reporting may have their income and deductions budgeted prospectively or retrospectively. The Department is proposing that a State agency may budget child support payments either prospectively or retrospectively, depending on the reporting option selected. Option 2 - Quarterly Reporting and Prospective or Retrospective Budgeting The Department is proposing to include a new reporting option State agencies may use for households that are subject to change reporting requirements under 7 CFR 273.12 and are eligible to receive a child support deduction. Under this option, State agencies may require households to submit a quarterly report to report changes in the amount of child support paid and changes in the legal obligation. The household would remain responsible for reporting changes other than changes in child support payments as required by 7 CFR 273.12(a)(1) within 10 days. The Department is proposing quarterly reporting for two reasons: (1) it enables State agencies to assign longer certification periods while receiving periodic information on the actual amount of child support paid, and (2) it allows States to adjust the deduction on the basis of several months of data. Under this proposal, a State agency electing to use the quarterly reporting system would be required to provide the household with a quarterly report by the end of the second month in each quarter. The State agency's quarterly report must be written in clear, simple language, meet the bilingual requirements of s272.4(b), and contain the following: a. A requirement to report the actual amount of child support paid for the first 2 months of the quarter and the actual amount paid or anticipated for the third month; b. A requirement to report changes in the legal obligation to pay child support anticipated for the upcoming quarter, including but not limited to changes such as the completion of an obligation or a change in the legally obligated amount. c. A requirement to return the report to the State agency by a specified date in the third month in the quarter; d. Notification of the verification the household must submit with the report; e. The individual or agency unit available to assist the household in completing the form and the toll-free number (or number where collect calls will be accepted) which the household may use to obtain further information; f. A statement to be signed by the household member who is responsible for paying child support indicating his or her understanding that the information may result in a change in the household's food stamp benefits, including reduction or termination; g. A statement that failure to return the report by the required deadline may result in disallowance of the child support deduction; h. A reminder that other changes required to be reported under 7 CFR 273.12(a)(1) must be reported within 10 days from the date the household becomes aware of the change; and i. A statement advising the household that the State agency will act on a change reported before the quarterly report is submitted; j. A brief description of the Food Stamp Program civil and criminal penalties for fraud. The State agency would use this report to make any changes in the household's child support deduction for the next 3 months. State agencies would be required to average the previous quarter's payments to determine the deduction for the following quarter. The State agency would also need to take into account any reported changes in the legal obligation to pay child support. Households must be given a reasonable time after the end of the second month to submit the quarterly report. If the household fails to file a quarterly report or files an incomplete report by the date set by the State agency, the State agency would be required to send the household a reminder notice advising the household that it has 10 days from the date the State agency mails the notice to file a complete quarterly report. If the household does not file a complete report by the extended filing date, the State agency would recalculate the household's eligibility and benefit level without allowing a deduction for child support. The State agency would not be allowed to terminate the household for failing to submit a complete quarterly report unless the household is otherwise ineligible. The State agency would be required to send an adequate notice as defined under current rules at 7 CFR 271.2 if the household fails to submit a complete report or if the information contained on a complete quarterly report results in a reduction or termination of benefits. Adequate notice is currently defined, in part, as a written notice that advises the household of an action the State agency intends to take. The notice may be received by the household prior to the date of the action, at the time the household receives its reduced benefits, or at the time the household would have received its benefits if the action the State agency intends to take is a termination of benefits. Households have 10 days from the mailing date of the notice to contest the State agency's action. State agencies may combine the reminder notice and adequate notice. The Department is further proposing in this rule to prohibit quarterly reporting for some food stamp households. Section 6(c)(3) of the Act prohibits dual reporting requirements. Thus, if the State agency elects to require a household to report any child support payments quarterly, the quarterly report would be the sole reporting requirement for reporting child support. Section 6(c)(1)(A) of the Act prohibits State agencies from requiring certain households such as migrant or seasonal farmworker households to submit periodic reports. We are including these statutory prohibitions in this proposal at 7 CFR 273.12. The Department does not intend that changes other than changes in child support be included on the quarterly report. The Department has recently approved several waivers allowing State agencies to implement a quarterly reporting system for certain portions of the food stamp caseload. We will be reviewing the impact of these waivers to determine the feasibility of a more expanded quarterly reporting system. The quarterly report described in this rule pertains only to child support payments. Option 3 - Monthly Reporting and Retrospective Budgeting State agencies may require households (except certain legislatively exempt households) to report changes on a monthly report form under the current rules at 7 CFR 273.21 (i.e., monthly reporting households). All monthly reporting households are required to be budgeted retrospectively. Section 6(c) of the Act and corresponding regulations at 7 CFR 273.21(h)(3) allow the State agency to determine the changes the household must report monthly. Households that are required to report monthly under 7 CFR 273.21 would be required to report their monthly child support payments on the monthly report if the State agency includes the requirement on its monthly report. If a household that is required to report its child support payment on a monthly report fails to report or fails to submit required verification related to its child support payment, the State agency would determine the household's eligibility and allotment level without consideration of the child support deduction. If the State agency does not require the household to report its monthly child support payments on the monthly report, the household would be subject to change reporting for child support payments. Summary of Child Support Deduction Reporting and Budgeting Procedures The intent of all the possible reporting and budgeting systems is to most accurately reflect a household's actual payment of child support while minimizing the burden on households and State agencies. For that reason, the Department has provided several options as discussed in detail above. In summary, the options are: (1) Change reporting: If a household has a record of at least 3 months of paid child support, the State agency would budget the child support deduction either prospectively or retrospectively based on an average of the payments made in at least 3 previous months, and the household would be required to report within 10 days changes in the legal obligation to pay child support. If a household has no record of paying child support (or a record of less than 3 months) the State agency would budget the child support deduction prospectively or retrospectively using an estimate based on available information in accordance with 7 CFR 273.10(c), and households would be required to report within 10 days changes in the legal obligation and changes in the amount of the payment of $50 or more. (2) Quarterly reporting: The State agency may budget child support payments prospectively or retrospectively based on actual monthly information reported by the household on a quarterly report form. (3) Monthly reporting: The State agency may budget child support payments retrospectively based on actual amounts reported by the household on a monthly report. State agencies may choose one or more of these options. State agencies may use a combination of the options, depending on the budgeting and reporting systems already in place. That is, a State agency which has monthly reporting for part of its caseload and change reporting for other households, may opt to require the monthly reporting households to report changes in child support payments monthly while other households are required to report the changes within 10 days. However, a State agency may not impose a dual reporting requirement on a household. The Department does not believe that a household should be subject to all three reporting methods because the reporting requirements would be too cumbersome. Thus, no household would be required under this proposal to report child support on a change report, a monthly report, and a quarterly report. Regardless of the system used, the State agency must act on any reported change. Accordingly, the Department is proposing to amend 7 CFR 273.10, 7 CFR 273.12(a) and (b), 7 CFR 273.21(h) and 7 CFR 273.21(j)(3)(iii) to specify the requirements for the options State agencies may elect for child support reporting and budgeting. The Department is also proposing to amend 7 CFR 271.2 to define "adequate notice" as it relates to monthly reporting and quarterly reporting. Child Support Deduction - Certification Periods Under current rules at 7 CFR 273.10(f), the State agency must establish a definite period of time (i.e., certification period) within which the household is eligible to receive benefits. Depending on household circumstances, the household may be certified for as short a period as 1 month but for no more than 12 months. The Department is not proposing special certification period requirements for households eligible to receive a child support deduction. Establishing special certification period requirements was considered, but during the January 20 hearing it was pointed out that current rules adequately address the situation of households that pay child support. Under current rules, households with no record of payments or which have extreme monthly variations in payments would be certified for a short period of time in accordance with 7 CFR 273.10(f)(4). Households with a stable payment record and households that report their child support payments quarterly or monthly would be certified for longer periods from 6 to 12 months, in accordance with 7 CFR 273.10(f)(5) and (8). Child Support Deduction - Quality Control (QC) As indicated in the above discussion, Congress recognized the fluctuating nature of child support payments and intended that determining the monthly amount of the allowable child support deduction should not be a burden for State agencies. Accordingly, the Department has proposed to give State agencies flexibility in determining how to budget the payments, including use of averaging. According to the legislative history of the child support deduction provision (House Conference Report No. 213, 103rd Congress, 1st Session (1993), p. 925), State agencies would be able to average the payments made during one certification period and use that amount, taking into account any changes in the obligation, for the next certification period. The report indicates that "The managers do not intend for this [averaging] procedure to deny a household a deduction for any child support actually paid, but rather the intention is to give States the option to use consistent budgeting procedures that would minimize the number of changes they would be required to make. State agencies correctly following such procedures would not be charged with quality control errors if the amount of child support that a household paid increased or decreased as long as the State agency adjusted the household's allotment prospectively at its next recertification." To implement this provision, the Department proposes that the QC system would review the accuracy of the deduction at the most recent certification action prior to the sample month. Any unreported change in actual child support payments or obligation subsequent to the certification action would not be the basis for citing a household reporting error or a State agency error. A variance would exist if the QC reviewer determines that the State agency did not apply the proper deduction at the most recent certification action or that the household reported a change after the most recent certification action and the State agency failed to act or acted improperly on the reported change. Therefore, the Department proposes to add a paragraph to 7 CFR 275.12(d)(2) to specify that any variances in the child support deduction resulting from unreported changes in actual child support payments or obligation shall be excluded from the QC error determination. Implementation Section 13971 of the Leland Act provides that State agencies may implement Section 13921, Child Support Payments to Non-Household Members, on September 1, 1994, and shall implement the child support deduction no later than October 1, 1995. Therefore, we are proposing the amendments in this rule be effective on September 1, 1994, and be implemented no later than October 1, 1995. The provision must be implemented for all households that newly apply for Program benefits on or after October 1, 1995, or the date the State agency implements the provision prior to the required implementation date. State agencies would be required to adjust the cases of participating households at the next recertification, at household request, or when the case is next reviewed, whichever comes first. The State agency must provide restored benefits to such households back to October 1, 1995, or the date the State agency implemented the provision prior to October 1, 1995. State agencies which fail to implement by October 1, 1995, shall provide benefits retroactive to October 1, 1995, or the date of application, whichever is later. Variances resulting from implementation of the provisions of the final rule would be excluded from error analysis for 120 days from the required implementation date, in accordance with section 13951 of Pub. L. 103-66, which amended section 16(c)(3)(A) of the Act, 7 U.S.C. 2025(c)(3)(A). State agencies which implement prior to the required implementation date must notify the appropriate regional office prior to implementation that they wish the variance exclusion period to begin with actual implementation, as provided in 7 CFR 275.12(d)(2)(vii)(A). Absent such notification, the exclusionary period will begin with the required implementation date. List of Subjects 7 CFR 271 Administrative practice and procedure, Food stamps, Grant programs-social programs. 7 CFR Part 273 Administrative practice and procedure, Aliens, Claims, Food stamps, Fraud, Grant programs-social programs, Penalties, Records, Reporting and recordkeeping requirements, Social security, Students. 7 CFR 275 Administrative practice and procedures, Food stamps, Reporting and recordkeeping requirements. Accordingly, 7 CFR parts 271, 273, and 275 are proposed to be amended as follows: 1. The authority citation of parts 271, 273, and 275 continues to read as follows: Authority: 7 U.S.C. 2011-2032. PART 271 - GENERAL INFORMATION AND DEFINITIONS s271.2 [Amended] 2. In 271.2, the definition of "Adequate notice" is amended by removing the words "in a Monthly Reporting and Retrospective Budgeting system" and adding in their place the words "in a periodic reporting system such as monthly reporting or quarterly reporting". PART 273 - CERTIFICATION OF ELIGIBLE HOUSEHOLDS 3. In s273.2: a. a new sentence is added at the end of paragraph (b)(2), b. a new paragraph (f)(1)(xi) is added, and c. a new sentence is added at the beginning of paragraph (f)(8)(i)(A). The additions read as follows: s273.2 Application Processing. * * * * * (b) Food Stamp application form. * * * (2) Income and eligibility verification system (IEVS). * * * The State agency shall also notify all applicants on the application form that information regarding child support payments may be verified with Child Support Enforcement agencies or courts. * * * * * (f) Verification. * * * (1) Mandatory verification. * * * (xi) Legal Obligation and Actual Child Support Payments. The State agency shall verify the household's legal obligation to pay child support, the amount of the obligation, and the monthly amount of child support the household actually pays. The household is responsible for providing verification of the legal obligation, the obligated amount, and the amount paid. The State agency shall accept any document that verifies the household's legal obligation to pay child support, such as a court or administrative order, or legally enforceable separation agreement. The State agency shall accept documentation verifying a household's actual payment of child support including, but not limited to, canceled checks, wage withholding statements, verification of withholding from unemployment compensation, and statements from the custodial parent regarding direct payments or third party payments the noncustodial parent pays or expects to pay on behalf of the custodial parent. Documents that are accepted as verification of the household's legal obligation to pay child support shall not be accepted as verification of the household's actual monthly child support payments. In addition to requiring verification from the household, the State agency shall be responsible for obtaining verification of the household's child support payments if the payments are made to the State's Title IV-D agency. State agencies shall enter into agreements with Child Support Enforcement (CSE) agencies to obtain data regarding the child support obligation and child support payment record of members of food stamp households receiving a child support deduction. The State agency shall match the records of food stamp recipients receiving a child support deduction against CSE automated data files. This match shall be conducted, at a minimum, at least once prior to the next recertification. For households certified for 3 months or fewer, the State agency shall conduct a match prior to alternate recertifications. The State agency shall use the information in determining the household's entitlement to a deduction in the new certification period. The State agency shall give the household an opportunity to resolve any discrepancy between household verification and CSE records in accordance with paragraph (f)(9) of this section. * * * * * (8) Verification subsequent to initial certification. (i) Recertification. (A) At recertification the State agency shall require the household to verify the amount of legally obligated child support a household member pays to a nonhousehold member. * * * * * * * * 4. In s273.9, paragraphs (d)(7) and (d)(8) are redesignated as paragraphs (d)(8) through (d)(9) respectively and a new paragraph (d)(7) is added to read as follows: 273.9 Income and Deductions. * * * * * (d) Income deductions. * * * (7) Child Support Deduction. Child support payments paid by a household member to or for a nonhousehold member, provided that the household member has a legal obligation to pay child support and the payments are verified in accordance with s273.2(f). Households that fail or refuse to obtain necessary verification of their legal obligation or of their child support payments shall have their eligibility and benefit level determined without consideration of a child support deduction. If the noncustodial parent makes child support payments to a third party (e.g., a landlord or utility company) on behalf of the nonhousehold member in accordance with the support order, such payments shall be included in the child support deduction. Payments that are made by the household to obtain health insurance for the child or children shall also be included as part of the child support deduction. For households that have at least a 3-month record of child support payments, the State agency shall allow a deduction for amounts paid toward arrearages. Alimony payments made to or for a nonhousehold member shall not be included in the child support deduction. Households that are eligible to receive a child support deduction shall report changes in accordance with the reporting requirements specified in s273.12 or s273.21. * * * * * 5. In s273.10: a. The introductory text of paragraph (d) is amended by adding the words "child support" between the words "shelter," and "and medical". b. A new paragraph (d)(8) is added. c. Paragraph (e)(1)(i)(E) is amended by removing the reference "(e)(1)(i)(F)" and adding in its place a reference to "(e)(1)(i)(G)". d. Paragraphs (e)(1)(i)(F) and (e)(1)(i)(G) are redesignated as paragraphs (e)(1)(i)(G) and (e)(1)(i)(H) respectively and a new paragraph (e)(1)(i)(F) is added. e. Newly redesignated paragraph (e)(1)(i)(G) is amended by removing the reference to "(e)(1)(i)(G)" and adding in its place a reference to "(e)(1)(i)(H)". The additions and revisions read as follows: s273.10 Determining household eligibility and benefit levels. * * * * * (d) Determining deductions. * * * (8) Child Support Deduction. The State agency shall budget child support payments either prospectively or retrospectively, depending on the reporting system used. In addition, the following budgeting procedures shall be used: (i) For change reporting households with a history of 3 or more months of paying child support, the State agency shall average at least 3 months of child support, taking into account any anticipated changes in the legal obligation, and use that average as the household's support deduction. (ii) For change reporting households with no child support payment record or less than a 3-month record, the State agency shall estimate the anticipated payments (excluding payments toward arrearages) and use that estimate as the household's support deduction. (iii) For quarterly reporting households, the State agency shall initially use either paragraphs (d)(8)(i) or (d)(8)(ii) of this section as appropriate, then develop an average using the information provided in the quarterly report for subsequent quarters, making any necessary adjustments for anticipated changes. (iv) For monthly reporting households, the State agency shall initially use either paragraphs (d)(8)(i) or (d)(8)(ii) of this section as appropriate, then adjust the deduction as appropriate based on the monthly reports. (e) Calculating net income and benefit levels. (1) Net monthly income. (i) * * * (F) Subtract allowable monthly child support payments in accordance with s273.9(d)(5). * * * * * s271.11 [Amended] 6. In s273.11, a. Paragraph (c)(1)(i) is amended by adding the words "child support," after the words "dependent care,". b. Paragraph (c)(2)(iii) is amended by adding the words "child support payment," after the word "allowable" in the second sentence and after the word "deductible" in the third sentence. 7. In s273.12, a. A new paragraph (a)(1)(vi) is added. b. A new sentence is added after the first sentence of paragraph (a)(2). c. Paragraph (a)(4) is redesignated as paragraph (a)(5) and a new paragraph (a)(4) is added. d. The heading of paragraph (b) is revised, new introductory text is added to paragraph (b) and the introductory text of paragraph (b)(1) is revised. e. Paragraph (b)(2) is revised. The revisions and additions read as follows: s273.12 Reporting changes. (a) Household responsibility to report. (1) * * * (vi) Changes in the legal obligation to pay child support, including termination of the obligation when a child reaches an age at which child support is no longer legally obligated. A household with less than a 3-month record of child support payments shall also be required to report changes greater than $50 from the amount used in the most recent certification action. Households required to report changes in child support on a quarterly or monthly report shall report actual monthly amounts paid in addition to changes in the legal obligation. (2) * * * Households that are required to report a change monthly as specified under s273.21 or that are required to report monthly child support payments on a quarterly report as specified under paragraph (a)(4) of this section shall not be required to report changes within 10 days of the date they become known to the household. * * * * * * * * (4) The State agency may require a household that is eligible to receive a child support deduction in accordance with s273.9(d)(7) to report its monthly child support payments on a quarterly report. (i) A State agency that elects to require a household to report its monthly child support payments on a quarterly report shall provide the household with the quarterly report no later than the end of the second month in the quarter. The State agency shall provide the household a reasonable period after the end of the month in which to return the report. If the household does not file the report by the due date or files an incomplete report, the State agency shall provide the household with a reminder notice advising the household that it has 10 days from the date the State agency mails the notice to file a complete quarterly report. If the household does not file a complete report by the extended filing date as specified in the reminder notice, the State agency shall determine the household's eligibility and benefits without consideration of the child support deduction. The State agency shall not terminate a household for failure to submit a quarterly report unless the household is otherwise ineligible. The State agency shall send the household an adequate notice as defined in s271.2 of this chapter if the household fails to submit a complete report or if the information contained on a complete quarterly report results in a reduction or termination of benefits. The quarterly report shall meet the requirements as specified in paragraph (b) of this section. The State agency may combine the content of the reminder notice and the adequate notice as long as the notice meets the requirements of the individual notices. (ii) The quarterly report form shall be the sole reporting requirement for reporting monthly child support payments. The State agency shall not include other items for the household to report on the quarterly report. The State agency shall not require households excluded from monthly reporting as specified in s273.21(b) to report monthly child support payments on a quarterly report. The State agency is also prohibited from requiring monthly reporting households to submit a quarterly report. * * * * * (b) Report forms. The State agency shall provide the household with a form for reporting the changes required in paragraph (a) of this section and shall pay the postage for the household to return the report. (1) The report form for reporting changes within 10 days of the date the change becomes known shall, at a minimum, include the following: * * * * * (2) The quarterly report form for reporting child support payments shall be written in clear, simple language and meet the bilingual requirements described in s272.4(b) of this chapter. The report shall include the following: (i) A requirement to report the actual amount of child support paid for the first 2 months of the quarter and the actual amount paid or anticipated for the third month; (ii) A requirement to report changes in the legal obligation to pay child support anticipated for the upcoming quarter, including but not limited to changes such as the completion of an obligation or a change in the legally obligated amount; (iii) The date in the third month by which the State agency must receive the form; (iv) Notification of the verification the household must submit with the report; (v) The name of the individual or agency unit available to assist the household in completing the form and the toll-free number (or number where collect calls will be accepted) which the household may use to obtain further information; (vi) A statement to be signed by the household member who is responsible for paying child support indicating his or her understanding that the information may result in changes in the level of benefits, including reduction or termination; (vii) A statement that failure to return the report by the required deadline may result in disallowance of the child support deduction; (viii) A reminder that other changes required to be reported under paragraph (a)(1) of this section must be reported within 10 days from the date the household becomes aware of the change; (ix) A statement advising the household that the State agency will act on changes in its monthly child support deduction if the household elects to report the change before submitting the quarterly report; and (x) A brief understandable description of the Food Stamp Program civil and criminal penalties for fraud printed in prominent and boldface lettering. * * * * * 8. In s273.21: a. A new paragraph (h)(2)(ix) is added. b. Paragraph (j)(3)(iii)(E) is redesignated as paragraph (j)(3)(iii)(F) and a new paragraph (j)(3)(iii)(E) is added. The revision and additions read as follows: s273.21 Monthly Reporting and Retrospective Budgeting (MRRB) * * * * * (h) The monthly report form. * * * (2) Monthly report form. * * * (ix) If the State agency elects to require reporting of child support payments on the monthly report form, the State agency shall require the household to report changes in the actual monthly amount of child support paid and any changes in the legal obligation to pay child support. * * * * * (j) State agency action on reports. * * * (3) Incomplete filing. * * * (iii) * * * (E) If the household does not report or verify its monthly child support payment or a change in its legal obligation, the State agency shall not allow a child support deduction. * * * * * Part 275 - PERFORMANCE REPORTING SYSTEM 9. In s275.12, a new paragraph (d)(2)(ix) is added to read as follows: s275.12 Review of active cases. * * * * * (d) Variance identification. * * * (2) Variances excluded from error analysis. * * * (ix) Any variance in a child support deduction which was the result of an unreported change subsequent to the most recent certification action shall be excluded from the error determination. * * * * * _______________________ ______________ Ellen Haas Date Under Secretary for Food, Nutrition, and Consumer Services
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