Due to the increasing number of children in families of divorced couples and single parents, many children in the United States are not receiving sufficient financial support and are going without medical insurance. Both the state and federal government have placed the burden to resolve this crisis squarely on the shoulders of employers through wage withholding and employer-provided medical insurance. Three recent amendments to state and federal laws will increase administrative responsibilities for employers.
Child Support Withholding
Originally, the federal Family Support Act of 1988 required child support payments to be withheld from a non-custodial parent's paycheck through the U.S. Department of Health and Human Services Office of Child Support Enforcement. For child support orders issued through state child support enforcement agencies, this requirement has been in effect since November 1990. However, beginning January 1, 1994, the wage withholding requirement applies to child support orders established outside of the child support enforcement system, such as through standard separation and divorce proceedings. In addition, it is not necessary for the non-custodial parent to be in default before wage withholding can begin.For Minnesota employers, this is not a new concept. Beginning with a seven-county pilot program a few years ago, some counties have already had automatic wage withholding for child support. In addition, Minnesota law has for some time required employers to ask new employees at the time of hire whether they have any court-ordered child support obligations, and to begin withholding according to the terms of the order. However, outside of the pilot program, and prior to the federal law, employers were not required to begin wage withholding until the payment of child support was in arrears.
The new federal law requires that wage withholding be used automatically beginning January 1, 1994, unless both parties agree to opt out of automatic child support withholding or the court fails to find good cause for automatic withholding. However, "good cause" will be viewed very narrowly, such as where the non-custodial parent establishes some method of guaranteeing payment. Even with the opt out method, wage withholding could become automatic if the non-custodial parent falls behind in payments.
The incentive for employers to follow the law is that employers may be held liable for the amount that should have been withheld, if they fail to do so. Since the law will now expand the extent of employer withholding, the employer's potential liability will also be expanded.
Medical Support Withholding
A recent change in Minnesota law that took effect August 1, 1993, requires employers to request that a new hire disclose whether he or she is subject to any medical support obligations that are required by law to be withheld from income and, if so, begin complying with the terms of the order. This change expands the amount of information Minnesota employers must obtain from new hires. Accordingly, new hire orientation procedures should be modified to comply with this new requirement.If an individual discloses that medical support is required to be withheld, the employer must begin withholding according to the terms of the order. If an individual discloses an obligation to obtain health and dental dependent insurance coverage, and coverage is available through the employer, the employer must make all application processes known to the individual at the time of hiring and enroll the employee and dependent in the plan. The employer and its health and dental insurance plan must enroll the dependent as a beneficiary in the employer's group insurance plan and withhold any required premium from the employee's income or wages. If more than one plan is available, the dependent must be enrolled in the insurance plan in which the employee is enrolled, or the least costly plan otherwise available that is comparable to a number two qualified plan.
An employer who willfully fails to comply with an order is liable for any health or dental expenses incurred during the period in which the dependent was eligible to be enrolled. These expenses could be substantial. In addition, the employer is subject to contempt sanctions and a fine of $500 to be paid to the person to whom the obligation is owed, or the public authority.
Even if the employee fails to execute documents necessary to enroll the dependent in the group health and dental insurance plan, the employer still must enroll the dependent in a plan for which other eligibility requirements are met. The employer can rely on information and authorization provided by child support enforcement agencies, or the dependent's custodial parent or guardian, for purposes of meeting the health plan's enrollment requirements.
Qualified Medical Support Orders and Group Health Plans
Effective August 10, 1993, two additional standards for group health plans were added by the Omnibus Budget Reconciliation Act of 1993. The first requires coverage of dependent children pursuant to Qualified Medical Care Support Orders (QMCSO). A QMCSO is a judgment or decree by a court that requires a group health plan to provide coverage to the children ("alternate recipients") of a plan participant, pursuant to state domestic relations law.Each group health plan must develop procedures for determining whether or not a QMCSO is qualified. Those procedures must be communicated to plan participants and alternate recipients. A determination of whether the QMCSO is qualified must be made within a reasonable period after the plan receives a QMCSO.
The QMCSO must include the name and last known mailing address of the participant and each known alternate recipient, a reasonable description of the type of coverage or benefits provided by the plan to each alternate recipient, the period of time to which the order applies, and an identification of each plan to which the order applies.
An alternate recipient's coverage under a plan pursuant to a QMCSO is tied to the participant's continued eligibility for coverage. An employee's termination could cut off the alternate recipient's coverage pursuant to the QMCSO (subject to COBRA rights).
If coverage is not provided pursuant to a QMCSO, the alternate recipient has access to federal court to enforce the QMCSO against the plan. Any action against the plan participant would have to be brought in state court.
The second standard requires a group health plan to include as a dependent any child under the age of 18 who has been "placed for adoption." The plan cannot require actual adoption to delay coverage. In addition, the plan cannot impose preexisting conditions restrictions on a child placed for adoption while the participant is eligible for coverage.
If your company has not already revised its personnel and group health plan procedures to begin complying with these new requirements, it should do so immediately. Information about child support and medical support should be requested of all new employees.