Child Support Enforcement

AFI Human Services Committee

Federal Update

THE CHILD SUPPORT PERFORMANCE AND INCENTIVE ACT OF 1998 (H.R. 3130)

August 3, 1998

On Thursday, June 25, 1998, the House passed by unanimous consent an amendment to H.R. 3130, the Child Support Performance and Incentive Act of 1998. The Senate approved the measure by unanimous consent on Friday, June 26, 1998. The amendment represents a compromise between a previous version of H.R. 3130 passed by the House on March 5, 1998, and the amended version of the bill passed by the Senate on April 2, 1998. The President is expected to sign the bill shortly.

H.R. 3130 provides relief for sixteen states who did not meet the child support automation requirements under the 1988 Family Support Act. These states faced financial penalties in child support as well as the potential loss of Temporary Assistance to Needy Families (TANF) block grant funds. The bill changes the federal financial incentives in the child support program to reflect the changes in the population receiving child support services, including former TANF recipients and a wider range of state performance. States are required to reinvest federal child support incentive funds into the child support program or closely related activities. The bill also removes some barriers to state medical child support enforcement of companies covered by ERISA. For more information, contact Sheri Steisel, Senior Committee Director at sheri.steisel@ncsl.org or Kirsten Rasmussen, Policy Associate at kirsten.rasmussen@ncsl.org or call (202) 624-5400. A brief description of the major provisions of the bill follows.

Description of Final Agreement on H.R. 3130:

Title I: Alternative Penalty Procedure

Eligibility for Alternative Penalty. If a State is making a good faith effort to comply with the data processing requirements of the Family Support Act of 1988 and if the State submits to the Secretary of Health and Human Services (HHS) a corrective compliance plan describing how, by when, and at what cost it will comply, the State would be able to avoid the penalty in current law and qualify for the new penalty. The new penalty would be 4 percent, 8 percent, 16 percent, 25 percent, and 30 percent, respectively, for the first, second, third, fourth, and fifth or subsequent year of failing to comply with the data processing requirements; this percentage would be applied to the amount payable to the State in the previous year as Federal administrative reimbursement under the child support program.

Penalty Waiver. All penalties would be waived if, by August 1, 1998, a State has submitted to the Secretary a request that the Secretary certify the State as meeting the 1988 data processing requirements and the State is subsequently certified as a result of a review conducted pursuant to the request.

Partial Penalty Forgiveness. If a State operating under the penalty procedure achieves compliance with the data processing requirements before the first day of the next fiscal year, then the penalty for the current fiscal year would be reduced by 90 percent.

Penalty Reduction for Good Performance. In addition to complying with the data processing requirements of the 1988 Act, States would have to comply with the data processing requirements imposed by the 1996 welfare reform law by October 1, 2000. In the case of the 1996 requirements, a State that fails to comply would be able to have its annual penalty reduced by 20 percent for each performance measure under the new incentive system (see Title II below) for which it achieves a maximum score.

Expansion of Waiver Provision. The authority of the Secretary to waive certain data processing requirements and to provide Federal funding for a wider range of State data system activities would be expanded to include waiving the single Statewide system requirement under certain conditions.

Federal Payments Under Waiver. States would have to submit to the Secretary separate estimates of the costs to develop and implement a single Statewide system and the alternative system being proposed by the State plus the costs of operating and maintaining these systems for five years from the date of implementation. The Secretary would have to agree with the estimates. If a State elects to operate such an alternative system, the State would be paid the 66 percent Federal administrative reimbursement only on expenditures that do not exceed the estimated cost of the single Statewide system.

Inapplicability of Penalty Under TANF. States would be subject to the child support penalties but would be exempt from penalties under the Temporary Assistance for Needy Families (TANF) program.

Title II: Child Support Incentive System

Amount of Incentive Payments. The incentive payment for a State for a given year would be calculated by multiplying the incentive payment pool for the year by the State's incentive payment share for the year. The incentive payment pool would be equal to the Congressional Budget Office estimate of incentive payments for each year under current law. Specifically, the amounts (in millions) for fiscal years 2000 through 2008, respectively, would be: $422, $429, $450, $461, $454, $446, $458, $471, and $483. After 2008, the incentive payment pool would increase each year by the inflation rate.

Calculating Incentive Payments. In addition to the incentive payment pool, incentive calculations would be based on the five factors defined below. The general approach would be to pay to each State its share of the incentive payment pool based on the quality of its performance on the five incentive performance measures. The five measures would be: paternity establishment, establishment of support orders, collections on current payments, collections on arrearages, and cost effectiveness.

Treatment of Interstate Collections. In computing incentive payments, support collected by a State at the request of another State would be treated as having been collected by both States. State expenditures on a special interstate project carried out under section 455(e) would be excluded from incentive payment calculations.

Regulations. The Secretary of HHS would be required to prescribe regulations necessary to implement the incentive payment program within nine months of the date of enactment.

Reinvestment. States would be required to spend child support incentive payments to carry out their child support enforcement program or closely related activities.

Transition Rule. The new incentive system would be phased in over two years beginning in fiscal year 2000.

General Effective Date. Except for the elimination of the current incentive program, the amendments made by this legislation would take effect on October 1, 1999.

Title III: Adoption Provisions

The current penalty for violating the provision on adoption across jurisdictional lines would be terminated and a new penalty would be substituted.

Title IV: Miscellaneous

Elimination of Barriers to Medical Child Support. The Secretaries of the Departments of Health and Human Services and Labor would have to design and implement a standardized medical support notice. State child support enforcement agencies would be required to use this standardized form to communicate the issuance of a medical support order, and employers would be required to accept the form as a "qualified medical support order" under the Employee Retirement Income Security Act.

Safeguard of New Employee Information. The bill would include several protections against misuse of the New Hire information collected by the child support enforcement program.

Limitations on Use of TANF Funds for Matching Under Certain Federal Transportation Programs. This provision would clarify that TANF money used as matching funds for grants under the Transportation Equity Act for the 21st Century must be drawn from the 30 percent that a state can transfer from TANF. Additionally, federal TANF funds used for match can only be used for new or expanded transportation services (not for construction) and must not supplant other state transportation expenditures. The law also clarifies that federal TANF funds used for match must primarily benefit current and former TANF recipients, non-custodial parents and low-income individuals at risk of qualifying for TANF benefits.

High-Volume Automated Administrative Enforcement in Interstate Cases. A definition of previous law would be clarified.

U.S. General Accounting Office Reports. By December 31, 1998, the Comptroller General of the United States would have to report to Congress on the feasibility and cost of creating and maintaining a nationwide instant child support order check system under which an employer would be able to determine whether a newly hired employee is required to provide support under a child support order. In addition, not later than December 31, 1998, the Comptroller General would have to report to Congress on the implementation of the Federal Parent Locator Service and the State Directory of New Hires.

Data Matching by Multi-State Financial Institutions. HHS would be able to assist States in coordinating financial institution data matches in the case of financial institutions with branches in more than one State.

Elimination of Unnecessary Data Reporting. An unnecessary State data reporting requirement in the child support enforcement program would be dropped.

Eligibility Under Welfare-to-Work Programs. Assistance provided to low-income noncustodial fathers would count towards the requirement that 70 percent of funds be spent on very low-income individuals.

Study on Child Support Owed by Aliens. The Secretary of HHS would be required to report to Congress within six months of enactment on the feasibility of a program that would bar entry to aliens trying to enter the United States if they owe $5,000 or more in child support to a U.S. citizen.

Technical Corrections. States would be given an additional five months to report data used to compute adoption incentive payments (until April 30, 1998) and the Secretary of HHS would be given an additional four months to approve the data (until July 1, 1998).

In addition, two conflicting requirements of current law concerning a State data reporting requirement on Social Security numbers would be reconciled. The requirement that states include social security numbers on all applications for driver's licenses is delayed until October 1, 2000. This coincides with the date that states must place social security numbers on driver's licenses (under the Immigration Reform Act of 1996).

AFI Human Services Committee

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