Child Support Provisions in the Deficit Reduction Act California Child Support Directors Association Training Conference October 4, 2006 By Paula Roberts Center for Law and Social Policy

Deficit Reduction Act of 2005  Signed into law on February 8,  Passed as S  Became Pub. L  Law includes TANF changes in work participation requirements and child support federal funding cuts, putting pressure on state budgets and bringing new attention to child support.

Overview of DRA  Federal match on incentive payments eliminated.  Federal match reduced for paternity testing.  New service fee.  Assignment and distribution changes.  Mandatory TANF review and adjustment.  Medical support provisions.  Federal tax offset procedure for adult children.  Reduced passport denial threshold.  FPLS insurance data matching.

Federal match cut on incentive payments  HHS may no longer pay a 66% match on incentive payments spent on IV-D activities.  Effective Oct. 1,  Amounts to a 20% cut in federal funds.  CBO assumes states will replace half of the funding gap—if states do, $8.4 billion will go uncollected.  To become whole, state must replace lost federal funds with new state funds (equal to 66% of state incentive payments).

Paternity test match reduced  The federal matching rate is reduced from 90% to 66%.  Effective Oct. 1, 2006.

Assignment  Pre-assistance assignment eliminated.  State flexibility to conform older assignments: State option to discontinue assignments in effect on Sept. 30, 1997 and to treat collections as if never assigned. State option to discontinue post-1997 pre-assistance assignments in effect before DRA and to treat as never assigned.  Effective Oct. 1, 2009, with state option to implement a year earlier.

Distribution to former TANF families  State option to eliminate federal tax offset exception to distribution rules—distribute like other collections Distribute to former TANF families before state Distribute to current support before arrears  State may elect old or new rules in state plan.  Federal share is waived if offset collections are distributed to former TANF families.  IRS will give priority to child support offsets, whether assigned or not assigned.  States may elect options after Oct. 1, 2008.

Pass-through to current TANF families  State authority unchanged to retain or pass through support.  Federal cost-sharing rules have changed for states that decide to passes through and disregard support.  Federal share is waived, up to $100 monthly pass- through limit for one child and $200 limit for two or more children.  Federal share is waived to extent of disregard.  Under existing law, TANF MOE credit is available for disregarded amounts.  Effective Oct. 1, 2008.

Effect on federal share  Louisiana has a 69.69% FMAP rate.  Under existing law, state pays federal government almost $70 dollars out of every $100 assigned to and collected by state.  Under DRA, if state TANF program passes through and disregards $100, family receives $100 more income, state gives up $30 and federal government gives up $70 in revenues.

$25 service fee  States must impose an annual $25 fee.  Charged to individuals who have never received TANF assistance.  For whom the state has collected at least $500.  4 options: (1) retained from collections; (2) paid by the applicant; (3) recovered from the absent parent; (4) paid by the state.  Treated as program income, shared with federal government.  Effective Oct. 1, HHS promulgating rules.

Decreased passport limits  The amount of unpaid support to trigger a passport denial has decreased from $5,000 to $2,500.  Effective Oct. 1, 2006.

Review and adjustment  States are required to review and, if appropriate, adjust orders for cases with an assignment under part A—understood to be current TANF cases.  Effective Oct. 1, 2007.

Medical support  Support orders to include a provision for medical support to be provided by either or both parents, “and shall be enforced.”  A child support agency may enforce medical support against a custodial parent if health care coverage is available at a reasonable cost.  Medical support includes health care coverage under a health insurance plan and payment of medical expenses.  Effective Oct. 1, 2006.

Tax intercept for adult children  The federal tax offset procedure can be used to collect arrears for children who have reached the age of majority.  Effective Oct. 1, 2007.

Other provisions  State option to use system for interstate case processing conduct insurance data matching.  HHS may conduct insurance data matching through FPLS.  Federal FPLS and training funds maintained.  General effective date Oct. 1, 2006, with exception when state laws must be amended (3 months after the 1 st day of the 1 st calendar quarter beginning after the close of the first regular session of the state legislature).

Contact me at: Center for Law and Social Policy (202)