Are You Using e-IWOs (Electronic Income Withholding Orders)?

According to the Census Bureau, 49.4% of all custodial parents had legal or informal child support agreements in 2017, decreasing slightly from 50.2% in 2015.

With an informal agreement, the custodial and noncustodial parents agree to terms that the court does not establish. Conversely, with a legal agreement, the court determines child support terms. Legal child support agreements are often enforced through an income withholding order (IWO) against the noncustodial parent.

As an employer, you might receive an IWO against one or more of your employees.

What is an income withholding order?

An IWO is a legal document an employer receives, ordering them to withhold child support payments from the noncustodial parent’s wages. This document can come from a court/judge, a child support agency, an attorney, or an individual (such as the custodial parent). If the document comes from anyone outside of the court or child support agency, that person must attach the underlying child support order.

Failure to honor a valid IWO may result in mandatory fines and penalties from the state.

The employer must verify the validity of the IWO, and begin the income withholding process if the document is indeed valid. Failure to honor a valid IWO may result in mandatory fines and penalties from the state. The court determines the withholding amount, frequency, and start date of the income withholding; the IWO states this information (among other things).

Once upon a time, states largely relied on paper or limited electronic methods when sending IWOs to employers — such as certified mail, hand delivery, or fax. However, rapid technological advancements has led to wide-scale adoption of electronic income withholding orders, or e-IWOs.

What are electronic income withholding orders?

The state child support agency sends e-IWOs — child support income withholding orders — to employers. This electronic communication between states and employers occurs through a portal, which is developed and hosted by the Federal Office of Child Support Enforcement (OCSE).

According to the OCSE, “The electronic Income Withholding Order (e-IWO) process is a cost-effective and efficient way for employers to process child support IWOs.” 

What are the benefits of e-IWOs?

Electronic income withholding orders allow employers to::

• Receive and process IWOs electronically, instead of by paper
• Let the child support agency know whether they accept or reject the support order
• Eliminate errors that stem from manual processes
• Eradicate administrative and postage costs of paper IWOs
• Adopt a paperless environment for processing IWOs
• Notify child support agencies of employee terminations and upcoming lump-sum payments
• Engage in ongoing communications with the child support agency

Best of all, child support payments will reach families faster. Per the OCSE, “Employers receive their e-IWOs the day after the state child support agency generates them.” 

Additionally, there’s no cost for employers to use the e-IWO system.

How many states are using e-IWO?

Based on OCSE data, all U.S. states currently use e-IWO. Guam and Virgin Islands are the only U.S. territories not using e-IWO.

How can employers use the e-IWO system?

It’s important to note that the e-IWO system is not an email service. According to the OCSE, “there is no option for emailing IWOs to your organization.” 

Employers who want to utilize the e-IWO system must register with the OCSE, at the email address provided in the Frequently Asked Questions on the agency’s website.

The OCSE has 2 e-IWO implementation options, which has recommendations by employer size.

Employers who want to utilize the e-IWO system must register with the OCSE, at the email address provided in the Frequently Asked Questions on the agency’s website.

Option 1: System-to-System Interface

This option is recommended for medium to large businesses with sufficient information technology (IT) resources.

How System-to-System Interface works:

• The OCSE system sends you the income withholding order in either a flat file or XML format, depending on which one you choose
• The agency can send you a PDF version of the IWO along with your file selection
• You establish an acknowledgement record, stating whether you accept or reject the IWO. Reasons for rejection include the employee no longer works for your business, or the income withholding order is a duplicate

The employer’s IT resources must be able to handle several months of programming — with 3-5 months being the estimated implementation time. For more information on the System-to-System Interface option, see the OCSE’s Software Interface Specification for States and Employers.

If you fully outsource payroll, your provider will manage e-IWOs on your behalf, including programming requirements. If you process payroll in house, you can use payroll software that enables system-to-system integration for e-IWOs.

Option 2: No Programming

This option is recommended for smaller employers who get only a few IWOs a month (if that much) and lack IT resources.

The No Programming option works like this:

• The OCSE system sends you an image-ready PDF version of the IWO along with a pre-filled acknowledgement — which can be a fillable PDF document or an Excel spreadsheet.
• Accept or reject the IWO, in the PDF or Excel document

No programming is required, and only minimal system configurations are needed from your IT department. Estimated implementation time is 2-4 weeks.

For details on the No Programming option, see the OCSE’s “Employer No Programming Option.”