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Child Support Assignment and Distribution

Provisions in TANF Reauthorization Bills

Vicki TuretskyCenter for Law and Social Policy

Presented to the 2005 Statewide Conference on Housing and Community Economic Development (September 14, 2005)

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2005 TANF Reauthorization Bills

• The “Personal Responsibility, Work, and Family Promotion Act of 2005” (H.R. 240) passed out of the House Human Resources Subcommittee.

• The “Personal Responsibility and Individual Development for Everyone (PRIDE) Act of 2005 (S. 667) passed out of the Senate Finance Committee.

• TANF extension through 12/31/05 passed the House (H.R. 3672) as a part of hurricane relief.

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Assignment and Distribution:Background

• Child support is retained for current and former TANF families to repay welfare benefits.

• Under 10% of child support payments is kept by the government.

• Only TANF cash assistance is subject to assignment.

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Assignment and Distribution: Background

In 2004, states collected $21.9 billion:• $1.1 billion for current TANF families.• $9.4 billion for former TANF families.• $9.5 billion for never TANF families.

$2.1 billion retained as recovered welfare costs.• $1.16 billion retained for former TANF families.• $914 million retained for current TANF families.

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Assignment and Distribution: Background

In 2004, Indiana collected $442.6 million:• $11.1 million for current TANF families.• $91.5 million for former TANF families.• $340.1 million for never TANF families.

Indiana retained $26.8 million (6%):• Federal share was $16.6 million• State share was $10.2 million

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Assignment and Distribution: Background

• States share retained support with the federal government according to the state’s Federal Medical Assistance Percentage (FMAP).

• All states pay at least a 50% share of retained support to the federal government. Poorer states pay a larger federal share.

• Effective Oct 1, 2005, Indiana will pay 62.98%.

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Assignment and Distribution: Background

• Assignment and distribution laws govern whether families or states keep support.

• Assignment laws answer the question: “Who has a claim to the child support?”

• Distribution laws answer the question: “Who is first in line for payment?”

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Assignment: Current Law

Families applying for TANF assistance must assign (sign over) to the state all rights to unpaid child support owed before and during the assistance period.

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Assignment: Current Law

• Assignments of support owed during the TANF assistance period are “permanently” assigned.

• States may not keep more support than the amount of assistance paid out (“unreimbursed assistance,” or URA).

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Assignment: Current Law

• Pre-assistance support is “temporarily” assigned to the state during the assistance period.

• Pre-assistance support is “conditionally” assigned after the assistance period.

• The “condition” is met when the state collects arrears through a federal tax offset. Otherwise, the support is paid to the former TANF family.

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Assignment: House and Senate Bills

House bill: no change to current law.

Senate bill: Families applying for TANF must permanently assign support owed during the assistance period, but pre-assistance support would belong to families.

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Distribution Overview: Current Law

• While a family is receiving TANF, the state is paid off before the family.

• After the family leaves TANF, the family is paid off first, except for arrears collected through a federal tax offset.

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Pass-through to Current TANF Families: Current Law

• A state has the option to retain or “pass through” to the family some or all of the retained support.

• Either way, the state must pay the federal government a share of the support. States with FMAP rates over 60% rarely pass through support.

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Pass-through to Current TANF Families: House Bill

• If a state increases the amount of support it passes through (and disregards for TANF benefits), the federal government would waive a limited portion of its share.

• The federal government would waive its share in the increase, up to the greater of a $50 increase or a $100 pass-through.

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Pass-through to Current TANF Families: Senate Finance Bill

• The federal government would waive its share to the extent that a state passes through (and disregards) the support.

• The federal government would waive its share for support passed through under existing state policies.

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Distribution to Former TANF Families: Current Law

• In general, once a family leaves TANF, support owed to the family is paid first.

• Monthly support is paid to the family.

• Arrears are paid to the family if collected by a method other than federal tax offset, but paid to the state when collected through a federal tax offset.

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Distribution to Former TANF Families: House Bill

• State option to pay former TANF families the arrears collected through a federal tax offset.

• But to elect this option, states would have to reorient their entire distribution system. Whether families or states get the support would depend upon the date collected, not the date owed.

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Distribution to Former TANF Families: Senate Finance Bill

• State option to pay arrears collected through federal tax offsets to former TANF families.

• States could claim TANF Maintenance of Effort (MOE) credit for expanded distribution.

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Contact:

Vicki TuretskySenior Staff AttorneyCenter for Law and Social Policy1015 15th Street, NW, Suite 400Washington, DC 20005(202) 906-8017 phone(202) 842-2885 fax vturet@clasp.orgwww.clasp.org