Child Support Provisions in the Deficit Reduction Act of 2005 (P.L. 109-171)

CRS Report for Congress
Child Support Provisions in the
Deficit Reduction Act of 2005 (P.L. 109-171)
Carmen Solomon-Fears
Specialist in Social Legislation
Domestic Social Policy Division
Summary
Among other things, P.L. 109-171 (the budget reconciliation measure, now referred
to as the Deficit Reduction Act of 2005 — S. 1932) made a number of changes to the
Child Support Enforcement (CSE) program. The act will reduce the federal matching
rate for laboratory costs associated with paternity establishment from 90% to 66%, end
the federal matching of state expenditures of federal CSE incentive payments reinvested
back into the program, and require states to assess a $25 annual user fee for child
support services provided to families with no connection to the welfare system. P.L.
109-171 also simplifies CSE distribution rules and extends the “families first” policy by
providing incentives to states to encourage them to allow more child support to go to
both former welfare families and families still on welfare. In addition, P.L. 109-171
revises some child support enforcement collection mechanisms and adds others. The
Congressional Budget Office (CBO) estimates that the CSE provisions contained in
P.L. 109-171 will reduce federal costs of the CSE program by $1.5 billion over the five-
year period FY2006-FY2010. This report will not be updated.
Background
Over the years, CSE has evolved into a multifaceted program. While recovery of
costs to provide cash welfare to needy families with children still remains an important
function, other aspects of the program include service delivery and promotion of
self-sufficiency and parental responsibility.
The CSE program has helped strengthen families by securing financial support for
children from their noncustodial parent on a consistent and continuing basis, and by
helping some families to remain self-sufficient and off public assistance by providing the
requisite CSE services. Child support payments now are generally recognized as a very
important income source for single-parent families. On average, child support constitutes
17% of family income for households that receive it (2001 data). Among poor families
who receive it, child support constitutes about 30% of family income (2001 data).


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The CSE program, Part D of Title IV of the Social Security Act, was enacted in
January 1975 (P.L. 93-647). The CSE program is administered by the Office of Child
Support Enforcement (OCSE) in the Department of Health and Human Services (HHS),
and funded by general revenues. All 50 states, the District of Columbia, Guam, Puerto
Rico, and the Virgin Islands operate CSE programs and are entitled to federal matching
funds. The following families automatically qualify for CSE services free of charge:
families receiving cash TANF benefits (Title IV-A), foster care payments (Title IV-E),
or Medicaid coverage (Title XIX). Collections on behalf of families receiving TANF cash
benefits are used to reimburse state and federal governments for TANF payments made
to the family. Other families must apply for CSE services, and states must charge an
application fee that cannot exceed $25. Child support collected on behalf of nonwelfare
families goes to the family, usually through the state disbursement unit.
In 1996, Congress passed major changes to the CSE program as part of its reform of
welfare. Since FY2002, when the authorization expired for the Temporary Assistance for
Needy Families (TANF) block grant and other related programs, proposals for significant
changes to the CSE program have been linked to welfare reauthorization legislation. P.L.
109-171 (the Deficit Reduction Act of 2005, S. 1932),1 among other things, reauthorized
the Temporary Assistance for Needy Families (TANF) block grant and made substantive
changes to the CSE program. CBO estimates that the CSE provisions in P.L. 109-171
will reduce federal costs of the CSE program by $1.5 billion over the five-year period
FY2006-FY2010. For a comparison of selected provisions, see Table 1.
Child Support Assignment and Distribution Policies
P.L. 109-171, the Deficit Reduction Act (S. 1932), seeks to improve the CSE
program and raise collections in order to increase the economic independence of former
welfare families and provide a stable source of income for all single-parent families with
a noncustodial parent. It simplifies CSE assignment and distribution rules, and
strengthens the “family-first” policies started in the 1996 welfare reform law.
Assignment of Child Support Rights. As a condition of receiving TANF
cash benefits, a family must assign its child support rights to the state. Assignment rules
determine who has legal claim on the child support payments owed by the noncustodial
parent. The child support assignment covers any child support that accrues while the
family receives cash TANF benefits,as well as any child support that accrued before the
family started receiving TANF benefits. Assigned child support collections are not paid
to families; rather, this revenue is kept by states and the federal government as partial
reimbursement for welfare benefits. Nonwelfare families who apply for CSE services do
not assign their child support rights to the state, and thereby receive all of the child
support collected on their behalf. An extremely important feature of the assignment
process is the date on which an assignment was entered. If the assignment was entered
on or before September 30, 1997, then pre-assistance and during-assistance arrearages are
“permanently assigned” to the state. (Note that past-due child support payments are


1 The conference agreement on S. 1932, the Deficit Reduction Act of 2005 (H.Rept. 109-362),
was originally passed by the House on December 19, 2005. It was then passed by the Senate with
amendments on December 21, 2005, and subsequently was passed again by the House on
February 1, 2006. It was signed into law (P.L. 109-171) by the President on February 8, 2006.

referred to as arrearages.) If the assignment was entered on or after October 1, 1997, then
only the arrearages that accumulate while the family receives assistance are “permanently
assigned.” The family’s pre-assistance arrearages are “temporarily assigned,” and the
right to those arrearages goes back to the family when it leaves TANF, unless the
arrearages are collected through the federal income tax refund offset program.
P.L. 109-171 stipulates that the child support assignment only covers child support
that accrues while the family receives TANF benefits. This means that any child support
arrearages that accrued before the family started receiving TANF benefits would not have
to be assigned to the state (even temporarily), and thereby any child support collected on
behalf of the former-TANF family for pre-assistance arrearages will go to the family.
Distribution of Child Support. Distribution rules determine which claim is paid
first when a child support collection occurs. The order of payment of the child support
collection is important because in many cases arrearages are never fully paid.
TANF Families. While a family receives TANF cash benefits, the states and federal
government retain any current support and any assigned arrearages collected up to the
cumulative amount of TANF benefits that has been paid to the family. While states may
pay their share of collections to the family, they must pay the federal government the
federal government’s share of child support collections collected on behalf of TANF
families. This means that the state, and not the federal government, bears the entire cost
of any child support passed through to families and disregarded by the state in
determining the family’s TANF cash benefit.
P.L. 109-171 provides incentives in the form of federal cost sharing to states to direct
more of the child support collected on behalf of TANF families to the families themselves
(often referred to as a “family-first” policy), as opposed to using such collections to
reimburse state and federal coffers for welfare benefits paid to the families. P.L. 109-171
will help states pay for the cost of their CSE pass-through and disregard policies by
requiring the federal government to share in the costs of the entire amount of child
support collections passed through and disregarded by states. P.L. 109-171 will allow
states to pay up to $100 per month (or $200 per month to a family with two or more
children) in child support collected on behalf of a TANF or foster care family to the
family, and would not require the state to pay the federal government the federal share of
those payments. In order for the federal government to share in the cost of the child
support pass-through, the state would be required to disregard (i.e., not count) the child
support collection paid to the family in determining the family’s cash TANF benefit.
CBO estimates that this provision will cost the federal government $140 million over the
five-year period FY2006-2010. This provision takes effect on October 1, 2008.
Former TANF Families. Pursuant to the 1996 welfare reform law (P.L. 104-193),
beginning on October 1, 2000, states must distribute to former TANF families the
following child support collections first before the state and the federal government are
reimbursed (the “family-first” policy): (1) all current child support, (2) any child support
arrearages that accrue after the family leaves TANF (these arrearages are called
never-assigned arrearages), plus (3) any arrearages that accrued before the family began
receiving TANF benefits. Any child support arrearages that accrue during the time the
family is on TANF belong to the state and federal government.



One of the goals of the 1996 welfare reform law with regard to CSE distribution
provisions was to create a distribution priority that favored families once they leave the
TANF rolls. Thus, generally speaking, under current law, child support that accrues
before a family receives TANF and after the family stops receiving TANF goes to the
family, whereas child support that accrues while the family is receiving TANF goes to the
state. This additional family income is expected to reduce dependence on public
assistance by both promoting exit from TANF and preventing entry and re-entry to TANF.
P.L. 109-171 gives states the option of distributing to former TANF families the full
amount of child support collected on their behalf (i.e., both current support and all child
support arrearages — including arrearages collected through the federal income tax refund
offset program). Thereby, P.L. 109-171 allows states to simplify the CSE distribution
process by eliminating the special treatment of child support arrearages collected through
the federal income tax refund offset program. Under P.L. 109-171, the federal
government shares with the states the costs of paying child support arrearages to the
family first. CBO estimates that this provision will cost the federal government $283
million over the five-year period FY2006-2010. This provision takes effect on October

1, 2009, or at state option not before October 1, 2008.


Expansion or Enhancement of Collection/Enforcement Tools
The CSE program has numerous methods by which to obtain child support from
noncustodial parents. They include income withholding; interception of federal and state
income tax refunds; seizure of lump-sum benefits, lottery winnings, and settlements;
withholding of driver’s licenses, professional licenses, and recreational licenses of persons
who owe past-due child support; seizure of assets from banks and other financial
institutions; denial of passports; imposition of criminal penalties against noncustodial
parents who repeatedly fail to financially support children who reside with custodial
parents in another state; and civil or criminal contempt-of-court procedures. Nonetheless,
in FY2004, states were collecting only 18% of child support obligations for which they
collectively had responsibility. For several years, child advocates and Members of
Congress have been pushing for more or enhanced CSE tools.
P.L. 109-171 includes provisions that (1) lower the threshold amount for denial of
a passport to a noncustodial parent who owes past-due child support; (2) allow states to
use the federal income tax refund offset program to collect past-due child support for
persons not on TANF who are no longer minors; (3) authorize the Secretary of HHS to
compare information of noncustodial parents who owe past-due child support with
information maintained by insurers concerning insurance payments and to furnish any
information resulting from a match to CSE agencies so that they can pursue child support
arrearages; (4) allow an assisting state to establish a CSE interstate case based on another
state’s request for assistance (thereby enabling an assisting state to use the CSE statewide
automated data processing and information retrieval system for interstate cases); (5)
require states to review and, if appropriate, adjust child support orders of TANF families
every three years; and (6) require that medical child support for a child be provided by
either or both parents. CBO estimates that these CSE collection tools will reduce federal
costs by about $36 million over the period FY2006-2010. (The effective dates related to
collection techniques vary; a few take effect immediately, while others take effect
between October 1, 2006, and October 1, 2009.)



Financing Provisions
The federal government reimburses each state 66% of the cost of its CSE program.
However, it reimburses states at a higher 90% matching rate for the laboratory costs of
establishing paternity. In addition, the federal government pays states an incentive
payment2 to encourage them to operate effective programs.
P.L. 109-171 includes provisions that (1) establish a $25 annual user fee for
individuals who have never been on TANF but receive CSE services and who have
received at least $500 in any given year — saving the federal government $172 million
over the five-year period FY2006-2010; (2) reduce the CSE federal matching rate for the
laboratory costs associated with establishing paternity from 90% to 66%3 — saving $28
million over the five years; and (3) eliminate the federal match on CSE incentive
payments that states, in compliance with federal law, reinvest back into the CSE program
— saving $1.6 billion over the five years.4
Table 1. Comparison of Child Support Assignment,
Distribution, and Financing Rules Under Old and New Law
Old LawNew Law (P.L. 109-171)
ChildAssignment rules stipulate who has aStipulates that the child support assignment
Supportlegal claim on the child supportonly covers child support that accrues during
Assignmentpayments owed by the noncustodialthe period that the family receives TANF.
Rulesparent. Generally, child support owedThus, child support owed before a family
before and during a family’s time onenrolls in TANF and after the family leaves
TANF belongs to the state and federalTANF belongs to the family, and child
government, and child support owedsupport owed during the time the family is on
after the family leaves the TANF rollsTANF belongs to the state. Effective October
belongs to the family.1, 2009; October 1, 2008, at state option.


2 The CSE incentive payment was statutorily set by P.L. 105-200. In the aggregate, incentive
payments to states may not exceed $446 million for FY2005, $458 million for FY2006, $471
million for FY2007, and $483 million for FY2008, to be increased to account for inflation in
years thereafter. The incentive payment is based in part on five performance measures related
to establishment of paternity and child support orders, collection of current and past-due child
support payments, and cost-effectiveness. In addition, P.L. 105-200 required mandatory
reinvestment of child support incentive payments into the CSE program or related activities.
3 Paternity establishment costs that are not associated with laboratory testing are reimbursed at
the regular CSE federal matching rate of 66%.
4 In addition, P.L. 109-171 establishes a minimum funding level for technical assistance and the
Federal Parent Locator Service (FPLS) — costing $4 million over the five-year period FY2006-
FY2010. P.L. 109-171 prevents funding for technical assistance (which is equal to 1% of the
federal share of child support collected on behalf of TANF families) from going below the
amount the state received in FY2002. Similarly, P.L. 109-171 prevents funding for the FPLS
(which is equal to 2% of the federal share of child support collected on behalf of TANF families)
from going below the amount the state received in FY2002. It is expected that the diminishing
share of the CSE caseload that receives cash TANF benefits, together with the new rules related
to assignment and distribution, will result in the federal government receiving a smaller amount
of child support collections than it previously received.

Old LawNew Law (P.L. 109-171)
ChildChild support distribution rulesFor families who receive assistance from the
Supportdetermine the order in which childstate (TANF or foster care), requires the
Distributionsupport collections are paid when bothfederal government to waive its share of the
Rulesthe family and the state have competingchild support collections passed through to
claims on the money. The general ruleTANF families by the state and disregarded
is that if the family is on TANF (orby the state up to an amount equal to $100
receives federal foster care aid), thenper month in the case of a family with one
the state is paid first. While a familychild, and up to $200 per month in the case of
receives cash TANF benefits, the statea family with two or more children. Effective
can send some, all, or none of its shareOctober 1, 2008.
of the child support collected to the
family. The state is required to send the
federal government the federal share of
any child support collected on behalf of
TANF families.
If the family is not on TANF, then theSimplifies child support distribution rules to
family is paid first. However, angive states the option of providing families
exception occurs for former TANFthat have left TANF the full amount of the
families if the child support is collectedchild support collected on their behalf (i.e.,
via the federal income tax refund offsetboth current child support and child support
program, in such cases, the state is paidarrearages, including support payments
first.collected via the federal income tax refund
offset program). The federal government
would have to share with the states the costs
of paying child support arrearages to the
family first. Effective October 1, 2009;
October 1, 2008 at state option.
FinancingWelfare families are automaticallyRequires families that have never been on
Rulesenrolled free of charge in the CSETANF to pay a $25 annual user fee when
program. Nonwelfare families mustchild support enforcement efforts on their
apply for CSE services, and states mustbehalf are successful (i.e., at least $500
charge an application fee that cannotannually is collected on their behalf).
exceed $25.Effective October 1, 2006.
In general, the federal governmentReduces the federal matching rate for
reimburses each state 66% of the costlaboratory costs incurred in determining
of expenditures on its CSE program.paternity from 90% to 66%. Effective
However, for the laboratory costs ofOctober 1, 2006.
establishing paternity, the federal
government reimburses states at a
higher 90% matching rate.
In addition, the federal governmentProhibits federal matching of state
pays states an incentive payment toexpenditure of federal CSE incentive
encourage them to operate effectivepayments. (This means that CSE incentive
programs. Federal law requires statespayments that are received by states and
to reinvest CSE incentive paymentsreinvested in the CSE program are not eligible
back into the CSE program or relatedfor federal reimbursement.) Effective
activities. If incentive payments areOctober 1, 2007.


reinvested in the CSE program, they are
reimbursed at the appropriate CSE
federal matching rate, i.e., 66% for
general activities or 90% for laboratory
testing for paternity determination.