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Disposable Income/Earnings

edited September 2010 in General Payroll Topics
Hi all....I'm looking for some advice on how to handle an issue I'm having with our payroll vendor.

We have had some issues where some of our staff's payroll checks shortfall to zero with the shortfall happening on the child support/state levy's. After some fairly extensive research into why this was happening my vendor provided me with the formula in their system on how it calculates "disposable income". They are using federal subject wages (W2 - Box 1) as their disposable income. I have sent copies of both the CCPA and the USC laws showing how disposable income is to be calculated but have been told that's not how their system is designed. This is creating a lot of manual work for me to make sure that all of my support order/garnishments area calc'd correctly.

Any suggestions?? Without naming the vendor, it is 1 of the big ones in the country. I'm just not sure where to go with this or if I should just let it go and continue the manual monitoring.

Comments

  • If they're one of the "big ones", are you sure there isn't an error or misunderstanding in the input?
    Not sure which "big one" you're talking about, but I find it hard to believe anybody who has a large client base and is writing payroll programs hasn't done the proper research. Do they admit that their system does not comply with the law?

    Otherwise, take it higher. And higher, stiill.
  • Can you give us an example of whats happening? I think we're with the same one, and I don't think I've ever had any issue with my calculations. (But then I don't think I've ever had such a small check that it would get taken down to zero anyway.)
  • Here is a quote from the email I received yesterday:
    The process for taking amounts from an employees paychecks goes in this order:
    Step 1 - Pay employee
    Step 2- Using Pretax Deductions, calculate Federal and State Taxes
    Step 3- Take Pretax Deductions from earnings
    Step 4- Take Taxes
    Step 5- Take Wage Attachments

    At this point she provides a screen shot from there configuration which clearly shows gross wages minus 401k, 403b, 408, S125, 408, etc.. then states:
    Wage Attachments have an "implied priority on the system" which is defined as follows:

    Priority
    Wage attachment deductions have an "implied" priority that sequences them higher than all post-tax voluntary deductions. The employee level priority determines the sequence in which wage attachment deductions are applied to an employee's pay after taxes have been withheld.
    Pretax deductions are not "Voluntary" deductions, so their priority is higher than Wage Attachments.

    At that point, I started citing the Fed/State laws and her final reply was:
    unfortunately, Pretax on our system has a higher priority. This isn't going to be changed. Since the deduction is classified as a "PRETAX" it will not be classified as "VOLUNTARY" and has to come out before taxes and wage attachments.

    I'm just not sure who to go higher with (gov't, their company mgmt, etc..) The above is as close to admitting as I can get from them.

    @Mindy - Yes we are talking about that provider. What alerted me to it was a part time employee with child support, S125, & 401k. The system took the full amounts of the pretax items and didn't even take close to 50% of the disposable for the child support.

    @David - The 2 individuals I have been working with are CPP's.
  • I find it interesting that they said "unfortunately, our system" blah-blah-blah, which seems to imply that they know it isn't correct, but are just trying to bluff you.

    Seems like they don't know the difference between priority in calculating TAXES, vs priority of taking non-tax DEDUCTIONS. It's two completely separate issues. That's the part I would emphasize.

    No governments are going to care whether the system you use is compliant or not. Is there a user group?
  • Ask your account reps boss to send you a customer service survey because you have some feedback to give them.

    This will fix your issue, because bonuses are tied to survey results.
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