Bonus/Lump Sum Reporting – Answers to Employers’ Questions

A lump sum is a one-time payment to an employee.  Examples are bonuses, commissions, severance, and vacation payouts.
 

The Department of Labor (DOL) issued Opinion Letter CCPA2018-1NA to address 18 specific types of lump sum payments and identify which ones qualify as earnings subject to the 50% to 65% withholding limits under the CCPA. Of the 18 types of payments, 15 are subject to the CCPA limitations on child support withholdings. Only three types of lump sum payments do not qualify as earnings:

• Buybacks of company shares
• Workers’ compensation for medical reimbursement
• Wrongful termination insurance settlements for compensatory or punitive damages

Please review the Opinion Letter to ensure your company follows the guidance provided by DOL.

No. Most lump sum payments qualify as earnings. The Department of Labor’s Opinion Letter CCPA2018-1NA clarifies which ones are subject to withholding limits for child support under Title III of the Consumer Credit Protection Act (CCPA).

No, child support agencies do not always send an IWO to garnish a lump sum. Some states use another document to garnish a lump sum.