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Involuntary and Voluntary Pay Deductions: Illinois

Involuntary and Voluntary Pay Deductions requirements for other states

Federal law and guidance on this subject should be reviewed together with this section.

Author: Vicki M. Lambert, The Payroll Advisor

Summary

  • Employers that receive an income withholding order (IWO) for child support against an employee's wages must begin withholding on the first payday after receipt of the IWO. The amount withheld for child support may not exceed the limits of the federal Consumer Credit Protection Act, although employers may withhold an administrative processing fee. Certain employers must remit withheld support electronically. Special rules apply to interstate income withholding orders. See Child Support Withholding.
  • Illinois limits the amount of disposable income that is subject to creditor garnishment. Employers are entitled to withhold an administrative processing fee. See Creditor Garnishment Withholding.
  • Voluntary assignments of wages entered into by employees are not valid unless several conditions are satisfied. Illinois law limits the amount of wages that are subject to wage assignments. See Voluntary Wage Assignments.
  • If an employee has unpaid state taxes, the Illinois Department of Revenue has the right to collect the debt by issuing a garnishment order against the employee's wages. Employers are required to honor these orders. There are limits on the amount subject to withholding. See Tax Levies.

Child Support Withholding

When to Withhold

Employers that receive an income withholding order (IWO) for child support against an employee's wages must begin withholding on the first payday after receipt of the IWO. Employers have seven business days after payday to send the withheld amount to the state disbursement unit (SDU). If an employee subject to an IWO is terminated, the employer must notify the SDU within seven days after the employee terminates.

Interstate Income Withholding Orders

An employer that receives a child support withholding order from another state must provide the employee with a copy of the order immediately.

The employer must treat an out-of-state income withholding order as if it had been issued in Illinois and withhold and distribute the funds as directed by the withholding order regarding:

  • The duration and amount of periodic payments of current child support;
  • The person designated to receive the payments;
  • The address to which the payments should be forwarded;
  • Medical support;
  • The amount of any periodic payments, fees and costs for the support enforcement agency, the issuing court, attorney fees; and
  • The amount of arrears and interest on the arrears.

The employer must follow the law of the employee's work state regarding:

  • The employer's fee for processing the income withholding order;
  • The maximum amount permitted to be withheld from the employee's disposable earnings;
  • The times within which the employer must implement withholding and forward the amount withheld to the payee; and
  • The priority rules for honoring multiple income withholding orders against the same employee.

+750 ILCS 22/502, +750 ILCS 22/503.

Penalties

An employer that fails to withhold child support or remit it to the SDU, on even one occasion, is liable for a penalty of $100 for each day the payment is late, not to exceed $10,000. A collection action may not be brought against the employer more than one year after the date of the alleged failure.

An employer that receives a notice from a noncustodial parent that a child support payment was not received has 14 days to respond to the noncustodial parent stating the reason why the payment was not received, or make the required payment plus interest. An employer that fails to do so is liable for the $100 per day penalty.

+750 ILCS 28/20; +750 ILCS 28/25; +750 ILCS 28/45.

Maximum Withholding Amount

Withholding for child support ordered by an agency-issued order is limited to a maximum of 50% of an employee's allowable disposable earnings. Illinois employers are permitted to withhold an administrative processing fee of $5 per month. Additional information is available from the Illinois Department of Child Support Services.

Priority of Multiple Orders

If an employee is subject to multiple child support withholding orders and earns an insufficient amount to satisfy all the orders, the employer must prorate the withholding.

Income and Disposable Earnings

Illinois defines income as any periodic form of payment due to an individual, regardless of source, including wages and salaries, commissions, bonuses, workers' compensation, disability, payments pursuant to a pension or retirement program, severance pay and interest.

Disposable earnings are the amount remaining after mandated deductions are subtracted from gross earnings. Child support is withheld from employees' disposable earnings.

Illinois excludes the following from income when determining pay available for child support withholding:

  • Federal, state and local taxes;
  • Social Security and Medicare (FICA) tax;
  • Required disability contributions;
  • Required retirement contributions;
  • Mandatory union dues; and
  • Mandated health insurance.

+750 ILCS 28/35.

State Disbursement Unit

The Illinois State Disbursement Unit (SDU) collects and disburses child support payments.

Employers must make child support payments to the SDU using electronic funds transfer (EFT) if they have 250 or more employees (not all of them need be located in Illinois) and they are remitting withheld support for one or more of the employees. Employers that have fewer than 250 employees, but withhold for at least 10 child support orders, also must make payments using EFT.

+750 ILCS 28/35.

Creditor Garnishment Withholding

Wages and Disposable Earnings

Illinois defines wages for purposes of creditor garnishment withholding as any hourly pay, salaries, commissions, bonuses, or other compensation owed by an employer to an employee. +735 ILCS 5/12-801.

Disposable earnings are that part of the earnings of any individual after any amounts required by law to be withheld are deducted. + 735 ILCS 5/12-803.

Garnishment Limits

Illinois limits the amount of disposable income that is subject to creditor garnishment to the lesser of the following amounts:

  • 15% of the gross amount paid for the week; or
  • The amount by which disposable earnings for the week exceed 45 times the federal or state minimum hourly wage.

Employer Administrative Fee

Illinois employers are permitted to collect a maximum administrative fee of 2% of the amount required to be deducted. +735 ILCS 5/12-814.

State Student Loan Garnishments

The salary, wages, commissions and bonuses of Illinois employees, even if living outside of Illinois, may be garnished by the Illinois Student Assistance Commission to pay a state-backed student loan debt. The employer must be served with a notice of administrative wage garnishment. +740 ILCS 170/1.

Voluntary Wage Assignments

A voluntary assignment of wages entered into by an employee to pay for or secure a debt are not valid unless all of the following conditions are satisfied:

  • The assignment is made in a written document that is signed by the wage-earner in person, and includes:
    • The date it became effective;
    • The Social Security Number of the wage-earner;
    • The name of the wage-earner's employer at the time the agreement became effective;
    • The amount of money loaned or the price of the articles sold or other consideration given;
    • The rate of interest or time-price differential, if any, to be paid and the date when such payments are due.
  • The assignment is given to secure an existing debt of the wage-earner or one contracted for by the wage-earner simultaneously with the assignment.
  • An exact copy of the assignment is provided to the wage-earner at the time the assignment is signed.
  • The words "Wage Assignment" are printed or written in boldface letters of not less than one-quarter of an inch in height at the top of the wage assignment, and one inch above or below the line where the wage-earner signed the assignment.
  • The assignment is written as a separate document complete in itself, and not as a part of a conditional sales contract or any other document.

+740 ILCS 170/1.

A wage assignment that makes a demand on an employee's wages is invalid unless all of the following requirements are satisfied:

  • The indebtedness secured by the assignment has been in default for more than 40 days and the default has continued to the date of the demand.
  • The demand correctly states the amount the employee is in default and the original copy, or a photocopy, of the assignment is provided to the employer.
  • Not less than 20 days before the demand is served, a notice of intention to make the demand is served on the employee and an advice copy is sent to the employer by registered or certified mail.

For voluntary wage assignments issued after January 1, 2017, creditors are required to mail copies of the demand to the employer by (i) first class mail and (ii) certified mail. Employee notices must provide that the employee can revoke a wage assignment if revocation would be allowed under federal law. An employer must immediately stop withholding if the employee revokes the wage assignment.

Any demand for withholding pursuant to a wage assignment has no legal effect if it fails to meet these requirements.

A valid demand applies only to wages due at the time the demand is served and to subsequent wages, until the total amount due under the assignment is paid off. Employers must continue to withhold pursuant to a wage assignment until the debt is paid off or until the end of the employer's payroll period ending immediately prior to 84 days after service of the demand, whichever occurs first. Therefore, demands can never apply to wages due prior to the date of the demand.

For voluntary wage assignments issued after January 1, 2017, the 84-day time limit does not apply.

+740 ILCS 170/2; Public Act 099-0903.

Assignment Limits

Illinois law limits the amount of wages that are subject to wage assignments. The maximum wages, salary, commissions, and bonuses that may be withheld for an assignment in any workweek cannot exceed the lesser of:

  1. 15% of the gross amount paid for that week, or
  2. The amount by which disposable earnings for a week exceed 45 times the federal minimum hourly wage. See Employee Compensation > Minimum Wage.

+740 ILCS 170/4.

Tax Levies

If an employee has unpaid state taxes, the Illinois Department of Revenue (DOR), after first notifying the employer, has the right to collect the debt by issuing a garnishment order against the employee's wages. Orders are served on employers on Form EDC-111, Response to Levy - Employer. Employers are required to honor these orders. After being served with the order, the employer must withhold for each workweek, the lesser of the following amounts:

  1. 15% of the employee's gross weekly wages; or
  2. The amount by which the employee's disposable earnings exceed 45 times the federal minimum hourly wage in effect at the time the amounts are payable. See Employee Compensation > Minimum Wage.

Wages and Disposable Earnings

Illinois defines wages subject to a tax levy to include salaries, bonuses, and commissions. Disposable earnings are the amount of earnings remaining after deductions are made for amounts required by law to be withheld, including deductions for Social Security and Medicare (FICA) taxes, and federal, state and local taxes.

Remittance Requirements

When remitting payments, a copy of Form EDC-111 must be included with each payment. The form may be photocopied but it must have an original signature. The first payment must be made at the close of the next payroll period, or by the last day of the next month, whichever is earlier. If the amount is not fully paid, the employer must send additional payments at least once every two months. Employers may send payments more often than required by law. Employers must continue to withhold for a wage levy until the tax liability is paid, plus any interest, or until the DOR rescinds the levy.

Future Developments

There are no developments to report at this time. Continue to check XpertHR regularly for the latest information on this and other topics.