[Federal Register Volume 65, Number 249 (Wednesday, December 27, 2000)]
[Rules and Regulations]
[Pages 82154-82176]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-31611]



[[Page 82154]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Child Support Enforcement

45 CFR Part 303

RIN 0970-AB97


National Medical Support Notice

AGENCY: Office of Child Support Enforcement, Administration for 
Children and Families, HHS.

ACTION Final rule.

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SUMMARY: This rule implements provisions of the Child Support 
Performance and Incentives Act of 1998 (CSPIA), Public Law 105-200, 
that require State child support enforcement agencies, under title IV-D 
of the Social Security Act (the Act), to enforce the health care 
coverage provision in a child support order through the use of the 
National Medical Support Notice (NMSN).
    A proposed rule was published in the Federal Register on November 
15, 1999 (64 FR 62074). After consideration of the written comments 
received, changes have been made in this final regulation, including 
changes to the NMSN found in the Appendix.

DATES: This regulation is effective January 26, 2001.

FOR FURTHER INFORMATION CONTACT: Elizabeth Matheson, Director, Division 
of Policy, Office of Child Support Enforcement (OCSE), (202) 401-9386.

SUPPLEMENTARY INFORMATION:

Statutory Authority

    This final rule is published under the authority of sections 452(f) 
and 466(a)(19) of the Social Security Act (the Act), 42 U.S.C. 652(f) 
and 666(a)(19), as amended by section 401 of the Child Support 
Performance and Incentive Act of 1998 (CSPIA), Public Law 105-200, and 
technical amendments in section 4(b) of the Noncitizen Benefit 
Clarification and Other Technical Amendments Act of 1998, Public Law 
105-306.
    Also being published in the Federal Register today is a parallel 
final regulation developed by the Department of Labor (DOL) under 
section 609(a) of the Employee Retirement Income Security Act of 1974 
(ERISA) (29 U.S.C.1169(a)), adopting the NMSN. Under ERISA section 
609(a)(5)(C), if the NMSN is appropriately completed, and satisfies the 
conditions of ERISA section 609(a)(3) and (4), the NMSN is deemed to be 
a ``qualified medical child support order'' as defined in section 
609(a) of ERISA.
    In this regulation, OCSE is implementing the provisions of CSPIA 
that require States to have in effect laws that require procedures to 
enforce the health care coverage provisions in child support orders 
through the use of the NMSN. The NMSN notifies the noncustodial 
parent's employer of the provision for health care coverage of the 
child in a IV-D case.

Background

    The enactment of the Child Support Enforcement Amendments of 1984, 
Pub. L. 98-378, added a new section 452(f) to the Act that required the 
Secretary to issue regulations to require State IV-D agencies to secure 
medical support information, and to secure and enforce medical support 
obligations whenever health care coverage is available to the 
noncustodial parent at a reasonable cost. Initially, these regulations 
were placed in Subpart B at 45 CFR 306.50 and 51. Subsequently, they 
were redesignated and placed where they appear now at 45 CFR 303.30 and 
31. Since the enactment of this legislation and the implementing 
regulations, States have been making efforts to establish and enforce 
medical support for children with limited success.
    The Omnibus Budget Reconciliation Act of 1993 (OBRA), Pub. L. 103-
66, was a significant piece of legislation that contained provisions 
intended to remove some of the impediments to State IV-D agency 
attempts to secure and enforce medical coverage for children in IV-D 
cases. OBRA contained many improvements that facilitated obtaining and 
enforcing medical coverage, including: prohibiting discriminatory 
health care coverage practices; creating ``qualified medical child 
support orders'' (QMCSOs) to obtain coverage from group health plans 
subject to ERISA; and allowing employers to deduct the costs of health 
insurance premiums from the employee/obligor's income. Some of the 
medical support provisions of OBRA were included as Medicaid State plan 
requirements under section 1908 of the Act [42 U.S.C. 1396g-1] and 
required States to enact laws governing employer and insurer compliance 
with health care provisions of support orders. The QMCSO provisions are 
contained in section 609 of ERISA (29 U.S.C. 1169).
    Section 382 of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (PRWORA), Pub. L. 104-193, added a new 
paragraph 19 to section 466(a) of the Act (466(a)(19)) that requires a 
provision for health care coverage in all child support orders 
established or enforced by IV-D agencies. Prior to enactment of PRWORA, 
IV-D agencies were required to petition for inclusion of medical 
support in all new and modified IV-D child support orders for cases 
with an assignment of medical support rights for public assistance 
cases under titles IV-A, XIX, and IV-E. Individuals not receiving 
public assistance could choose not to seek medical support. Despite 
improved medical support requirements (such as procedures for including 
health care coverage in all child support orders under title IV-D) and 
a focus on enforcement of medical support by OCSE and the State IV-D 
programs, the enforcement of medical support coverage for children 
under the IV-D program has remained problematic.
    Extensive consultations with State IV-D agencies, employers, HHS, 
DOL, and advocates of medical support coverage, resulted in an array of 
medical support provisions in CSPIA. These provisions were enacted in 
order to further eliminate barriers that prevent meaningful 
establishment and enforcement of medical child support coverage.
    In addition to the requirements that are contained in this 
regulation, CSPIA provided for the establishment of a Medical Child 
Support Working Group. The Working Group was charged with submitting a 
report to the Secretaries of Health and Human Services and Labor 
containing recommendations regarding appropriate measures to address 
impediments to the effective enforcement of medical support by IV-D 
agencies. The Working Group held a series of meetings beginning in 
March, 1999. At its final meeting in June, 2000, the MCSWG approved its 
report to the Secretary of Health and Human Services and the Secretary 
of Labor. The Working Group's report contains seventy-six 
recommendations for expansion of health coverage for children eligible 
for child support enforcement services. The Working Group also 
submitted comments on the Notice of Proposed Rulemaking published in 
the Federal Register on November 15, 1999 (64 FR 62074). The Working 
Group included thirty members representing: HHS and DOL, State child 
support directors, State Medicaid directors, employers (including 
payroll professionals), sponsors and administrators of group health 
plans (as defined in section 607(1) of ERISA), organizations 
representing children potentially eligible for medical support, State 
medical child support programs, and organizations representing State 
child support programs.
    Section 401 of CSPIA strengthens the enforcement of medical support 
coverage for children by requiring HHS

[[Page 82155]]

and DOL to jointly develop a NMSN to be issued by States to enforce the 
medical support obligations of a non-custodial parent. The NMSN must 
comply with requirements of section 609(a)(3) and (4) of ERISA, which 
pertain to informational requirements and restrictions against 
requiring new types or forms of benefits. In addition to complying with 
ERISA requirements and all title IV-D requirements, the NMSN must 
include a severable employer withholding notice informing the employer 
of: (1) Applicable provisions of State law requiring the employer to 
withhold any employee contributions due under any group health plan in 
connection with coverage required to be provided; (2) the duration of 
the withholding requirement; (3) the applicability of limitations on 
any such withholding under title III of the Consumer Credit Protection 
Act; (4) the applicability of any prioritization required under State 
law between amounts to be withheld for purposes of cash support and 
amounts to be withheld for purposes of medical support, in cases where 
available funds are insufficient for full withholding for both 
purposes; and (5) the name and telephone number of the appropriate unit 
or division to contact at the State agency regarding the NMSN.
    We believe that employers will welcome the use of a standard form 
that will be used by all State IV-D agencies as required in these 
regulations. This will simplify processing for all concerned and most 
importantly enhance health care coverage for children who are excluded 
from their noncustodial parent's group health plan.
    Section 466(a)(19) of the Act, as amended by section 401(c)(3) of 
CSPIA, requires States to have in effect laws requiring the use of 
procedures providing for IV-D agencies to use the NMSN to enforce child 
support orders which include a provision for the health care coverage 
of the child. Section 466(a)(19)(B) of the Act requires the use of the 
NMSN in all cases where the noncustodial parent is required to provide 
health care coverage for the child pursuant to the order and the 
noncustodial parent's employer is known to the State agency. The 
statute provides an exception, under section 466(a)(19)(B), to using 
the NMSN if a court or administrative order stipulates alternative 
health care coverage to the noncustodial parent's employment-based 
coverage.
    Under section 466(a)(19)(B)(i), States must use the NMSN to 
transfer notice of the provision for health care coverage of the child 
to employers, including State or local governments and churches. 
Section 466(a)(19)(B)(ii) requires the employer to transfer the NMSN 
within 20 business days after the date of the NMSN, without the 
employer withholding notice, to the appropriate plan which provides 
health care coverage for which the child is eligible. The plan 
administrator then determines if the Notice is qualified under section 
609(a) of ERISA in the case of an ERISA-covered plan, or, in the case 
of a church plan, section 401(f) of CSPIA.
    Upon notification by the plan administrator(s) that enrollment may 
occur and the amount of employee contribution to withhold, the employer 
implements the withholding from the employee's income. The employer 
withholds employee contributions within the limitations on withholding 
in accordance with the amounts allowed by the State of the employee's 
principal place of employment (which may equal or be less than that 
allowed by the Federal Consumer Credit Protection Act (15 U.S.C., 
section 1673(b)), or the amounts allowed for health insurance premiums 
by the child support order, whichever is less. If the amount for the 
premium cannot be withheld due to such limitations on withholding, the 
child may not be enrolled. The employer also observes the State law of 
the employee's principal place of employment for prioritization 
purposes if withholding is required for both cash and medical support 
payments.
    Section 466(a)(19)(B)(iii) of the Act requires, in cases where the 
noncustodial parent is a newly hired employee, that the State agency 
send the NMSN, together with the income withholding notice pursuant to 
section 466(b) of the Act, within two business days after the date the 
newly hired employee is entered into the State Directory of New Hires, 
pursuant to section 453A of the Act.
    Under section 466(a)(19)(B)(iv) of the Act, when the employment of 
a noncustodial parent with any employer who has received an NMSN is 
terminated, the employer is required to notify the State IV-D agency of 
this termination. Finally, under paragraph (C), any liability of a 
noncustodial parent employee to a group health plan for contributions 
necessary for enrollment of a child is subject to appropriate 
enforcement, unless the employee contests such enforcement based on a 
mistake of fact.
    This section is effective October 1, 2001, or, if later, the 
effective date of State laws requiring the use of the MSN. Such State 
laws must be effective no later than the close of the first day of the 
first calendar quarter that begins after the close of the first regular 
session of the State legislature that begins after October 1, 2001. For 
States with 2-year legislative sessions, each year of such session 
would be regarded as a separate regular session. This deadline provides 
States ample opportunity to enact implementing State legislation after 
publication of final regulations.

Description of Regulatory Provisions and Changes Made in Response to 
Comments

    We are implementing the statutory requirement for the development 
and use of the NMSN by adding a new section, 45 CFR 303.32, ``National 
Medical Support Notice,'' to existing rules governing the Child Support 
Enforcement program under title IV-D of the Act. This section restates 
statutory requirements and includes requirements in paragraphs (c)(5), 
(7) and (8) in response to comments received on the proposed 
regulations. These new paragraphs address employee contests to 
withholding of health plan contributions based on a mistake of fact, 
procedures for notifying employers to terminate such withholding and 
procedures for the IV-D agency to select from available options for 
health care coverage when notified by plan administrators of those 
options.
    Section 303.32(a) requires the State to have laws requiring 
procedures for the mandatory use of the NMSN in accordance with section 
466(a)(19) of the Act.
    Section 303.32(b) provides for an exception to the use of the NMSN. 
The exception applies to cases with court or administrative orders that 
stipulate alternative health care coverage.
    Section 303.32(c) includes the mandatory procedures for enforcement 
of health care coverage for the child through the use of the NMSN.
    Section 303.32(c)(1) requires State IV-D agencies to use the NMSN 
to provide notice of the provision for health care coverage of the 
child(ren) to employers.
    Section 303.32(c)(2) requires State IV-D agencies to send the NMSN 
to the employer within two business days after the date of entry into 
the State Directory of New Hires of an employee who is an obligor in a 
IV-D case.
    Section 303.32(c)(3) requires employers to transfer the NMSN to the 
appropriate group health care plan providing any such health care 
coverage for which the child(ren) is eligible (excluding the severable 
employer withholding notice directing the employer to withhold any 
mandatory contributions to the plan) within twenty business days after 
the date of the NMSN.

[[Page 82156]]

    Section 303.32(c)(4) requires employers to withhold any mandatory 
employee contributions to the plan and send any employee contributions 
withheld directly to the plan. Employers are specifically directed to 
transfer contributions to the plan because employers may also be 
directed by a separate child support withholding notice to forward 
support payments withheld from the employee's wages to a State IV-D 
agency.
    Section 303.32(c)(5) was a part of proposed paragraph (c)(4) in the 
NPRM. Based on comments received on the NPRM, under paragraph (c)(5), 
employees may contest the withholding based on a mistake of fact. 
However, the employer must initiate the withholding until such time as 
the employer receives notice that the contest is resolved.
    Section 303.32(c)(6) requires employers to notify the State agency 
promptly whenever the employment of a noncustodial parent for whom the 
employer received an NMSN is terminated. This is consistent with the 
requirement for notification of termination in income withholding cases 
pursuant to 45 CFR 303.100(e)(1)(x).
    Section 303.32(c)(7) was added in response to comments to require 
the State agency to promptly notify the employer when there is no 
longer a current order for medical support in effect for which the IV-D 
agency is responsible.
    Section 303.32(c)(8) was added as a result of comments on a 
provision pertaining to Part B, ``Plan Administrator Response'' portion 
of the NMSN. Under section 303.32(c)(8), the IV-D agency must select 
from available options when the plan administrator returns ``Part B'' 
of the NMSN and under item 3 informs the IV-D agency that there is more 
than one option available under the plan. The IV-D agency must select 
an option and notify the plan administrator of this selection. This 
provision will ensure that children are enrolled when a decision must 
be made if there is more than one option for health care coverage.
    To comply with statutory requirements, section 303.32(d) requires 
enactment of State laws requiring the use of the NMSN. The requirements 
for using the NMSN must be effective the later of October 1, 2001 or 
the effective date of implementing State law. Such State laws must be 
effective no later than the first day of the first calendar quarter 
beginning after the first regular session of the State legislature that 
begins after October 1, 2001. For States that have two year legislative 
sessions, each year of such session would be regarded as a separate 
regular session.

Description of the National Medical Support Notice and Changes Made in 
Response to Comments

    A State IV-D agency will issue a two-part NMSN, Parts A & B, to an 
employer who maintains or contributes to a group health plan and who 
employs a noncustodial parent who is obligated by a court or 
administrative child support order to provide health coverage for a 
child(ren). Part A of the NMSN, the Notice to Withhold for Health Care 
Coverage, is modeled on the federally-approved standardized income 
withholding form that was issued to State IV-D agencies by action 
transmittal (OCSE-AT-98-03) on January 27, 1998. Employers have voiced 
approval of this form indicating that the standardized uniform 
withholding form has greatly facilitated the processing of child 
support income attachments.

Part A, Notice To Withhold for Health Care Coverage

    Part A, the Notice to Withhold for Health Care Coverage, includes 
information for, and responsibilities of the employer. In response to 
comments received on page one of the Notice to Withhold for Health Care 
Coverage, we clarified that the NMSN applies to State and local 
government and church health plans. We added the Issuing Agency's fax 
number. We also replaced ``alternate recipient(s)/child(ren)'' with 
``child(ren)'', and ``employee/obligor'' with ``employee.'' We replaced 
``Court Name'' with ``Court or Administrative Authority.'' With respect 
to the various types of health coverage available, we deleted ``under 
your plan'' and replaced ``Basic'' with ``Medical.''
    On page one of the Notice to Withhold for Health Care Coverage, the 
issuing agency provides information starting with the name and address 
of the issuing agency, date of the notice, case number, telephone and 
fax numbers of the issuing agency, name of court or administrative 
authority, date of the support order, and the support order number. The 
issuing agency provides pertinent information with respect to the 
employer, the employee, the custodial parent, and the child or 
children. The issuing agency provides the employer's Federal EIN number 
(if known) and the employer's name and address. Information on the 
employee is also provided including the employee's name, social 
security number, and mailing address. Information is provided on the 
custodial parent, and the child or children, including their names and 
addresses. If there is a danger of domestic violence and abuse to the 
custodial parent and/or the children, the IV-D agency may substitute 
the name of an official as well as its address for the address of the 
custodial parent and children. Finally, page one includes a provision 
for the type of family group health care coverage that is required by 
the order, i.e., any available or medical, dental, vision, prescription 
drug, mental health, and other. If no option is specified, the employer 
should send Part B to the administrator of each group health plan for 
which the child may be eligible.
    Throughout the remainder of this preamble, the first page of the 
Notice to Withhold for Health Care Coverage, Part A, will be referred 
to as the ``case identification data section.''

Employer Response

    The ``Employer Response'', attached to Part A, is to be completed 
by the employer. Under the heading for ``Employer Response,'' we 
clarified that the employer has twenty business days to forward Part B 
to the plan administrator if none of the response situations described 
in boxes 1, 2, and 3 apply. If any one of the three response situations 
in boxes 1, 2, or 3 apply, the employer must return Part A to the IV-D 
agency within twenty business days after the date of the notice. If the 
plan administrator informs the employer that the child(ren) is/are 
enrolled in an option under the plan for which the employer determines 
that the employee contribution exceeds the amount that may be withheld 
from the employee's income due to State or Federal withholding 
limitations and/or prioritization, the employer must check box 4 and 
return Part A to the IV-D agency.
    The response situations on the ``Employer Response'' have been 
clarified and revised. The previous response number 1 has been split 
into two responses. Response number 1 now reads, ``Employer does not 
maintain or contribute to plans providing dependent or family health 
coverage.'' Response number 2 now reads, ``The employee is among a 
class of employees (for example, part-time or non-union) that are not 
eligible for family health coverage under any group health plan 
maintained by the employer or to which the employer contributes.'' 
Responses 2 and 3 have been redesignated 3 and 4 respectively. In the 
newly designated response number 3, ``Health care coverage is not 
available because the employee is no longer employed by the employer,'' 
we added a new line for the ``date of termination'' of the employee.

[[Page 82157]]

Response number 4, previously designated number 3, was not changed and 
says, ``State or Federal withholding limitations and/or prioritization 
prevent the withholding from the employee's income of the amount 
required to obtain coverage under the terms of the plan.'' On the 
bottom of the ``Employer Response,'' we added a new line for the 
employer to provide the ``employer identification number'' (EIN), if it 
was not provided by the Issuing Agency in the case identification data 
section.

Instructions to Employer

    In response to comments on the ``Instructions to Employer,'' we 
made the following changes. We deleted the word ``also'' from the first 
sentence in the first paragraph under the heading, ``Instructions to 
Employer''. Under the subheading of ``Employer Responsibilities,'' we 
deleted the opening clause ``As the employer of the employee, you are 
required to:'' since it is clear from the heading to this section, 
``Instructions to Employer,'' that the instructions apply to the 
employer. Under subparagraph 2.b.2, we deleted ``and the parties'' to 
clarify that if enrollment cannot be completed because of 
prioritization or limitations on withholding, the employer should 
complete item 4 of the Employer Response to notify the Issuing Agency. 
Also, under the subheading of ``Employer Responsibilities,'' we added a 
new subparagraph 2.c. that instructs the employer, after the plan 
administrator notifies the employer that the employee is subject to a 
waiting period that expires more than ninety days from the date of 
receipt of the Notice, or whose duration is determined by a measure 
other than the passage of time (for example, the completion of a 
certain number of hours worked), to notify the plan administrator when 
the employee is eligible to enroll in the plan and that the Notice 
requires the enrollment of the child(ren) named in the Notice in the 
plan.
    Under the subheading of ``Limitations on Withholding,'' we 
clarified that the maximum Consumer Credit Protection Act limit applies 
to the combined amount withheld for both cash support and for medical 
support coverage. We clarified that under the National Medical Support 
Notice, the employer may not withhold, for health insurance premiums, 
more than the least of: (1) The amounts allowed by the Federal Consumer 
Credit Protection Act (15 U.S.C. section 1673(b)); (2) the amounts 
allowed by the State of the employee's principal place of employment; 
or (3) the amounts allowed for health insurance premiums by the child 
support order. In the NPRM, item three previously read, ``The amounts 
allowed for medical support by the child support order.'' As noted 
above, we revised item three. The purpose of this change is to 
differentiate between employee contributions, or premiums, for health 
coverage paid to the plan administrator, and cash medical support 
collected by the IV-D agency under a separate income withholding order 
which is paid to the custodial parent. (The income withholding form, 
rather than the NMSN, is used to withhold cash medical support when 
specifically designated in an order).
    Under the subheading of ``Priority of Withholding'' in this 
section, we added space for the IV-D agency to provide State specific 
information regarding the prioritization of withholding payment.
    Under the subheading of ``Notice of Termination of Employment,'' we 
made minor changes by eliminating unnecessary words.
    Under the subheading of ``Employee Liability for Contribution to 
Plan,'' we clarified the language regarding contests. We added 
clarifying language to the second, third and fourth sentences to 
indicate that the employee may contest the withholding under this 
Notice based on a mistake of fact. The second sentence reads, ``The 
employee may contest the withholding under this Notice based on a 
mistake of fact (such as the identity of the obligor).'' In the third 
sentence, we added the language, ``by the Issuing Agency''. The third 
sentence says, ``Should an employee contest the withholding under this 
Notice, the employer must proceed to comply with the employer 
responsibilities in this Notice until notified by the Issuing Agency to 
discontinue withholding.'' In order to clarify who the employee should 
contact in order to contest enforcement, we added the fourth sentence: 
``To contest withholding under this Notice, the employee should contact 
the Issuing Agency at the address and telephone number listed on the 
Notice.'' Finally, we added a sentence to make clear that if an 
employee wishes to contest a determination that the NMSN is a qualified 
medical child support order with respect to an ERISA covered plan, DOL 
has taken the position that the contest must be made in Federal court. 
The last sentence under the subheading, ``Employee Liability for 
Contribution to Plan,'' says, ``With respect to ERISA covered group 
health plans, it is the view of the Department of Labor that Federal 
courts have jurisdiction if the employee challenges a determination 
that the Notice constitutes a Qualified Medical Child Support Order.''
    We made no changes to the following subheadings in this section, 
``Duration of Withholding,'' ``Possible Sanctions,'' and ``Contact for 
Questions.''
    Under the final DOL regulation published today in the Federal 
Register, Part B of the NMSN, the ``Medical Support Notice to Plan 
Administrator,'' notifies the administrator of the group health plan in 
which the named employee is enrolled or eligible for enrollment that 
the employee is obligated by a court or administrative child support 
order to provide medical support coverage for the named child(ren). 
Part B provides the information necessary for the plan administrator to 
treat the NMSN as a ``qualified medical child support order'' under 
section 609(a) of ERISA, and to enroll the child(ren) as dependents of 
the participant in the group health plan. Part B of the NMSN was also 
developed to comply with the requirements placed on group health plans 
under State laws described in section 1908 of the Act, and to 
accommodate the requirements on State agencies to use automated 
processing of medical child support orders as well. Part B also 
includes a ``Plan Administrator Response'' that is used by the plan 
administrator to inform the Issuing Agency that either the child has 
been enrolled or that there are multiple options from which the Issuing 
Agency must select coverage, that the employee is subject to certain 
types of waiting periods, or that the order is not qualified. The 
specific contents of Part B are explained in detail in the DOL 
regulation published today.
    We have attached the final NMSN (including instructions) as an 
Appendix in the Federal Register. However, the NMSN will not be 
codified in the Code of Federal Regulations.

Response to Comments

    We received twenty-six comments in response to the notice of 
proposed rulemaking published in the Federal Register on November 15, 
1999. The commenters included State and local governments, national 
organizations, law firms, private citizens, and the Medical Child 
Support Working Group (MCSWG).
    The MCSWG had a congressional mandate in accordance with CSPIA to 
make recommendations based on an assessment of the form and content of 
the NMSN. The MCSWG provided input into the development of the proposed 
NMSN and submitted extensive comments in response to the NPRM. Many of 
the MCSWG's comments on the NPRM were consistent with comments received 
from State IV-D agencies and other commenters on the NMSN. We

[[Page 82158]]

were able to incorporate most of the comments provided by the MCSWG 
with minor exceptions.
    We took these comments into consideration in the development of the 
final rule. Our responses are limited to comments made with respect to 
the requirements and responsibilities imposed on the State IV-D 
agencies and the employers of noncustodial parents of children with 
child support judicial or administrative orders that include a 
provision for health care coverage. These responses are also limited to 
comments on Part A of the NMSN.
    Also being published in the Federal Register today, the Department 
of Labor (DOL), in a parallel final regulation, has responded to 
comments focused on the responsibilities and requirements imposed on 
group health plan administrators in accordance with section 609(a) of 
ERISA.

Comments on Part 303.32 National Medical Support Notice

Comments to Section 303.32(a) and (b)

    1. Comment: Three commenters noted that language was unclear in the 
first sentence of paragraph (a).
    Response: We agree and have clarified the first sentence to require 
that, ``States must have laws * * * for the use, where appropriate, of 
the National Medical Support Notice (NMSN), to enforce * * * .''
    2. Comment: Seven commenters recommended that section 303.32 should 
indicate throughout it that State IV-D agencies use the NMSN ``where 
appropriate'' in accordance with section 466(a)(19)(A) of the Act.
    Response: We agree in part. For consistency with section 
466(a)(19)(A) of the Act, we added the words ``where appropriate'' in 
paragraph (a) of this section. Paragraph (a) requires States to have 
laws pertaining to the use of the NMSN. The sentence reads, ``States 
must have laws, in accordance with section 466(a)(19) of the Act, 
requiring procedures specified under paragraph (c) of this section for 
the use, where appropriate, of the National Medical Support Notice 
(NMSN) * * *. '' Given this change to paragraph(a), we do not believe 
it is necessary to add the language, ``where appropriate'' to other 
subsections of section 303.32.
    3. Comment: Two commenters asked for additional clarification on 
what constitutes ``alternate'' coverage in section 303.32(b). Three 
commenters requested that we provide a list of exceptions that can be 
construed as alternative coverage and some indication of how much 
flexibility States have on the use of alternative coverage.
    Response: Section 466(a)(19)(B) provides an exception to the 
requirement that the noncustodial parent provide coverage through his 
or her employment-related health plan. Section 466(a)(19)(B) says, 
``unless alternative coverage is allowed for in any order of the court 
(or other entity issuing the child support order) * * *'' Because the 
statute allows for alternative coverage if stipulated in the order, we 
believe it is inappropriate to develop a Federal list of exceptions. 
However, an example of alternative coverage that might be stipulated in 
an order could be cash contributions for premiums for health insurance 
coverage provided through the custodial parent's employment. Another 
example of alternative coverage that might be stipulated in an order 
could be private coverage, unrelated to the noncustodial parent's 
employment, such as California's ``IV-D Kids Medical Program.'' States 
have flexibility to define and allow alternative coverage that meets 
the health care needs of the child.
    4. Comment: One commenter suggested that it be made clear that 
alternative coverage is an alternative to the noncustodial parent's 
employer-based coverage.
    Response: We believe the language is clear on this point. The 
statute specifically references, in sections 466(a)(19)(B), (B)(iii), 
and (C) of the Act, the noncustodial parent's obligation to provide 
medical support and the use of the NMSN to enroll the child(ren) in the 
noncustodial parent's employment-related health plan. This regulation 
implements the statutory requirement. As previously noted, however, 
section 466(a)(19)(B) allows alternative coverage if stipulated in the 
order, which could be coverage other than the noncustodial parent's 
employer-based coverage.
    5. Comment: Two commenters asked whether the Medicaid program under 
title XIX and the State Children's Health Insurance Program (SCHIP) 
under title XXI should be excluded from consideration as alternative 
coverage.
    Response: Section 466(a)(19)(B) of the Act refers to alternative 
coverage as coverage allowed for in a judicial or administrative order. 
The statute does not preclude medical support under Medicaid or SCHIP 
from being stipulated in the order as alternative coverage. However, 
provisions at 45 CFR 303.31(b)(1) preclude IV-D agencies from 
considering Medicaid as satisfactory health insurance. The Medical 
Child Support Working Group addressed this issue during its 
deliberations and recommendations published in June, 2000. We are 
examining the Working Group's recommendations on this issue.
    6. Comment: One commenter recommended an expansion of alternative 
coverage to include any definition of reasonable coverage as defined by 
State laws and which is not through an employer.
    Response: We are bound by section 466(a)(19)(B) of the Act that 
limits alternative coverage to coverage allowed for in a court or 
administrative order.

Comments to Section 303.32(c)(1) and (2)

    1. Comment: One commenter recommended using ``send'' rather than 
``transfer'' the NMSN to the employer. The commenter indicated that by 
using the word ``transfer'' an implication is made that this section 
only applies to situations in which there is a new employer identified 
in a case with a known previous employer.
    Response: In order to be consistent with the statute at section 
466(a)(19)(B)(i), we are retaining the word ``transfer'' whenever 
conveyance of the Notice is required. Section 303.32(c)(1) applies in 
all appropriate cases pursuant to section 303.32(a) regardless of 
whether or not there is a known previous employer. We are also 
replacing ``send'' with ``transfer'' in section 303.32(c)(2). This 
provision requires the State agency to transfer the NMSN to the 
employer within two business days after the date of entry of an 
employee who is an obligor in a IV-D case in the State Directory of New 
Hires.
    2. Comment: One commenter recommended that when a noncustodial 
parent provides medical coverage that is not employer-related, the NMSN 
should not be required to be used as a result of information derived 
from the State Directory of New Hires (SDNH).
    Response: As noted at 45 CFR 303.32(a), the NMSN is used to enforce 
the provision of health care coverage for children of noncustodial 
parents who are required to provide health care coverage through an 
employment-related group health plan in accordance with a child support 
order. If the order specifies coverage that is not employer-related, 
and the noncustodial parent is providing such coverage, the IV-D agency 
would not be required to send an NMSN to the employer within two 
business days as a result of information derived from the SDNH.
    3. Comment: One commenter indicated that it is unclear whether the 
obligor must have a child support order in effect at the time the IV-D 
agency sends the NMSN to the employer.

[[Page 82159]]

    Response: Yes, there must be an order in effect at the time the IV-
D agency sends the NMSN to the employer. The statute at sections 
466(a)(19)(A) and (B) of the Act limits the use of the NMSN to 
enforcement of child support orders.
    4. Comment: One commenter inquired whether the two business day 
requirement for sending the NMSN to the employer also applies to 
employment information obtained from other sources.
    Response: Section 466(a)(19)(B)(iii) of the Act specifies that in 
any case in which the noncustodial parent is a newly hired employee 
entered in the State Directory of New Hires pursuant to section 453A(e) 
of the Act, the State agency provides, where appropriate, the NMSN, 
together with the income withholding notice issued pursuant to section 
466(b), within two days after the date of entry of such employee in 
such Directory. The statute does not impose the two day requirement for 
sending the NMSN when employment information is obtained from other 
sources.
    5. Comment: One commenter recommended that enhanced funding be made 
available to State IV-D agencies to meet the two business day 
requirement to send the NMSN to the employer after the date of entry in 
the SDNH.
    Response: Section 455(a)(3)(B) of the Act provides States with 
enhanced (80 percent) Federal financial participation (FFP) to meet the 
new developmental requirements of PRWORA and the Family Support Act of 
1988. States may use funds from their allocation of enhanced FFP to pay 
for developmental costs of enhancing the Statewide automated system to 
generate the NMSN. However, the ongoing maintenance costs of the system 
for actually transferring the NMSN to the employer is considered a 
regular program administrative cost that is eligible for FFP at the 66 
percent matching rate pursuant to 45 CFR 307.35. The use of enhanced 
funds would require the submittal of an advance planning document (APD) 
to the Federal Office of Child Support Enforcement in accordance with 
45 CFR 307.15.

Comments to Section 303.32(c)(3)

    1. Comment: Two States believe that the twenty business day time 
frame for employers to send Part B of the NMSN to the plan 
administrators is too long. Recommendations were made for a shorter 
time frame of ten business days.
    Response: We are bound by the statute at section 466(a)(19)(B)(ii) 
that prescribes the twenty business day timeframe as the limit that 
employers have to send the NMSN to plan administrators. It reads, 
``within twenty business days after the date of the National Medical 
Support Notice, the employer is required to transfer the Notice * * *'' 
Employers may send the notice sooner since the statute indicates 
``within 20 business days * * *''
    2. Comment: One commenter inquired what penalties would be imposed 
on an employer for failing to transfer the NMSN to the plan 
administrator within the twenty business day timeframe.
    Response: The employer is subject to applicable State laws since 
these requirements will be incorporated into State law in accordance 
with sections 466(a)(19) and 454(20) of the Act. State laws should 
address penalties or consequences to employers for failing to meet the 
prescribed statutory time frame.
    3. Comment: One State noted that this paragraph addresses the 
twenty business day time frame for the employer to transfer the NMSN to 
the plan administrator, but is silent on the forty business day time 
frame that plan administrators have to respond to the Notice.
    Response: Requirements related to the forty business day time frame 
are included in the Department of Labor regulation published today.

Comments to Section 303.32(c)(4)

    1. Comment: One State asked whether the NMSN could be used for 
income withholding of cash medical support as specified in an order.
    Response: No. The NMSN is used to enforce the provision of health 
care coverage in an order and to enroll children in the noncustodial 
parent's employer-related health plan. Section 452(f) of the Act 
requires the Secretary of HHS to issue regulations that require IV-D 
agencies to include medical support as part of any child support order. 
The income withholding form, rather than the NMSN, is used to withhold 
cash medical support if specifically designated in an order. 
Instructions on the income withholding form (see OCSE Action 
Transmittal-98-03, number 17a) indicate, ``Dollar amount to be withheld 
for payment of medical support, as appropriate, based on the underlying 
order.''
    2. Comment: One commenter suggested that the Medicaid program be 
given the option to pay for health insurance premiums when the Federal 
or State withholding limitations have been reached.
    Response: A State may be able to do this if it elects the option 
under section 1906 of the Act to enroll individuals under title XIX in 
cost effective group health plans.
    3. Comment: One commenter recommended that the IV-D agency not be 
held liable for IV-D actions taken on medical support in instances 
where the noncustodial parent makes changes to the medical support 
provisions of an order without notifying the IV-D agency of such 
actions.
    Response: We are unaware of any circumstances in a IV-D case where 
an order can be modified without notice to the IV-D agency or to the 
custodial parent. However, an employee has the opportunity to contest 
the withholding of employee contributions based on a mistake of fact 
which would bring errors to the IV-D agency's attention and ensure that 
withholding is appropriate.
    4. Comment: Three commenters questioned the provision that requires 
immediate withholding even though an employee contests such 
withholding. One State indicated that this is inconsistent with income 
withholding for child support. The noncustodial parent has a right to 
contest adverse actions as well as the right to be heard prior to 
action being taken.
    Response: The notice provision in this regulation is consistent 
with the statutory language regarding income withholding under which 
income withholding for cash support commences pending resolution of any 
contest in favor of the employee. Section 466(b)(4)(A) of the Act 
states, ``Such withholding must be carried out in full compliance with 
all procedural due process requirements of the State, and the State 
must send notice to each noncustodial parent * * *. (i) that the 
withholding has commenced; and (ii) of the procedures to follow if the 
noncustodial parent desires to contest such withholding on the grounds 
that the withholding or the amount withheld is improper due to a 
mistake of fact.''
    5. Comment: Two commenters suggested that the regulations should 
provide that the only basis for contesting the withholding should be 
mistake of fact or identity of the employee.
    Response: We agree and added a new paragraph (c)(5) indicating that 
employees may contest the withholding based on a mistake of fact. We 
removed the last sentence in proposed (c)(4) regarding the initiation 
of withholding until such time that the contest is resolved, and 
inserted it into the new paragraph (c)(5) pertaining to contests. We 
also added similar language to the ``Instructions to Employer,'' 
subheading ``Employee Liability for Contribution to Plan,'' to clarify 
that an employee may contest the withholding under this Notice based on 
a mistake of fact.

[[Page 82160]]

    6. Comment: One commenter asked for the contest rules for medical 
support and income withholding.
    Response: Provisions at 45 CFR 303.32(c)(5) limit the circumstance 
for an employee to contest the withholding to a mistake of fact, such 
as the identity of the obligor. The procedural rules for hearing 
contests are determined under State law.
    7. Comment: Three commenters requested Federal procedures for a 
contest when an employee's contribution to a medical plan has been 
inappropriately withheld.
    Response: We believe it is more appropriate for States to develop 
their own specific administrative and operational procedures for 
contests. Procedures for addressing contests should include procedures 
for return of inappropriately held funds.

Comments to Former Section 303.32(c)(5)--Now Section 303.32(c)(6)

    1. Comment: One commenter recommended changing the timeframe for an 
employer to notify the IV-D agency whenever the noncustodial parent's 
employment is terminated from ``promptly'' to a twenty day timeframe.
    Response: We are using ``promptly'' in order to be consistent with 
the procedures in place for income withholding cases (see 45 CFR 
303.100(e)(1)(x)).

Additional Comments on Mandatory Procedures

    1. Comment: One commenter recommended that the regulation indicate 
that States must have laws to require employers to follow all of the 
procedures outlined at 45 CFR 302.32.
    Response: We have already done so at 45 CFR 303.32(a) under which 
States must have laws in accordance with section 466(a)(19) of the Act 
requiring procedures that are specified under section 303.32(c) for the 
use of the NMSN. These State laws and procedures are applicable to all 
paragraphs of this subsection.
    2. Comment: A commenter recommended that an additional mandatory 
procedure be added to ensure that the NMSN is binding on the employer 
and, if applicable, on the plan administrator without regard to the 
date when the underlying support order was issued.
    Response: Under the heading of ``Instructions to Employer'' in the 
NMSN, we noted that the NMSN replaces any previous notice that the IV-D 
agency has sent with respect to the employee and the children listed on 
the NMSN. We also noted earlier in the preamble that if the NMSN is 
appropriately completed and satisfies the conditions of ERISA under 
section 609(a)(3) and (4), the NMSN is deemed to be a qualified medical 
child support order as defined in section 609(a) of ERISA and binding 
on all parties concerned. The date the underlying support order was 
issued, therefore, does not affect the binding nature of the NMSN.
    3. Comment: One commenter suggested adding additional subsections 
under paragraph (c), ``Mandatory procedures'', that would allow the 
State to amend or terminate the NMSN for the following reasons: as a 
result of a successful contest by the employee; upon emancipation of 
any of the children named in the NMSN; upon modification or termination 
of the medical support order; to add other children to the required 
coverage; upon determining that the children have other satisfactory 
health insurance; to correct any mistakes of fact contained in the 
NMSN; and, upon case closure.
    Response: State IV-D agencies have the authority to reissue the 
NMSN or to terminate the NMSN when appropriate. We do not think it is 
appropriate to list in the regulatory language every circumstance that 
may result in amending or terminating the NMSN. However, with respect 
to notifying the employer when there is no longer a current order for 
medical support in effect, we have added subparagraph (c)(7) in this 
regulation. This provision requires the State to have procedures for 
promptly notifying the employer when there is no longer a current order 
for medical support in effect.
    In response to the commenter's concerns with amending or 
terminating the NMSN, the IV-D agency could take the following actions:
    (a) Result of a successful contest by the employee-Inform the 
employer that the NMSN is no longer in effect;
    (b) Emancipation of child(ren) named in the NMSN-Coverage of the 
child(ren) named in the NMSN would terminate pursuant to State law;
    (c) Modification or termination of the medical support order-
Reissue the NMSN if appropriate;
    (d) Need to add other children to the required coverage-Reissue the 
NMSN to add the child(ren);
    (e) Upon determining that the children have comparable coverage--
the NMSN (Part A) provides notification that the employer must continue 
to withhold employee contributions and may not disenroll (or eliminate 
coverage for) the child(ren) unless the employer is provided 
satisfactory written evidence that the child(ren) is or will be 
enrolled in comparable coverage which will take effect no later than 
the effective date of disenrollment from the plan; and
    (f) To correct any mistakes of fact contained in the NMSN-Reissue 
the NMSN in order to make the correction(s).
    4. Comment: One commenter suggested that a separate section be 
added to this regulation to provide for a Federal prescription on 
allocation of withholding in instances where the combined income and 
medical support withholding would exceed the maximum Consumer Credit 
Protection Act (CCPA) limits. This should include allocating in 
accordance with specified priorities between the income withholding for 
cash child support and for employee contribution premium payments for 
enrolling the child(ren) through the use of the NMSN.
    Response: The Medical Child Support Working Group (MCSWG) made 
recommendations in its June, 2000 Report on priorities of allocation 
when there are cases where the combined income withholding for cash 
child support and employee contributions for premium payments to health 
administrators for health coverage exceeds the maximum CCPA limits. In 
response to this comment, we plan to consider the recommendations from 
the MCSWG before determining whether a Federal allocation standard 
should be established. In the meantime, the employer must follow the 
required prioritization on withholding in accordance with the State law 
of the employee's principal place of employment. We have added 
additional blank lines to the NMSN (see ``Instructions to Employer'' 
under the subheading, ``Priority of Withholding'') where States may 
include State specific information regarding prioritization between 
cash and medical support.
    5. Comment: One commenter recommended changing the effective date 
of this regulation to read, ``If a change in State law is not required, 
this section is effective October 1, 2001; if a change in State law is 
required, this section is effective on the effective date of State laws 
described in paragraph (a) of this section. Such State laws must * * * 
separate regular session.''
    Response: Section 303.32(d) is consistent with section 401(c)(3) of 
CSPIA, as amended by section 4(b) of Public Law 105-306. The statute 
requires the effective date to be the later of ``(A)October 1, 2001; or 
(B) the effective date of laws enacted by the legislature of such State 
implementing such amendments, but in no event later than the first day 
of the first calendar quarter beginning after the close of the

[[Page 82161]]

first regular session of the State legislature that begins after the 
date specified in subparagraph (A). For purposes of the preceding 
sentence, in the case of a State that has a 2-year legislative session, 
each year of such session shall be deemed to be a separate regular 
session of the State legislature.''

Comments on Part A of the NMSN

Case Identification Data Section

    1. Comment: Eight commenters recommended changing the title from 
``Employer Withholding Notice'' to ``Notice to Enroll.''
    Response: The statute at section 466(a)(19)(B)(ii) of the Act 
specifies a ``withholding notice'' that is severable and retained by 
the employer. The employer sends the ``Part B'' portion of the notice 
to the plan administrator. In response to the comment and for clarity, 
we have revised the title to read, ``Notice to Withhold for Health Care 
Coverage''.
    2. Comment: One commenter suggested adding a statement that the 
employer is required by law to enroll the children.
    Response: Unless the employer is also his/her plan administrator, 
the employer does not enroll children into the plan. The plan 
administrator enrolls children into the plan.
    3. Comment: Several commenters suggested that the Notice, pursuant 
to section 401(e) and (f) of CSPIA, should contain language clarifying 
that the Notice applies to State and local government and church plans. 
These commenters expressed concern that because the Notice refers 
specifically to ERISA, it may be misinterpreted as applicable to only 
ERISA-covered plans.
    Response: We agree. We added clarifying language to the case 
identification data section regarding the use of the NMSN with respect 
to State and local government and church plans.
    4. Comment: One commenter recommended adding ``administrative 
authority'' to the line in the case identification data section where 
only ``court name'' appeared in the NPRM. The commenter made this 
suggestion to recognize cases in which the order has been issued by an 
administrative authority other than by a court.
    Response: We agree. We added ``administrative authority'' to this 
line so that it now says, ``Court or Administrative Authority.''.
    5. Comment: Six commenters suggested deleting the term ``alternate 
recipient(s)'' from ``alternate recipient(s)/child(ren)'' and 
``obligor'' from ``employee/obligor.''
    Response: We agree, and for clarity and simplicity, we deleted 
``alternate recipient(s)'' and ``obligor'' throughout the NMSN so that 
only ``child(ren)'' and ``employee'' will remain.
    6. Comment: Three commenters expressed concern regarding the 
confidentiality of the custodial parent's address appearing in the case 
identification data sections of the NMSN. They recommended that the 
employer be informed to keep the custodial parent's address 
confidential and not to disclose that information to the employee.
    Response: Information on the children's address is required under 
section 609(a) of the Employee Retirement Income Security Act of 1974 
(ERISA). If a State makes a determination that the custodial parent's 
or child's address must be safeguarded, the State may substitute the 
address of the IV-D agency for that of the custodial parent and 
children.
    7. Comment: Four commenters recommended adding a line for the IV-D 
agency fax number to the case identification data section of the NMSN.
    Response: We agree. We added a line for the IV-D agency's fax 
number accordingly.
    8. Comment: One commenter indicated a problem with understanding 
the term ``basic'' type of family group health care coverage listed on 
the bottom of the NMSN, Part A, and suggested replacing ``basic'' with 
``basic/medical'' or ``major medical.''
    Response: We replaced ``basic'' coverage with ``medical'' coverage. 
The language on types of coverage noted on the bottom of the case 
identification data section now reads: ``Any health coverages 
available'' or ``medical''; ``dental''; ``vision''; ``prescription 
drug''; ``mental health''; and ``other.

Employer Response

    9. Comment: Two commenters indicated that the instructions under 
the ``Employer Response'' do not address under what circumstances the 
employer should complete item 3. Item 3 in the notice of proposed 
rulemaking said that, ``State or Federal withholding limitations and/or 
prioritization prevent the withholding from the employee's income of 
the amount required to obtain coverage under the terms of the plan.''
    Response: We agree that this section needs clarification. In the 
revised NMSN, we changed number 3 to number 4. We revised the 
introductory language under ``Employer Response'' to read, ``Check 
number 4 and return this Part A to the Issuing Agency if the Plan 
Administrator informs you that the child(ren) is/are enrolled in an 
option under the plan for which the employee contribution exceeds the 
amount that may be withheld from the employee's income due to State or 
Federal withholding limitations and/or prioritization.''
    10. Comment: One commenter suggested removing the parenthetical 
just below the ``Employer Response'' heading that in the proposed rule 
read,'' (To be completed by Employer, as appropriate)''. The commenter 
suggested that we replace the parenthetical with language regarding the 
twenty business day timeframe for employers to send the Notice to the 
plan administrator if none of the situations reflected in responses 
listed in this section apply. If any one of the situations reflected in 
the responses listed apply, the commenter recommended that the same 
twenty business day timeframe be used by the employer to inform the IV-
D agency which situation exists as reflected in the list of responses 
that precludes enrollment of the child(ren) in the health plan.
    Response: We agree. We revised the paragraph under the ``Employer 
Response'' section to return this part to the IV-D agency within twenty 
business days after the date of the Notice, or sooner, when any one of 
the following responses apply: (1) ``Employer does not maintain or 
contribute to plans providing dependent or family health care 
coverage'', or (2) ``The employee is among a class of employees (for 
example, part-time or non-union) that are not eligible for family 
health care coverage under any group health plan maintained by the 
employer or to which the employer contributes'', or (3) ``Health care 
coverage is not available because the employee is no longer employed by 
the employer.''
    11. Comment: One commenter recommended adding space for the 
employer's EIN or employer identification number at the bottom of the 
``Employer Response'' section. This is needed if the EIN is not 
provided by the Issuing Agency on the Employer Withholding Notice.
    Response: We agree. We added space for the EIN in the ``Employer 
Response'' section.
    12. Comment: One commenter asked that the employer be required to 
provide the cost of the employee's contribution on the ``Employer 
Response'' form when the employer returns the response indicating that 
the withholding limitations have been exceeded.
    Response: We are not requiring employers to do so because of the 
inherent differences involved in each case. We encourage States to 
contact employers when it may be necessary to have this information.

[[Page 82162]]

    13. Comment: One commenter noted that when coverage is not 
available, a copy of Part A, that is sent back to the IV-D agency, 
should not be sent to the custodial parent as instructed in the 
introductory paragraph under ``Employer Response.''
    Response: We agree. The IV-D agency is responsible for dealing with 
the custodial parent in a IV-D case, and is therefore responsible for 
notifying the custodial parent when the IV-D agency is notified that 
coverage is not available. Requiring employers to also send a copy of 
Part A to the custodial parent would place an additional burden on 
employers. We have revised the introductory paragraph of the ``Employer 
Response'' to clarify that Part A should not be sent to the custodial 
parent when coverage is not available. The first sentence in the 
introductory paragraph now reads, ``If either 1, 2, or 3 below applies, 
check the appropriate box and return this Part A to the Issuing Agency 
within 20 business days after the date of the Notice, or sooner as 
reasonable.'' Similarly, in the new explanatory language regarding box 
4 in the introductory paragraph of the ``Employer Response,'' the 
employer is required to return Part A to the Issuing Agency only. Under 
``Instructions to Employer,'' we made a conforming change to 
subparagraph 2.b.2 under the subheading, ``Employer Responsibilities.'' 
We deleted ``and the parties.'' Subparagraph 2.b.2. now reads: ``Upon 
notification from the plan administrator(s) that the child(ren) is/are 
enrolled, either (1) * * * or (2) complete item 4 of the Employer 
Response to notify the Issuing Agency that enrollment cannot be 
completed because of prioritization or limitations on withholding.''
    14. Comment: A commenter requested that we add a line for ``date of 
termination'' under response 2 on the ``Employer Response.'' A 
commenter also suggested that, when an employee terminates employment, 
the form should instruct employers to use box 2 under the ``Employer 
Response'' section of Part A of the NMSN that indicates, ``Health care 
coverage is not available because the employee is no longer employed by 
the employer * * *.''
    Response: Under ``Employer'' Response we renumbered Response 2 in 
the proposed rule to response 3 in the revised form that pertains to 
the fact that the employee is no longer employed by the employer. We 
also added a line for ``date of termination'' under the new response 3.
    The new response 3 under the ``Employer Response'' section of the 
NMSN is intended to inform the IV-D agency that the employee is no 
longer employed by the employer at the time that the employer receives 
the NMSN. The requirement for employers to promptly notify the IV-D 
agency when an employee terminates employment is consistent with the 
current procedure for income withholding cases.

Instructions to the Employer

    15. Comment: One commenter suggested having the ``Instructions to 
the Employer'' precede the ``Employer Response'' section because the 
instructions should be read first before attempting to complete the 
form. Another commenter requested that Part A and Part B should be 
placed together at the beginning, followed by the instructions for both 
Parts.
    Response: We decided to maintain the format used in the NPRM. We 
believe that the current sequence and format of the Notice provides 
specific clarifying instructions for employers and plan administrators. 
Part A includes the Notice to Withhold for Health Care Coverage, the 
Employer Response and the Instructions to Employer. Part B includes the 
Medical Support Notice to Plan Administrator, the Plan Administrator 
Response, and the Instructions to Plan Administrator.
    16. Comment: Three commenters recommended an indication of what 
actions should be taken when it is known that there is an enrollment 
waiting period in instances of recent employment. One commenter 
recommended adding an explanation on the form regarding the employer's 
role when the plan calls for a waiting period. A waiting period may 
exist before enrollment can take place because the employee is a new 
employee or until some other criterion is fulfilled, such as a 
requirement to complete a certain number of hours worked. The commenter 
recommended that the employer notify the plan administrator when 
enrollment can take place upon receipt of notification from the plan 
administrator that the waiting period will be in effect for a period of 
more than 90 days from the date of receipt of the Notice or the waiting 
period's duration is determined by another criterion.
    Response: We agree that clarification is needed. We added 
subparagraph 2.c. under the heading of ``Employer Responsibilities'' in 
the ``Instructions to Employer'' to read: ``If the plan administrator 
notifies you that the employee is subject to a waiting period that 
expires more than 90 days from the date of its receipt of this Notice, 
or whose duration is determined by a measure other than the passage of 
time (for example, the completion of a certain number of hours worked), 
notify the plan administrator when the employee is eligible to enroll 
in the plan and that this Notice requires the enrollment of child(ren) 
named in the Notice in the plan.''
    17. Comment: One commenter suggested deleting the word ``also'' 
referring to children that appeared in the proposed notice in the first 
sentence under the section ``Instructions to Employer''. The sentence 
said, ``This document serves as notice that the employee identified 
above is obligated by a court or administrative child support order to 
provide health care coverage for the child(ren) also identified 
above.''
    Response: We agree, and deleted ``also'' from the sentence. The 
sentence now reads, ``This document serves as notice that the employee 
identified on this Notice is obligated by a court or administrative 
child support order to provide health care coverage for the child(ren) 
identified on this Notice.''
    18. Comment: One commenter recommended deleting the clause, ``As 
the employer of the employee, you are required to:'' that appeared in 
the proposed Notice in the first sentence under the subheading 
``Employer Responsibilities'' in the ``Instructions to Employer'' 
section of Part A. The commenter indicated that it is evident that the 
employer is the employee's employer since this is under the subheading 
of ``Employer Responsibilities'' and therefore unnecessary to use this 
clause.
    Response: We agree, and deleted the clause ``As the employer of the 
employee, you are required to:'' We listed the employer's 
responsibilities directly without the previous opening clause.
    19. Comment: Two commenters recommended adding ``medical support'' 
to identify the ``Notice'' in the second sentence under the section 
``Instructions to Employer'' so that the sentence would read, ``This 
National Medical Support Notice replaces any Medical Support Notice 
that the Issuing Agency has previously served on you with respect to 
the employee and the children listed on this Notice.''
    Response: We agree and added ``Medical Support'' before ``Notice.''
    20. Comment: Three commenters recommended that additional language 
be added under the subheading of ``Limitations of Withholding'' in the 
``Instructions to Employer'' section of Part A to indicate that the 
Consumer Credit Protection Act (CCPA) limit

[[Page 82163]]

applies to the combined amounts withheld for cash and medical support.
    Response: We agree and have added language so that it now reads, 
``The total amount withheld for both cash and medical support cannot 
exceed ______% of the employee's aggregate disposable weekly 
earnings.'' We also clarified that under the National Medical Support 
Notice, the employer may not withhold more than the least of: (1) The 
amounts allowed by the Federal Consumer Credit Protection Act (15 
U.S.C. section 1673(b)); (2) the amounts allowed by the State of the 
employee's principal place of employment; or (3) the amounts allowed 
for health insurance premiums by the child support order.
    21. Comment: One commenter suggested changing the subsection title 
from ``Limitations on Withholding'' to ``Limitations on Premiums'' in 
the ``Instructions to Employer'' section in order to avoid confusion 
for employers who are more accustomed to receiving income withholding 
notices for cash support.
    Response: The limitations on withholding apply to both the amount 
of cash child support or medical support, whether in the form of cash 
amounts for medical support or employee contributions to health 
insurance coverage. Therefore, we have not changed the subheading 
``Limitations on Withholding'' to ``Limitations on Premiums.''
    22. Comment: In the ``Instructions to Employer'', two commenters 
suggested adding a line under the ``Limitations of Withholding'' 
subheading so that the IV-D agency could indicate the amount of cash 
medical support that may be included in the order.
    Response: If cash medical support is included in the order, it is 
unlikely that the same order would include a provision for health 
insurance coverage. If required by an income withholding order, an 
employer sends cash medical support to the IV-D agency. Cash medical 
support payments, specified in an order, are used for example, to 
reimburse the custodial parent for medical costs incurred by the 
custodial parent. The NMSN is used for a different purpose, that is, to 
enroll children in their noncustodial parent's employment-related 
health plan. The employer withholds the employee's contribution, or 
payment of the premium, and sends it to the plan administrator and not 
to the IV-D agency.
    Limitations on withholding are set as a percentage of aggregate 
earnings. If support is being withheld under a separate income 
withholding notice, the amount of support being withheld would be 
specified on that notice and available to the employer. For clarity, we 
are changing the reference to line 3 under the heading of ``Limitations 
on Withholding'', that is in the ``Instructions to Employer'' section 
of the NMSN, to read, ``The amounts allowed for health insurance 
premiums by the child support order, as indicated here: ____.'' This 
will clarify that the withholding is for employee contributions rather 
than for cash medical support.
    23. Comment: Two commenters recommended that additional space be 
provided under the subheading of ``Priority of Withholding'' in the 
``Instructions to Employer'' section of the NMSN that appeared in Part 
A, for the IV-D agency to provide a description of priorities between 
cash and medical support under State law.
    Response: We agree and added additional space under this subheading 
for that purpose.
    24. Comment: One commenter asked for a definition of ``comparable'' 
coverage under the subheading of ``Duration of Withholding at 
subparagraph 1.b. that allows for disenrollment of a child because the 
child will be enrolled in comparable coverage.
    Response: Comparable coverage means coverage that is similar in 
scope to the current coverage and that would provide approximately the 
same type and extent of coverage to the child or children. Although the 
term ``comparable'' coverage appears in section 1908(a)(3)(C)(i)(II) of 
the Act, the term is not explicitly defined. The Health Care Financing 
Administration is responsible for interpretations of title XIX and 
intends to promulgate regulations which will include discussion of the 
term ``comparable.''
    25. Comment: One commenter suggested that a State have the option 
of tailoring the provisions under the subheadings of ``Limitations on 
Withholding'' and ``Priority of Withholding'' portions in the 
``Instructions to Employer'' section of Part A in the NMSN in 
accordance with its State law.
    Response: The Consumer Credit Protection Act (CCPA) allows States 
to specify limits for amounts withheld which may be less than the 
maximum amounts allowed for by the CCPA. With respect to 
prioritization, we added space under the subheading ``Priority of 
Withholding'' in the ``Instructions to Employer'' section of Part A in 
the NMSN. The additional space is intended for States to provide 
information on how they prioritize between cash and medical support.
    26. Comment: One commenter suggested changing the subtitle 
``Duration of Withholding'' in the ``Instruction to Employer'' section 
of Part A to that of ``Duration of Enrollment.''
    Response: We believe that the subtitle ``Duration of Withholding'' 
should not be changed. The section ``Duration of Withholding,'' in the 
``Instruction to Employer'' addresses withholding in the context of 
withholding employee contributions, rather than coverage or enrollment. 
Since the employer is responsible for withholding employee 
contributions for health plan premium payments, we believe it is 
important to list the circumstances that would allow the employer to 
discontinue withholding. They are as follows: the court or 
administrative child support order noted in the NMSN is no longer in 
effect, or the child(ren) is or will be enrolled in comparable coverage 
effective upon disenrollment, or the employer eliminates family health 
coverage for all of its employees.
    27. Comment: One commenter suggested revising the language under 
the subsection of ``Notice of Termination of Employment,'' in the 
``Instructions to Employer'' section of Part A to eliminate unnecessary 
words. The language in the proposed rule read as follows: ``In any case 
in which the above employee's employment with the above employer 
terminates, the employer must promptly notify the Issuing Agency listed 
above of such termination. This requirement may be satisfied by sending 
to the Issuing Agency named above a copy of any notice the employer is 
required to provide under the continuation coverage provisions of ERISA 
or the Health Insurance Portability and Accountability Act.''
    The commenter suggested the following revised language, ``In any 
case in which the employee's employment terminates, the employer must 
promptly notify the Issuing Agency listed above of such termination. 
This requirement may be satisfied by sending the Issuing Agency a copy 
of any notice the employer is required to provide under the 
continuation coverage provisions of ERISA or the Health Insurance 
Portability and Accountability Act.''
    Response: We agree and incorporated the revised language 
accordingly.
    28. Comment: One commenter recommended changing the heading of 
``Notice of Termination of Employment'' to ``Notice of Termination of 
Employment or Disenrollment of Children.'' The commenter further 
recommended that the employer be required to notify the State if the

[[Page 82164]]

children are disenrolled for any reason other than termination or 
amendment of the NMSN by the IV-D agency.
    Response: This recommendation would impose an additional reporting 
requirement on the employer. The plan administrator is responsible for 
notifying all parties concerned, including the IV-D agency, whether the 
NMSN is a qualified medical child support order and whether enrollment 
of the child(ren) occurs, or if the NMSN does not meet the criteria and 
enrollment does not occur.
    29. Comment: Three commenters recommended that a sentence be added 
under the subheading of ``Employee Liability for Contribution to Plan'' 
in the ``Instruction to Employer'' section of Part A of the NMSN 
indicating that in an event the employee contests withholding of the 
employee's contribution required by the health plan, the employee 
should contact the IV-D agency at the address listed on the NMSN.
    Response: We agree. We added the following sentence under this 
heading, ``To contest the withholding under this Notice, the employee 
should contact the Issuing Agency at the address and telephone number 
listed on the Notice.''
    30. Comment: A commenter requested clarification regarding how an 
employee could challenge certain aspects of the Notice qualification 
process.
    Response: Although the issue of the Notice qualification process is 
more appropriately addressed in DOL's regulation, we concur with the 
commenter that clarification is needed in Part A. We added the 
following language under the ``Instructions to Employer'', subheading 
``Employee Liability for Contribution to Plan': ``With respect to ERISA 
covered group health plans, it is the view of the Department of Labor 
that Federal courts have jurisdiction if the employee challenges a 
determination that the Notice constitutes a Qualified Medical Child 
Support Order.''
    31. Comment: One commenter recommended that the NMSN be made 
available for universal use in all child support cases and not limited 
to cases under the title IV-D program. Another commenter recommended 
that the NMSN should only be used by State IV-D agencies.
    Response: The statute at section 466(a)(19)(A) requires the use of 
the NMSN where appropriate in title IV-D cases.
    32. Comment: One commenter inquired whether the Case Number and 
Support Order Number requested in both Parts A and B of the NMSN are 
the same.
    Response: They are not the same. The case number identifies the 
number of the case in the IV-D agency's caseload. The support order 
number pertains to the judicial or administrative support order that 
exists with respect to the individuals associated with the IV-D case.
    33. Comment: Several commenters objected to the provision in Part B 
of the NMSN in the ``Plan Administrator Response,'' section, (item 
2.b.) that requires the IV-D agency to make a selection from an array 
of multiple options available under the health plan or plans. These 
commenters expressed concerns that there may be inadequate staff to 
make the selection, that such interaction may cause delays in 
enrollment, and that such interaction may hinder automation of the 
child support enforcement system. Another commenter supported the 
provision that the plan administrator should notify the IV-D agency 
that a choice among more than one option is required. The commenter 
also suggested that if the IV-D agency does not respond within twenty 
business days after the plan administrator has returned the Plan 
Administrator Response informing the IV-D agency that a choice is 
required, and the plan has default option, the plan administrator 
should enroll the child(ren), and the participant if necessary, in the 
plan's default option.
    Response: We believe that decisions regarding selection of coverage 
are very important. If the plan administrator notifies the IV-D Agency 
that the participant is not enrolled in the plan and that more than one 
coverage option is available, the decision as to which option should be 
selected rests with the IV-D agency, in consultation with the custodial 
parent. The IV-D agency has this responsibility on the basis that the 
IV-D agency initiated the enrollment process, is providing services to 
the custodial parent and child, and is in the best position to make 
such a selection, in consultation with the custodial parent. If the IV-
D agency does not make this selection and reply to the plan 
administrator within twenty business days, and the plan has a default 
option, the plan administrator should enroll the child(ren) in the 
default option. If the plan does not have a default option, the plan 
administrator may wish to contact the IV-D agency to ensure that each 
child is placed in appropriate coverage as soon as reasonably possible.
    We have added paragraph (c)(8) to this final regulation at 45 CFR 
303.32 to clarify the IV-D agency's responsibility if it receives a 
plan administrator response form indicating a choice of options is 
necessary before enrollment may proceed.

Executive Order 12866

    Executive Order 12866 requires that regulations be drafted to 
ensure that they are consistent with the priorities and principles set 
forth in the Executive Order. The Department has determined that this 
final rule is consistent with these priorities and principles. This 
regulation has been determined to be significant and has been reviewed 
by the Office of Management and Budget.

Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (Public Law 96-354) requires the 
Federal government to anticipate and reduce the impact of regulations 
and paperwork requirements on small entities. The Secretary certifies 
that this proposed rule will not have a significant economic impact on 
a substantial number of small entities because the primary impact of 
these regulations is on State governments. These regulations place 
requirements on IV-D agencies for the use of the NMSN. The NMSN itself 
will help small employers and small plan administrators who are 
required under State laws to comply with orders to enroll children in 
health care plans available to their employees.

Paperwork Reduction Act of 1995

    Section 303.32(c)(1) contains an information collection 
requirement. As required by the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)), the Administration for Children and Families has 
submitted a copy of this section to the Office of Management and Budget 
(OMB) for its review.
     Title: National Medical Support Notice.
     Summary: The information collected by State title IV-D 
agencies will be used to complete the National Medical Support Notice 
(NMSN) which will be sent to employers of employee/obligors and used as 
a means of enforcing the health care coverage provision in a child 
support order. Primarily, the information State agencies will use to 
complete the NMSN will be the information regarding appropriate persons 
which is necessary for the enrollment of the child in employer related 
health care coverage, such as the employee (name, SSN, mailing 
address); employer's name/address; the name/address of the child(ren); 
and the custodial parent's name and address. The employer forwards the 
second part of the NMSN to the group health plan administrator which 
contains the same individual identifying information. The plan

[[Page 82165]]

administrator requires this information to determine whether to enroll 
the child(ren)in the group health plan. If necessary, the employer 
would also initiate wage withholding from the employee's wages for the 
purpose of paying premiums to the group health plan for enrollment of 
the child.
     Description of the likely respondents: State and local 
title IV-D agencies initiate the process of enforcing medical health 
care coverage for the child by completing and sending the NMSN to known 
employers of the noncustodial parents (employee/obligors). Employers 
and plan administrators are on the receiving end of the NMSN.

Information collection.......................................        (1)
Number of respondents........................................         54
Responses per respondent.....................................     13,454
Average burden hours per response............................       1666
                                                              ----------
    Total annual burden hours................................   123,507
 
\1\ 45 CFR 303.32

    The Office of Management and Budget (OMB) filed comments on this 
request for approval due to comments from one State. The State's first 
comment pertained to changing the timeframes that the employer and plan 
administrator have for processing the NMSN. The State wanted to change 
the timeframe that the employer has to forward the NMSN to the plan 
administrator from twenty business days from the date of the NMSN, to 
ten business days. The State also wanted to change the timeframe that 
the plan administrator has to enroll or deny enrollment from forty 
business days from the date of the NMSN, to twenty business days.
    With respect to the twenty business days timeframe for employers, 
we are bound by the statute at section 466(a)(19)(B)(ii) of the Social 
Security Act that specifies this timeframe for employers. With respect 
to the forty business days timeframe for plan administrators, we are 
bound by the statute at section 609(a)(5)(C)(ii) of the Employment 
Retirement Income Security Act of 1974 (ERISA) that specifies this 
timeframe for plan administrators. We have no authority to change 
statutorily required timeframes.
    As part of its second comment, the State indicated that it believes 
the NMSN is fine for ERISA employers but may be rejected by non-ERISA 
employers. Therefore the State recommended that the instructions and 
response sections in the NMSN should be modified and changed.
    Historically, the IV-D program experienced difficulties in 
enforcing medical support coverage of children in ERISA covered health 
plans. ERISA preempts State law, under whose authority child support 
orders are established, and provides a basis for denying enrollment of 
children under the IV-D program in ERISA covered health plans. A 
primary objective of the NMSN is to meet the ERISA requirements for a 
qualified medical child support order to effect enrollment. The 
impediments to enrollment were in the ERISA covered health plans and 
not with the non-ERISA plans. The NMSN has been developed to apply to 
employer-related health plans. We have no reason to make any 
modifications to the NMSN as we are in agreement with the State that 
the NMSN will facilitate enrollment in ERISA covered health plans. We 
do not agree that there will be problems with non-ERISA plans.
    The information collection requirements were approved by OMB under 
OMB number 0970-0222.

Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 requires 
that a covered agency prepare a budgetary impact statement before 
promulgating a rule that includes any Federal mandate that may result 
in the expenditure by State, local, and Tribal governments, in the 
aggregate, or by the private sector, of $100 million or more in any one 
year.
    If a covered agency must prepare a budgetary impact statement, 
section 205 further requires that it select the most cost effective and 
least burdensome alternative that achieves the objectives of the rule 
and is consistent with the statutory requirements. In addition, section 
203 requires a plan for informing and advising any small governments 
that may be significantly or uniquely impacted by the rule.
    We have determined that the rule will not result in the expenditure 
by State, local, and Tribal governments, in the aggregate, or by the 
private sector, of more than $100 million in any one year. Accordingly, 
we have not prepared a budgetary impact statement, specifically 
addressed the regulatory alternatives considered, or prepared a plan 
for informing and advising any significantly or uniquely impacted small 
governments.

Executive Order 13132

    Executive Order 13132 on Federalism applies to policies that have 
federalism implications, defined as ``regulations, legislative comments 
or proposed legislation, and other policy statements or actions that 
have substantial direct effects on the States, or on the distributions 
of power and responsibilities among the various levels of government.'' 
While this rule does not have federalism implications for State or 
local governments as defined in the Executive Order, there were 
extensive consultations with State members of the Medical Child Support 
Work Group, as well as other State and local child support 
practitioners, on the content of the Notice and its requirements.

Congressional Review

    This rule is not a major rule as defined in 5 U.S.C., Chapter 8.

List of Subjects in 45 CFR Part 303

    Child support, Grant programs/social programs, Reporting and 
recordkeeping requirements.

(Catalog of Federal Domestic Assistance Program No 93.563, Child 
Support Enforcement Program.)

    Dated: August 18, 2000.
Olivia A. Golden,
Assistant Secretary, Administration for Children and Families.
    Approved: August 29, 2000.
Donna E. Shalala,
Secretary, Department of Health and Human Services.

    For the reasons discussed above, we are amending 45 CFR Chapter III 
as follows:

PART 303--STANDARDS FOR PROGRAM OPERATIONS

    1. The authority citation of Part 303 continues to read as follows:

    Authority: 42 U.S.C. 651 through 658, 660, 663, 664, 666, 667, 
1302, 1396a(a)(25), 1396(d)(2), 1396b(o), 1396b(p) and 1396(k).

    2. A new 303.32 is added to read as follows:


Sec. 303.32  National Medical Support Notice.

    (a) Mandatory State laws. States must have laws, in accordance with 
section 466(a)(19) of the Act, requiring procedures specified under 
paragraph (c) of this section for the use, where appropriate, of the 
National Medical Support Notice (NMSN), to enforce the provision of 
health care coverage for children of noncustodial parents who are 
required to provide health care coverage through an employment-related 
group health plan pursuant to a child support order and for whom the 
employer is known to the State agency.
    (b) Exception. States are not required to use the NMSN in cases 
with court or administrative orders that stipulate alternative health 
care coverage to employer-based coverage.

[[Page 82166]]

    (c) Mandatory procedures. The State must have in effect and use 
procedures under which:
    (1) The State agency must use the NMSN to transfer notice of the 
provision for health care coverage of the child(ren) to employers.
    (2) The State agency must transfer the NMSN to the employer within 
two business days after the date of entry of an employee who is an 
obligor in a IV-D case in the State Directory of New Hires.
    (3) Employers must transfer the NMSN to the appropriate group 
health plan providing any such health care coverage for which the 
child(ren) is eligible (excluding the severable Notice to Withhold for 
Health Care Coverage directing the employer to withhold any mandatory 
employee contributions to the plan) within twenty business days after 
the date of the NMSN.
    (4) Employers must withhold any obligation of the employee for 
employee contributions necessary for coverage of the child(ren) and 
send any amount withheld directly to the plan.
    (5) Employees may contest the withholding based on a mistake of 
fact. If the employee contests such withholding, the employer must 
initiate withholding until such time as the employer receives notice 
that the contest is resolved.
    (6) Employers must notify the State agency promptly whenever the 
noncustodial parent's employment is terminated in the same manner as 
required for income withholding cases in accordance with 
Sec. 303.100(e)(1)(x) of this part.
    (7) The State agency must promptly notify the employer when there 
is no longer a current order for medical support in effect for which 
the IV-D agency is responsible.
    (8) The State agency, in consultation with the custodial parent, 
must promptly select from available plan options when the plan 
administrator reports that there is more than one option available 
under the plan.
    (d) Effective date. This section is effective October 1, 2001, or, 
if later, the effective date of State laws described in paragraph (a) 
of this section. Such State laws must be effective no later than the 
close of the first day of the first calendar quarter that begins after 
the close of the first regular session of the State legislature that 
begins after October 1, 2001. For States with 2-year legislative 
sessions, each year of such session would be regarded as a separate 
regular session.

    Note: The following appendix will not appear in the Code of 
Federal Regulations.


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[FR Doc. 00-31611 Filed 12-26-00; 8:45 am]
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