A National Medical Support Notice (NMSN) may be sent to you, if one of your employees has a child support obligation, by a state child support enforcement agency (CSEA). The NMSM is a standardized form that advises you when your employee has been ordered to provide health insurance coverage for a child through your company's health plan.

The NMSN is a federal form that all state child support enforcement agencies must use. If an order has been issued and health coverage is available through the employer, the child must be enrolled by the Plan Administrator.

The standardized NMSN does have some advantages for the employer:

* It provides uniform documents so the employer does not have to learn 50 different forms and ways of doing the same thing.
* The NMSN meets all ERISA requirements under section 609(a)(3) & (4) and is in fact a Qualified Medical Child Support Order.
* It satisfies state law for withholding employee contributions for the child's health care coverage. It also sets up the priorities for withholding when withholding is inadequate to cover child support and a NMSN.
* The NMSN states the duration of the medical support withholding and should have the name and address of a contact at the CSEA.

The NMSA consists of four documents.

* Part A, " Notice to Withhold for Health Care Coverage"
* Part B, Medical Support Notice to Plan Administrator"
* Responses to Both Notices

The following five steps are a summary of what the employer is responsible to do under the NMSA without compensation for his time or trouble.

* Step One: Determine if the NMSN really applies to you or an employee of yours under the four listed categories. If so complete the response portion and send it back to the CESA it came from.
* Step Two: If none of the response categories apply send Part B of the form to your Plan Administrator.
* Step Three: The Administrator should notify you when the enrollment is complete at which time you tell your payroll department or payroll service provider how much to deduct from the employee and on what basis.
* Step Four: If the combination of the premium amount and the deduction for health care exceed the maximum allowable deduction the employer has to look at state law to determine the priority of the payments. If state law priorities keep the employer from paying the premium complete the Employer Response and send it to the CSEA.
* Step Five: If enrollment for the child cannot be completed until a future date or until some other action takes place you need notify the Plan Administrator when the employee will be eligible to enroll. You should also notify the CSEA of the time frame involved.

Charles J. Read, CPA has been in the payroll, accounting and tax business for 30 years, the last fifteen in private practice. Mr. Read is the author of “How to Start a New Business”.

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Unclaimed or uncashed payroll checks handled incorrectly by an employer can result in serious trouble for the employer. Prior to implementing a policy on how your company handles these types of checks, there are several issues to consider:

Every state has escheat laws that affect unclaimed or abandoned property. In general the laws require that such property, including the funds from uncashed and/or unclaimed payroll checks, be turned over to the state after a designated period. That period and possibly a minimum amount vary from state to state. The state then holds the items for the owner or heirs until a claim is filed to collect the property.

If an uncashed payroll check is voided the money is then available in the company's payroll checking account. If later the funds are not available to pay the employee or to submit to the state the, employer and officers could find themselves under a breach of fiduciary responsibility. If the courts find the actions intentional the court could find criminal intent. Remember once you issue a check for wages to an employee those funds no longer belong to the company in any way. Under no circumstances should the funds from uncashed paychecks be returned to the general checking account.

Even if the employee never claims the money or cashes the payroll check the employee deserves credit on his Social Security and Medicare accounts for wages earned. The wages also need to be reported as paid for unemployment purposes and unemployment tax needs to be paid. Even though the employee did not actually cash the check, the wages are considered to have been paid during the tax year in which the check was dated

The company must report these wages on the 941, 940 and W-2 forms and pay all taxes that are due as if the uncashed unclaimed payroll checks had been cashed on a timely basis. State unemployment reports and taxes will also need to be filed and paid as if the payroll check was cashed.

Your company policy should contain the following items at a minimum:

A method of collecting, reporting and safeguarding unclaimed payroll checks and recording and tracking uncashed payroll checks,

An outline of the steps to be made and the recording of those steps in attempting to contact the employee who has not cashed or not claimed a paycheck,

The specific period of time, which may be prescribed by the State, after which the payroll check will be voided and the monies escrowed pending payment to the employee or the state. The method and place where this will be recorded,

The period of time, which will be prescribed by the state, after which the monies will be forwarded to the state.

The method and place where this payment will be recorded.

Charles J. Read, CPA has been in the payroll, accounting and tax business for 30 years, the last fifteen in private practice. Mr. Read is the author of “How to Start a New Business”.



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