ADP Garnishments and Deductions 2 — Questions and Answers
Question 1: In ADP Workforce Now, where would a payroll specialist typically set up a new employee wage garnishment?
- Payroll > Pay Statements
- Process > Payroll > Garnishments
- Payroll > Deductions & Benefits > Garnishments (Correct answer)
- HR > Employee Profile > Deductions
Correct answer: Payroll > Deductions & Benefits > Garnishments
In ADP Workforce Now, garnishments are set up under the Payroll module in the Deductions & Benefits section where the garnishment type, amount, and priority are configured.
Question 2: Which type of deduction is classified as a 'pre-tax' deduction that reduces an employee's federal taxable wages?
- 401(k) Roth contribution
- Wage garnishment
- Section 125 cafeteria plan contribution (Correct answer)
- Union dues
Correct answer: Section 125 cafeteria plan contribution
Section 125 cafeteria plan contributions (such as health insurance premiums paid through a cafeteria plan) reduce federal taxable wages and are considered pre-tax deductions.
Question 3: What is a 'Creditor Garnishment' also commonly referred to as in payroll?
- Income execution (Correct answer)
- Child support order
- Student loan offset
- Tax levy
Correct answer: Income execution
A creditor garnishment is also called an income execution, which is a court order directing an employer to withhold a portion of an employee's wages to pay a debt owed to a creditor.
Question 4: How should a payroll specialist handle an employee who voluntarily requests a deduction for a personal loan repayment to their employer?
- Process it as a garnishment
- Set it up as a voluntary deduction coded appropriately in ADP (Correct answer)
- Decline because employer loans cannot be deducted from payroll
- Process it only after receiving a court order
Correct answer: Set it up as a voluntary deduction coded appropriately in ADP
Employer loan repayments are voluntary deductions that should be set up as a specific deduction code in ADP's payroll system, subject to applicable state wage assignment laws.
Question 5: What is the typical employer administrative fee that states may allow for processing a wage garnishment?
- $0 — employers cannot charge fees
- $1 to $5 per payment (Correct answer)
- 10% of the garnished amount
- A flat $25 per order
Correct answer: $1 to $5 per payment
Many states permit employers to charge a small administrative fee, typically $1 to $5 per garnishment payment, to offset the cost of processing the order.
Question 6: When processing student loan garnishments under the Higher Education Act, what is the maximum percentage of disposable pay that can be withheld?
- 10%
- 15% (Correct answer)
- 25%
- 30%
Correct answer: 15%
Under the Higher Education Act, administrative wage garnishments for defaulted federal student loans are limited to 15% of disposable pay.
Question 7: An employee presents a claim of exemption after a garnishment is served. What is the payroll specialist's immediate responsibility?
- Stop all garnishment withholding immediately
- Continue withholding but hold funds pending court review
- Forward the claim to legal counsel and await court instruction (Correct answer)
- Notify the employee their claim has been accepted
Correct answer: Forward the claim to legal counsel and await court instruction
The employer should forward the exemption claim to legal counsel or the appropriate agency and await a court order before changing any withholding, as the legal determination is not the employer's to make.
ADP Garnishments and Deductions 2
In ADP Workforce Now, where would a payroll specialist typically set up a new employee wage garnishment?