Fundamental Payroll Certification Fundamental Payroll Involuntary and Voluntary Deductions 5 — Questions and Answers
Question 1: An employee's disposable earnings are $300 per week. The federal minimum wage is $7.25/hour. What is the maximum creditor garnishment amount?
- $75.00 (Correct answer)
- $82.50
- $150.00
- $217.50
Correct answer: $75.00
25% of $300 = $75; amount above 30x $7.25 = $300 - $217.50 = $82.50; the lesser figure of $75 is the maximum that can be garnished.
Question 2: Which of the following deductions is correctly subtracted from gross wages to arrive at 'disposable earnings'?
- Employee-elected health insurance premiums
- Voluntary 401(k) deferrals
- Mandatory state disability insurance contributions (Correct answer)
- After-tax life insurance deductions
Correct answer: Mandatory state disability insurance contributions
Only legally required deductions — such as mandatory state disability insurance — reduce gross wages to reach disposable earnings; voluntary elections do not.
Question 3: A child support order alone consumes the full CCPA maximum withholding for an employee. The employer then receives a creditor garnishment. What is the correct employer action?
- Divide the maximum withholding proportionally between both orders
- Apply the creditor garnishment and reduce the child support amount
- Withhold nothing additional for the creditor and notify the issuing court (Correct answer)
- Increase total withholding beyond the CCPA limit to satisfy both
Correct answer: Withhold nothing additional for the creditor and notify the issuing court
When existing orders already reach the CCPA maximum, no additional amount can be withheld; the employer must notify the creditor's court that the withholding limit is exhausted.
Question 4: An employer receives a garnishment order for an employee who was terminated last week. What must the employer do?
- Apply the garnishment to the final paycheck only
- Notify the issuing court or agency that the individual is no longer employed (Correct answer)
- Hold the order for 90 days in case the employee is rehired
- Forward the order to the state unemployment office
Correct answer: Notify the issuing court or agency that the individual is no longer employed
Upon receiving a garnishment for a terminated employee, the employer must promptly notify the issuing court or agency so enforcement can be redirected appropriately.
Question 5: An employee instructs the employer to direct-deposit their entire paycheck into a personal savings account. A valid creditor garnishment order is also in effect. How should the employer proceed?
- Honor the direct deposit fully since the creditor must garnish the bank
- Apply the garnishment to wages before depositing the remainder (Correct answer)
- Inform the creditor that direct deposit prevents withholding
- Split withholding equally between the garnishment and the deposit
Correct answer: Apply the garnishment to wages before depositing the remainder
Wage garnishment attaches to the employee's earnings, not to bank accounts; the employer must withhold the garnishment amount before depositing the remaining balance.
Question 6: A state's garnishment law limits creditor garnishments to 10% of disposable earnings. The federal CCPA limit is 25%. Which limit should the employer apply?
- Always apply the federal 25% limit as federal law supersedes state law
- Always apply the state 10% limit as it is more jurisdiction-specific
- Apply the limit that is more protective of the employee (the lower 10% limit) (Correct answer)
- Request clarification from the issuing court before withholding anything
Correct answer: Apply the limit that is more protective of the employee (the lower 10% limit)
When state and federal garnishment limits conflict, employers must apply the law that affords greater protection to the employee, which is the lower state limit of 10%.
Question 7: What is the potential consequence for an employer who ignores a valid wage garnishment order?
- No liability, provided the employer notifies the employee of the order
- The employer may be held personally liable for the amount that should have been withheld (Correct answer)
- The debt transfers automatically to the employee's next employer
- The garnishment order is voided and must be reissued by the court
Correct answer: The employer may be held personally liable for the amount that should have been withheld
An employer who fails to comply with a valid garnishment order can be held liable for the unwithheld amount, effectively making the employer responsible for the employee's debt.
Fundamental Payroll Certification Fundamental Payroll Involuntary and Voluntary Deductions 5
An employee's disposable earnings are $300 per week.
The federal minimum wage is $7.25/hour.
What is the maximum creditor garnishment amount?