The current law was enacted on January 1, 2004. This highlights the major changes from the prior child support law. 1While we are focusing on the legal aspects of support, remember that the law is only one factor for parents to consider. We encourage couples to creatively find financial solutions that best fit their family rather than blindly following the legal standards for child support because every family is unique.
Shared Placement Formula
If either parent has placement of the children less than 25% (92 overnights) of the time, the current percentage standards (17% one child, 25% two, 29% three and 31% for four) apply. But when one parent has at least 25% placement with the children (which is probably the majority of couples) the formula under the new rule is as follows:
1. Determine each parent’s obligation under the percentage standards
(17% one child, 25% two, 29% three and 31% for four).
2. Multiply the obligation for each parent by 150% to account for household maintenance expenditures duplicated by both parents, such as a bedroom, clothes, and personal items. (These are not variable costs but rather basic support costs.)
3. Multiply that amount for each parent by the proportion of time that the child spends with the other parent; and
4. Offset resulting amounts against each other.
For example, Mary makes $42,000 and has the children 61% of the time; Bob makes $25,000 and has the children 39% of the time.
|X .25||x .25|
|Step 2:||x 150%||x 150%|
|Step 3:||x .39||x .61|
|Step 4:||$6,142.50 –||$5,715.75 = $423.75/12 = $35.31|
Mary pays Bob $35.31 each month.
Variable costs are reasonable costs above basic support costs, including child care, tuition, a child’s special needs, and other activities that involve substantial cost. While these are statutorily defined, parents can voluntarily define variable costs based upon the unique circumstances of their family.
Under the current rule, the court must assign responsibility for payment of the child’s variable costs in proportion to each parent’s share of placement, giving due consideration to disparity in the parents’ incomes.
When parents are trying to determine how to specifically handle these types of costs, it would be helpful for family mediators to know that under the current rule, variable costs can be paid between parents or to a third party (such as a day care provider). However, variable costs cannot be paid to the DWD trust fund in the same or even as a separate order from child support.
Lower Percentages for Low Income Parents
Unlike the prior rule the current rule has a permissive schedule for both low and high-income parents. Low income parents (below 125% of federal poverty guidelines) will be allowed reduced percentage rates if the court determines that a parent’s total economic circumstances limit his or her ability to pay using the full percentage rates. For parents with income between approximately 75% and 125% of federal poverty guidelines, percentage rates in the schedule gradually increase as income increases. Full percentage rates apply to parents with income greater than or equal to approximately 125% of federal poverty guidelines. aspe.hhs.gov/poverty/09poverty.shtml
If the parent’s monthly income is below approximately 75% of federal poverty guidelines, the court may set an amount appropriate for the total economic circumstances. This amount may be even lower than lowest support amount in schedule.
Lower Percentages for High Income Parents
Like the low-income provisions, the current rule also provides permissive reductions for high-income parents. The standard percentages would apply to a parent who earns less than $84,000 per year.
Parents with income above $84,000 will begin to get a reduction. For those with income between $84,000 and $150,000, the court may apply approximately 80% of the full percentage standards. This is 14% for 1 child, 20% for 2 children, 23% for 3 children, 25% for 4 children, and 27% for 5 or more children.
As income increases, the reduction increases. For the portion of income above $150,000, the court may apply approximately 60% of the full percentage standards, which is 10% for 1 child, 15% for 2 children, 17% for 3 children, 19% for 4 children, and 20% for 5 or more children.
The authors of the current child support rule hoped that it would reduce that portion of litigation for placement, which is solely driven by a desire to reduce child support. The rule may produce results that parents find surprising. Some people are still surprised to find out that under the current rule, a parent may have placement only 25% of the time but if his or her income is high enough (and the other’s is low enough) he or she may still be ordered to pay child support. This would be a significant change from most parents’ assumptions based upon the prior law.
Remember Mary and Bob? The following table demonstrates how support changes under both the prior rule and the current rule as Mary’s placement decreases and Bob’s increases.
Prior DWD 40
New DWD 40
|Bob||$25,000||25%||Bob pays $520.83||Bob pays $257.81|
|Mary||$42,000||61%||Mary pays $35.31|
|Bob||$25,000||39%||Bob pays $364.74|
|Mary||$42,000||59%||Mary pays $77.19|
|Bob||$25,000||41%||Bob pays $300.04|
|Mary||$42,000||54%||Mary pays $181.88|
|Bob||$25,000||46%||Bob pays $67.63|
|Mary||$42,000||50%||Mary pays $118.29||Mary pays $265.63|
How does the current rule affect support changes? In some cases, support will be fairly similar. Higher income parents who make much more than their spouse will probably be paying more with equal placement than under the current rule. In fact, it seems that the current rule recognizes income disparity to a greater extent than the prior rule so that support would be somewhat higher for most high earning shared-time parents up to $84,000. Parents who earn above that amount will have the lower percentage.
Now more than ever, it is still critically important to encourage parents to creatively focus on problem solving. Knowing the current rule will help parents make informed decisions. The more parents know about the impact of their decisions, the better they can discuss, plan and problem solve.
1 We are not discussing changes in the shared placement formula with serial parents (one parent with multiple families), income imputation changes for parents not working at their full earning capacity, the calculation of social security benefits received by a child, and when to include the undistributed income of a closely held corporation.