We’ve all been calculating disposable wages for so many years now that we can just about do it in our sleep. Disposable wages for child support are always gross less taxes, and sometimes the calculation might have to look at health insurance when the noncustodial parent is covering the child as a dependent, but that’s just part of the old equation.
It’s actually the Consumer Credit Protection Act that sets the definition of disposable wages as gross less all amounts required by law to be withheld. Law requires that we withhold Federal Income Tax, FICA-OASDI, FICA-HI, State Taxes, Local Taxes, and mandatory pension plans like Public Employee Retirement Plans.
Now, the Affordable Care Act is making it mandatory that every American have health insurance coverage. Does this mean that, like FIT and SIT and FICA, your employees’ health insurance deduction now qualifies as an amount required by law to be withheld? Will it reduce disposable wages now that the ACA is in effect?
The answer is no. Because employees have several options for securing health insurance and are not required to get their health insurance through payroll deductions, it will not be considered a mandatory deduction for those who do. Therefore, ACA will not have an impact on your calculation of disposable wages. Unless, of course, your state chooses to do so!