Iowa child-support changes spark questions

BY ZHI XIONG | APRIL 14, 2009 7:40 AM

A month after the Iowa Supreme Court adopted new child-support guidelines, attorneys around the state are still learning to navigate the changes before the rules go into effect July 1.

They are more dramatic than in previous revisions, legal experts say. Adjusting for updated economic data, the new formula aims to smooth out some financial inequities for parents.

Ultimately, the changes may ease the burden on low-income parents who do not have custody of their child or children.

“The fairness of the new formula is more obvious,” said Steve Lytle, a Des Moines attorney who was part of the advisory committee that suggested the changes to the Iowa Supreme Court in 2004.

Since the late-1980s, the federal government has required states to set up standard guidelines in calculating divorced or separated parents’ child-support contributions and revise them every four years.

Iowa had temporary guidelines in place even before that, Lytle said.

“We were ahead of the curve,” he said.

But the key is past tense. Over the years, Iowa’s formula could not keep up with economic changes. With each revision, the state simply adjusted for inflation rates without considering the overall cost of rearing children.

“We had to continue plugging into the old data,” Lytle said. “The problems continued to grow.”

The state did not have enough money to conduct studies to update the cost of raising a child. Based on outside data, the advisory committee reported a family with one child spent between 25 to 30 percent of total income on childcare expenses. A family with three kids could spend more than half of their earnings.

Aside from matching the formula with current economic data, the new guideline corrects two traps of the former system.

One is the “notch effect.” The original formula used broad increments for reporting monthly earnings. Sometimes, parents whose income landed at the higher end of the bracket contributed less than their pay afforded. The new formula uses smaller divisions.

The other major change tries to level with increasing cost of health insurance. In the old system, the parent who pays for a child’s coverage got that amount deducted from the money he or she paid in child support. It didn’t work well for either side.

“It didn’t cut the paying parent much of a break, nor did it leave the other parent with enough support,” Lytle said.

The new formula adds the cost of health insurance to the parents’ pooled income. Then, the contribution will be divided based on the individuals’ earnings. Experts agree it is a “fairer” system, but it is also one point that requires the most analysis.

“To me, the deductibility of health-insurance cost is the most challenging,” said Randall Willman, a partner at Leff Law Firm in Iowa City who practices family law.

Willman said the new guideline made up the core of discussions at an April 10 seminar hosted by the Iowa Association for Justice. More than 100 lawyers and judges came away with one consensus: They need more meetings to hash out the changes before July.

“It’s certainly a topic that’s on everybody’s minds,” Willman said. “It’s a change we need to negotiate, including the judges.”

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