Question

Example 6-2 John Jenkins earns $1,290 per week. The deductions from his pay were: FIT $116.00 FICA—OASDI 79.98 FICA—HI 18.71 State income tax 31.00 State disability insurance 9.03 Credit union deduction 40.00 Health insurance premium 47.50 Charitable contribution 5.00 John’s disposable earnings would be: $1,290.00 - $116.00 (FIT) - $79.98 - $18.71 (FICA deductions) - $31.00 (SIT) - $9.03 (disability insurance) = $1,035.28 Example 6-3 Huffman Company has a child support order outstanding on one of its employees (Charles Suffert—$170 per week). Charles Suffert's disposable income is $950 per week. A new garnishment is received for a $5,000 debt to a credit card company. The company would take an additional $237.50 out of Suffert's pay. Lesser of: 25% × $950 = $237.50 or $950 − (30 × $7.25) = $732.50 Kalen O'Brien earned $720 this week. The deductions from her pay were as follows: FIT $76.00 FICA-OASDI 44.64 FICA-HI 10.44 State income tax 36.00 State disability insurance 8.71 Health insurance premium 19.00 Credit union contribution 38.00 United Fund contribution 6.00 O'Brien's employer just received a garnishment order (credit card debt of $3,560) against her pay. Compute the following; round your answers to the nearest cent. a. O'Brien's disposable earnings: $____________ b. The amount of her pay subject to the garnishment: $___________

Answer 1

a. O ’ Brien’s Disposable Earnings $ 544.21

Disposable earnings is the amount of earnings left after legally required deductions are made.

Computation of Disposable Earnings

Weekly Earned		$   720.00
Less deductions (Refer Note 1 & 2)
FIT	$    76.00
FICA - OASDI	$    44.64
FICA - HI	$    10.44
State IncomeTax	$    36.00
State disability insurance	$       8.71	$ (175.79)
Disposable Earnings		$   544.21

Note 1

Deductions required by law:

federal, state, and local taxes,

the employee's share of Social Security,

Medicare and

State Unemployment Insurance tax.

withholdings for employee retirement systems required by law.

Note 2

Below deductions not required by law hence Health insurance premium ($ 19), Credit union contribution ($ 38) and United fund contribution ($ 6) have not been considered.

voluntary wage assignments,

union dues,

health and life insurance,

contributions to charitable causes,

purchases of savings bonds,

retirement plan contributions (except those required by law) and

payments to employers for payroll advances or purchases of merchandise—usually may not be subtracted from gross earnings when calculating disposable earnings under the CCPA.

b. The amount of her pay subject to the garnishment: $ 136.05

The maximum amount that may be garnished in any workweek or pay period, regardless of the number of garnishment orders received by the employer. For ordinary garnishments (i.e., those not for support, bankruptcy, or any state or federal tax), the weekly amount may not exceed the lesser of two figures: 25 percent of the employee's disposable earnings, or the amount by which an employee's disposable earnings are greater than 30 times the federal minimum wage (currently $7.25 an hour).

Computation of Garnishment

Lesser of i) or ii)	Calculation	Amount
i) 25 percent of the employee's disposable earnings, or	25% of $ 544.21	136.05
ii) the amount by which an employee's disposable earnings are greater than 30 times the federal minimum wage (currently $7.25 an hour).	$ 544.21 - ($ 7.25 * 30)	326.71
Lesser is i)		136.05