It’s not just deadlines for licensing and appointments that can tank your producers’ insurance careers – timely child support payments for parents who work in insurance are mission critical.
Families are organic things. That is to say, they’re complicated. And they grow, shrink, fracture, splinter, and morph over time.
Changing family structure can be painful when kids are involved, as divorce or separation bring emotional overhauls. Custodial parents may be strapped for cash, paying for children as single parents with limited income. Noncustodial parents, or parents with partial custody, find themselves in situations where their income is beholden to another family, and how the funds are spent on their children are somewhat outside their control.
Co-parents whose custodial agreements come with some degree of animosity often face court visits fraught with emotional and financial decisions. These decisions often have far-reaching repercussions for relationships and future life choices. For licensed insurance professionals, however, some of the consequences of custody and child-support arrangements come with a looming threat: Miss your child support payments and the state will terminate or suspend your license.
As we dive in on the topic d’jour, please keep in mind that you are responsible for your own due diligence (and any relevant child support payments), and this blog isn’t legal (or personal relationship) advice.
What are the penalties for insurance professionals who fail to pay child support?
Insurance professionals who fall behind on child support face consequences including but not limited to suspension or termination of their insurance license. Other state-enforced penalties could include suspended driver’s licenses, revoked concealed carry permits, wage garnishment (where the state will take back pay for child support from someone’s paycheck, like taxes), and even a felony charge that can result in jail time.
Let’s break it down. All states have some type of penalty for failing to make child support payments. If you happen to be a licensed insurance producer, that includes suspending or terminating a license. While there is no shortage of ways an insurance producer may lose their license, missed child-support payments surely must be one of the less well-known.
Like all things insurance, while someone who has skipped child support is sure to find themselves in hot water no matter what state they’re in, the degree of severity and the particulars of the situation vary by state.
As is presented in this helpful National Conference of State Legislatures (NCSL) chart, the “delinquency threshold” for states runs the gamut.
- California and New Mexico can suspend a professional license if someone is 30 days behind on child support.
- Virginia allows courts to use license suspension to penalize non-custodial parents once they have passed $5,000 in arrears and are more than 90 days overdue.
- New Jersey holds off on suspension until a parent hasn’t paid for six months, isn’t providing health care for the child, and all other enforcement options and notices have been exhausted.
As noted, depending on the state, penalties can also go well beyond jeopardizing one’s professional license. Drivers licenses, for example, are also subject to state suspension or termination in every state. In most states, the penalty and timelines for both professional licenses and drivers licenses are the same. In some, however, you may lose your insurance license over child support far before you lose your license to drive. And in others, it’s vice versa; you’ll walk to work far before you are forced to stop selling insurance. Even though you may not necessarily need your car to work in today’s remote/hybrid world, you probably still want to avoid losing your drivers license.
For all agencies, carriers, and MGAs, having a pulse on these issues is essential. For one thing, a producer whose license is in jeopardy in their resident state will automatically be facing license jeopardy in every state. For another, agencies whose DRLPs are responsible for child support must be conscious – a DRLP license suspension or termination could spell trouble for the entire agency’s ability to write business.
How is child support calculated?
Different states use different models, but there are three major models for determining child support: income shares, percentage of income, and the Melson formula.
- Income shares is by far the most popular model, used in 41 states. It takes a combined income of the parents, and then calculates what amount of income would be generated for the child’s well-being from the non-custodial parent.
- In states that rely on percentage of income calculations, the calculation is based on a set income rate, minimum, or percentage of the non-custodial parent’s income.
- The Melson formula, used only by Delaware, Hawaii, and Montana, is based on income shares plus a few other considerations for public policy decisions about what basic child welfare should look like.
Each model has limitations, and changes based on things like how many children are involved per parent, how many households are involved, what the share of custody looks like, and other considerations. One point in the insurance industry that makes these calculations even trickier is that insurance professionals are often making money from commissions.
State and judicial calculations may base support off an annual average, or off of a standard base pay expectation. One Montana attorney’s blog speaks to the trouble some families saw in the past few years:
“The most difficult scenario is the situation where commissions may have been historically high but due to economic factors, commissions and sales opportunities have dropped. The court has to balance the interest in providing children the support they deserve, and the realistic income available for support. As you can imagine, this can be a complex balancing act.”
As the author notes, bonuses are in a similar consideration class: If a bonus has historically always been received, then a judge may count that bonus toward standard income.
Things like job loss or custody rearrangement get an extra layer of complexity when one parent fears losing the license they need for their livelihood. Granted, most states rely on the custodial parent to alert authorities if child support isn’t being paid in a timely manner, so some of this calculus comes down to existing relationships and whether your co-parent and you have reasonable expectations for each other.
How can insurance producers get the state to reinstate a license after losing it for failure to pay child support?
Most states have provisions for contesting court orders and arrears assessments. Generally, though, if the court decides your arrears are accurate, to have your license reinstated will require you to provide proof to the state that you have paid your arrears in full. In some states, it’s sufficient to show evidence that you have a workable payment plan.
Depending on the state, a noncustodial parent may have 14 to 90 days after being notified of an impending license suspension to contest the court order or arrange a payment plan for reinstatement. It’s worth noting that Utah doesn’t have a statutory provision for reinstatement, and instead you’ll need to address a petition to the court and have a specific hearing to be granted license reinstatement.
Are there exceptions to child support delinquency license revocation?
It depends on the state. Missouri has a provision for noncustodial parents to contest a license revocation on the grounds that it would create an undue hardship. Other states have extensive methods for non-custodial parents to engage with the judicial process of child support assessments and repayments long before someone might find their license in jeopardy.
In Kentucky, arrears assessed before Jan. 1, 1994, are exempt from any license penalties. If that seems like a long time ago (nearly three decades!), then let that be a reminder: Just because a child has reached the age of majority does not mean a parent with child support in arrears is exempt from that back pay. Stories abound of parents jailed for evading warrants and court dates for child support payments they missed decades ago.
At AgentSync, we can’t help families maintain amicable financial and emotional boundaries. However, we can help agencies, carriers, and MGAs protect themselves from the risk and exposure of most ordinary and extraordinary license foibles. If you’re interested in seeing how, check out AgentSync in action.