In early 2024, many employers utilizing the iSolved payroll solution noticed discrepancies in garnishment calculations for employee paychecks. These variances weren’t the result of user error but rather stemmed from recent changes in several state garnishment laws and the timing of iSolved’s updates to its withholding rules. Understanding the cause of these irregularities—and how they were ultimately resolved—is critical for employers to ensure compliance and trust in automated payroll systems.
TL;DR
iSolved’s garnishment calculations were temporarily incorrect due to recent changes in state wage garnishment laws that went into effect before the company updated its system rules. These misalignments led to higher-than-expected garnishment amounts and incorrect net pay. iSolved later deployed an update that corrected the formula based on the new state requirements. Employers should review garnishment outcomes to ensure compliance during the transition.
What Triggered the Garnishment Miscalculations?
The core issue arose from legislative amendments across multiple states that modified how disposable income should be calculated for the purpose of wage garnishments. One notable change was a redefinition of “disposable earnings” that excluded a broader set of deductions before assessing garnishment amounts.
However, iSolved’s software still operated on the previous standards set by those states. As a result, when garnishments were applied, they were calculated against a higher pool of income, leading to excessive deductions from employee paychecks. This directly affected net pay, sometimes creating hardship for employees and liability risks for employers.
Timeline of the Problem
- January 2024: Several states officially enacted changes to garnishment laws, modifying definitions and calculation methods.
- February 2024: Employers using iSolved began noticing paychecks with incorrect garnishment amounts and unusual net pay outcomes.
- March 2024: iSolved acknowledged the issue and began implementing a withholding rule update to align with new state laws.
- April 2024: Updated withholding and garnishment rules were fully deployed, correcting the discrepancies in net pay calculations.
Key Factors Behind the Delay
Several technical and operational factors contributed to the delayed update of garnishment calculations in iSolved:
- Complexity of State Law Changes: Each state has its own wage garnishment limits, definitions, and minimum thresholds, making it challenging for a national payroll system to quickly adapt to updates.
- Delayed Legislative Clarifications: In some cases, states released implementation guidance weeks after the law’s effective date, leaving system developers in limbo.
- System Scheduling for Quarterly Updates: iSolved typically releases compliance-based system updates on a quarterly schedule, which created a lag in implementing mid-cycle legal adjustments.
Impact on Employers and Employees
The consequences of the garnishment miscalculations extended beyond accounting errors. Many payroll departments had to proactively manage employee grievances, address incorrect net pay issues, and manually adjust garnishment records retroactively.
For employees: Over-deductions for garnishments resulted in lower-than-expected take-home pay. In some states, this meant non-compliance on wage thresholds, particularly for minimum wage or low-salary earners.
For employers: There was an increased burden in reconciling incorrect garnishment reports, staying compliant with both federal and state law, and preserving employee trust in the company payroll process.
The Withholding Rule Update: What Changed?
In iSolved’s April 2024 update, key changes were introduced to correct garnishment accounting:
- Redefined Disposable Income: Adjustments made to align with new state definitions that exclude health insurance, retirement contributions, and state tax withholdings before calculating garnishment thresholds.
- Updated Prioritization Logic: Reordered garnishments—for example, prioritizing child support over consumer debt—as now required by some updated laws.
- Corrected Net Pay Calculations: Ensured that garnishment amounts no longer violate state-mandated minimums for take-home pay.
These corrections were automatically applied to ongoing payroll cycles, meaning that employees and administrators no longer needed to make manual adjustments unless correcting a past cycle.
Preventing Future Payroll Issues
The iSolved garnishment miscalculations highlight the ongoing challenge of balancing automation with compliance. Employers that rely on automated HR and payroll platforms must still maintain vigilance during times of legislative transition.
To avoid similar issues in the future, experts recommend the following best practices:
- Subscribe to Legal Alerts: Keep up with changing labor and payroll laws from reliable sources like the Department of Labor or SHRM.
- Run Parallel Calculations: Cross-check garnishment outputs during known legal update periods using spreadsheet models or third-party tools.
- Engage Support Early: If discrepancies are noticed, engaging the payroll system provider quickly can accelerate patch rollouts or clarification.
- Audit Payroll Results: Regularly audit batches, particularly when garnishments or deductions are processed, to identify inconsistencies early.
Conclusion
The garnishment errors in iSolved’s payroll system emerged from the complex interplay of legal shifts and system update delays, not negligence. While the company has since corrected its approach with a withholding rule refresh, the incident reinforces the importance of regularly validating payroll processes, especially during seasons of regulatory change.
Employers are ultimately accountable for wage compliance—even when using automated systems—so the value of combining technology with oversight cannot be overstated.
Frequently Asked Questions (FAQ)
- Q: Why were garnishment amounts too high in early 2024?
- A: Because iSolved had not yet updated its system to match new state definitions of disposable income, resulting in higher-than-legal garnishment amounts.
- Q: Did the issue affect all states?
- A: No, it mainly affected states that changed their garnishment laws in January 2024. States without new laws generally did not experience issues.
- Q: When did iSolved fix the calculations?
- A: iSolved released an update in April 2024 that corrected withholding and garnishment calculations based on updated state laws.
- Q: Can past errors be corrected retroactively?
- A: Yes, but retroactive corrections often require manual entries and coordination with both employees and courts or creditors.
- Q: How can employers prevent similar problems?
- A: Monitor legal updates, conduct audits, and maintain open communication with payroll providers during legislative transitions.