Notice to financial institutions: The wage exemption amount for restriction notices and levies will increase on December 31, 2021 – Emploi et RH

United States: Notice to Financial Institutions: The Wage Exemption Amount for Restriction Notices and Direct Debits Will Increase on December 31, 2021

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Under New York’s Exempt Income Protection Act (“EIPA”), certain funds in custodial accounts are exempt from most restriction notices and levies. An exemption under the EIPA relates to an amount deemed to be protected wages, the amount of this exemption being linked to the minimum wage. Following an increase in the New York State minimum wage that takes effect on December 31, 2021, the amount of the wage exemption under the EIPA will increase beginning on that date in some parts of New York State. ‘State.

The EIPA came into effect in 2009 and, among other things, requires financial institutions to remove certain funds from deposit accounts from the reach of creditors seeking to restrict or levy on those accounts. There are two exemptions under the EIPA: (1) for wages; and (2) for the direct deposit or electronic payment of funds “reasonably identifiable as exempt by law” during the 45-day period prior to service of the prohibition notice or withdrawal.

Under the wage exemption, a financial institution must make a certain amount available to the depositor based on the amount of the federal or New York State minimum wage (whichever is greater). Because the New York State minimum wage will increase on December 31, 2021, the wage exemption amount under the EILA will also increase effective that date. Under legislation enacted in 2016, the minimum wage in New York State now varies depending on the location in New York State where the person is employed. As of December 31, 2021, the minimum wage in New York will remain at $15.00 per hour; the minimum wage in Nassau, Suffolk and Westchester counties will increase to $15.00 per hour; and the minimum wage in all other parts of the state will increase to $13.20 an hour.

The corresponding wage exemptions based on the new minimum wage amounts as of December 31, 2021 are as follows: $3,600 in New York and Nassau, Suffolk, and Westchester counties; and $3,168 in all other parts of the state.

The New York State Department of Financial Services (“DFS”) provided guidance to banking institutions in April 2017 on how to determine the applicable wage exemption, given the possibility that the institution may not know where his client is employed. The DFS guidelines state that:

  • If, after due diligence, a banking institution obtains the most recent information regarding an account holder’s business address…the banking institution must calculate the amount of exempt wages based on this information.
  • However, if, after due diligence, a banking institution is unable to obtain the most recent information as described in (i) above, the banking institution may use the higher minimum wage in effect in the state at the time of this calculation, thereby protecting the account holder’s salary as required by law.

Please note that the DFS Guidelines do not specify what type of activity constitutes “reasonable due diligence” with respect to these matters.

As stated above, in addition to the salary exemption, there is an exemption for funds exempted by law. Under this separate exemption, if there has been a direct deposit or electronic payment of legally exempt funds into an account within the 45-day period prior to service of the prohibition notice or debit , the institution must generally make available to the depositor up to $3,000 from the account despite the prohibition notice or withdrawal. The current amount of $3,000 was increased to this amount in April 2021 and is subject to change again in April 2024 and then every three years thereafter based on changes in the Consumer Price Index .

Please note that this notice is a general overview of the application of the EIPA and is not intended to be legal advice. The requirements of the EIPA are very detailed and must be reviewed in their entirety and in conjunction with the federal rules protecting certain funds against garnishment.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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Marianne R. Winn