The following terms are frequently used in governmental publications to describe various aspects of the TANF program (Temporary Assistance for Needy Families). These terms are in general use and commonly accepted; however, you should be aware that your State may employ different terminology for one or more of them.
A family whose monthly GROSS INCOME falls below a multiple of the need standard is considered "in need". The need standard is set by each State, usually varies by family size, and can be used to determine eligibility for TANF.
The payment standard is used to determine the size of a family's TANF grant; it usually varies by family size. Usually, a family's TANF grant is equal to the lesser of the MAXIMUM PAYMENT or the family's income deficit (payment standard minus NET INCOME). In some States, the family's grant is equal to less than 100 percent of the income deficit (see DEFICIT PAYMENT).
A family's TANF payment is generally equal to its income deficit (PAYMENT STANDARD minus NET INCOME). Some States set the family's TANF grant at only a fraction of the family's income deficit. This fraction is referred to as the deficit payment.
The maximum payment is the highest monthly benefit a family can receive; it varies by family size. A family whose NET INCOME is zero can receive the maximum payment; a family with positive NET INCOME may receive less than the maximum payment.
To calculate NET INCOME, a certain portion of a family's GROSS INCOME is ignored. The first portion is referred to as the income disregard, the fixed dollar amount of earnings that is ignored. The second portion is the BENEFIT REDUCTION RATE (BRR).
The benefit reduction rate is the rate at which a family's TANF grant falls as the family's earned income grows. For example, a BRR of 80 percent implies that for every dollar the family earns, the family's TANF grant is reduced by 80 cents. The BRR is only applied to earnings that exceed the INCOME DISREGARD.
A family's GROSS INCOME must fall below a State-specified threshold (generally 185 percent of the NEED STANDARD) to receive any TANF benefits. Some States apply different gross income tests to TANF applicants and TANF recipients. Other States do not use a Gross Income test; only a NET INCOME TEST is applied.
Gross income is the total pre-transfer income a family receives. Gross income is used to determine eligibility for TANF and in calculating NET INCOME.
A family's NET INCOME must fall below a State-specified threshold (generally the PAYMENT STANDARD) to receive any TANF benefits. Some States apply different net income tests to TANF applicants and TANF recipients. Other States do not use a Net Income test; only a GROSS INCOME TEST is applied.
A family's net income is equal to a family's GROSS INCOME minus the INCOME DISREGARD, the remainder of which is then multiplied by the BENEFIT REDUCTION RATE. It is used to determine TANF eligibility and the TANF benefit amount.
A sanction is a financial penalty imposed on families that fail to meet work or other requirements necessary to receive their full TANF grants. States set their own sanction policies, and there are three main ways to apply a sanction: (1) reduce a family's TANF grant by a fixed dollar amount, (2) reduce a family's TANF grant by a fixed percentage; and (3) calculate the TANF benefit using a smaller family size (i.e., removing the adult from the assistance unit). States may also have escalating penalties for infractions subsequent to the first, which typically increase the period that sanctions are in effect.
Many States have adopted unique names for their TANF program, which may be found in the Names Of State TANF Programs topic.
Most of the information in this topic was drawn from the Urban Institute's website at:
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