For initial eligibility determinations, the State must apply the former AFDC program's two-step income test to establish whether a child would have been considered a "needy child" under the State's title IV-A plan in effect on July 16, 1996. In addition to the income test, the State must apply a test of resources. Both the two-step income and resources tests must be applied, in accordance with 45 CFR 233.20. ¹

Prior to the passage of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, each State set its own AFDC need standard to use in determining eligibility for the program. The term "AFDC need standard" refers to the amount of money a State determined that a particular size family needed to subsist. For title IV-E purposes, the State's need standard as of July 16, 1996, (disregarding any Section 1115(a) waivers that may have been in effect on that date) is the amount that provides the basis for both steps in the initial income test portion of the AFDC eligibility determination process.

The two-step income test to determine financial need under AFDC to be conducted in accord with Federal requirements and the State plan as in effect on July 16, 1996, is as follows (see 45 CFR 233.20(a)(3)(xiii) and 45 CFR 233.20(a)(3)(ii)(F)):

Step One of the Income Test-Gross Income Limitation: The State determines if the family's gross income is less than 185 percent of the State's AFDC need standard, after applying appropriate disregards. ² If the family's gross income is more than 185 percent of the State's AFDC need standard, the child would have been ineligible for the program and, thus, is not eligible for title IV-E. If the family's gross income does not exceed 185 percent of the State's AFDC need standard, the State proceeds to the second step to continue the process of determining if a child is a needy child and would have been eligible for AFDC.

Step Two of the Income Test-Determination of Need: For this second step, the State compares the family's income, after applying further appropriate disregards, to 100 percent of the State's AFDC need standard, the same need standard used in step one. If the family's income is in excess of 100 percent of the State's need standard, the child would not have been eligible for AFDC and, thus, is not eligible for title IV-E. If the family's income does not exceed 100 percent of the need standard, the child would have met the AFDC income test for eligibility.

In addition to applying the two-step income test to determine if a child would have been considered a "needy child" under AFDC, the State must determine whether the child's family has resources under $10,000 in value, after appropriate disregards.³ Both the income and resources tests must be applied to the child and family in the removal home to determine initial eligibility for AFDC.

Redeterminations of title IV-E eligibility: Under AFDC, the two-step income test also applied to eligibility redeterminations. Since the 1980s, however, ACF has had policies in place that allow a State to use a slightly different process to redetermine a child's AFDC eligibility for the purpose of title IV-E. As stated in the Child Welfare Policy Manual at 8.4A #6, a State may choose to apply only the gross income limitation, which compares the child's income against 185 percent of the need standard. A State also may substitute a child's foster care need standard (formerly known as the "foster care payment rate") for the AFDC need standard when redetermining a child's eligibility. This policy remains in effect. Regardless of the income test the State applies, the $10,000 resources test also must be applied to redetermine a child's eligibility.

Under the AFDC foster care program, before the creation of title IV-E, a State used a child's foster care rate (referred to as the foster care need standard) as the need standard for redetermining the child's eligibility, rather than using the AFDC need standard. When AFDC was replaced by the Temporary Assistance for Needy Families (TANF) program in 1996, ACF issued policy (PIQ 96-01, Question #2) directing States to use the AFDC need standard for eligibility determinations, but did not explicitly prohibit the use of a child's foster care need standard for making redeterminations. Accordingly, States may use either the child's foster care need standard or the AFDC need standard for making redeterminations unless the Department issues a regulation that directs them otherwise.

¹ The two-step process has been in place since 1981. See the 1994 Green Book, 14th Edition, July 15, 1994, Section 10 for more details on the two-step process.

² The gross income limitation -the first step of the process- was increased from 150 percent to 185 percent of the need standard by the Deficit Reduction Act of 1984 (Public Law 98-369) and implemented through regulation at 45 CFR 233.20(a)(3)(xiii).

³ Public Law 106-169 increased the resource limit to $10,000. See the Child Welfare Policy Manual at 8.4A #15 for more information.

For initial eligibility determinations, the State must apply the former AFDC program''s two-step income test to establish whether a child would have been considered a "needy child" under the State''s title IV-A plan in effect on July 16, 1996. In addition to the income test, the State must apply a test of resources. Both the two-step income and resources tests must be applied, in accordance with 45 CFR 233.20. ¹

Prior to the passage of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, each State set its own AFDC need standard to use in determining eligibility for the program. The term "AFDC need standard" refers to the amount of money a State determined that a particular size family needed to subsist. For title IV-E purposes, the State''s need standard as of July 16, 1996, (disregarding any Section 1115(a) waivers that may have been in effect on that date) is the amount that provides the basis for both steps in the initial income test portion of the AFDC eligibility determination process.

The two-step income test to determine financial need under AFDC to be conducted in accord with Federal requirements and the State plan as in effect on July 16, 1996, is as follows (see 45 CFR 233.20(a)(3)(xiii) and 45 CFR 233.20(a)(3)(ii)(F)):

Step One of the Income Test-Gross Income Limitation: The State determines if the family''s gross income is less than 185 percent of the State''s AFDC need standard, after applying appropriate disregards. ² If the family''s gross income is more than 185 percent of the State''s AFDC need standard, the child would have been ineligible for the program and, thus, is not eligible for title IV-E. If the family''s gross income does not exceed 185 percent of the State''s AFDC need standard, the State proceeds to the second step to continue the process of determining if a child is a needy child and would have been eligible for AFDC.

Step Two of the Income Test-Determination of Need: For this second step, the State compares the family''s income, after applying further appropriate disregards, to 100 percent of the State''s AFDC need standard, the same need standard used in step one. If the family''s income is in excess of 100 percent of the State''s need standard, the child would not have been eligible for AFDC and, thus, is not eligible for title IV-E. If the family''s income does not exceed 100 percent of the need standard, the child would have met the AFDC income test for eligibility.

In addition to applying the two-step income test to determine if a child would have been considered a "needy child" under AFDC, the State must determine whether the child''s family has resources under $10,000 in value, after appropriate disregards.³ Both the income and resources tests must be applied to the child and family in the removal home to determine initial eligibility for AFDC.

Redeterminations of title IV-E eligibility:

Under AFDC, the two-step income test also applied to eligibility redeterminations. Since the 1980s, however, ACF has had policies in place that allow a State to use a slightly different process to redetermine a child''s AFDC eligibility for the purpose of title IV-E. As stated in the Child Welfare Policy Manual at 8.4A #6, a State may choose to apply only the gross income limitation, which compares the child''s income against 185 percent of the need standard. A State also may substitute a child''s foster care need standard (formerly known as the "foster care payment rate") for the AFDC need standard when redetermining a child''s eligibility. This policy remains in effect. Regardless of the income test the State applies, the $10,000 resources test also must be applied to redetermine a child''s eligibility.

Under the AFDC foster care program, before the creation of title IV-E, a State used a child''s foster care rate (referred to as the foster care need standard) as the need standard for redetermining the child''s eligibility, rather than using the AFDC need standard. When AFDC was replaced by the Temporary Assistance for Needy Families (TANF) program in 1996, ACF issued policy (PIQ 96-01, Question #2) directing States to use the AFDC need standard for eligibility determinations, but did not explicitly prohibit the use of a child''s foster care need standard for making redeterminations. Accordingly, States may use either the child''s foster care need standard or the AFDC need standard for making redeterminations unless the Department issues a regulation that directs them otherwise.

¹ The two-step process has been in place since 1981. See the 1994 Green Book, 14th Edition, July 15, 1994, Section 10 for more details on the two-step process.

² The gross income limitation -the first step of the process- was increased from 150 percent to 185 percent of the need standard by the Deficit Reduction Act of 1984 (Public Law 98-369) and implemented through regulation at 45 CFR 233.20(a)(3)(xiii).

³ Public Law 106-169 increased the resource limit to $10,000. See the Child Welfare Policy Manual at 8.4A #15 for more information.

For initial eligibility determinations, the State must apply the former AFDC program?s two-step income test to establish whether a child would have been considered a "needy child" under the State?s title IV-A plan in effect on July 16, 1996. In addition to the income test, the State must apply a test of resources. Both the two-step income and resources tests must be applied, in accordance with 45 CFR 233.20. ¹

Prior to the passage of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, each State set its own AFDC need standard to use in determining eligibility for the program. The term ?AFDC need standard? refers to the amount of money a State determined that a particular size family needed to subsist. For title IV-E purposes, the State?s need standard as of July 16, 1996, (disregarding any Section 1115(a) waivers that may have been in effect on that date) is the amount that provides the basis for both steps in the initial income test portion of the AFDC eligibility determination process.

The two-step income test to determine financial need under AFDC to be conducted in accord with Federal requirements and the State plan as in effect on July 16, 1996, is as follows (see 45 CFR 233.20(a)(3)(xiii) and 45 CFR 233.20(a)(3)(ii)(F)):

Step One of the Income Test?Gross Income Limitation: The State determines if the family''s gross income is less than 185 percent of the State''s AFDC need standard, after applying appropriate disregards. ² If the family''s gross income is more than 185 percent of the State''s AFDC need standard, the child would have been ineligible for the program and, thus, is not eligible for title IV-E. If the family''s gross income does not exceed 185 percent of the State''s AFDC need standard, the State proceeds to the second step to continue the process of determining if a child is a needy child and would have been eligible for AFDC.

Step Two of the Income Test?Determination of Need: For this second step, the State compares the family''s income, after applying further appropriate disregards, to 100 percent of the State''s AFDC need standard, the same need standard used in step one. If the family''s income is in excess of 100 percent of the State''s need standard, the child would not have been eligible for AFDC and, thus, is not eligible for title IV-E. If the family''s income does not exceed 100 percent of the need standard, the child would have met the AFDC income test for eligibility.

In addition to applying the two-step income test to determine if a child would have been considered a "needy child" under AFDC, the State must determine whether the child?s family has resources under $10,000 in value, after appropriate disregards.³ Both the income and resources tests must be applied to the child and family in the removal home to determine initial eligibility for AFDC.

Redeterminations of title IV-E eligibility:

Under AFDC, the two-step income test also applied to eligibility redeterminations. Since the 1980s, however, ACF has had policies in place that allow a State to use a slightly different process to redetermine a child''s AFDC eligibility for the purpose of title IV-E. As stated in the Child Welfare Policy Manual at 8.4A #6, a State may choose to apply only the gross income limitation, which compares the child''s income against 185 percent of the need standard. A State also may substitute a child?s foster care need standard (formerly known as the "foster care payment rate") for the AFDC need standard when redetermining a child''s eligibility. This policy remains in effect. Regardless of the income test the State applies, the $10,000 resources test also must be applied to redetermine a child''s eligibility.

Under the AFDC foster care program, before the creation of title IV-E, a State used a child?s foster care rate (referred to as the foster care need standard) as the need standard for redetermining the child''s eligibility, rather than using the AFDC need standard. When AFDC was replaced by the Temporary Assistance for Needy Families (TANF) program in 1996, ACF issued policy (PIQ 96-01, Question #2) directing States to use the AFDC need standard for eligibility determinations, but did not explicitly prohibit the use of a child''s foster care need standard for making redeterminations. Accordingly, States may use either the child''s foster care need standard or the AFDC need standard for making redeterminations unless the Department issues a regulation that directs them otherwise.

¹The two-step process has been in place since 1981. See the 1994 Green Book, 14th Edition, July 15, 1994, Section 10 for more details on the two-step process.

²The gross income limitation?the first step of the process?was increased from 150 percent to 185 percent of the need standard by the Deficit Reduction Act of 1984 (Public Law 98-369) and implemented through regulation at 45 CFR 233.20(a)(3)(xiii).

³Public Law 106-169 increased the resource limit to $10,000. See the Child Welfare Policy Manual at 8.4A #15 for more information.

For initial eligibility determinations, the State must apply the former AFDC program?s two-step income test to establish whether a child would have been considered a "needy child" under the State?s title IV-A plan in effect on July 16, 1996. In addition to the income test, the State must apply a test of resources. Both the two-step income and resources tests must be applied, in accordance with 45 CFR 233.20. ¹

Prior to the passage of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, each State set its own AFDC need standard to use in determining eligibility for the program. The term ?AFDC need standard? refers to the amount of money a State determined that a particular size family needed to subsist. For title IV-E purposes, the State?s need standard as of July 16, 1996, (disregarding any Section 1115(a) waivers that may have been in effect on that date) is the amount that provides the basis for both steps in the initial income test portion of the AFDC eligibility determination process.

The two-step income test to determine financial need under AFDC to be conducted in accord with Federal requirements and the State plan as in effect on July 16, 1996, is as follows (see 45 CFR 233.20(a)(3)(xiii) and 45 CFR 233.20(a)(3)(ii)(F)):

Step One of the Income Test?Gross Income Limitation: The State determines if the family''s gross income is less than 185 percent of the State''s AFDC need standard, after applying appropriate disregards. If the family''s gross income is more than 185 percent of the State''s AFDC need standard, the child would have been ineligible for the program and, thus, is not eligible for title IV-E. If the family''s gross income does not exceed 185 percent of the State''s AFDC need standard, the State proceeds to the second step to continue the process of determining if a child is a needy child and would have been eligible for AFDC.

Step Two of the Income Test?Determination of Need: For this second step, the State compares the family''s income, after applying further appropriate disregards, to 100 percent of the State''s AFDC need standard, the same need standard used in step one. If the family''s income is in excess of 100 percent of the State''s need standard, the child would not have been eligible for AFDC and, thus, is not eligible for title IV-E. If the family''s income does not exceed 100 percent of the need standard, the child would have met the AFDC income test for eligibility.

For initial eligibility determinations, the State must apply the former AFDC program?s two-step income test to establish whether a child would have been considered a "needy child" under the State?s title IV-A plan in effect on July 16, 1996. In addition to the income test, the State must apply a test of resources. Both the two-step income and resources tests must be applied, in accordance with 45 CFR 233.20. ¹

Prior to the passage of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, each State set its own AFDC need standard to use in determining eligibility for the program. The term ?AFDC need standard? refers to the amount of money a State determined that a particular size family needed to subsist. For title IV-E purposes, the State?s need standard as of July 16, 1996, (disregarding any Section 1115(a) waivers that may have been in effect on that date) is the amount that provides the basis for both steps in the initial income test portion of the AFDC eligibility determination process.

The two-step income test to determine financial need under AFDC to be conducted in accord with Federal requirements and the State plan as in effect on July 16, 1996, is as follows (see 45 CFR 233.20(a)(3)(xiii) and 45 CFR 233.20(a)(3)(ii)(F)):