Countless parents struggle with uncooperative former spouses over child support. Many custodial parents do not know that a QDRO can be used to collect delinquent child support.
According to ERISA § 206(d)(3)(K), and IRC § 414(p)(8), “a domestic relations order can be a QDRO only if it creates or recognizes the existence of an alternate payee’s right to receive, or assigns to an alternate payee the right to receive, all or a part of a participant’s benefits. For purposes of the QDRO provisions, an alternate payee cannot be anyone other than a spouse, former spouse, child, or other dependent of a participant.”
When a client is not paying court-ordered support or is in arrears, the pension or retirement account can be a viable source for funds.
Retirement plans are marital assets and subject to division and distribution in a divorce, but even many veteran attorneys do not understand that retirement plans can be tapped to pay child support.
The Employee Retirement Income Security Act (ERISA) provides that qualified domestic relations orders (QDROs) can be used for one of three purposes: 1) to divide a pension to provide property rights to a spouse or former spouse; 2) to provide child support to a spouse, former spouse, child, or other dependent of a participant and 3) to provide maintenance to a spouse or former spouse of a participant. These three provisions apply to qualified defined benefit and defined contribution plans. Child support QDROs can be attached to any ERISA-governed retirement program, such as a 401(k) plan or pension plan. Child support QDROs do not apply to non-ERISA qualified plans, such as Individual Retirement Accounts (IRAs).
Attorneys and their clients should not overlook retirement funds even if the participant is too young to be eligible to retire. Even when the supporting parent has lost his or her job, retirement funds can be used to make support payments. This applies to both 401(k) plans and traditional pension plans.
QDROs may be used to enforce child support when the properly crafted domestic relations order “relates to the provision of child support, alimony payments, or marital property rights to a spouse, child, or other dependent of a participant, and – is made pursuant to a State domestic relations law (including a community property law).”
An obligor sometimes prefers that current child support be made from his or her retirement plan as opposed to his or her income, which frees income for daily living expenses.
Obtaining a child support QDRO is not difficult. The child support QDRO requires that a court order or judgment must exist setting forth the amount that should be paid. The QDRO is then signed by the judge and approved by the plan administrator.
