Normally the alternate payee is the participant’s spouse or former spouse, but when the QDRO is for delinquent child support, it is a good idea to name the child as the alternate payee, rather than the former spouse. Most plan administrators will accept either the spouse or the child, but if the child is named as the alternate payee, the participant pays taxes on the distribution. Child support payments, prompt or late, are not considered a deductible expense. Under normal circumstances, child support payments are nontaxable to the custodial parent who receives them. For example, if ex-wife Abigail owes $1,000 of delinquent child support payments to ex-husband Bill, Bill pays no taxes on those amounts when received. Rather, if the QDRO is prepared correctly, amounts taken from Abigail’s retirement plan and distributed to Bill would be taxable to her. The plan’s administrator provides Abigail with a Form 1099-R at the end of the year and reports the distribution to the IRS.

Normally, the retirement plan administrator withholds 10 percent of the distribution amount for federal tax withholding. The lawyer drafting the QDRO may need to have the QDRO account for that 10 percent reduction so the custodial parent receives the full amount of child support ordered. That is, the QDRO should be drafted to request 10 percent more than is actually owed (for example, if $900 is owed in delinquent child support, the QDRO should request a distribution of $1,000 so that, after the 10 percent withholding is done, the total distribution is $900).

However, many retirement plan administrators are not even aware of, and therefore do not even adhere to, the 10 percent withholding requirement.

If the QDRO relates to maintenance payments, distributions are taxable to the recipient. Thus, a QDRO should be drafted to disburse only the actual maintenance owed to the recipient.


Unfortunately, any distribution from a qualified retirement plan to an individual that is made before the individual attains age 59½ is subject to a 10 percent tax penalty as an early withdrawal. However, this penalty does not apply if the distribution is: (a) properly rolled over into an IRA or another qualified retirement plan; (b) made following employment termination and the individual has attained age 55; (c) made as a loan to the individual; or (d) made pursuant to a QDRO.

No QDRO can mandate any distribution unless the retirement plan itself provides for one. Defined contribution plans are more likely to allow for immediate distributions than are defined benefit plans. That is, many defined benefit plans do not allow a participant (or an alternate payee) to begin receiving distributions of any kind until normal retirement age, as defined under the plan (normally ages 62 to 65).

Retirement funds are usually overlooked as a method of making support payments. A QDRO can be the best possible solution. If either party participates in any retirement programs, this can be a lifeline that eliminates years of struggle and expense.