Collect Child Support, Maintenance, or Alimony with a QDRO

The collection of child support arrearages, as well as spousal alimony or maintenance arrearages, can occur by seizing and partitioning the paying party's retirement account. A Qualified Domestic Relations Order (QDRO) is a court order which has been filed with the court and determined by the Retirement Plan Administrator to be acceptable or “qualified” under certain federal ERISA rules. A QDRO recognizes the existence of an alternate payee (i.e., legally separated spouse, former spouse, domestic partner, child and/or other dependent) who has the right to receive benefits that are or will be payable to a member.

QDRO's are most commonly used in divorces to divide retirement assets. Essentially, the retirement account of one party is partitioned and a certain amount, or right to receive future payments, is set-off to the other party.

The use of QDRO's to collect other domestic relations judgments is often overlooked. Pursuant to federal law a retirement plan can be used to provide child support and alimony payments through the use of a QDRO.

In today's economy the use of QDRO's to collect child support or spousal maintenance/alimony payments is important. People are being laid off everyday and unemployment is high; however, individuals still may have some retirement assets or benefits from their former job. The retirement assets or benefits could be used to pay the debt owed.

Care must be used when using a QDRO because of the tax issues involved. The person receiving the assets via QDRO may have a taxable event when they liquidate the assets they receive. Imagine you receive retirement assets of $10,000 to satisfy a $10,000 child support debt, but after tax you only realize $7,000. There are ways to deal with this issue, including having the amount you receive 'grossed-up' to account for tax you have to pay, or have the child named as the alternate payee.

For more information regarding QDRO's see the Department of Labor FAQ's.

New Child Support Guidelines - Excessive Arrearages Are Not in Child's Best Interest

One of the more interesting additions to the child support guidelines, effective January 1, 2010, is the inclusion of language cautioning that high child support arrearages have the effect of 'chasing away' noncustodial parents from their children. Here is the language:

Attributing potential income that results in an unrealistic child support obligation may cause the accumulation of an excessive arrearage, and be contrary to the best interests of the child(ren). Research shows that on average more noncustodial parental involvement is associated with greater child educational attainment and lower juvenile delinquency. Ordering support for low-income parents at levels they can reasonably pay may improve noncustodial parent-child contact; and in turn, the outcomes for their children.

In other words, a noncustodial parent may be less likely to have contact with the child if he/she is harassed to pay back a large child support arrearage. The counter-argument is that the noncustodial parent made his/her own bed when he/she failed to pay support and now they must lie in it. By including this language the Supreme Court is not favoring custodial or noncustodial parents, but rather the children involved.

There remains plenty of opportunity for either a custodial or noncustodial parent to argue their own position with support from the guidelines and other applicable law; however, it is clear that the Supreme Court wants attorneys, judges and parents to be cognizant of the concern that high arrearages may, for whatever reason, have the effect of chilling the parent-child relationship, and this is not in the child's best interest.

For more on the policy concerns behind excessive child support arrearages click here.

"All Things Family Law" featured in the Fort Wayne Gazette

Click here for article.