I see dozens of QDRO each year to settle marital property divisions. I have never seen one to pay child support, although it should be possible under the QDRO regs. Why not? Is there a legal impediment?

While permissible under the QDRO rules, the employee has to pay the income tax on the child's benefits under the assignment of interest rule.

MJB -

Have you or the others seen a QDRO used to meet obligations for child support from a DC plan against the account of a participant not otherwise in pay status?

I recently had a hardship request from an employee who said that garnishments for current and back child support had reduced his paycheck to an unsurvivable amount. I mentioned that he might be able to work with an attorney or friend-of-the-court to have a QDRO drafted against his plan assets to bring his support current -- but nothing came of it.

As often as I hear about the difficulty custodial parents and state agency have in collecting back child support and the number of garnishments to friend-of-the-court agencies our employees have, it seems like I would get a QDRO once in a while. Do you think it's just ignorance on the part of those responsible for collecting support money?

- Beth

For whatever it is worth, I have handled and approved a small number of QDROs attaching the PS accounts of participants not in pay status for child support. All were issued by domestic relations section of the local courts (operating as the state collection and disbursement unit). The plans involved all provided for distributions under a QDRO before the earliest retirement age.

Along the lines of this thread,how long can a PA restrict a Payees account to allow the AP to have their DRO amended in order to qualify? I'm working with someone whose account has been restricted since 2005 and the PA won't release it without an order from the court. Thoughts?

http://www.dol.gov/ebsa/Publications/qdros.html
See (for example) Q&As 2-10 to 2-12 and cross references in the footnotes.

mrstexas:

Because you are dealing with Fidelity and typically Fidelity does not know the law and does not care to follow the law, I am not going to offer a detailed suggestion. If you cannot get state court orders to say exactly what the 900 pound goriila wants, you may have to resort to forcing the 18 month period to run on a requirement for disposition following a decision on qualification of an order. Unfortunately, the way to make the 18 months run is to trigger a distribution, but most people don't understand that. Once you tirgger a distribution, I don't know if you can stop it. But maybe you can bull your way to forcing Fidelity to release restrictions based on the 18 month rule and the determination that the orginal order was not qualified. You should also see if you can enlist support from the Department of Labor. Unfortunately, the DOL has its own problems with understanding the law and has some blinding biases that are not favorable to your quest.

If QDROphile is correct that it's Fidelity in question, and if they are being reluctant to remove a hold that should otherwise have expired, then you're best immediate course of action is via the plan sponsor... ie, the company's benefits department. Provide a clear and polite written summary of the facts and law to the plan sponsor and request that they remove or instruct Fidelity to remove the account hold. In areas of ambiguity where they are otherwise reluctant to take action, Fidelity will nearly always defer to written instruction from a client. If the company tries to simply forward your letter to Fidelity then politely escalate w/in the company's benefits/HR structure.

Thank you. The 18 month period has well expired. The parties decided not to amend the DRO in order to qualify but Fidelity left the restriction and won't remove it.

Some plan fiduciary is responsible for QDRO administration, and may be the culprit unless FIdleity is refusing to follow instructions of the fiduciary. I think Fidleity has a service option that allows total outsourcing of QDRO administration, and that outsourcing should include appointment of a special fiduciary -- I don't know the relationship of the fiduciary to Fidelity. Masteff is correct that you need to get to the fiduciary who is responsible, otherwise Fidelity just hides behind its mechanical policies. No matter what the Fidelity policies, the appropriate fiduciary can instruct Fidelity to call off account restrictions. the plan sponsor is not necessarily the fiduciary, but it can identify the fiduciary.

Thanks for putting it in better words QDROphile... yep, I know someone who's basically outsourced the whole shootin' match to Fidelity, but the plan sponsor still has 2-3 people in-house w/ enough brains to address problems. One key thing a plan sponsor has is a backdoor into Fidelity leading directly to an dedicated customer service manager whose job it is to sort out this type of mess.

We are dealing with a plan that does not want to honor
FL-460 since they are claiming the participant/ex husband is not in pay status. Any case law or suggestions

There are two different types of child support orders which can be enforced against retirement benefits.

1. Under 42 USC 666(b) a state child support agency can issue an enforceable order against a retirement plan to require that back child support be paid to the state agency. The funds are a repayment to the state agency for amounts that the state agency paid to the custodial parent because of the failure of the employee to pay child support required under the divorce decree. The child support initially ordered by the divorce decree is not contingent on a retirement benefit being payable payable to the employee. Since this state agency order is authorized under federal law, the state order is not preempted by ERISA. However, the order is only enforceable against retirement benefits that are in pay status. Presumably the payments will be taxed to the participant. The failure of the plan to pay benefits to the child suport agency will result in liability of the employer to the child support agency of the amount of child support owed.

2. Under IRC 414(p) a state court can issue a DRO that a retirement plan pay funds from a participant's vested retirement benefits to a child who is an alternate payee. The DRO can be approved as a QDRO if the requirements of 414(p) are met. The funds can be paid to the custodial parent for the benefit of the child. The payments can be ordered even if the retirement benefits are not in pay status. Under the IRC payments to a child who is an alternate payee are taxed to the participant.

Q which type of payments are FL-460?

Thanks for your help. A Lump Sum payment. The Plan seems to be a misunderstanding and their interpretation of “payable” and how it should be interpreted in regards to a Qualified Domestic Relations Order. I spoke with The Department of Labor and according to the representative we spoke with, the plan should honor the judge’s order and pay out a lump sum for child support arrears as ordered on the Qualified Domestic Relations Order For child support if the plan can pay out the alternative payee’s portion per The Qualified Domestic Relations Order relating to the divorce. The DOL representative informed me that, “payable” on the FL-460 form should be interpreted by the plan as follows: If a former spouse/alternative payee can receive his or her share of the annuity fund prior to the participant retiring through the Qualified Domestic Relations Order relating to a divorce, the annuity is currently payable. And if the annuity is currently payable under The Qualified Domestic Relations Order relating to the divorce, the annuity is currently payable under the Qualified Domestic Relations Order For child support. The representative from the Department of Labor explained that under Federal laws, a Qualified Domestic relations order is in fact a judgment, decree or order pursuant to state law relating to child support, alimony, or marital property rights directing that all or part of a Participant’s benefit be paid to an Alternate Payee and if the plan were to state in their rules that the former spouse/alternative payee could not receive his or her share of the annuity fund prior to the participant retiring, the plan could then deny an early distribution of the annuity fund for child support arrears through the Qualified Domestic Relations Order for Child Support. But if the plan allows an alternative payee to make an early withdraw from the annuity plan by way of a Qualified Domestic Relations Order relating to a divorce, the same rule must apply for the Qualified Domestic Relations Order for Child Support.

Now the plans attorney sent a letter stating that the reason they cannot pay out the lump sum for child support but can pay for share from divorce is as folllows; (word for word)

The Plan does not allow for immediate distribution of funds when the QDRO is relating to child support. The reasoning for this is because child support is an ongoing obligation which the alternative payee cannot relinquich their rights, title or interest in the participants account. therefore, immediate distribution of community property benefits can be made and be consistent with the terms of the plan, unlike a QDRO for child support."

This has been a very tough battle to say the least. Now the attorney for the plan is suggesting we appeal the plans decision but the time has expired becasue it took the plan well over 14 days to respond to our letter pointing out the plans rules as well as the DOL's advice.

It seems that Federal law has made it pretty clear that a Qualified Domestic Relations Order can in fact be utilized for child support arrears and according to the Carpenters Annuity Trust Fund for Northern California’s own rules, “A QDRO is a judgment, decree or order pursuant to state law relating to child support, alimony, or marital property rights directing that all or part of a Participant’s benefit be paid to an Alternate Payee. A QDRO must meet the requirements of the Retirement Equity Act as set forth in 26 USC §414(p) and 29 USC §1056(d).
{Reference: ANNUITY PLAN SUMMARY PLAN DESCRIPTION Page 11 -Item 27.} http://www.cfao.org/

In the plan rules and regulations for Carpenters Annuity Trust Fund for Northern California, it is written that benefits can only be paid at retirement and or if one of the ten categories is met. Looking under item H in the Annuity plan Summary plan Description, it is written that a Qualified Domestic Relations Order falls under one of the categories.

When may I or my Beneficiaries receive the money from my Individual Account?

Because Defined Contribution Pension benefits can only be paid at retirement
or death, the money in your Individual Account may only be paid if one of the
following ten categories is met:

H. If You Have a Qualified Domestic Relations Order
If you are an Alternate Payee and have been awarded benefits under a
Qualified Domestic Relations Order, you may apply for your benefits as directed in that Qualified Domestic Relations Order.

{Reference: ANNUITY PLAN SUMMARY PLAN DESCRIPTION Page 2- Item 8.}

Please be advised that we will take all necessary actions to ensure that the judge’s order is carried out. The Carpenter Funds Administrative Office has no legal validation supporting their decision to disregard the court order/ Qualified Domestic Relations Order for Child Support that is currently in place? One of the three uses of a QDRO is ensuring payment of child support, with the other two being for alimony and division of marital property. (1) An "alternate payee," as used in the Code, is defined as a spouse, former spouse, or dependent. The SUMMARY PLAN DESCRIPTION defines a QDRO as 1 of 10 categories which allows the plan to pay out an early distribution of the annuity early and the plans own definition of a Qualified Domestic Relations Order includes child support? The Qualified Domestic Relations Order for Child Support is a Qualified Domestic Relations order and the judge’s order should be honored.

Pursuant to TITLE 29 > CHAPTER 18 > SUBCHAPTER I > Subtitle B > part 2 > § 1056. Form and payment of benefits
A retirement plan can be used to provide child support and alimony payments through the use of a QDRO. A QDRO is defined as a judgment, decree, or order which relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child or other dependent of a participant and is made pursuant to a State domestic relations law. 29 D.S.C. § 1056(d)(3)(B)(ii)(I)and (II), which is interpreted to mean that child support should have the same legal rights as marital property rights to a spouse and or former spouse.
On June 10, 2010, the U.S. Department of Labor ("DOL") announced the issuance of a final rule ("the Rule") which clarify certain timing issues with respect to domestic relations orders and qualified domestic relations order (QDRO) under section 206(d)(3) of ERISA. The Rule, which the DOL was required to issue in response to a specific directive contained in the Pension Protection Act of 2006, is effective on August 9, 2010.
Section 206(d)(3) of Title I of ERISA and the related provisions of section 414(p) of the Internal Revenue Code provide a limited exception to the prohibition against the assignment or alienation of pension benefits. The exception permits a plan participant's benefits to be assigned to an alternate payee pursuant to a QDRO. An alternate payee is defined as the participant's spouse, former spouse, child or other dependent(s) provided for in a QDRO.
In pertinent part, the Rule provides: Subsequent Domestic Relations Orders: The new Rule provides that a domestic relations order that otherwise meets the requirements to be a QDRO will not fail to be treated as a QDRO solely because the order is issued after, or revises another domestic relations order or QDRO.

As we will all agree, Qualified Domestic Relation Orders for Child Support are very complex. This is why we performed intensive research and relied on the plan as well as the Department of Labor for direction. We have spent countless hours which equate to thousands of dollars as well as various out of pocket expenses from the legal fees associated with the filing of the Qualified Domestic Relations Order for Child Support.


We have spoken to an attorney and he has suggested that we file an motion against the plan as well as seek sanctyions for the lost wages and attorney fees associated with the fl-460.


Any suggestions would help. I do not know if we should

A. file motion against the plan seeking judge to order that they pay out lump sum for past due child support and follow FL-460
B. Ammend the original QDRO for community property to include child support arrears
C. GIVE UP.


Please help if you have any suggestions. Thank you,

SOME OF THE ABOVE INFO HAS BEEN TAKEN FROM THE LETTER WE SENT THE PLAN AND THE PLANS ATTORNEY SO IT MAY SOUND A BIT STRANGE, BUT I THOUGHT IT WOULD HELP.