I received a call today asking if an employees 401(k) account could be garnished for child support or back child support? Any insight would be great. Thanks!

I don't know this answer for sure, but I do know that employee benefits cannot be garnished. If the 401(k) is an employee benefit, it cannot be garnished. Also, the code clearly states that 401(a) plans [401(k) plans are first 401(a) plans] are for the sole use of the employee and beneficiaries. Hopefully someone else knows positively...

Generally, any court action which seeks to direct payment from the plan to someone other than the participant requires a Qualified Domestic Relations Order (QDRO).

Note however, that plans sponsored by governmental units will usually be covered by different requirements.

if it is a qualified plan subject to ERISA, it can be garnished by the appropriate issuance of a QDRO by the local domestic relations court.

However, the QDRO can not force a distribution if the participant is not permitted a distribution.

A plan may provide that an alternate payee under a QDRO can receive a payment earlier than when a participant is eligible to receive a distribution. A defined contribution plan will often contain such a provision.

Under ERISA 206(d(3)(k) a QDRO can be enforced against both employees and retirees to provide income for children who are alternate payees. A QDRO can provide for payment to the custodial parent as the guardian of a dependent child. The plan may permit payment to an alternate payee before the employee is elgible to receive benefits. Under IRC 414(p) a qdro can be enforced against state employers who consent to such orders. Also, retirement benefits in pay status can be garnished under state laws enacted under Section 466 of the Social Security Act to enforce child support orders. States are required to enact such legislation to avoid losing federal aid for dependent children. Under Dol opinion 2001-06A, notices of withholding issued by a state agency that administers the child support enforcement program are enforceable as QDROS provided that the notice of withholding meets all of the requirements for a QDRO under ERISA other than the requirement for a court order.

Thank you all for your insight - mjb that is exactly what I was looking for. I appreciate your help in this matter.

What about a child support order that names a state agency as the payee? An agency would not seem to qualify as an alternate payee under the Code, right?

Should the plan require that the parent be named the payee?

A state agency can be designated as the party to whom child support payments can made even though it is not an alternate payee for child support under a QDRO, since the agency acts as the agent for the child in collecting and paying child support. See Dol Opinion Letter 2002-03A.

Thanks for the cite, but I haven't been able to locate the ruling. The Lexis and Westlaw reps said it's not in their databases yet, and I haven't found it on the DOL site or elsewhere on the internet. Have you seen it on the internet, or do you know where else I might obtain a copy?

Thanks.

Article on ruling appears in RIA Pension and Benefits week of July 29, P 4.