Qualified Domestic Relations Orders:
A Much Overlooked Tool for Collecting Your Past-Due Child Support

• Are you owed child support?
  
• Does the non-custodial parent have a pension or retirement account?
  
• If so, a Qualified Domestic Relations Order may be your solution.

A Qualified Domestic Relations Order ("QDRO") is a special order that is signed by a judge and submitted to a retirement plan administrator to allow an "alternate payee" (someone other than the non-custodial parent) to receive payments directly from the non-custodial parent's pension or retirement account. QDROs are usually done involuntarily to collect money from a parent who refuses to pay. However, QDROs can be done voluntarily as well. Of course, it is much faster and easier with the non-custodial parent's cooperation.

To begin this process, it is important to find out whether QDROs were already prepared at the time of divorce. Property held in pensions and retirement accounts cannot be divided until a QDRO has been done, even if it is ordered in a divorce decree. However, many lawyers are unfamiliar with their use, so it is not unusual that an attorney handling a divorce action has not prepared and submitted a QDRO to the plan administrator. If the retirement plan has not been divided in accordance with the divorce decree, the result of a child support QDRO would be that the support is paid, in part, from funds that should belong to the custodial parent already!

It is also important to determine if the plan is one that is not subject to the Employee Retirement Income Security Act of 1974 (ERISA) - many retirement plans for government employees fall into this category. These plans cannot be divided using a QDRO at all and may have alternative procedures for dividing the plan proceeds to allow an alternate payee to receive payments.

There are two broad types of retirement plans - defined benefit plans and defined contribution plans. Defined benefit plans are usually funded solely by the non-custodial parent's employer, and will usually pay a pre-determined monthly payment to the non-custodial parent at the time of retirement. Such plans often have the words "pension," "benefit" or "annuity" in the plan name, although the name of any plan cannot be used reliably to determine what type of plan it is. When a QDRO is done for a defined benefit plan, an alternate payee will generally be able receive funds only in monthly installments rather than a lump sum, and usually cannot receive any payments at all until the non-custodial parent retires or reaches retirement age.

Defined contribution plans are usually funded by an employee from deposits made directly from a paycheck. Some employers also contribute funds. The name of a defined contribution plan may have the terms "401k," "savings," "investment" or "contribution" in it. When a QDRO is done for a defined contribution plan, an alternate payee can usually receive the funds prior to the non-custodial parent's retirement and can usually receive them in a lump sum.

The first step in the QDRO process is to contact the plan administrator for information about the plan. Don't be surprised if the plan administrator is reluctant to release information - a few will even go out of their way to make the QDRO process difficult and time-consuming - but since fulfillment of the QDRO ultimately depends upon their cooperation, it is worth going out of your way to keep the relationship on good terms. Request a plan summary and a model QDRO, if they have one, and try to determine how long the participant has participated in the plan - this provides a clue as to whether there are sufficient funds to pay the child support since generally plan administrators will not reveal the amount in the retirement fund.

The next step in the QDRO process is called a "fly letter" - an initial draft of the QDRO is prepared and sent to the plan administrator to see whether the QDRO will "fly," i.e., whether it is qualified under the plan. It is important to get a response from the plan administrator in writing, confirming the QDRO is qualified and will be honored once it is signed by a judge. This helps prevent any last-minute changes of mind on the part of the plan administrator after the QDRO has been signed by the judge.

The next step is to submit the QDRO to the judge for signature in the jurisdiction of the child support order. If the non-custodial parent is in a different state, an alternative procedure is to register the child support order for enforcement in the non-custodial parent's state and submit it to the judge in that jurisdiction instead. The process of obtaining the judge's signature will usually require a hearing, and the non-custodial parent must be served with notice of the action.

After the QDRO is signed by the judge, it is submitted to the plan administrator. However, just because the QDRO is signed by a judge does not mean the retirement plan administrator must honor it. That is why developing a good working relationship with the plan administrator is essential for effectively completing the QDRO process. The plan administrator reviews the QDRO to make sure it is "qualified" according to the standards of the retirement plan, and a separate board or committee will generally review the QDRO as well. If they determine the QDRO is qualified, the retirement account will be divided according to the amount awarded by the judge.

An important point to remember is that funds taken from a retirement account are always taxable as income to someone, and the taxes will usually be withheld by the plan administrator. Since child support is not taxable as income to the custodial parent, the non-custodial parent should only receive credit for the amount of the payment after taxes have been withheld. If the retirement account is large enough to cover the entire arrearage balance, it is better to obtain a QDRO for 20% more than the actual arrearage balance, which will allow the full amount of the arrearage to paid after taxes.

Collecting child support with a QDRO is neither a simple nor a fast process, and it could take more than a year to complete. How complex and difficult the process will be depends upon the rules and policies of the retirement plan, the relationship with the plan administrator, state child support collection laws, the efficiency of the local court system, and the level of knowledge and familiarity with QDROs of the attorneys and judges involved. Hiring a private child support enforcement agency or attorney familiar with the process can be a definite advantage. If the technical requirements are observed and the pitfalls of the process are avoided, a QDRO can be a very effective collection tool.

Return to the Top