It had been 10 years since her ex-husband had last made a court-mandated child-support payment for their four children. After numerous judicial procedures failed to collect the $160,000 he owed her, this woman tried a little-known but powerful legal alternative that worked. She used a Qualified Domestic Relations Order (QDRO) to tap her former husband's 401(k) plan.
QDROs are obscure legal documents commonly used to help a former spouse get his or her fair share of a retirement account accumulated during the marriage. However, "very few of the nation's attorneys know that a QDRO can also be used to access retirement accounts to pay child-support arrearages," says Tim Voit, president of Voit Econometrics Group, an economics consultant in Naples, Fla.
That's unfortunate, since about half of all annual child support goes unpaid. Only $13 billion, or 56%, of the $23 billion due was collected for fiscal year 2000, according to the National Child Support Enforcement Assn. in Washington, D.C. In such cases, it's typically the wife who suffers.
To obtain a child-support QDRO, your attorney or state child-support agency must first determine what kind of retirement benefits your ex-spouse is entitled to from current and former employers. Once you have identified the 401(k) or pension plans, contact the plan administrators to request copies of their written QDRO procedures. You also should ask for information on the amount due to your ex and the earliest date funds may be withdrawn from the plan. The federal Employee Retirement Income Security Act requires plans to provide all this information as soon as they are notified that a child-support action has begun. Next, call your state child-support agency to obtain a detailed list of delinquent payments as of a specific date.
Using all of this information, have an attorney who specializes in QDROs draft the order, then submit it to the divorce court and the plan administrator for approval. Finally, says Voit, "be sure you send the final, court-approved QDRO to the plan, or else you won't get paid."
Usually, it takes about three months for payments to begin. "They will continue uninterrupted even if the noncustodial parent changes jobs, becomes unemployed or disabled, runs away, or even dies," says David Clayton Carrad, a lawyer and president of QDRO Solutions, an Augusta (Ga.) consultant to state child-support enforcement agencies. The money will be taxed at the capital-gains rate of 20%, but often the plan participant will be required to pay rather than the recipient.
Using a QDRO to secure child support has many advantages. Most important, you can get access to the money long before your delinquent ex-spouse retires. In many cases, "pension plans provide early-payment options, which means that they may be tapped for child support immediately," says Carrad, "whether the participant retires or continues to work." A QDRO also gets funds at their source, unlike other legal remedies that encourage child-support payments via threats of penalties, such as jail time or revocation of a driver's license. Once a pension plan has accepted a QDRO, it disburses payments directly to you or the child-support agency. Your ex-spouse loses all control over the funds. You can obtain a QDRO against retirement-benefit plans anywhere in the country, and the order can be modified to increase or decrease payments if the child-support arrearages have risen or been paid.
QDROs, which cost about $500 to make up, do have drawbacks. Since every pension plan is different, each QDRO must be custom-tailored to meet the plan's requirements. QDROs are also more complicated and difficult to draft than other child-support enforcement remedies, such as wage attachments. Finally, a QDRO only covers private employers' retirement plans. You must follow separate procedures to collect child support from individual retirement accounts or from government or military plans.
Retirement accounts are the foundation of an average household's wealth. So, if you have a former spouse who is shirking child support obligations, it pays to go after this source of funds.
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By Toddi Gutner