paying child support from PS plan

[Santo Gold]

The sponsor of a small PS plan received a letter and forms from the state's child support enforcement office, requesting that a portion of any compensation paid to the employee be paid to the agency for child support. The letter and follow up conversations indicate that a portion of any payments from the PS plan should also be sent to the child support agency.

The employee has now terminated employment and wants to take his money. He is aware of the above situation and is OK with receiving an amount less than what has been determined must go for child support. He wants to take a cash distribution. Would he be taxed on the child support portion? If not, who would get the 1099-R?

Thanks

[Guest b2kates]

yes,child support is a parental obligation. it is not deductible alimony. the entire amount should be on the 1099-r of the participant.

[QDROphile]

Unless the participant directs the plan to pay a portion of a distribution to the participant instead to someone else, the plan should not do so unless the payment is pursuant to a qualified domestic relations order. The entire distribution is treated as a distribution to the participant. The plan administrator should not suggest that the particpant provide such a direction, and it is questionable policy for a plan to send distribution amounts to others at the direction of the particpant, even as a courtesy.

[Guest mjb]

Q: Payment of pension benefits in pay status to a child support enforcement agency is required under 42 USC 666(b). Each state is required under the Social Security law to establish child support enforcement agencies who have been given the authority under state law to collect back child support from the plan, not the employee. See 42 USC 666(b)(8). Since the Social Security law is a federal law it is not preempted by ERISA. Under DOL opinions the child support enforcement orders must generally meet the requirements for QDROS except that they are not required to be signed by a judge.

[QDROphile]

Who suggested that signature by a judge is a requirement for a QDRO?

Your refinement about child support collections law is well taken. However, the plan has to be careful to act properly in accordance with the requirements, and my experience is that the agencies are terribly sloppy in their communication. Add to that the federal law that is also terribly sloppy (for example, the law refers almost exclusively to employers and incorrectly presumes that the employer is providing retirement benefit payments) and the state law that is probably even worse, and my conlusion is that the plan has to be careful in its interpretation of what is required. I have looked at the collection law as a domestic relations law and applied the QDRO requirements accordingly, including not reading into the law (ERISA) a requirement for signature by a judge (or even a court document) when no such requirement was ever there in the first place.

[Guest b2kates]

QDROphile, I am confused by your assertion that a QDRO does not require a judges signature. Other than the domestic relations office, which is authorized to issue QDROs under state law, how would an order be valid if not executed by a judge- even if it is just a consent decree.

[QDROphile]

Nowhere in 414(p) (1)(B) do you see the words "court" or "judge". The words "judgment" and "decree" certainly imply a court proceeding, but many agencies issue "orders" and no court is involved. It depends on what the state "domestic relations law" encompasses and permits. To me, child support is in the general category of domestic relations. The DOL has issued an advisory opinion about agency orders as domestic relations orders, specifically to point out that the term is not limited to court proceedings.

[Guest mjb]

I dont know of any state that allows divorces/property settlements to be granted by state agencies. I have never seen a divorce decree that was not signed or approved by a judge since divorce is a civil cause of action for a law suit. Property settlement are either approved by the court or incorporated as part of the divorce decree after agreement by the parties. Plans do not accept DROS that are not signed by a judge or incorporated as a property settlement approved by a court of competent jurisdiction. Prior to the enactment of 42 UCS 666 there was no authority under 414p for a state agency to seize pension benefits as reimbursement for child support provided by the state because such a seizure would be an impermissible alienation of benefits under ERISA. 42 USC 666 provides for an expedited and inexpensive means to collect back child support for any source of income of the employee including unemployment and disability benefits without the need for court proceedings. The DOL opinion included the reference to child support orders not having to be signed by a judge to make it clear that the state agency did not need to get a court order before ordering the seizure of pension benefits in payout.

[GBurns]

Isn't a divorce decree and divorce property settlement different and separate items from a DRO ?

[Guest QDRO crazy]

Nowhere in 414(p) (1)(B) do you see the words "court" or "judge". The words "judgment" and "decree" certainly imply a court proceeding, but many agencies issue "orders" and no court is involved. It depends on what the state "domestic relations law" encompassþes and permits. To me, child support is in the general category of domestic relations. The DOL has issued an advisory opinion about agency orders as domestic relations orders, specifically to point out that the term is not limited to court proceedings.

Hello, I am very frustrated with the current situation we are in. Plan has provided information on QDRO'S and we followed them. Once judge signed FL-460 for support and we sent it off to the plan, they now state that since the participant is not retired, we cannot collect for back child support. Even though in the plans rules and guidelines it states that an annuity can be withdrawn early for 10 reasons and one is a QDRO. Why is the plan acting as if the QDRO for support is a wage assignment order? This is for my wife and what we did was: separate her portion of her ex husbands annuity and pension plan by way of two separate QDRO'S. Once the judge ordered the ex to sign and notarize those two QDRO'S, we submitted a FL-460 QDRO for support. The judge signed off, we sent all three into the plan asking that they follow the judges orders and they did for the pension and annuity for the marriage, but sent a letter stating that the benefits are not payable for the QDRO for support and advised us that they would put a lien on the funds until they become payable. It seems that since the ex owes more than what is in the annuity, and the judge signed off on the QDRO, and in their rules it states that an early distribution can be done by way of QDRO- it seems that they should turn over the annuity as a lump sum per the signed QDRO. Any help would be appreciated.