A Qualified Domestic Relations Order (QDRO) is a legal order issued by a court that provides for the division and distribution of retirement assets in a divorce or separation case.
While QDROs are primarily used to deal with the division of retirement benefits, they can also be used to collect unpaid child support – or make paying child support easier.
How is this possible?
A QDRO creates an alternative payee’s right to receive some part of a retirement plan participant’s benefits. Both IRC § 414(p)(8) and ERISA § 206(d)(3)(K), indicate that the alternative payee can be the plan participant’s child or other dependent.
That creates an avenue for the recipient parent to access those funds if the paying parent falls behind in their support or simply refuses to pay. A court order is generally required to set the amount that needs to be paid, and the QDRO must be authorized by the family court judge and then approved by the plan’s administrator.
In some cases, the paying parent may actually prefer that a QDRO be used to pay the child support from their pension. Here’s why:
- It creates structured payments: By using a QDRO, the paying parent can make certain that the child support payments are made through a structured and regulated process, rather than relying on direct payments.
- It allows for automatic record-keeping: This method can provide a clear record of payment and help avoid disputes or allegations of non-payment of support that could prove problematic later.
- It can help protect other assets: Instead of having to liquidate non-retirement assets or face other financial hardships to meet child support obligations, the paying spouse can utilize the retirement assets specifically allocated for child support. This way, they can maintain other assets or savings for their own future needs.
In other words, this can be an advantage to the paying spouse if they’re worried about a career situation that’s in flux or they’re concerned about not having enough liquid assets on hand for their current goals or lifestyle needs.
It’s essential to seek experienced legal and financial guidance to understand the specific laws and procedures related to QDROs and child support enforcement in your jurisdiction, as well as the pros and cons of this approach. Personalized guidance based on your circumstances can help to protect your interests.