No One Can Touch My Retirement for Child Support or Alimony, Right?

Statement: No one can touch a retirement plan with a judgment.

Response: That is not true.

Many times, in our practice, we will hear clients and attorneys mistakenly state that if funds are in a “retirement plan” no one can touch them – not creditors, not their former spouse, no one.  This is an incorrect statement.

Statement:  A QDRO is always needed to access a retirement plan for funds for the non-plan spouse or another person.

Response: That is not true.

Many people will also mistakenly state that a Qualified Domestic Relations Order or QDRO is needed to access or split retirement plans but this is not always true.   To start analyzing all of this, the question becomes, “Are all retirement plans equal?

Statement:  All retirement plans are subject to QDROs under the law.

Response: That is not true.

All retirement plans are not equal.  There are different types and different rules for the types of plans.  For instance, the QDRO or Qualified Domestic Relations Order is a creature of the ERISA statutes.  ERISA is the Employee Retirement Income Security Act. It was passed in 1974 and covers plans such as 401(k) plans, profit-sharing, and deferred compensation plans set up by employers (as well as some types of health plans like HRA accounts and flex spending plans or disability and life plans (to some extent) but NOT plans set up by any governmental entity or church.

ERISA also does not cover “Individual” plans such as individual IRA plans or Simplified Employee Pension (SEP). (Note: “Simple” IRA. plans may be employer-sponsored plans protected under ERISA.)  IRA plans may be protected (to “some” extent) from creditors in a bankruptcy situation – depending upon state law.  The types of accounts that do come from and follow the requirements of ERISA are protected from being attached by creditors and are safe from bankruptcy.

What about alimony or child support if we have an ERISA-protected account?

ERISA law permits the use of ERISA protected funds to satisfy a judgment for back due Alimony or Child Support. Such a judgment, related to family obligations, may require a QDRO to issue against retirement funds and may permit those funds to be removed presently to satisfy the debt owed (instead of having the funds become available only when the wage earner for the retirement fund reaches retirement age).

What about alimony and child support if we have a non-ERISA individual IRA?

As noted above, if the issue is “bankruptcy” then there is some federal protection but that is only up to a certain amount.  Lawsuits do not equal bankruptcy though and therefore individual IRAs are not protected from judgments from lawsuits.

What about state law?

We think the answer is in Ohio’s exemption statute – O.R.C. Section 2329.66.  Subsection (A)(10)(c) deals with IRA accounts and lists exceptions from title 31 which seem to us to deal with child support.

Summary:

1. Not all retirement accounts are protected from lawsuits and attachments by creditors.
2. In relation to family support issues, even with ERISA-protected retirement accounts, money may be taken from the account to satisfy family child support and spousal support obligations which have been reduced to a judgment.
3. If you are concerned with whether your retirement accounts are protected, you should consult with a knowledgeable attorney.
4. If you are due back support for child support or spousal support, you may be able to collect that from the retirement account(s) of the person who was ordered to pay the support.