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UNUSUAL USES OF QDROS: USING THE QDRO TO COLLECT CHILD SUPPORT AND SPOUSAL MAINTENANCE

JOHN T. ECK LAW OFFICES OF ROBERT T. STITES, P.C. 933 West Weatherford Street Fort Worth, Texas 76102 (817) 336-7577 Facsimile (817) 336-7583

25TH ANNUAL MARRIAGE DISSOLUTION INSTITUTE May 9-10, 2002 Austin, Texas

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JOHN T. ECK LAW OFFICES OF ROBERT T. STITES, P.C. 933 West Weatherford Street Fort Worth, Texas 76102 (817) 336-7577 Facsimile (817) 336-7583

EDUCATION University of Oklahoma College of Law, Norman, Oklahoma Doctor of Jurisprudence, 1994 Southern Methodist University, Dallas, Texas Bachelor of Science, Economics, 1991 Bachelor of Arts, Political Science with Departmental Distinction, 1991 PROFESSIONAL LICENSES State of Texas, 1995 Northern District of Texas, 1997 Fifth Circuit Court of Appeals, 1999 MEMBERSHIPS AND APPOINTMENTS State Bar of Texas Tarrant County Bar Association Tarrant County Family Law Bar Association Fort Worth-Tarrant County Young Lawyers Association College of the State Bar of Texas Advisory Committee for the 233rd District Court Managing Editor, American Indian Law Review CLE ACTIVITIES AND PUBLICATIONS

Eliminating Indian Stereotypes From American Society: Causes and Legal and Societal Solutions (co-authored with Kim Chandler Johnson), American Indian Law Review, Volume 20:1, p.65 (1995-96). Alternative Enforcement Remedies, Texas Association of Domestic Relations Offices, 15th Annual Conference, October 1999.

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TABLE OF CONTENTS I. INTRODUCTION ................................................................................................................................... 1 II. QDRO DEFINED .................................................................................................................................. 1 III. QDRO USES......................................................................................................................................... 3 A. Child Support and Spousal Maintenance...................................................................................... 3 1. Immediacy of the Relief............................................................................................................... 3 2. Form of the Order ........................................................................................................................ 4 3. Amount of the Benefit.................................................................................................................. 4 B. Life Insurance .................................................................................................................................. 4 C. Medicaid ........................................................................................................................................... 5 D. Possible Barriers to Use of a QDRO ............................................................................................. 5 1. Impermissible Ex Post Facto Modification.................................................................................. 5 2. State Exemption Statutes.............................................................................................................. 6 3. Changing the Beneficiary............................................................................................................. 8 E. Helpful Tips .................................................................................................................................... 10 1. Follow the Rules ........................................................................................................................ 10 2. Imprecise QDRO Problems........................................................................................................ 10 3. Where to Send the Benefits........................................................................................................ 10 4. Potential Benefits Relinquished ................................................................................................. 11 5. Tax Implications ........................................................................................................................ 11 6. Death of the Child ...................................................................................................................... 11 7. Attorneys Fees .......................................................................................................................... 11 IV. DRAFTING......................................................................................................................................... 12 V. CONCLUSION..................................................................................................................................... 13 APPENDIX A ............................................................................................................................................ 14

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UNUSUAL USES OF QDROS: USING THE QDRO TO COLLECT CHILD SUPPORT AND SPOUSAL MAINTENANCE
I. INTRODUCTION Most attorneys who practice family law know that a Qualified Domestic Relations Order (QDRO) is used in a divorce to divide the spouses interests in private pension plans governed by the Employee Retirement Income Security Act of 1974 (ERISA). 29 U.S.C. 1001, et seq. Usually, QDRO articles focus on dividing these plan benefits pursuant to the trial courts power to divide the marital estate of the parties in a just and right manner. TEX. FAM. CODE 7.001, 7.003. However, what many attorneys do not know is that there are lesserknown uses for a QDRO that can provide an effective way to achieve the needs of the client. This article will address the basic provisions of a QDRO, however, the primary focus of this article is to examine the lesser-known uses of a QDRO. Specifically, this article will examine the use of a QDRO for the collection and enforcement of child support and spousal maintenance obligations. This article will also examine the use of a QDRO for estate planning and insurance beneficiary protection. Just as there are potential complications and dangers when using a QDRO to divide marital assets, so it is true when using a QDRO for these lesser-known purposes. This article will highlight some of these complications and offer some solutions and practical tips to achieve positive results for the client. There are several great articles on QDROs. For those wanting a more comprehensive examination of private pension plans and their uses, I recommend the article by Charla Bradshaw Conner entitled Handling ERISA Retirement Plans: An Overview and Explanation of QDRO Drafting from the 2001 Advanced Family Law Course and Gary A. Shumans book entitled Qualified Domestic Relations Order Handbook (2d. ed. & Supp. 2001). I would also like to thank attorneys Barbara Nunneley and Philip D. Phillips for their input. While there are Texas cases addressing ERISA preemption issues, there are no Texas cases or statutes that specifically allow or disallow the use of a QDRO for the collection or enforcement of child support and spousal maintenance. II. QDRO DEFINED In 1974, Congress passed ERISA to provide better protection for beneficiaries of employee pension and welfare benefit plans in the private workplace. See Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 44 (1987). ERISA imposed a number of requirements on these plans relating to reporting and disclosure, vesting, funding, discontinuance, and payment of benefits. A variety of different retirement plans are covered by ERISA, including defined benefit pension plans, defined contribution plans, such as a 401(k) or profit-sharing plans. Employer based insurance plans are a part of ERISA as well. 29 U.S.C. 1002(1). One of the provisions added was an antialienation spendthrift provision preventing the plan participant (employee or former employee as defined in 29 U.S.C. 1056(d)(3)(J) who is or may become eligible to receive a benefit of any type from an employee welfare benefit plan or pension benefit plan) from assigning or alienating his or her benefit under a pension plan subject to ERISA. See 29 U.S.C. 1056(d)(1) (requiring that [e]ach pension plan shall provide that benefits provided under the plan may not be assigned or alienated.). This prevents most creditors from reaching the plan benefit and usually prevents the plan benefit from becoming part of the debtors estate in bankruptcy. See Patterson v. Shumate, 504 U.S. 753, 760 (1992) (11 U.S.C. 541(c)(2) includes protection for ERISA benefits); Commercial Mortg. Ins. Inc. v. Citizens Nat. Bank, 526 F. Supp. 510, 518 (N.D. Tex. 1981) (ERISA benefits protected from garnishment). The anti-alienation requirements contained in ERISA supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan [subject to the ERISA requirements]. 29 U.S.C. 1144(a). The term State law, includes all laws, decisions, rules, regulations, or other State action having the effect of law, of any State. 29 U.S.C. 1144(c)(1). A law relates to an employee benefit plan if it has a connection with or reference to such a plan. Brandon v. Travelers Ins. Co., 18 F.3d 1321, 1325 (5th Cir. 1994) (citing Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97 (1983)). The United

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States Supreme Court considers this preemption provision of ERISA deliberately expansive, and designed to establish pension plan regulation as exclusively a federal concern. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46 (1987) (quoting Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523 (1981)). The combination of the anti-alienation and preemption provisions of ERISA raised concern as to the validity of orders entered in state divorce proceedings requiring that pension benefits be paid to a person other than the plan participant. Congress resolved this matter through the QDRO. The law defines a QDRO as a domestic relations order that meets certain requirements set forth in the statute. It must first be a judgment, decree, or order (including approval of a property settlement agreement) which: (i) relates to the provision of child support, alimony payments, or marital property rights to a spouse, child, or other dependent of a plan participant, and (ii) is made pursuant to a State domestic relations law (including a community property law). 29 U.S.C. 1056(d)(3)(B)(ii). The order must then meet three other requirements: (1) The order must create or recognize the existence of an alternate payees right to, or assigns to an alternate payee the right to, receive all or a portion of the benefits payable with respect to a plan participant under a plan (29 U.S.C. 1056 (d)(3)(B) (i)(I)); (2) The order must clearly specify: (i) the name and the last known mailing address (if any) of the plan participant and the name and mailing address of each alternate payee covered by the order (29 U.S.C. 1056(d)(3)(C)(i)); (ii) the amount or percentage of the plan participants benefits to be paid by the plan to each such alternate payee, or the manner in which such amount or percentage is to be determined (29 U.S.C. 1056(d)(3)(C)(ii)); (iii) the number of payments or period to which such order applies (29 U.S.C. 1056(d)(3)(C)(iii)); and (iv) each plan to which such order applies (29 U.S.C. 1056(d)(3)(C)(iv)); and (3) The order must not:

(i) require the plan to provide any type or form of benefit, or any option, not otherwise provided under the plan (29 U.S.C. 1056(d)(3)(D)(i)); (ii) require the plan to provide increased benefits (determined on the basis of actuarial value) (29 U.S.C. 1056(d) (3)(D)(ii)); and (iii) require the payment of benefits to an alternate payee which are required to be paid to another alternate payee under another order previously determined to be a qualified domestic relations order (29 U.S.C. 1056(d) (3)(D)(iii)). The law requires each plan to establish reasonable procedures to determine the qualified status of domestic relations orders and to administer distributions under such qualified orders. 29 U.S.C. 1056(d)(3)(G)(ii). Upon receipt of a domestic relations order, the plan administrator must notify the plan participant and the alternate payee of the receipt of the order and the plans procedures for determining its qualified status. The plan administrator has a reasonable period in which to determine that status and inform the parties of the decision. See 29 U.S.C. 1056(d)(3)(G)(i)(II). Simply stated, the transfer of pension benefits to an alternate payee can only be done through a QDRO. See Fox Valley & Vicinity Const. Workers v. Brown, 879 F.2d 249, 252 (7th Cir. 1989) ([E]RISA preempts any attempt to alienate or assign benefits by a domestic relations order if that order is not a QDRO.). Without a QDRO, the pension plan administrator will refuse to implement the courts decision. It is important for this article to note that an alternate payee is defined as more than just a spouse or former spouse, but also includes a child, or other dependent of a plan participant who is recognized by a domestic relations order as having a right to receive all, or a portion of, the benefits payable under the plan with respect to such participant. 29 U.S.C. 1056(d)(3)(K). Further, ERISA defines a QDRO as relating to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a participant and be made pursuant to State domestic relations law (including a community property law). 29 U.S.C.

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1056(d)(3)(B)(ii). Child support relates to a number of non-divorce matters such as paternity, suits affecting the parent-child relationship, and enforcements of child support and spousal maintenance orders. Likewise, a QDRO must set forth the name and address of each alternate payee covered by the QDRO. 29 U.S.C. 1056(d)(3) (C)(i). This term is helpful if there is more than one child. The implication is that Congress intended the QDRO to be utilized for purposes beyond property division and divorce. Clearly Congress intended the QDRO to be available for the collection of child support and spousal maintenance. III. QDRO USES A. Child Support and Spousal Maintenance The practicality of using a QDRO for the collection of child support or spousal maintenance of the plan participant depends upon the type of plan in which the plan participant is a member. If the plan is a defined benefit plan (such as a pension plan), the amount of the participants accrued benefits under the plan will usually be expressed in terms of a monthly or annual benefit. The benefit paid is usually based upon a formula that considers the length of participation in the plan, age of the plan participant and income at the time of retirement. If benefits are taken prior to the normal retirement age, the benefit will usually be actuarially reduced. If the plan is a defined contribution plan (such as a 401(k) or profit sharing plan), the plan participants accrued benefits will usually be expressed in terms of a total account balance, or a lump sum payment or payments. Obtaining child support or spousal maintenance through a QDRO does present some considerations that are not normally encountered through regular wage withholding. 1. Immediacy of the Relief How quickly does the alternate payee need the support? An immediate or early permitted distribution date is the most common problem when using a QDRO to collect support. Because defined contribution plans usually contain a lump sum distribution option and because a plan participant is often permitted to obtain his or her entire accrued account balance upon leaving the service of the employer, an alternate payee can

often obtain a lump sum distribution under a defined contribution plan quickly and in larger amounts. Most defined benefit plans do not contain a lump sum distribution option and the earliest retirement age to begin receiving the plan benefits under such plans is usually when the plan participant attains the age of 50. See 29 U.S.C. 1056(d)(3)(E)(ii)(II). Most defined benefit plans also provide for the distribution of benefits if the plan participant becomes permanently disabled. Of course, if the plan participant is presently eligible to receive benefits under the defined benefit plan (the plan participant is in pay status), then the alternate payee can usually begin receiving benefit payments as soon as the plan administrator approves the QDRO. Therefore, unless there is an allowed permitted distribution date within a reasonable period of time, the payment of future child support or spousal maintenance obligations under a QDRO may not be immediately feasible and may even take decades before the benefits begin. Further, the administrator has a reasonable period in which to determine that approval status and inform the parties of the decision. See 29 U.S.C. 1056(d)(3)(G)(i)(II). Most attorneys incorrectly believe that the plan administrator has 18 months to review the QDRO. An 18-month period does not apply when benefits are to be paid to the alternate payee under a domestic relations order where the plan administrator separately accounts for the benefits that would be paid to the alternate payee during the time it is being reviewed for qualification as a QDRO. 29 U.S.C. 1056(d)(3)(H)(i). If within 18 months from the date on which the first payment would be required to be made under the proposed QDRO, the plan administrator has determined that the proposed QDRO would not qualify then the plan administrator must pay the benefits as if there was no QDRO. 29 U.S.C. 1056(d)(3)(H)(ii)-(v). While this appears to be a hindrance to a quick payment, it is this authors experience that this almost never happens. Most plan administrators respond within a month or two. The approval time can be cut down significantly if efforts are made to have the order preapproved. Even if benefits are not presently distributable to the alternate payee, a QDRO may be useful for the purpose of protecting the alternate payees interest by preventing the plan participant from

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borrowing against plan benefits prior to the permitted time of distribution. The QDRO will also prevent benefits from going to another alternate payee pursuant to a future QDRO. All parties are treated equally so being first to enter a QDRO can be critical if there are limited benefits. 2. Form of the Order As previously stated, the benefits can only be distributed pursuant to plan requirements and these requirements are usually strict. See Stott v. Bunge Corp., 800 F. Supp. 567, 573-74 (E.D. Tenn. 1992). Most employee benefit plans provide for an annuity or other periodic payment distribution option that can be fitted to the framework of child support or spousal maintenance. As previously stated, in the case of some defined contribution plans, lump sum payments may be available. As for spousal maintenance, there is no specific definition of periodic payments under section 8.001(a) of the Texas Family Code. Therefore, it is possible to create a QDRO that provides for the periodic and extended payment of support in most cases. 3. Amount of the Benefit Are there enough benefits in the plan to cover the obligation? In a defined benefit plan, there could be annuity costs that need to be factored out of the account. Further, actuarial adjustments may have to be made to compensate for the difference in the ages of the plan participant and the alternate payee. However, while there may be reductions to consider in some plans, future child support or spousal maintenance payments may be provided from any benefits that have accrued in the plan participants account, regardless of whether or not benefits were earned or accrued during the marriage. A QDRO may provide the alternate payee with up to 100 percent of a plan participants benefits (if not previously divided by another QDRO). For example, assume a child-support arrearage of $5,000. As described above, the entire amount could be garnished immediately (if a defined contribution plan) even if the plan participants total account balance is just $6,000. Of course, the plan participant must be fully vested in the amounts assigned to the alternate payee under the QDRO in order for the alternate payee to receive

an immediate distribution. There also must not be a previously entered QDRO since that QDRO will have already segregated the amount awarded to its alternate payee. It is even possible to divide the marital portion of the plan participants accrued benefits between the plan participant and the alternate payee spouse and then use the plan participants portion of the benefits to pay child support or spousal maintenance obligations. For example, the plan participant has an accrued benefit on the date of divorce of $1000 per month in a defined benefit plan, all of which is community property. If the alternate payee is entitled to a community portion of 50% or $500 per month as a part of the property division, the alternate payee could then seek to have the remaining $500 per month of the plan participants benefit assigned to the alternate payee as child support or spousal maintenance. B. Life Insurance Many private employers provide life insurance to employees through employee welfare benefit plans. 29 U.S.C. 1002(1). Often, life insurance policies can provide added security to the nonparticipant spouse or child in the event of the death of the plan participant. For example, the parties agree to name a spouse or child as the beneficiary of the policy to secure support when the plan participant dies. A QDRO for insurance benefits can secure the plan participants obligation to pay the support and even secure indebtedness pursuant to the divorce decree or other order, or secure the non-participant spouse funds to compensate for the plan participants failure to pay indebtedness ordered to be paid pursuant to the divorce decree or other order. There are no federal statutes that explicitly address these life insurance benefits and QDROs. Therefore, an order addressing these ERISA based benefits can be deemed qualified only if the order is found by the plan administrator or reviewing court to be qualified under the QDRO statutes that deal with retirement benefits. See Carland v. Metropolitan Life Ins. Co., 935 F.2d 1114, 1119-20 (10th Cir. 1991) (following the provisions of 29 U.S.C. 1056(d)(3) to qualify a divorce decree provision for an ERISA based policy).

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C. Medicaid In Jack W. Marrs article QDROs and Private Plans from the 25th Annual Advanced Family Law Course (1999), he describes a way QDROs can be used as a part of estate planning. Elderly couples are often faced with the burden of increasing medical expenses consuming a greater percentage of their fixed income. This situation can become disastrous when one of the spouses requires institutionalization. Medicaid can help the situation, however the income of the institutionalized spouse is often a significant factor in determining that spouses eligibility for Medicaid. The income of a non-institutionalized spouse is not a factor in the eligibility determination. See 42 U.S.C. 1396a(a)(17). A transfer of income from the institutionalized spouse to the noninstitutionalized spouse through the use of a QDRO can affect the institutionalized spouses eligibility for Medicaid in a way to allow for greater affordability. Use of a QDRO is an accepted method of transferring income from the institutionalized spouse to the non-institutionalized spouse. See L.M. v. Division of Medical Assistance & Health Servs., 659 A.2d 450 (N.J. 1995). Procedurally, a friendly suit would be filed pursuant to section 2.501 of the Texas Family Code by the non-institutionalized spouse against the institutionalized spouse, seeking spousal maintenance. The final order would be a QDRO. The attorney may want to make sure that each spouse is represented by separate counsel to avoid the possibility of fraud. D. Possible Barriers to Use of a QDRO As stated above, the use of a QDRO for child support, spousal maintenance or enforcement has not been approved or disapproved by Texas courts. It is important to be aware of potential barriers to using a QDRO in Texas. 1. Impermissible Ex Post Facto Modification The use of a QDRO is permissible for enforcement of existing child support and spousal maintenance arrearages. Most states seem to agree that attaching benefits via a QDRO for enforcement of support is not an impermissible ex post facto modification of the property division. See Cody v. Cody, 594 F.2d 314 (2d Cir. 1979); Merry v. Merry, 592 F.2d 118 (2d Cir. 1979);

Baird v. Baird, 843 S.W.2d 388 (Mo. Ct. App. 1992); Sippe v. Sippe, 398 S.E.2d 895 (N.C. Ct. App. 1991). The decision in Hogle v. Hogle, 732 N.E.2d 1278 (Ind. App. 2000), provides a comprehensive analysis of law across the country. In Hogle, the husband was ordered to pay $1,000 a month in child support under a 1979 California decree. The wife reduced the arrears to money judgments by writs of attachment, and she then sought enforcement of the writs in Indiana. The court held that the writs satisfied the technical requirements of a QDRO. Id. at 1281. ERISA, the court reasoned, does not require a QDRO to be a part of the judgment in the case, but a QDRO can be used to garnish a retirement plan to satisfy past due support obligations. Id. The Iowa courts In re Marriage of Rife, 529 N.W.2d 280 (Iowa 1995), reached the same result. There, in a 1982 divorce, the wife was awarded $500 a month in alimony. The husband made two payments in the next twelve years. In 1993, the wife obtained a QDRO that ordered the arrearage of $12,000 be satisfied by means of a garnishment of the corpus of the husbands pension plan. Id. at 282. The Iowa court upheld the order, noting that ERISA was not intended to be a vehicle for the avoidance of family support obligations. We see nothing in the federal statute that prohibits invasion of the corpus. Id. at 281. Despite the clarity of the law, a few cases have held that a QDRO may not be used to enforce support obligations, because that would be tantamount to a post-divorce modification of the property division. In Hoy v. Hoy, 510 S.E.2d 253 (Va. Ct. App. 1999), at the time of the divorce, the husband had no pension plan. The decree awarded the wife alimony. After the husband fell behind, the wife sought a QDRO on the husbands pension plan, at which time he did have an interest in a plan. The Virginia appellate court held that the post-divorce order awarding benefits from the pension was not enforcement of a spousal maintenance order via a QDRO, but was instead an improper attempt to reopen and modify the divorce decree. Id. at 25455. A QDRO, the court held, must be consistent with the substantive provisions of the original decree, and that statutory exception does not empower the trial court to make substantive modification of the final decree.

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However, Virginia courts have also said essentially the opposite, allowing a spouse to attach a pension for the enforcement of support, and in doing so, not making the enforcement a new property division. See Moreno v. Moreno, 480 S.E.2d 792 (Va. Ct. App. 1997). In DeSantis v. DeSantis, 714 So. 2d 637 (Fla. 1998), the divorce judgment had awarded the husband his pension plan, and had awarded the wife her pension plan. After the wife failed to make a Florida court ordered cash payment to the husband, the trial court entered a QDRO to attach assets on the wifes pension plan. The appellate court reversed, holding that were the court to grant a QDRO attaching the wifes pension in favor of the husband, this would be tantamount to granting the husband an interest in an asset that he was not entitled to and that the final judgment was extinguished. Id. at 638. The court of appeals held that this would be an impermissible modification of the final adjudication of property rights in the divorce case. Id. However, Iowas In re Marriage of Bruns, 535 N.W.2d 157 (Iowa Ct. App. 1995), disavowed this type of reasoning employed in Hoy and DeSantis. In this case, the court held that attachment by means of a QDRO of a former spouses pension plan does not amount to an improper modification of the final adjudication of property rights, even when there has been an adjudication establishing that the creditor spouse has no interest in the debtor spouses pension. The court held that the wife was not seeking to redistribute property previously awarded in the divorce decree, but was instead seeking to enforce an alimony provision through garnishment or attachment. Id. at 161. Likewise, in Baird v. Baird, 843 S.W.2d 388 (Mo. Ct. App. 1992), the wife sought a lump sum distribution from the pension plans current balance to cover past due spousal maintenance and child support. The trial court denied the request, noting that the divorce decree had awarded the husband his pension. The trial court, like the court in Hoy and DeSantis, held that a QDRO entered 11 years after the divorce would be an unlawful modification of the property division portion of the divorce decree. Id. at 391. The court of appeals reversed, holding that a QDRO could be used to enforce the delinquent support payments. Id. at 392. The court in Stinner v. Stinner, 554 A.2d 45

(Pa. 1989), also allowed a quasi-QDRO for enforcement of support. In that case, the Stinners were married in 1956 and divorced in 1977. They entered into a property settlement agreement prior to the divorce that provided that the husband would pay alimony to the wife. After 18 months, the husband ceased payments. The wife brought an action for breach of the agreement, and a complaint in equity to enforce the agreement. Six years later, the wife filed two writs of execution to garnish the husbands pension. The plan administrator refused to comply with the writ of execution on the grounds that it was not a QDRO. The trial court agreed. The appellate court, however, reversed, and held that the pension could be attached to enforce the alimony agreement, and although the writ of execution itself was not a QDRO, the 1980 judgment satisfied the requirements of a QDRO in that it was related to alimony payments for a former spouse, it was made pursuant to Pennsylvania domestic relations law, it specified the amount of the plan participants benefits to be paid and a period to which the order applied, and it named the plan participant and the alternate payee. Id. at 47-48. Further, courts have ruled that it is not necessary that the QDRO be entered at the time of divorce since the need for a QDRO may not be apparent at the time of divorce and that it may be necessary as an enforcement tool on a previous judgment. In Rohrbeck v. Rohrbeck, 566 A.2d 767, 774 (Md. 1989), the court of appeals of Maryland recognized the need for QDROs to enforce an earlier entered support order, and reversed the trial courts refusal to consider a QDRO proposed by the wife after judgment (dissolving the marriage). The court of appeals found that a QDRO was properly entered in order to enforce payment of maintenance in favor of a disabled wife against a husband who had successfully evaded other collection action. Id. at 774. As for Texas, remember that the court cannot modify the property division established at the time of divorce. However, it can enter orders in aide and clarification of its prior orders. TEX. FAM. CODE 9.007, et seq. The court may also enforce its prior order. TEX. FAM. CODE 9.001, et seq. 2. State Exemption Statutes Section 42.0021 of the Texas Property Code

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exempts a persons right to receive payments or right to assets in a pension, profit sharing, or similar plan from attachment, execution and seizure for debt satisfaction. TEX. PROP. CODE 42.0021(a). The statute further provides that if it is held invalid or preempted by federal law in whole or in part or in certain circumstances it remains in effect in all other respects to the maximum extent permitted by law. Id. Further, The Texas Turnover Statute requires that a court not enter or enforce an order that requires the turnover of proceeds or the disbursement of property which is exempt under any statute, including section 42.0021. TEX. CIV. PRAC. & REM. CODE 31.002(f). However, the Texas Turnover Statute does not apply to the enforcement of a child support obligation or a judgment for past due child support. Id. Also, section 42.005 of the Texas Property Code provides that section 42.0021 is inapplicable to child support liens established pursuant to Subchapter G, Chapter 157 of the Texas Family Code. TEX. PROP. CODE 42.005. It is not clear that these provisions bar the use of a QDRO for support collection and enforcement. If this is the case, then it is contrary to ERISA. In the case of child support, it may be necessary to take an additional step to perfect a child support lien. Once the lien is established, it would seem that a QDRO for the enforcement of a child support arrearage would not be subject to the section 42.0021 exemption. If section 42.0021 does interfere with ERISA, then it should be preempted. In Boggs v. Boggs, 520 U.S. 833 (1997), the United States Supreme Court declared that a state law which conflicts with the provisions of ERISA or operates to frustrate its objectives is preempted. Id. at 851. This was also the same result in Egelhoff v. Egelhoff, 532 U.S. 141, 121 S.Ct. 1322, 1328, 149 L.Ed.2d 264 (2001), although it dealt with beneficiary designations. See infra. The court noted in Boggs that the QDRO mechanism was intended by Congress to confer beneficiary status on a spouse, former spouse, child or other dependent who is named an alternate payee in a QDRO. Boggs, 520 U.S. at 847. Although Boggs did not address preemption in the context of a state exemption from claims of creditors which arguably denies former spouses and children of a plan participant the right to obtain beneficiary

status by requesting entry of a QDRO, it would seem that the reasoning would apply equally. The Fifth Circuit Court of Appeals has ruled that section 42.0021 is not preempted by ERISA. See Heitkamp v. Dyke, 943 F.2d 1435 (5th Cir. 1991); NCNB Texas Natl Bank v. Volpe, 943 F.2d 1451 (5th Cir. 1991). In Heitkamp, the court held that the exemption created by section 42.0021 furthered enforcement of federal bankruptcy rules. And was, therefore, excluded from the broad preemption of ERISA. Heitkamp, 943 F.2d at 1450. It was noted that, had section 42.0021 been inconsistent with the provisions of the Bankruptcy Code, it might have reached a different conclusion. Id. In light of the fact that a literal reading of section 42.0021 leads to the conclusion that it would bar post divorce attempts to obtain a QDRO as an enforcement tool, the Fifth Circuit courts opinions might be inapplicable. Further, the opinions of the Fifth Circuit did not involve attempts to enforce domestic relations orders through a QDRO. It appears that while the Fifth Circuit may inhibit the use of a QDRO for support enforcement, Boggs may be persuasive. Texas appellate decisions addressing the validity of section 42.0021 have not addressed the ERISA preemption issue, dealing instead with the validity of the exemption claim in the face of a turnover order. They offer little guidance. See Caulley v. Caulley, 806 S.W.2d 795 (Tex.1991); Leibman v. Grand, 981 S.W.2d 426 (Tex. App.-El Paso 1998, no writ); Lozano v. Lozano, 975 S.W.2d 63 (Tex. App.--Houston [14th Dist.] 1998, writ denied); DeVore v. Central Bank & Trust, 908 S.W.2d 605 (Tex. App.--Fort Worth 1995, no writ); Roosth v. Roosth, 889 S.W.2d 445 (Tex. App.--Houston [14th Dist.] 1994, writ denied); Schultz v. Cadle Co., 825 S.W.2d 151 (Tex. App.-Dallas 1992, writ denied); Rucker v. Rucker, 810 S.W.2d 793 (Tex. App.--Houston [14th Dist.] 1991, writ denied); Ex parte Wessell, 807 S.W.2d 17 (Tex. App.--Houston [14th Dist.] 1991, no writ). A further argument in support of enforcement (and potentially a way around the state exemption issue) can be made that assignment to an alternate payee pursuant to ERISA is not contemplated by the prohibition against attachment, execution and seizure since the alternate payee under ERISA attains the status of a beneficiary rather than of a creditor. 29 U.S.C. 1056(d)(3)(J).

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3. Changing the Beneficiary Often, parties agree to name a former spouse as a beneficiary for retirement benefits or employer based insurance policies in an effort to secure a property division or to secure the payment of support upon the death of the plan participant. What if the beneficiary is redesignated or is never changed pursuant to the agreement? Federal and state courts consistently hold that ERISA preempts application of state law regarding the designation of beneficiaries under an ERISA plan. See Brandon v. Travelers Ins. Co., 18 F.3d 1321, 1325 (5th Cir.1994); McMillan v. Parrott, 913 F.2d 310, 311 (6th Cir.1990); Brown v. Connecticut General Life Ins. Co., 934 F.2d 1193, 1195 (11th Cir.1991). Texas courts follow this as well. Heggy v. American Trading Employee Retirement Account Plan, 56 S.W.3d 280, 283 (Tex. App.--Houston [14th Dist.] 2001, no writ); Emmens v. Johnson, 923 S.W.2d 705, 707 (Tex. App.--Houston [1st Dist.] 1996, writ denied). However, there is uncertainty over what law does control the designation of beneficiaries if the state law is preempted. Some courts, not finding applicable provisions in ERISA, consider applicable federal common law. Brandon, 18 F.3d at 1325; McMillan, 913 F.2d at 311. Federal and state courts have differed on the issue of whether the provisions of ERISA or federal common law controls designation of beneficiaries for plan benefits. McMillan, 913 F.2d at 311. The Sixth Circuit has concluded that 29 U.S.C. 1104(a)(1)(D) of ERISA exclusively controls designation of beneficiaries for plan benefits. McMillan, 913 F.2d at 311-12. See Metropolitan Life Ins. Co. v. Marsh, 119 F.3d 415, 421 (6th Cir.1997) (citing McMillan, 913 F.2d at 312). In McMillan, the plan participant designated his wife as plan beneficiary of his retirement accounts. McMillan, 913 F.2d at 311. Later, when the two divorced, each signed a property settlement agreement relinquishing any and all claims against the other. The plan participant subsequently remarried and, without removing his ex-wifes name as beneficiary, died. The trial court later granted the widows claim, under federal law, for one-half of the benefits, despite the ex-wife being named as the designated beneficiary for the plan. Id. Disagreeing, the appellate court reversed judgment and awarded all benefits to the ex-wife as designated beneficiary.

Id. at 312. In doing so, the McMillan court cited an ERISA requirement that a [plan] fiduciary shall discharge his duties with respect to a plan solely...in accordance with the documents and instruments governing the plan.... Id. at 312; 29 U.S.C. 1104(a)(1)(D). In reaching its holding, the McMillan court opined that this approach fulfills the Congressional intent that ERISA plans be uniform in their interpretation, simple in their application, and allow parties to be certain of their rights and obligations. McMillan, 913 F.2d at 312. As an alternative approach, the Fifth, Seventh, and Eighth Circuits rely on federal common law in order to resolve the question of how beneficiaries are designated under an ERISA plan. See Brandon, 18 F.3d at 1326; Manning v. Hayes, 212 F.3d 866, 870-74 (5th Cir. 2000); Fox Valley & Vicinity Constr. Workers' Pension Fund v. Brown, 897 F.2d 275, 281-82 (7th Cir.1990); Lyman Lumber Co. v. Hill, 877 F.2d 692, 693 (8th Cir. 1989). In Brandon, the court faced a situation similar to McMillan. The plan participant designated his wife as primary beneficiary on a group life insurance policy taken out by his employer. Brandon, 18 F.3d at 1322. When the two divorced, the court issued a decree divesting the wife of any claim to her husbands employment benefits. Id. at 1323. The husband, however, never removed his ex-wife's name as primary beneficiary. Upon the husbands death, a dispute arose between the contingent beneficiary on the policy, and the deceaseds ex-wife, concerning entitlement to insurance proceeds. Id. The trial court subsequently rendered judgment for the contingent beneficiary, holding that the language in the divorce decree took precedence over the plan documents designating the ex-wife as primary plan beneficiary. Id. In reaching this decision, the Brandon court drew guidance from Texas Family Code section 9.301 and fashioned a federal common law rule wherein named ERISA beneficiaries may waive, in a divorce decree, their designation of beneficiaries in an ERISA plan. Brandon, 18 F.3d at 1326-27. As justification for resorting to federal common law, the Brandon court cited the long and venerable history of federal respect for state domestic relations law. Id. at 1326. Other Texas courts have followed this reasoning. See Emmens, 923 S.W.2d at 712) (following Brandon, with

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slight modification, and adopting section 9.302 of the Texas Family Code as federal common law in the designation of beneficiary issue); Weaver v. Keen, 43 S.W.3d 537, 544 (Tex. App.--Waco, 2001) (adopting the holding in Emmens that section 9.302 of the Texas Family Code applied as federal common law, prevents a former spouse from receiving ERISA-qualified pension plan benefits, absent one of its exceptions). However, the court in Heggy v. American Trading Employee Retirement Account Plan, 56 S.W.3d 280 (Tex. App.--Houston [14th Dist.] 2001, no writ), has followed McMillan. Id. at 284. In Heggy, the husband named his wife as the beneficiary for any sums remaining in his retirement account. They divorced and after marrying his second wife, he did not remove the beneficiary designation. He then died. The second wife claimed the first wife contractually waived any right to such benefits in the divorce decree and that the designation of the first wife as plan beneficiary must yield to the terms of the divorce decree. Like the McMillan court, the Heggy court believed that such a holding allows parties to be certain of their rights and obligations. Id. It is for that reason that ERISA plans are administered according to their controlling documents. Id. at 285. Moreover, if the designation on file controls, plan administrators and courts need only look to plan documents to determine the beneficiary, thus avoiding needless and expensive litigation. Id.; McMillan, 913 F.2d at 284. The United States Supreme Courts recent decision in Egelhoff v. Egelhoff, 532 U.S. 141, 121 S.Ct. 1322, 149 L.Ed.2d 264 (2001), followed the Sixth Circuit approach. In Egelhoff, during the course of their marriage, the husband designated the wife as the beneficiary to an ERISA governed life insurance policy provided by his employer. They later divorced. Two months later, the husband died intestate without having changed the beneficiary designation to the life insurance policy. After the plan administrator paid the life insurance proceeds to his ex-wife as beneficiary, the husbands children brought suit under Washington state law to recover the proceeds. Applying ERISA preemption, the trial court granted summary judgment for the ex-wife. The court of appeals subsequently reversed the trial courts judgment, concluding that ERISA did not preempt the Washington statute, with the state's

high court affirming the appellate courts ruling. On petition for certiorari, the United States Supreme Court reversed in a seven to two decision, citing the need for uniformity and simplicity of plan administration. Id. at 1328-29. The Egelhoff decision also addressed the argument, relied on by the Fifth Circuit in Brandon, that family and probate law, being areas of traditional state regulation, fall outside of ERISA preemption. Id. at 1330. While the Court recognized that a presumption against preemption exists in areas of traditional state regulation such as family law, it reasoned [this] presumption can be overcome where, as here, Congress has made clear its desire for preemption. Id. In the recent case of Barnett v. Barnett, No. 99-0313, 2000 WL 33651828, (Tex. Dec. 6, 2001), a five to four decision, the Texas Supreme Court relied on the Egelhoff decision to find state community property laws preempted to the extent that they affected benefits paid under an employer based ERISA life insurance plan. The deceased plan participant, embroiled in divorce proceedings at the time he died, had designated his estate as beneficiary. His surviving spouse sought to recover her community property interest in the life insurance proceeds after the proceeds had already been paid to the estate. The court found that ERISA preempted the surviving spouses constructive trust claim against the husbands estate for life insurance proceeds paid to the estate, even though proceeds were community property under state law. Barnett at *7. See 29 U.S.C.A. 1144(a). The court concluded, in the words of the Egelhoff decision, that unlike generally applicable laws regulating areas where ERISA has nothing to say, which we have upheld notwithstanding their incidental effect on ERISA plans, this [state law] governs the payment of benefits, a central matter of plan administration. Id. (quoting Egelhoff, 121 S.Ct. at 1328). The court further concluded based on Egelhoff that the state law at issue has a prohibited connection with ERISA plans because it interferes with nationally uniform plan administration.... Uniformity is impossible...if plans are subject to different legal obligations in different states. Id. (quoting Egelhoff, 121 S.Ct. at 1328). Further, the Texas Supreme Court found federal common law could not be applied to

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ameliorate the effect of ERISA preemption of state constructive trust law that deprived the surviving spouse of her claim against the husbands estate for life insurance proceeds that were community property, where fraud on the community had no federal common law equivalent, and not all states had adopted community property law that would give the federal common law equivalent the necessary uniformity. Barnett at *14. See 29 U.S.C.A. 1001 et seq. The Egelhoff and Barnett decisions not only cast doubt on state laws that relate to ERISA, but also cast doubt on the practice of reliance on federal common law in the area of ERISA based benefits. As shown by these cases, naming someone as a beneficiary in an ERISA based policy without a QDRO can be dangerous. Had the deceased spouse in Barnett survived until divorce proceedings were concluded, the surviving spouse could have obtained a decree that qualified as a QDRO under ERISA. See generally, Metropolitan Life Ins. Co. v. Wheaton, 42 F.3d 1080 (7th Cir.1994); Carland v. Metropolitan Life Ins. Co., 935 F.2d 1114 (10th Cir.1991). Instead, the surviving spouse is now relegated to a claim for constructive fraud on the community. This is not fair, but it is the law. Remember that under section 9.101 of the Texas Family Code, you could apply for a QDRO if such an agreement was reached in the decree. E. Helpful Tips 1. Follow the Rules Find out what type of plan is being divided. As previously discussed, using a QDRO in a defined benefit plan to satisfy child support or spousal maintenance may not be a good idea unless the plan participant is of retirement age. In considering the use of a QDRO for child support or spousal maintenance, the threshold question should be to ascertain when payment to the alternate payee can be made according to the plan rules. Further, if the QDRO is being considered to make monthly child support or spousal maintenance payments, you should determine whether the plan will allow monthly payments and/or lump sum payments. The QDRO cannot change the form of the benefit payable by a qualified plan. 29 U.S.C. 1056 (d)(3)(D)(i). The important thing to remember is to make sure that the payments ordered do not violate the terms of

the plan, and that the form of the payments are a payment option available under the plan. 2. Imprecise QDRO Problems The court has discretion to determine the terms of the QDRO (within the confines of ERISA and the plan at issue) pursuant to state domestic relations law. Property division is the most common use of a QDRO. The division can be by lump-sum distribution, if the asset is a 401(k) account. Or, if the asset is a pension of uncertain length and value (based on actuarial estimates), the QDRO might entitle the alternate payee to 50% of the value of the plan accrued during the marriage. This leaves the ultimate calculation to the plan administrator. Either way, the property division is simple and straightforward. As an enforcement tool, however, the QDRO has the potential to become very crude. In the simplest case, the QDRO can easily order a lumpsum distribution from a 401(k) plan to satisfy a judgment for back child-support or maintenance. If future payments are not guaranteed, or the duration of the future obligation is uncertain, then additional terms contemplating the contingencies of possible underpayment or overpayment will have to be included. For example, the plan participant might die in the first year he receives his pension benefits, leaving the alternate payee with none of the payments the alternate payee was planning on. Occasionally, due to mismanagement or fraud, plans will lose value or go bankrupt, limiting the alternate payees remedy. Finally, the obligation to the alternate payee might change or terminate due to death or subsequent modification of the underlying order. For example, custody changes, the child may die, reach 18, or marry. Some plans reject the provisions outlined in section 154.001 of the Texas Family Code for the support of the child. The plan administrator will often advise that it cannot determine when support payments should cease and will request some form of definitive end date. Even if the plan accepts the provisions of section 154.001, it will often be necessary to supply the plan with a subsequent order abating the support when a condition of section 154.001 has been met. 3. Where to Send the Benefits Another problem is that the plan may insist

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that the benefits be paid directly to the alternate payee. Some plans refuse to send the benefits to anyone but the alternate payee at the alternate payees address. Obviously, when the benefits do not go through the local support registry or the Attorney General, the plan participant appears delinquent. 4. Potential Benefits Relinquished From a strategic point of view, during a divorce, the alternate payee may wish to consider the possible need for a future source of garnishable income to secure the payment of child support and/or spousal maintenance. If the entire pension or 401(k) account is awarded to the alternate payee instead of another asset (the house, for example), the alternate payee may lose a potential enforcement mechanism at a future date, since retirement accounts are usually the last asset people expend in financial difficulty and they usually survive bankruptcy. Following a Chapter 7 discharge, the retirement plan may be the plan participants only garnishable asset. 5. Tax Implications Another important consideration if requesting a QDRO as a collection or enforcement mechanism is the potential tax due on the distribution to the alternate payee. As to child support, most orders name the custodial parent as the recipient of child support for the child. However, as discussed above, the child may be named as the alternate payee under ERISA. 29 U.S.C. 1056(d)(3)(K). Naming the child as the alternate payee will cause the plan participant to be taxed on the distribution to the child. See Stahl v. Commr, 81 T.C.M. (CCH) 1087 (2001). If the former spouse is named as the alternate payee, the alternate payee will be taxed on the distribution. 26 U.S.C. 402(e)(1)(A). Note that the statute only imposes a tax on the alternate payee if the alternate payee is the spouse or former spouse. Id. Some plans will not allow tax provisions in the QDRO. Other plans will not allow the alternate payee to designate a beneficiary that does not also qualify as an alternate payee. It is a good idea to clarify these issues with the plan administrator in advance. Remember that if the child is the alternate payee, the pre-retirement survivor annuity cannot be used because it is only available

for former spouses. Once again, the imperfections of using a QDRO for support are evident. Who will cash a $30,000 check made payable to a child? Does this count as property belonging to the child? What will the local registry or Attorney General do with the check? Once again, verify this arrangement will work. If the QDRO enforces an award of spousal maintenance, the alternate payee usually pays the tax on the income anyway (unless the order is to the contrary), so no adjustment would be required. In either case, because the distribution is made pursuant to a QDRO, the payment is not subject to the ten percent premature distribution tax. 26 U.S.C. 72(t)(2)(C). 6. Death of the Child An unanswered question is whether a QDRO for the purpose of paying child support allows the alternate payee child to designate a beneficiary. There is little authority in this area. However, there are intuitive arguments that can be made. First, if there is an arrearage, the death of the child should not have an effect on the arrearage. However, as to the payment of current support, the plan participant is faced with paying monies for the benefit of a deceased child. Does the plan administrator follow state law and terminate the withholding or does ERISA preempt the statute? 7. Attorneys Fees Whether the QDRO can be used specifically for collection of fees is not specifically addressed in the ERISA statutes. A QDRO may generally not be drafted so as to pay the parties attorneys directly out of the retirement plan. See Cunningham, Davison, Beeby, Rogers & Alward v. Herr, 494 N.W.2d 575 (Mich. App. 1993). The case of Johnson v. Johnson, 727 A.2d 473 (N.J. Super. Ct. App. Div. 1999) is illustrative. In Johnson, a provision in the parties divorce judgment that required payment of attorneys fees from the husbands pension fund was found to have constituted an assignment of benefits expressly prohibited by federal law. The parties divorce judgment stated that $8,000 would be withdrawn from the husbands union annuity fund, with $4,000 to be paid to the wifes attorney and $4,000 to be paid to the husbands attorney. The fund refused to disburse these monies, asserting

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that the payments would violate ERISA and the Internal Revenue Code (IRC). The trial court joined the fund as a party and ordered it to pay the attorneys fees in accordance with the divorce judgment. On appeal, it was found that the orders compelling payment of attorneys fees from the fund violated ERISA and must be vacated. The court noted that the fund was established and maintained pursuant to the provisions of ERISA and the IRC, so that the fund was required to comply with the provisions of those statutes. ERISAs anti-alienation provision states: Each pension plan shall provide that benefits provided under the plan may not be assigned or alienated. 29 U.S.C. 1056(d)(1). This provision reflects a considered congressional policy choice, a decision to safeguard a stream of income for pensioners . . . even if that decision prevents others from securing relief for the wrongs done them. Johnson, 727 A.2d at 477 (quoting Guidry v. Sheet Metal Workers Natl Pension Fund, 493 U.S. 365, 376 (1990)). See also 26 U.S.C. 401(a)(13)(A) (In general, a trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that benefits provided under the plan may not be assigned or alienated.). According to the United States Department of the Treasury, the definition of assignment or alienation includes any direct or indirect arrangement (whether revocable or irrevocable) whereby a party acquires from a plan participant or beneficiary a right or interest enforceable against the plan in, or to, all or any part of a plan benefit payment which is, or may become, payable to the plan participant or beneficiary. 26 C.F.R. 1.401(a)-13(c)(1)(ii). In accordance with these provisions, the plan documents expressly prohibited the assignment or the sale of the plan participants rights under the plan, the court noted. The court said that there are only two exceptions to ERISAs anti-alienation provision. The first exception permits a voluntary and revocable assignment of not more than 10% of any benefit payment. That exception only applies to benefits which are currently payable. Which was not applicable in this case. The second exception, the court said, is for QDROs, which must meet specified requirements for exemption from ERISAs anti-alienation provision, as set out in 29 U.S.C. 1056(d)(3). The attorneys did not fall within ERISAs definition of an alternate

payee, defined as any spouse, former spouse, child, or other dependent of a participant who is recognized by a domestic relations order as having a right to receive all, or a portion of, the benefits payable under a plan with respect to such participant. 29 U.S.C. 1056(d)(3)(K). Further, the disputed provisions did not relate to child support, alimony, or the parties marital property rights as required by 29 U.S.C. 1056(d)(3)(B) (ii)(I). Instead, the provisions concerned the payment of attorneys fees arising out of the parties marriage dissolution, a matter not provided for under the anti-alienation exception. Johnson, 727 A.2d at 479. Finally, the payment of a plan participants attorneys fees was a benefit not provided for under the plan and thus violated 29 U.S.C. 1056(d)(3)(D)(i). The annuity fund specified several circumstances in which payments would be made, but did not provide for a pre-retirement lump-sum withdrawal to pay attorneys fees. Since the orders for the payment of attorneys fees did not meet the statutory definition of a QDRO, they were ineffective and unenforceable, the court decided. The court cited several federal court cases, including Dickerson v. Dickerson, 803 F. Supp. 127 (E.D. Tenn. 1992) (order awarding wife immediate lump-sum payment from husbands pension benefits, rather than waiting until pension benefits reached pay status, did not meet requirements for QDRO); Stott v. Bunge Corp., 800 F. Supp. 567 (E.D. Tenn. 1992) (order requiring one-half of husbands pension benefits to be paid to wife in lump sum as soon as administratively possible did not meet requirements for QDRO because it required payment before time permitted by plan); and AT&T Management Pension Plan v. Tucker, 902 F. Supp. 1168 (C.D. Cal. 1995) (orders directing pension plan to pay over $50,000 and additional $10,000 to wifes attorney as attorneys fees were not QDROs and were preempted by ERISAs antialienation clause). Since obtaining attorneys fees directly from the plan is unlikely, your remedy may be to look to payment once the benefits are distributed, or get paid in advance. IV. DRAFTING The following model QDRO in Appendix A is intended for use by family law attorneys in order

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to obtain current and past-due child support for their clients. It is a defined benefit QDRO for a plan participant in pay status. The plan administrator approved this order, but your results may vary. A defined contribution plan will be similar. Further, an additional clause may be helpful to incorporate into your QDRO such as identifying that the order relates to the provision of spousal/child support to the alternate payee as a result of the [name of order] between the plan participant and the [obligee/former spouse]. Remember to reference the need for a QDRO in your motion for modification and/or enforcement. V. CONCLUSION The QDRO is an underutilized order. The QDRO is most useful for its most common application: distributing community property interests in qualified plans. However, its use is not so limited in law and should not be so limited in practice. In the right situations, it can provide a fairly effective remedy to overcome the problems of funding support obligations and enforcement of those same obligations. While a QDRO for this purpose can be a challenge to draft, it can provide a steady and reliable source of support. Again, the only procedural limitation in ERISA is that it be entered pursuant to state domestic relations law and relate to the provision of child support, spousal support payments, or marital property rights.

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APPENDIX A CAUSE NUMBER ______________ IN THE INTEREST OF BABY BEAR, A MINOR CHILD IN THE DISTRICT COURT OF TARRANT COUNTY, TEXAS 324TH JUDICIAL DISTRICT

QUALIFIED DOMESTIC RELATIONS ORDER THE GOLDILOCKS MANAGEMENT PENSION PLAN This Order creates or recognizes the existence of an Alternate Payees right to receive all or a portion of the pension benefits payable with respect to a plan participant under a pension plan.

It is the intent of this Order that this Order is a domestic relations order as defined in section 206(d)(3)(B)(ii) of the Employee Retirement Income Security Act of 1974, as amended (ERISA). It is also the further intent of the Court that this order is a qualified domestic relations order as defined in section 206(d)(3)(B)(ii) of ERISA.
1. This Order shall apply to the Goldilocks Management Pension Plan (the Plan). 2. The Plan Administrator is Goldilocks, Domestic Relations Department, 123 Porridge Lane, The Woods, Texas. 3. The Plan Participant is: Name: PAPA BEAR Address: Social Security Number: 4. The Alternate Payee is: Name: BABY BEAR Address: Social Security Number: Date of Birth: November 1, 1982 5. This Order assigns to the Alternate Payee, for the purpose of child support payments, the right to receive a portion or all of the pension benefits provided by the Plan to the Plan Participant as described in the following paragraphs. The child the subject of the suit is as follows: Name: BABY BEAR Birthplace: Fort Worth, Tarrant County, Texas Present Address: Sex: Male Birth Date: November 1, 1982 Social Security No.:

6. IT IS ORDERED that the Plan shall pay the Alternate Payee a monthly pension benefit from the Plan Participants monthly pension benefit in the Plan, as follows:

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DATE March 1, 1998 April 1, 1998 May 1, 1998 June 1, 1998 July 1, 1998 August 1, 1998 September 1, 1998 October 1, 1998 November 1, 1998 December 1, 1998 January 1, 1999 February 1, 1999 March 1, 2000 April 1, 2000 May 1, 2000 June 1, 2000 July 1, 2000 August 1, 2000 September 1, 2000 October 1, 2000 November 1, 2000 December 1, 2000 January 1, 2001 February 1, 2001

AMOUNT $ 417.89 $ 417.89 $ 417.89 $ 417.89 $ 417.89 $ 417.89 $ 417.89 $ 417.89 $ 417.89 $ 417.89 $ 417.89 $ 417.89 $ 390.08 $ 390.08 $ 390.08 $ 390.08 $ 390.08 $ 390.08 $ 390.08 $ 390.08 $ 390.08 $ 390.08 $ 390.08 $ 390.08

DATE March 1, 1999 April 1, 1999 May 1, 1999 June 1, 1999 July 1, 1999 August 1, 1999 September 1, 1999 October 1, 1999 November 1, 1999 December 1, 1999 January 1, 2000 February 1, 2000 March 1, 2001 April 1, 2001 May 1, 2001 June 1, 2001 until a condition of section 9 of this Order is met

AMOUNT $ 403.98 $ 403.98 $ 403.98 $ 403.98 $ 403.98 $ 403.98 $ 403.98 $ 403.98 $ 403.98 $ 403.98 $ 403.98 $ 403.98 $ 376.17 $ 376.17 $ 376.17

$ 256.79

7. The monthly pension payments to the Alternate Payee shall commence as soon as administratively possible after the Plan Administrator determines that this Order is a qualified domestic relations order. 8. The Alternate Payees monthly pension benefit payments shall be made payable to: BABY BEAR c/o MAMA BEAR, Tarrant County Child Support Office, P. O. Box 961014, Fort Worth, Texas 76161-0014, Account Number _____________. 9. The monthly pension benefit payments to the Alternate Payee shall cease upon the earliest of the following events: (a) the Plan Administrators receipt of a Court order which requires the termination of pension payments to the Alternate Payee under this Order; (b) the date the Alternate Payee reaches the age of 18 years, provided that, if the Alternate Payee is fully enrolled in an accredited secondary school in a program leading towards a high school diploma, the payments shall continue to be due and payable until the end of the school year in which the Alternate Payee graduates; (c) the Alternate Payee marries; (d) the Alternate Payee dies; (e) the Alternate Payees disabilities are otherwise removed for general purposes; (f) the Alternate Payee is otherwise emancipated; or (g) the death of the Plan Participant. 10. Nothing contained in this Order shall require the Plan or the Plan Administrator to (a) provide any type or form of benefits, or option, not otherwise provided under the Plan, (b) provide increased pension benefits (determined on the basis of actuarial value), and (c) require the payment of pension benefits to the Alternate Payee which are required to be paid to another alternate payee under another domestic relations order previously determined to be a qualified domestic relations order by the Plan Administrator.

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11. The monthly pension payments to the Alternate Payee pursuant to this Order shall be included in the Plan Participants gross taxable income. 12. A Court certified copy of this Order shall be served upon the Plan Administrator. SIGNED on ___________________________________, 1998.

_______________________________________ JUDGE PRESIDING

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