Can Child Support be Taken from a Retirement Fund?
Many tools are available to enforce compliance when parents do not fulfill their child support obligations. Some measures—like seeking to suspend the parent’s driver’s license—act coercively. They put pressure on the parent to remove the legal disability by finally catching up on unpaid child support. Other tools allow the state to reach the parent’s money directly and take it to fulfill their child support obligations.
Can the state reach into a parent’s retirement fund and confiscate money to pay for child support? This would be ideal for many parents. Someone who has failed to pay child support for years could end up owing $100,000 or more. For many people, their retirement account is the largest asset that they have, and gaining access to the fund could cover some or all of the money you are owed.
However, South Carolina’s law limits the ability of any creditor to reach a person’s retirement accounts. You should contact Surasky Law Firm for more individualized advice about your case. If you are the parent who receives support payments, we can develop strategies for obtaining child support. If you are the delinquent parent, we can also explain your rights and represent you in any hearing over your past-due support obligations.
South Carolina’s Law on Attaching Property
South Carolina Code § 15-41-30 is the relevant law. It identifies the property exempt from attachment, levy, and sale based on any court process. The law then lists over a dozen subsections of exempt property.
Subsection 13 exempts any plan under Section 408(a) of the Internal Revenue Code, as well as those under 408A. These accounts cover many popular individual retirement accounts, including:
· Traditional IRAs
· Roth IRAs
· SEP (Self Employment Plans)
· SIMPLE plans
If you open an IRA, then the money you deposit into it is exempt from creditor attachment. The same is true of other qualifying plans. That is good news for parents planning for retirement.
This subsection includes a limitation, however. You cannot fraudulently convey money into a retirement account to keep it out of the reach of a creditor. So if you are behind on child support to the tune of $50,000, you can’t quickly open a retirement plan and stash money in it to keep it away from the other parent. Still, the law doesn’t say family law creditors are exempt from this law.
Subsection 14 also exempts plans that qualify under the Employee Retirement Income Security Act (ERISA), which is an important federal law. This law covers some popular employer-sponsored plans, such as:
· 401K
· HRA accounts
· Profit-sharing plans
Using a QDRO to Reach Child Support
Child support also potentially implicates federal law. ERISA and the Internal Revenue Code allow for Qualified Domestic Relations Orders (QDRO) to divide marital property during divorce. Under the law, a former spouse can also receive payments for child support, which qualifies as a domestic relations order.
Since federal law regarding employer-sponsored retirement plans trumps state law, this might be an option if the delinquent parent has an ERISA-qualifying retirement plan. The QDRO instructs the plan administrator to make a payment to the payee, which should be exempt from penalties. This is not an option for individual retirement accounts.
Consult an attorney. The interplay of state and federal laws is complicated. Furthermore, ERISA can limit the ability to receive payment out of a retirement plan. For example, you might only become eligible once the delinquent parent begins to receive payment on the plan. Essentially, that means you would need to wait until his or her retirement to finally get paid for the child support that you are owed.
Furthermore, some plans are not subject to a division with a QDRO.
Other Enforcement Techniques
South Carolina's Department of Social Services (DSS) usually takes the lead on unpaid child support cases. The federal government requires that the state help parents get unpaid child support, although you can use your own attorney. Either way, parents have many techniques for getting a parent to pay, such as:
Withholding income from the payor’s paycheck. This method guarantees payment so long as the parent is working.
Deducting child support from the workers’ compensation or unemployment benefits.
Applying a lien to the parent’s home or personal property. The lien entitles you to payment if and when the property is sold.
Seizing the delinquent parent’s bank accounts and stocks. You can apply the amount seized directly to the unpaid child support debt.
Intercepting state and/or federal tax refunds.
Seizing personal injury settlements over a certain dollar amount.
Revoking the payor’s passport or driver’s license. This action puts pressure on the delinquent parent to start paying.
Revoking the payor’s professional, business, or occupational license. This is usually a final step, since it will make it harder for the parent to pay.
Revoking recreational licenses.
Reporting past-due support to credit reporting bureaus, which can tank a parent’s credit.
A parent who is delinquent on child support could also face an enforcement hearing in court. A judge who finds that the delinquent parent willfully disobeyed the child support order could hold that parent in contempt of court.
Contempt can result in fines and up to a year in jail. Judges hesitate to jail anyone since that obviously makes it hard for parents to earn a living and finally catch up on child support. But it is an option for especially egregious violations, and some judges reach their limit.
This is a Complex Area of Law—Talk to an Expert
The state has an obvious interest in getting parents to pay to support their children. For that reason, many techniques are available. At the same time, the state also wants to limit the ability of creditors to reach certain assets, so it has made them exempt.
Child support arrearages represent a significant amount of money for parents. Surasky Law Firm can assist anyone involved in a child support enforcement action. Please call our law firm to speak with an Aiken, SC child support lawyer about the status of child support payments.
