July 15, 2019

Colorado Court of Appeals: Collection of Arrearages of Child Support and Maintenance from ERISA Account Proper Under Qualified Domestic Relations Order

The Colorado Court of Appeals issued its opinion in In re Marriage of Drexler and Bruce, Jr. on Thursday, March 28, 2013.

Dissolution of Marriage—Retirement Funds—Employee Retirement Income Security Act—Qualified Domestic Relations Order—Noncompliance Order.

Husband appealed the trial court’s judgment holding that his retirement funds were not exempt from assignment under a qualified domestic relations order (QDRO) to satisfy domestic support arrearages, and sanctioning husband for noncompliance with the QRDO transfer. The judgment was affirmed.

The parties’ marriage ended in 2010 and husband was ordered to pay wife $5,000 per month in child support and $12,000 per month in maintenance for four years, followed by $8,000 per month for two years. Husband, a tax attorney and partner at a large law firm, did not comply, resulting in the accumulation of $101,486 in support arrearages and the suspension of his law license. Wife then moved for a QDRO to collect the arrearages from the funds held in husband’s Employee Retirement Income Security Act (ERISA) retirement plan at the law firm.

Husband objected, arguing that Colorado and federal law prohibited assigning his retirement funds to wife to pay the arrearages. The trial court disagreed and ordered the transfer. Husband did not comply, so the court ordered that the QDRO transfer be completed without his signature, that he reimburse wife for her attorney fees, and that the suspension of his previous contempt sentence for violating other court orders be lifted. He appealed.

ERISA generally prohibits assignment or alienation of retirement plan funds. However, both ERISA and the Internal Revenue Code (IRC) provide that the anti-alienation provisions do not apply to funds assigned to a former spouse under a QDRO. A QDRO is a “domestic relations order” that assigns to an alternate payee the right to receive all or a portion of the benefits payable to a participant. Such an order is defined as made pursuant to a state domestic relations law that concerns the provision of child or spousal support, or marital property rights of a former spouse of a plan participant. Here, the QDRO was entered to satisfy husband’s unpaid obligations relating to the dissolution, and therefore originated under Colorado domestic relations law, and not, as argued by husband, under Colorado collections law.

A QDRO also may be used under ERISA to enforce maintenance and child support obligations imposed under a divorce decree. Thus, the trial court did not violate the anti-alienation provisions of ERISA and the IRC by issuing the QDRO to enforce husband’s unpaid support obligations.

Husband argued that regardless of the QDRO exception to ERISA’s anti-alienation clause, his retirement benefits are exempt under Colorado law because CRS § 13-54-102(1)(s) exempts pension or retirement fund plans, including those subject to ERISA “from levy and sale under writ of attachment or writ of execution.” The Court of Appeals agreed with wife that the statute is preempted by ERISA because it imposes limitations not imposed by ERISA. It found that CRS § 13-54-101(1)(s) conflicts with ERISA and therefore is preempted by ERISA in accordance with conflict preemption to the extent it imposes additional limitations not imposed by ERISA on a spouse’s right to receive retirement plan funds under a QDRO.

Husband also contended that the trial court erred by entering the noncompliance order without a hearing after he did not cooperate with the QDRO transfer. The Court disagreed. Husband did not request such a hearing, so there was no error in the trial court not holding one.

Summary and full case available here.