In Silverman v. Spiro, 438 Mass. 725 (2003), the Massachusetts Supreme Judicial Court held that a judge can enter a qualified domestic relations order (QDRO) requiring a party in a domestic relations dispute to pay the other party’s attorney’s fees and costs (attorney’s fees) out of his or her retirement account in the context of a claim for the collection of past due spousal or child support.
The Silverman decision is one of first impression in Massachusetts. The holding clarifies that a QDRO issued to aid in the collection of attorney’s fees incurred to enforce a spousal or child support order does not violate the QDRO exception to the anti-assignment and anti-alienation provision of the Employment Retirement Income Security Act of 1974 (ERISA).
ERISA-governed retirement plans must contain an anti-assignment and anti-alienation provision that prohibits an employee from assigning or alienating benefits under the plan. Such a provision is intended to protect an employee from his or her creditors – to “protect an employee from his own financial improvidence in dealing with third parties.” Hawkins v. Commissioner of Internal Revenue, 86 F.3d 982, 988 (10th Cir. 1996), quoting American Tel. & Tel. Co. v. Merry, 592 F.2d 118, 124 (2d Cir. 1979).
QDROs came about in 1984 when Congress passed the Retirement Equity Act of 1984 (REA). The REA amended ERISA to provide an exception to the anti-assignment and anti-alienation rule – a “qualified domestic relations order,” or a “QDRO.” REA, Pub. L. No. 98-397, § 104(a), 98 Stat. 1433 (1984). See 29 U.S.C. § 1056(d)(3)(A). The term “qualified domestic relations order” is defined in ERISA as “a domestic relations order . . . which creates or recognizes the existence of an alternate payee’s right to, or assigns to an alternate payee the right to, receive all or a portion of the benefits payable with respect to a participant under a plan.” Pub. L. No. 98-397, § 104(a), supra. See 29 U.S.C. § 1056(d)(3)(B)(i)(I). A “domestic relations order” is “any judgment, decree, or order (including approval of a property settlement) which — (I) relates 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 (II) is made pursuant to a State domestic relations law.” Pub. L. No. 98-397, § 104(a), supra. See 29 U.S.C. § 1056(d)(3)(B)(ii).
QDROs are most often used in the context of property division arising from divorce. With a QDRO the court can assign the ERISA-governed retirement benefits of one spouse to the other to effectuate an equitable distribution of martial property. As a result of the Silverman case practitioners now often use QDROs as a tool in the collection of child support and alimony payments (and related attorney’s fees) as well.