QDRO, QMCSO, IWO Oh My! Divorce Orders Requiring Employer Action

All employers, whether today or tomorrow, will encounter court orders requiring their action as a result of an employee’s divorce. Court orders requiring employer action include qualified domestic relation orders (QDRO), qualified medical child support orders (QMCSO), and income withholding orders (IWO). With today’s divorce rate climbing over 50%, employers will increasingly have to accommodate such court orders.

During marriage, generally a spouse’s income and retirement plan are considered marital property. Upon divorce, the court will enter orders dividing the parties’ assets and liabilities, including retirement accounts. A qualified domestic relation order (QDRO) is used by the court to divide ownership of retirement assets between divorcing spouses. All retirement plans covered by ERISA require a QDRO to divide retirement accounts. A QDRO must contain the following information:

  • The name and mailing address of the participant and each alternate payee;
  • The name of each plan to which the QDRO applies;
  • The percentage or dollar amount of the retirement account to be paid to the alternate payee;
  • The length of time or number of payments required by the QDRO.

Employers may also encounter qualified medical child support orders (QMCSO). A QMCSO requires the employee eligible under a group health plan to provide coverage for their dependent children even if they do not have custody of them. QMCSOs may be entered in family law cases involving children, whether or not the parties were ever married. The employee, child’s custodial parent, legal guardian, or state agency may apply for health coverage for the employee’s child. If a state child support enforcement agency is seeking medical coverage for a child, the order requiring medical support will instead be called a National Medical Support Order or Notice (NMSO or NMSN). A QMCSO must include the following:

  • The name and address of the employee;
  • The names and addresses of the children to be covered;
  • Description of the medical coverage to be provided;
  • The length of time medical coverage is required to be provided;
  • Each health plan affected by the order.

A NMSO must include:

  • The name of the state child support enforcement agency issuing the notice;
  • The name and address of the employee;
  • The names and addresses of the children to be covered;
  • The name and address of a state or local official that may be substituted for the child.

NMSOs must also satisfy the QMCSO requirements by including a description of the medical coverage to be provided and specify the period of time the coverage is to be provided.

A third type of order employers often encounter is an income withholding order (IWO). An IWO requires child support to be directly collected from an employee’s paycheck by the employer. IWOs may be entered even if there is no past due child support. Employers have ten days to process paperwork and then must withhold child support from the employee’s next paycheck. Payments must be sent within seven business days after payday. Employers may also withhold an additional $2.00 from each paycheck for administrative expenses. An employer can only withhold up to 50% of an employee’s disposable income. Employees may be subject to more than one IWO. Current child support takes priority over past due child support. Additionally, an IWO takes priority over other wage garnishments, except for IRS tax levies entered prior to the IWO.

It is important for employers to establish policies and procedures on how to handle family law orders. Employers need to have procedures in place to verify that the orders they receive are valid. If you have concerns regarding an order you receive, contact the attorney who sent you the order and you can also contact your own attorney.

Kristen A. Shaffer
Kristen is an Attorney and Vice President at Shuttleworth & Ingersoll whose work focuses on family law and litigation.