Drexler v. Bruce

• Decision Date: 28 March 2013
• Docket Number: Court of Appeals Nos. 11CA2202 & 12CA0192
• Parties: IN RE the MARRIAGE OF Regina T. DREXLER, Appellee, and Charles B. BRUCE, Jr., Appellant.
• Court: Colorado Court of Appeals

315 P.3d 179

IN RE the MARRIAGE OF Regina T. DREXLER, Appellee,
and
Charles B. BRUCE, Jr., Appellant.

Court of Appeals Nos. 11CA2202 & 12CA0192

Colorado Court of Appeals,
Div. I.

Announced March 28, 2013

City and County of Denver District Court No. 09DR2227, Honorable Herbert L. Stern, III, Judge
McClain Drexler Matthews, LLC, Michael P. Matthews, Denver, Colorado, for Appellee

Charles B. Bruce, Jr., Pro Se

Opinion by JUDGE TAUBMAN

¶ 1 This appeal is one of several brought by Charles B. Bruce, Jr. (husband) arising out of the dissolution of his marriage to Regina T. Drexler (wife). The present dispute raises the issue whether an obligor spouse's retirement funds in a plan subject to the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001–1461 (2010), are exempt from assignment under a qualified domestic relations order (QDRO) to satisfy domestic support arrearages. Husband argues that his retirement funds are exempt under both Colorado and federal law. We hold that the funds are not exempt, and we affirm the trial court's orders for a QDRO assigning the funds to wife, and sanctioning husband for noncompliance with the transfer.

I. Background

¶ 2 The parties' marriage ended in 2010 and husband was ordered to pay wife $5000 per month in child support and maintenance of $12,000 per month for four years, followed by $8000 per month for two years. Thereafter, husband, who was a tax attorney and partner at a large law firm, did not comply with his obligations, resulting in the accumulation

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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 ERISA retirement plan at the law firm.

¶ 3 Husband objected, contending that Colorado and federal law prohibited assigning his retirement funds to wife to pay the arrearages. The trial court disagreed and ordered him to transfer the funds to wife using a QDRO. After husband did not comply, the court ordered that the QDRO transfer be completed without his signature, that he reimburse wife for her attorney fees incurred because of his noncompliance, and that the suspension of his previous contempt sentence for violating other court orders be lifted. This appeal followed.

II. Use of the QDRO to Satisfy Wife's Arrearages A. Standard of Review

¶ 4 We review de novo the legal issue whether Colorado and federal statutes prohibit assignment of husband's retirement funds to pay wife's arrearages. SeeWolf Ranch, LLC v. City of Colorado Springs, 220 P.3d 559, 563 (Colo.2009) (statutory interpretation is a question of law subject to de novo review).

B. Federal Law

¶ 5 ERISA was enacted to protect private retirement plan participants and their beneficiaries. See29 U.S.C. § 1001b(b) (2006); Boggs v. Boggs, 520 U.S. 833, 845, 117 S.Ct. 1754, 138 L.Ed.2d 45 (1997). To this end, the act generally prohibits assignment or alienation of retirement plan funds. 29 U.S.C. § 1056(d)(1) (2006); seePeople v. Stephenson, 12 P.3d 266, 268 (Colo.App.1999) (ERISA anti-alienation clause prohibits assignments of retirement benefits, even when done pursuant to court order); see also26 U.S.C. § 401(a)(13)(A) (2006) (the Internal Revenue Code (IRC) contains a similar anti-alienation provision for retirement plan funds).

¶ 6 Both ERISA and IRC further provide, however, that the anti-alienation provisions do not apply to retirement funds that are assigned to a former spouse under a QDRO. 29 U.S.C. § 1056(d)(3) (2006); 26 U.S.C. § 401(a)(13)(B) (2006); Boggs, 520 U.S. at 846, 117 S.Ct. 1754; Hawkins v. Comm'r of Internal Revenue, 86 F.3d 982, 988 (10th Cir.1996); In re Marriage of LeBlanc, 944 P.2d 686, 688 (Colo.App.1997).

1. QDRO

¶ 7 A QDRO is a mechanism created under ERISA to allow a former spouse to receive all or a portion of the benefits owed to a participant under a retirement plan. SeeBoggs, 520 U.S. at 846–47, 117 S.Ct. 1754; see alsoRafferty–Plunkett v. Plunkett, 392 Ill.App.3d 100, 331 Ill.Dec. 261, 910 N.E.2d 670, 672 n.1 (2009) (describing QDRO as “a creature of” ERISA); Barnes v. Barnes,181 Md.App. 390, 956 A.2d 770, 789–90 (2008) (same). A QDRO is defined as 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. 29 U.S.C. § 1056(d)(3)(B)(i) (2006); Boggs, 520 U.S. at 846, 117 S.Ct. 1754; see also26 U.S.C. § 414(p)(1)(A) (2006). A “domestic relations order” in turn is defined as an order made pursuant to 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. 29 U.S.C. § 1056(d)(3)(B)(ii) (2006); Boggs, 520 U.S. at 846, 117 S.Ct. 1754; see also26 U.S.C. § 414(p)(1)(B) (2006).

¶ 8 Here, the QDRO was entered expressly as a means to satisfy husband's unpaid obligations relating to the dissolution, including those for child support, maintenance, and attorney fees under section 14–10–119, C.R.S.2012. Thus, the QDRO originated under Colorado domestic relations law, as required by ERISA, and not, as husband contends, under Colorado collections law.¹

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2. Support Arrearages

¶ 9 A QDRO is not only a mechanism to divide retirement benefits between spouses under the marital property provisions of a dissolution decree; it may also be used, under ERISA, to enforce maintenance and child support obligations imposed under the decree. SeeLeBlanc, 944 P.2d at 688–89. A QDRO issued for this purpose does not result in an improper modification of the property division provisions of the decree. SeeHogle v. Hogle, 732 N.E.2d 1278, 1284 (Ind.Ct.App.2000); In re Marriage of Bruns, 535 N.W.2d 157, 161–62 (Iowa Ct.App.1995); Baird v. Baird, 843 S.W.2d 388, 391–92 (Mo.Ct.App.1992); Nichols v. Nichols, 891 P.2d 1303, 1306 (Okla.Civ.App.1995).

¶ 10 Further, the decree need not expressly provide that support payments will be paid from retirement funds. SeeIn re Marriage of Thomas, 339 Ill.App.3d 214, 273 Ill.Dec. 647, 789 N.E.2d 821, 831–32 (2003) (rejecting obligor husband's argument that parties' settlement agreement, under which wife waived any right to his retirement benefits, precluded the court from assigning his benefits under a QDRO to satisfy maintenance and child support arrearages); Baird, 843 S.W.2d at 391–92 (reversing trial court order dismissing QDRO as to pension funds that were awarded solely to the obligor spouse under the decree).

¶ 11 On this issue, we decline to follow Hoy v. Hoy,29 Va.App. 115, 510 S.E.2d 253, 254–55 (1999), which held that using a QDRO to collect unpaid spousal support from the obligor spouse's retirement funds constituted an improper modification of the dissolution decree. SeeThomas,273 Ill.Dec. 647, 789 N.E.2d at 831 (agreeing with the “quantum of persuasive authority” permitting use of a QDRO to assign retirement benefits to satisfy past due maintenance and child support obligations); Hogle, 732 N.E.2d at 1283–84 (rejecting Hoy in favor of other authorities holding that a QDRO is an appropriate mechanism for enforcing support arrearages); see also Michael P. Boulette, Collecting Child Support and Maintenance: A New Role for QDROs, 69 Bench & Bar of Minn. 20, 22 (Oct. 2012) (noting that the use of QDROs to enforce past due support has “received increasing...