Rev. Rul. 80-27

Advice has been requested whether a plan will lose its qualification under section 401 of the Internal Revenue Code if the plan trustee complies with a court order requiring the distribution of benefits of a participant in pay status to the spouse or children of the participant in order to meet the alimony or support obligations of the participant.

X corporation established a qualified pension plan for its employees. A was a married employee of X with children. A retired and began to receive monthly payments of $500 under the terms of the plan. A's spouse sued A for divorce. The final divorce decree provided that A should pay $100.00 per month to the spouse as alimony and child support payments. When A subsequently defaulted on these payments, A's former spouse obtained a court order requiring the trustee of the X corporation plan to deduct $100 per month from the retirement payments due to A and to pay the amounts deducted to the former spouse.

Prior to the enactment of the Employee Retirement Income Security Act of 1974 (ERISA) [Pub. L. 93-406, 1974-3 C.B. 1], attachments of a participant's interest in a qualified plan because of the claims of the employer were permitted. See Rev. Rul. 56-432, 1956-2 C.B. 284.

Section 401(a)(13) of the Code, as added by ERISA, provides that a trust shall not constitute a qualified trust unless the plan of which the trust is a part provides that benefits under the plan may not be assigned or alienated.

Section 1.401(a)-13(b)(1) of the Income Tax Regulations provides that, for the purposes of section 401(a)(13) of the Code, a trust will not be qualified unless the plan of which the trust is a part provides that benefits provided under the plan may not be anticipated, assigned (either at law or in equity), alienated or subject to attachment, garnishment, levy, execution, or other legal or equitable process.

The rule against assignment or alienation of plan benefits was intended to assure that the accrued benefits of a plan participant are actually available for retirement purposes. (See H.R. Rep. 93-807, 93d Cong., 2d Sess. (1974), p. 68.) [1974-3 C.B. (Supplement) 236]. Therefore, the participant's benefits are not subject to attachment by general creditors. However, the rule was not intended to defeat the enforcement of the obligation of a plan participant to support the spouse or children of the participant through alimony or support payments. (See, e.g., Cartledge v. Miller, 457 F. Supp. 1146 (S.D.N.Y. 1978); Cogollos v. Cogollos, 402 N.Y.S.2d 929 (Sup. Ct. 1978); and Wanamaker v. Wanamaker, 401 N.Y.S.2d 702 (Sup. Ct. 1978).

Accordingly, a plan will not lose its qualification under section 401(a) of the Code merely because the trustee complies with a court order requiring deductions from the benefits of a participant in pay status for alimony or support payments. However, accrued benefits that are not currently payable to the participant under the terms of the plan may not be attached since the participant has no present right to such benefits.

Rev. Rul. 56-432, 1956-2 C.B. 284, is obsoleted.