Kentucky Child Support Laws and Retirement Plan Distributions
Kentucky employers with 20 or more employees need to notify the child support office if any employee who is currently under a wage withholding order for child support terminates employment and is due to receive a retirement plan distribution of at least $150. The notification requirement only applies if the employee elects to receive the distribution in cash. If the employee chooses to roll his distribution to an IRA or another plan, then there is no requirement to notify the child support office.
The individual providing the notification must include their name, email address and phone number and a statement that reads: "The following individual (include name and social security number (SSN)) is due to receive a lump sum payment from our retirement plan scheduled to be paid on XXXX date (would need to be in the future).” If the SSN is not available, the FULL name and the last four digits of SSN can be provided instead.
After the child support office receives the notification, they will inform the county that holds the child support order of the upcoming payment. The distribution should not be processed for at least 30 days from the date notification is made to the child support office, to give the county time to research whether the employee is in arrears on any child support payments.
The county that holds the child support order will determine if the payment should be redirected because of any past-due child support obligations. The county will need to supply a court order if they are requesting that the payment be redirected.
Generally, as long as the child support payments are current, the retirement distribution will not be affected. However, if the child support payments are in arrears, some or all of the distribution can be applied to the amount in arrears.
Notification is not required if the employee chooses to roll over to an IRA or qualified plan - because then it is not current income to the person. Since you won’t know the participant’s chosen method of distribution until you receive the participant’s signed distribution request, the notification cannot be started until you have the participant’s completed distribution form in hand. From this point, if the employee is electing to be paid a lump sum in cash, the child support office is notified and there needs to be a 30-day wait before the distribution can be paid. So, the participant will have a waiting period of about 45 days in this situation.
The lump sum coordinator for Kentucky Child Support Enforcement is Carolyn Coney. She can be reached at (505)564-2285 ext. 4859 or by email at CarolynG.Coney@ky.gov. The written notification must be mailed to the address listed below or FAXED to Ms. Coney’s attention at (502) 564-9864. Please note that this contact information is for employers only and should NOT be provided to participants.
Child Support Enforcement
Attn: Carolyn Coney
Post Office Box 2150
Frankfort, KY 40602-2150
RMS does not have any involvement in the notification process with the child support office, as we generally are not aware of those situations with individual employees. If we are assisting with distribution request reviews, and there is an employee for whom this might be an issue, the employer will need to inform the RMS Account Executive so that we are aware of any 30-day wait that might need to be applied.