Support Payments to Include K Plan Assets

May 17, 2002 ( - Pennsylvania judges awarding child support should include an employee's 401(k) contributions and the employer's match when determining the person's income, an appeals court has ruled.

A three-judge Pennsylvania Superior Court panel ruled that a lower court judge mistakenly didn’t include the retirement plan payments Howard Portugal made to his employer, Microsoft, when setting the level of support payments, according to a story in The Legal Intelligencer.

“The trial court must include any voluntary contributions that a parent makes to his or her retirement plan,” Judge Michael Joyce wrote for the panel.

With no Pennsylvania case law as precedent, the Superior Court relied on a Virginia Court of Appeals case which held that an employee’s 401(k) contributions are voluntarily made for the employee’s future benefit, so they should be included when determining support payments.

However, the Superior Court could not determine whether the trial court included Howard’s 401(k) contributions and sent the case back to the trial judge for further consideration.

The appeals judges also agreed with claims by Portugal’s wife Lorie who claimed that the trial judge should have also included in her husband’s income the money from Microsoft’s 401(k) matching contribution.

The Superior Court judges said an employer’s contribution constitutes “any form of payment … collectible by an individual regardless of source” if the employee can access his employer’s contributions at the time support is calculated.

The judges worried that allowing 401(k) matches to be excluded from support calculations might spark parents to work out deals with employers under which they take less in wages in exchange for a higher shielded match amount.

Case Background

According to court papers, Howard Portugal moved from suburban Philadelphia to the State of Washington in 1999 after taking the Microsoft job – leaving Mrs Portugal and two young children behind. The couple originally planned to reunite, but eventually decided to make the separation permanent.

Mrs Portugal filed for spousal and child support in September 2000. In July 2001, the trial judge ordered Portugal to pay $1,599 per month in child support from the time of the separation through the end of 2000 and $1,625 per month after that. He was also ordered to provide health insurance for the children.

Lawyers for Mrs. Portugal appealed the child support order, arguing that both her estranged husband’s retirement contribution and the company match should have been taken into account. The husband also appealed.
The husband’s cross-appeal was also sent back to the trial court on one issue – his claim that the trial court erred in not allocating to him one of the children’s tax exemptions.

The Superior Court did not rule on this issue because the trial court erred in allowing both parents to claim the child as a dependant.