Child Support Calculations: The Unfairness of the Mandatory Retirement Deduction

  1. Family Law
  2. Custody and Child Support
  3. Child Support Calculations: The Unfairness of the Mandatory Retirement Deduction

When calculating child support, California Family Code section 4059 (c) requires the court to deduct from a parent’s net disposable income all mandatory retirement payments, so long as they are a condition of employment. On the other hand, the Family Code does not allow a parent to deduct from net disposable income payments to plans such as 401(k) plans in which participation is not a condition of employment. The combination of this rule discriminates against parents whose employers do not require participation in a retirement plan and discriminates against the children of parents whose employer requires participation in a retirement plan.

The children of parents whose employer requires participation in the plan will receive less support from that parent than the children of parents who work for an employer that does not require participation in a plan. If a parent has $100 of net disposable income and ten dollars of mandatory contributions, then that parent’s share of support will be calculated on $90. On the other hand, if a parent with the same disposable income has a non-mandatory 401(k) plan with a private employer that parent’s share of child support will be calculated on $100 even though the parent’s actual cash from the employer will be $90.

Because most mandatory retirement plans are government pension plans for government employees and not all employees are government employees, this rule often leads to bizarre and unfair results.

Consider, for example, a mother working in the private sector and contributing to a 401(k) plan in which her employer does not require her to participate, who was married to a father who is a public employee with a pension plan into which the government requires contributions. Assume they both make the same income and the amounts of money contributed to each of their plans by the two parents are equal. In this case, the public employee will be allowed to contribute money toward that employee’s ultimate retirement and pay less support, while the mother will be required to contribute more money for support and punished for planning for retirement.

This rule also results in discriminatory child support awards for the children even if the parents in each case have identical net disposable incomes before considering mandatory retirement payments. There are three options: 1) both parents have mandatory plans; 2) only one parent has a mandatory plan; and 3) neither parent has a mandatory plan.

First, if both parents are public employees with mandatory retirement plans, the calculation of support will deduct the contributions to those plans from both employees’ net disposable income. This results in the lowest payment of child support of the three options.

Second, if one of the parents is a public employee with a mandatory plan and the other is not, the calculation of support will deduct the contributions of only one parent and give the child of those two parents more support than if they were both employees with mandatory plans. As is pointed out above, the parent who will be contributing to the extra support will be the one in the private sector. This results in a child support payment that is in the middle of the three options.

Third, if both parents are in the private sector and have non-mandatory plans, then neither parent will be able to deduct the retirement contributions from the disposable income. Their children, therefore, will receive the highest of the three possible support awards.

All these results occur when the parties have the same net disposable income without regard to the mandatory retirement payments. The results become even more lopsided in the middle case if the public employee with the mandatory retirement plan has the higher income of the two parents. That higher income results in higher mandatory contributions and thus lower pro rata contributions by the parent with the higher income to the support of the parent’s children relative to the other parent’s contribution.

The United States’ public policy is to encourage people to plan and save for their retirement. Given the inadequacy of the Social Security system, it is even more important now that people plan and save for retirement. California’s public policy, as set forth in the Family Code regarding child support, is to discourage parents of minor children from making contributions to voluntary plans, contrary to the public policy of the United States. California’s policy is wrong.

One legislative remedy would be to allow parents who contribute to voluntary plans to deduct those contributions up to the amount of the contributions of the other parent’s mandatory contributions. Then both parents would be treated more equally, and their children would be treated more equally. Another legislative remedy would be to simply eliminate the deduction for mandatory contributions and treat them as if they were the equivalent of voluntary contributions.

The problem with getting a legislative remedy, however, is that the state employee unions have great sway in the California Legislature. The Legislature cannot be expected to do the right thing.

As far as the courts go, to date there is no California appellate court opinion regarding the discriminatory nature of the deduction for mandatory retirement contributions. That means that a parent making voluntary contributions when the other parent is making mandatory contributions can make the argument to the appellate courts that the statute is unconstitutional, and the argument will not be frivolous. On the contrary, attorneys are supposed to bring new arguments to the court.

The problem with the judicial remedy, however, is that it is expensive and does not have a guaranteed result. Rarely is there enough money at stake in a child support award to justify the tens of thousands of dollars that are required to pursue an appellate remedy. To pursue this remedy probably will require an attorney to handle the case on a pro bono basis and a client willing to risk having an attorney’s fee and cost award made against the client by the appellate court. Until such a combination comes together, this unfairness can be expected to continue.

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