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An employer’s matching contribution to a parent’s 401(k) plan should be considered income in calculating child support if the parent can access the funds, the Pennsylvania Superior Court has ruled in a case of first impression. The court’s decision in Portugal v. Portugal overturns a Chester County Common Pleas Court ruling. Lorie and Howard Portugal married in 1987. The couple had a son in 1995, and, in 1997, their daughter was born. Howard relocated to Washington state in 1999 after he took on a new position with Microsoft. His family planned to join him soon after his relocation, but the couple instead decided to make their separation permanent. Lorie filed for spousal and child support in September 2000. In July 2001, the court entered an order directing Howard to pay $1,599 per month in child support from the time of the separation through the end of 2000 and to pay $1,625 per month thereafter. Howard was also ordered to provide health insurance for the two children. However, Lorie conceded that she was living with another man, and she was then ordered to reimburse Howard for the spousal support he had paid, according to the opinion. Lorie appealed the order, arguing that the trial court committed several errors when calculating the amount of monthly child support. Howard cross-appealed. Lorie claimed that the trial court’s calculations were in error because the court did not include contributions that Howard made to Microsoft’s 401(k) plan when determining his monthly income. The Superior Court agreed, on the basis of its interpretation of Pa. R.C.P. 1910.16-5. The statute states that support is calculated by determining the parties’ net monthly income, determined by subtracting only federal, state and local taxes, FICA payments, non-voluntary retirement payments, union dues and health insurance premiums that benefit the other party or children. The court determined that Howard’s contributions to his employer’s 401(k) plan did not fall within the scope of this list. “Only non-voluntary retirement payments are properly excludable from a parent’s net monthly income. … The trial court must include any voluntary contributions that a parent makes to his/her retirement plan,” Judge Michael T. Joyce wrote for the panel, which included Judges Kate Ford Elliott and Phyllis W. Beck. The court also relied on Pa. C.S.A. � 4302. In part, the section states that all forms of retirement and pensions constitute income. Finding no Pennsylvania case law addressing the issue whether Howard’s 401(k) contributions should count as income, the court turned to a Virginia Court of Appeals decision, Frazer v. Frazer, holding that 401(k) contributions are voluntarily set aside by the employee for his or her future benefit and should, therefore, be included in determining gross income for support purposes. However, the Superior Court could not determine whether the trial court included Howard’s 401(k) contributions when calculating his support obligations, and remanded the case to the trial court for further proceedings on this issue. The Superior Court then turned to Lorie’s claim that the trial court abused its discretion in not including as income the employer’s matching contributions to Howard’s 401(k) plan. Finding no binding authority on the issue, the court turned to two North Dakota Supreme Court decisions. In Shiply v. Shiply, the North Dakota Supreme Court ruled that an employer’s contributions to an employee’s pension plan were properly included in calculating the employee’s gross income because the funds constituted “income from any source” under North Dakota’s statutory definition of gross income. The same court also held, in Shaver v. Kopp, that an employer’s contribution to a tax-deferred savings plan qualified as gross income because the employer could withdraw these funds at any time. The Pennsylvania court agreed with the North Dakota decisions. Under � 4302, the court 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. “For if an employee/parent is entitled to any portion of these funds at the time of the support calculation,” the court reasoned, “his/ her children should presently reap the benefit of the investment. “If we were to determine that an employer’s matching contributions are not income, it would be possible for an employee to enter into an agreement with his employer to take less wages in exchange for a heightened matching contribution. This would effectively permit an employee to shield his income in an effort to reduce his child support obligation.” Howard’s cross-appeal was remanded 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 Lorie and Howard to claim the child as a dependant. Mark A. Momjian of Philadelphia-based Schnader Harrison Segal & Lewis represented Howard Portugal. Terry Vanderpool represented Lorie Portugal.

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