ERISA Plans Not Safe from Government-Owed Restitution

A federal court has found a retirement plan participant’s plan balance can be garnished for money owed to the U.S. government.
By None

The U.S. District Court for the Western District of North Carolina has ruled that neither the Employee Retirement Income Security Act’s (ERISA’s) anti-alienation provision nor the anti-alienation provision in the Internal Revenue Code provides a bar to the garnishment of government-owed restitution from a qualified pension plan.

Section 206(d) of ERISA, the anti-alienation provision, provides that “each pension plan shall provide that benefits under the plan may not be assigned or alienated.” But Chief U.S. District Judge Frank D. Whitney agreed with the U.S. government’s argument that the Mandatory Victim Restitution Act of 1996 (MVRA) provides a Congressional exception to ERISA’s anti-alienation provision with regard to the enforcement of restitution against a criminal defendant.                  

According to the court opinion, the MVRA provides that the U.S. may enforce a judgment imposing a fine [or an order of restitution] in accordance with the practices and procedures for the enforcement of a civil judgment under Federal law or State law. The MVRA says, “Notwithstanding any other Federal law (including section 207 of the Social Security Act), a judgment imposing a fine may be enforced against all property or rights to the property of the person fined,” and it lists a few exceptions. The court agreed that defendant Willard Edward Wilson’s interest in the United Brotherhood of Carpenters Pension Fund did not fit within any of the exceptions listed.

One of the exceptions listed in the MVRA was “property which would be exempt from a levy for the payment of federal income taxes.” Whitney noted that Congress has mandated that for purposes of enforcement of the Internal Revenue Code’s alienation provision, a restitution order is to be treated as “a lien in favor of the United States on all property and rights to property of the person fined as if the liability of the person fined were a liability for a tax assessed under the Internal Revenue Code of 1986.” The court cited two court cases which emphasized that tax liabilities may be garnished from an ERISA plan and thus, under the IRC alienation provision, so may government ordered fines or restitution.

Wilson was convicted of conspiring to defraud the United States by facilitating a mortgage fraud scheme. He was ordered to pay restitution in the amount of $850,374.71. The government obtained a Writ of Continuing Garnishment against Wilson’s interest in the United Brotherhood of Carpenters Pension Fund, but the fund claimed that Wilson’s pension benefits are exempt from garnishment under ERISA. So, the government filed the lawsuit.

The opinion in USA v. Wilson is here.