Anti-alienation

[BTG]

Church plans are not subject to the anti-alienation requirements of Code Section 401(a)(13) or ERISA Section 206(d). However, many voluntarily include language prohibiting a participant's benefit from being assigned, garnished, etc...

Can anybody think of any problem with a church plan that generally prohibits such alienation being amended to permit a participant's benefit to be garnished in the limited situation where the purpose was provide restitution to the plan or a particpating employer for a crime? Thanks.

[mbozek]

Church plans are not subject to the anti-alienation requirements of Code Section 401(a)(13) or ERISA Section 206(d). However, many voluntarily include language prohibiting a participant's benefit from being assigned, garnished, etc...

Can anybody think of any problem with a church plan that generally prohibits such alienation being amended to permit a participant's benefit to be garnished in the limited situation where the purpose was provide restitution to the plan or a particpating employer for a crime? Thanks.

If the plan wants to permit recovery of funds for restitution on account of embezzlement or conviction of a crime against the employer it is necessary to have such an exception to the non alienation rules in the plan document because courts do not like to add implied exceptions to non alienation provisions. One question is whether the provision would apply to offenses committed before the date the plan is amended. The other is whether state law prohibits such a recovery. Many states have laws prohibiting seizure of pension benefits by creditors with narrow exceptions such as fraudlent conveyance. I dont know if a pension plan seekiing restitution from a participant would be regarded as a creditor under state law. Garnishment is a procedure allowed under state law that is only available to a judgment creditor and may not be available to seize pension benefits.

[jpod]

Consider having a "bad boy" forfeiture clause in the plan. (They were permitted under pre-ERISA vesting rules, I believe.) That won't get $$ in the hands of the employer, but the money will be freed up to be used for other plan purposes, which could then save the employer $$, if not immediately at least over time. You would need to consider the extent to which that could be applied retroactively to benefits already vested.

[Guest lacynich]

Thanks for this!

[Guest leopan13]

Thanks