court-ordered garnishment

A client just sent me a Final Order of Garnishment from a US District Judge, demanding $X from a participant account for restitution and court-ordered interest.  The order names the Participant as Defendant and the recordkeeper/custodian as "Garnishee".  Nowhere does it mention the plan name.

Anyone have any experience with this?  I get that it's not the same as a QDRO, but shouldn't there at least be some basic standards it has to meet?  I don't want to do anything that will put the plan sponsor in a bad position, either by paying out without proper due diligence or by rejecting it without good reason.

Thanks!

Second Carol's first sentence, though you may want to send it to plan counsel before responding to it. FWIW, there are two recent appointments on the bench at the USDC Albany, both magistrates, both with prosecutorial backgrounds, if that's where the order came from.

17 hours ago, Carol V. Calhoun said:

Garnishment of a participant's account outside of a QDRO is allowed under ERISA only for federal tax debts or court-ordered criminal restitution. If it doesn't say it's for one of those things, I'd respond that this is a qualified plan which is forbidden from complying except in those situations. 

Thanks.  It does clearly indicate it is for "... the full satisfaction of the outstanding restitution balance", though it does go on to say that a portion is actually for "Court-ordered interest" on the base restitution amount.  It doesn't say anything about "criminal restitution"; do we need to be that detailed?

15 hours ago, blguest said:

FWIW, there are two recent appointments on the bench at the USDC Albany, both magistrates, both with prosecutorial backgrounds, if that's where the order came from.

It's neither of those.

If the court’s order names as the garnishee the § 403(b)(7) account’s custodian, isn’t it that trust company that might want its lawyer’s advice about whether and how to respond?

And if the order does not name the plan or its administrator, might the plan’s administrator want its lawyer’s advice about whether it must or should do something, or need not (and perhaps should not) do anything?

There are 163,000+ ERISA qualified retirement and pension plans in the USA are you going to assume that it is your Plan.  I would kick it back and require the Order to identify the correct name of the plan.  

You didn't say that this was a QDRO and that it was a garnishment intended to implement a criminal restitution.  In order for that to take place the court would first have to determine that the debtor's spouse did not have a marital interest in the Plan. 

In US v. Abell, 435 F.Supp.3d 299 (D. Mass.,2020), affirmed 985 F.3d 111 (2021), the husband pleaded guilty to eight counts of wire fraud and money laundering and was sentenced to 97 months incarceration and three years supervised release. The Court also issued an Order of Forfeiture for criminal restitution in the amount of $3,879,750.00.  The Government sought a Writ of Garnishment against the husband's assets including his 401(k) plan with an approximate value of $393,500.00.

The husband and his wife oppose garnishment of the 401(k) account on the grounds that the wife had a vested interest in the 401(k) account by virtue of her marriage to the husband, and that Massachusetts property law compels equitable distribution of marital assets and, therefore, the wife is entitled to an equitable portion of the funds in the 401(k) account.

The court held:

        "The argument that Massachusetts property law precludes garnishment of defendant's 401(k) Account is unavailing. Persuasive case law indicates that the pre-divorce property interest of an individual in her spouse's ERISA-qualified retirement account is governed exclusively by federal law, not state property law. See, e.g., United States v. Novak, 476 F.3d 1041, 1061 (9th Cir. 2007) (en banc) ("Retirement plans covered by ERISA ... are governed exclusively by federal law."); United States v. Beulke, 892 F. Supp. 2d 1176, 1180 (D.S.D. 2012) ("Federal  law, not state community property law, determines whether a person has a 'property or a right to property' interest in an ERISA-qualified pension plan."). It is undisputed that the Abells are still married. In the absence of a divorce decree or other qualifying domestic relations order, state property law will not displace federal law with respect to a spouse's alleged claim to a 401(k) Account subject to a criminal restitution order. See Beulke, 892 F. Supp. 2d at 1180."  (Emphasis supplied.)

 In US v. Brazile, Case No. 4:18-cv-00056 SEP.,  United States District Court, E.D. Missouri, Eastern Division.(2020), -
-https://scholar.google.com/scholar_case?case=17860472826493880578&hl=en&lr=lang_en&as_sdt=6,33&as_vis=1&oi=scholaralrt&hist=bY5nDLcAAAAJ:12484640753426065479:AAGBfm1agvHLwT5aWZ_N6PDZrK7iWFqV8A&html=&eexpid=320022102

...involved a case where on July 30, 2013, Steven Brazile ("Steven") pleaded guilty to one count of transportation of securities obtained by fraud, in violation of 18 U.S.C. § 2314. As a part of his plea agreement with the Government, Steven acknowledged that he owed restitution in the amount of $3,902,880.85. The Government has a lien against Steven's property and rights to property under 18 U.S.C. § 3613(c) as a result of the judgment entered against him on November 13, 2013, in the Northern District of Illinois.

    Before the entry of Steven's sentence and judgment, Lorraine Brazile ("Lorraine"), Steven's then-wife, filed a suit for dissolution of marriage in the Circuit Court of St. Louis County, Missouri, on July 25, 2013. Id. On August 29, 2013, Defendants entered into a voluntary Property Settlement and Separation Agreement ("Agreement"), and the circuit court entered a final judgment of dissolution awarding Lorraine child support and a portion of Steven's pension benefits. On August 24, 2016, Defendants submitted a qualified domestic relations order ("QDRO") to the divorce court, which assigned Lorraine 100% of Steven's lump sum benefit amount and monthly annuity benefits.  The QDRO similarly awarded Lorraine 100% of the Braziles' marital home on Vienna Avenue (the "Vienna property").

    In September of 2017—four years after their marital dissolution and 13 months after they submitted their QDRO assigning the disputed assets to Lorraine—probation officers conducted a home visit and discovered that Steven and Lorraine were living together with their children and were raising their kids together as a "family." Id. ¶ 28. The Government contends that this demonstrates the Defendants entered into a "sham divorce" to transfer assets to Lorraine that could otherwise have been used to pay victim restitution. The Government alleges fraudulent transfer in violation of 28 U.S.C. § 3304(a)(2) (Count I); fraudulent transfer in violation of 28 U.S.C. § 3304(b)(1)(A) (Count II); and fraudulent transfer in violation of 28 U.S.C. § 3304(b)(1)(B) (Count III).

    The Government alleges that Steven has violated three provisions of the Federal Debt Collection Procedures Act ("FDCPA"). As a remedy, it asks the Court to void the final judgment and dissolution of property in Defendants' divorce case, enter judgment for the United States for the full value of the property transferred from Steven to Lorraine, and grant the United States a lien against all fraudulently transferred property such that it can seize that property immediately to pay Steven's restitution. By seeking dissolution of agreements to which he is a party, reversal of his transfer of assets to Lorraine, and seizure of the house he lives in as well as other assets that allegedly support him and his family—all in satisfaction of Steven's own debt.

    The court goes on to consider several evidentiary issues, expert witness qualifications, res judicata, collateral estoppel, waiver, equitable estoppel, and more.  The Court then held:

        "Count III alleges constructive fraud in violation of 28 U.S.C. § 3304(b)(1)(B). Doc. [1] at 11. To prove constructive fraud under that section, the Government must show that Steven transferred assets to Lorraine "without receiving a reasonably equivalent value in exchange for the transfer" at a time when he "intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to pay as they became due." 28 U.S.C. § 3304(b)(1)(B)(ii).
  

        "As noted already, the Government alleges the Braziles' divorce settlement gave Lorraine all of the couple's viable assets in order to insulate those assets from Steven's criminal restitution liabilities. The Government thus contends that all the elements of § 3304(b)(1)(B) have been met. Doc. [66] at 5-12."

        * * * * 

        "By contrast, the Government has produced substantial, undisputed evidence that Steven was aware of his impending restitution liabilities when he signed the divorce settlement. See, e.g., Doc. [85] ¶¶ 15, 17-18, 32. The restitution debt totaled roughly four times what Steven received in the divorce, even if the assets allocated to him are assigned their full value. See Doc. [87] at 31 (explaining that the "grand total" of Steven's share of the divorce settlement amounted to $800,490.0).[7]  Steven has neither contradicted this evidence nor produced other evidence that would support a finding in his favor, so the Government is entitled to summary judgment."

    See also Cf: United States of American v. Wolas, 520 F.Supp.3d 114 (2021) - Criminal Action No. 17-10198-FDS,United States District Court, D. Massachusetts (2021), -
https://scholar.google.com/scholar_case?case=9503464558169105254&q=United+States+of+American+v.+Wolas,+Criminal+Action+No.+17-10198-FDS,United+States+District+Court,+D.+Massachusetts+(2021)&hl=en&as_sdt=20000003=

another forfeiture case where the parties had been divorced and sought to amend the divorce decree to give the ex-wife the ex-husband's $700,000.00 retirement account.  Said the Court: 

        "In Florida, marital assets are distributed equitably upon divorce. Fla. Stat. Ann. § 61.075. Such assets include "[a]ll vested and nonvested benefits, rights, and funds accrued during the marriage in retirement, pension, profit-sharing, annuity, deferred compensation, and insurance plans and programs." Fla. Stat. Ann. 61.075(6)(a) (emphasis added). A spouse who does not have legal title to a marital asset acquires an interest in that asset only if a court issues a judgment during the divorce proceeding establishing that interest. United States v. Kermali, 60 F. Supp. 3d 1280, 1283 (M.D. Fla. 2014) ("In Florida, however, there is no legal interest in marital assets until a judgment vesting such interest has been entered in a divorce proceeding."); Fla. Stat. § 61.075(8) ("[T]itle to disputed [marital] assets shall vest only by the judgment of a court."). (Emphasis supplied.)

    In re Michael GONSALVES, Debtor, Monica Gonsalves, Plaintiff v. Michael Gonsalves, Defendant, Bankruptcy No. 12–30233, Adversary No. 13–00023, Signed Oct. 1, 2014, 519 B.R. 466, United States Bankruptcy Court, D. Maryland, at Greenbelt, the Court said: 

        "The Master's Report did not include a statement of the standards employed to determine extant property. But the standards are well established. In determining a marital award in Maryland, a court must determine the amount and value of marital property at trial. Property that is disposed of before trial cannot be declared marital property, with the exception of dissipated property. Omayaka v. Omayaka, 417 Md. 643, 12 A.3d 96, 101 (2011). Generally,

            "marital property which generates a monetary award must ordinarily exist as "marital property" as of the date of the final decree of divorce based on evidence adduced at the trial on the merits or a continuation thereof. Therefore, property disposed of before commencement of the trial under most circumstances cannot be marital property. Although, "marital property" is defined as "all property, however titled, acquired by either or both spouses during their marriage ...," the legislative scheme of the 1978 Marital Property Act contemplates determination of marital property at the time marriage is dissolved, i.e., when the absolute divorce is granted.

On a related matter, see USA v. Wells, No. 23-3969,D.C. No. 3:13-cr-00008-SLG-1, United States Court of Appeals for the 9th Circuit, (September 26, 2025), addressing the right to seize the full amount of a convicted felon’s TSP account under the Mandatory Victims Restitution Act of 1996 (MVRA) in derogation of the spouse’s right to insist on an annuitized payout what would make is subject to a garnishment not to exceed 25%. The purpose of the MVRA is to provide compensation for crime victims and their families. 

     Said the court: 

        “Under the MVRA, the government cannot enforce a restitution order by cashing out a defendant’s retirement plan account if the retirement plan’s terms prohibit the defendant from doing so without spousal consent. Here, FERSA § 8435 provides the relevant terms of Wells’ retirement plan. Section 8435 prohibits Wells from cashing out the balance of his TSP account without his spouse’s consent. Section 8437(e)(3) does not expand the government’s authority under the MVRA, nor does it override FERSA’s spousal protections.”

    See United States v. Byers, 133 F.4th 824 (USCA 8th Cir. 2025).  The IRS brought suit against the husband to enforce a substantial tax lien against the family home that was titled in his sole name.  He and his wife claimed that the wife had a property interest in the property as the “marital homestead”, pursuant to Minn. Stat. § 507.02, and, therefore, was entitled to half of the proceeds from the sale of the property.  Said the Court: 

        “Although "Minnesota homestead laws," including § 507.02, afford Deanna "extensive protection to safeguard her rights and interests in the homestead property owned by [Ronald]," they "do not vest in [Deanna] a property interest which rises to the level of that recognized under Texas law in United States v. Rodgers, 461 U.S. 677[, 103 S.Ct. 2132]." Id. As a result, Deanna's "homestead interest in the [Wayzata Property] is not in the nature of a property right for which the government need compensate in a forced sale action under 26 U.S.C. § 7403." Id.[4] The district court did not err in determining that Deanna lacked a present property interest in the home and granting summary judgment to the government.”

Although Minnesota has the concept of “marital property” in its law, Minnesota Statutes 518.003, neither party argued that the wife had a marital property interest in the proceeds of sale.   

SOOO... since you have a fiduciary duty to the Participant and a potential Alternate Payee you might want to confirm that there is in fact no such potential Alternate Payee who will suffer a loss of benefits if a divorce action is pending and/or the account with which you are dealing is "marital" or "community" property, and or is not subject to being garnished or attached.  

And while you are at it, take a look at one of my favorite cases:  Brown v. Continental Airlines, Inc., 647 F. 3d 221 (5th Cir., 2011)-
 https://scholar.google.com/scholar_case?case=4019345202025914766&q=brown+v.+continental+airlines&hl=en&as_sdt=20000003

    Continental alleged that a number of pilots and their spouses obtained "sham" divorces for the purpose of obtaining lump sum pension distributions from the Continental Pilots Retirement Plan that they otherwise could not have received without the pilots' separating from their employment with Continental.  The pilots were allegedly acting out of concern about the financial stability of Continental and the fear that the Plan might be turned over to the PBGC and that their retirement benefits would be substantially reduced.   By divorcing, the pilots were able to obtain QDROs from state courts that assigned 100% (or, in one instance, 90%) of the pilots' pension benefits to their respective former spouses.  The Plan provides that, upon divorce, if the pilot is at least 50 years old (as all the pilots in this case were), a former spouse to whom pension benefits are assigned can elect to receive those benefits in a lump sum even though the pilot continues to work at Continental.  The former spouses presented the QDROs to Continental and requested payment of lump-sum pension benefits.  After the former spouses received the benefits, the couples remarried.  

    Continental sought to obtain restitution under ERISA Section 502(a)(3).  The Court of Appeals noted that ERISA § 206(d)(3) limits the QDRO qualification determination to whether the state court decree calls for benefit payments outside the terms of the Plan. It rejected Continental’s expanded reading of § 206, concluding that plan administrators may not question the good faith intent of Participants submitting QDROs for qualification

 David