Defendant is serving fifty-one months imprisonment for wire fraud, mail fraud, and making and subscribing a false tax return and is required to pay $2,165,126.40 in restitution.
Based on Fifth Circuit case law that allows restitution liens to attach to the non-debtor’s solely managed community property, the government sought to garnish fifty percent of Defendant’s spouse’s retirement accounts. The disputed accounts are comprised of funds that were once regulated by ERISA and are now regulated by Section 408 of the Tax Code. The court found that because the accounts are no longer governed by ERISA, they are no longer subject to ERISA’s anti-alienation provision.
While ERISA’s anti-alienation provision generally prohibits the assignment of retirement benefits except for two statutory exceptions, § 408(a) is not as narrow. Under § 408(a), the beneficiary of an account may assign the account to a third person and may withdraw money from the account at any time. In re Dunn, 5 B.R. 156, 158 (Bankr. N.D. Tex. 1980). As such, the ERISA provisions are not analogous to § 408’s provisions. The court held that § 408’s preemption and alienation provisions cannot be read to mean that they preempt state community property laws.
Because federal preemption did not apply to the Defendant’s spouse’s § 408 retirement accounts, the Court refused to quash writs of garnishment against them.
United States v. Gwendolyn Berry; No. 4:17-cr-00385.