Blogging Employee Benefits

May 23, 2006

Involuntary Transfer of Prisoners’ Pension Benefits Violates Anti-Alienation Rules

Filed under: Litigation — Fuguerre @ 9:32 pm

ERISA's anti-alienation provision prohibits enforcement of a state law under which prison wardens were to notify pension plans to send prisoners' benefit payments to the inmate's institutional address, according to a 6th Circuit decision affirming a district court ruling. [DaimlerChrysler v. Cox, No. 05-1716]

Under Michigan's State Correctional Facility Reimbursement Act, pension benefits are included among a prisoner's assets for purposes of potential reimbursement to the state for costs incurred during a prisoner's incarceration. If a state court awarded the state a percentage of a prisoner's pension benefits, then the prisoner would be ordered to inform the pension plan that benefit payments were to be sent to the institutional address, where the payments were to have been deposited in institutional accounts. If a prisoner complies with that order and directs the pension plan to send the payments to the institutional address, then garnishment by the state for reimbursement under SCFRA is permissible without conflict with ERISA.

However, if a prisoner refused to direct the pension plan as ordered, then SCFRA called for the prison warden to notify the pension plan to send the benefit payments to the inmate's institutional address.  The court found that SCFRA requirement to violate ERISA's anti-alienation provision.  Refusing the state's contention that its redirection of benefit payments only encumbered those amounts after they left plan control, the 6th Circuit observed that the SCFRA notices from prison wardens would be enforced against plan benefits before distribution against the direction of the prisoners, in violation of ERISA.

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