Milgram v. Orthopedic Assocs. Defined Contribution Pension Plan

Milgram v. Orthopedic Assocs. Defined Contribution Pension Plan

Do ERISA and the IRC prohibit enforcement of a money judgment against a defined contribution plan? In this Analysis, Barry L. Salkin of Olshan Grundman Frome Rosenzweig & Wolosky LLP addresses this and the other issues. He writes:

SUMMARY: A defined contribution plan beneficiary sued under ERISA to recover funds removed from the pension fund account and credited to his former wife. The U.S. District Court N.D.N.Y. entered judgment against the Plan. The Plan appealed contending that the pension agreement, ERISA's anti-alienation provision and various other federal and state laws prohibited enforcement of the judgment. The Court of Appeals rejected these contentions and affirmed the judgment of the District Court. [Milgram v. Orthopedic Assocs. Defined Contribution Pension Plan, 662 F.3d 187 (2d Cir. 2011) [enhanced version available to subscribers]]   

Anti-alienation Provisions: ERISA and the Internal Revenue Code ("Code") provide that all tax-qualified pension plans contain anti-alienation provisions. ERISA Section 206(d)(10) mandates that a pension plan "shall provide that benefits provided under a plan may not be assigned or alienated." Code Section 401(a)(13) likewise conditions preferential tax treatment on a pension plan's prohibiting the alienation and assignment of plan benefits and all tax-qualified plans contain language to that effect.

Exceptions to Anti-alienation Provisions: The exceptions are very limited - the enforcement of a federal tax levy under Code Section 6331 (relating to levy and distraint) and the collection by the U.S. on a judgment resulting from an unpaid federal tax assessment; the enforcement of a criminal restitution order pursuant to 18 U.S.C. § 3361; the Mandatory Victims Restitution Act (subject to a limit of 25% of monthly pension payments under the Consumer Credit Protection Act); qualified domestic relations orders; and an implied exception for "killer statutes." That seems quite straightforward, but in Milgram v. The Orthopedic Associates Defined Contribution Plan, defendant argued that the Code's anti-alienation provisions also applied to money judgments rendered against a defined contribution pension plan.

Plan's Argument: Milgram concerned a payment from the appellant's plan to the appellee's ex-wife which, with accumulated earnings and interest, totaled $1,571,723. The ex-wife had been ordered to make restitution to the plan in the same amount that the plan owed to the appellee, and the plan argued, first, that requiring it to pay to plaintiff appellee before the plan had received payment from the ex-wife was in violation of the Code's anti-alienation provisions and thus risked disqualifying the plan.

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  • 03-07-2012

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