The anti-alienation provision under Section 206(d)(1) of ERISA provides federal protection to retirement assets from most ordinary creditors. The provision thus prohibits an assignment or alienation of pension plan benefits under each pension plan. In contrast, the Mandatory Victims Restitution Act (MVRA) requires courts to issue a restitution order in addition to a conviction against a defendant in order to compensate the victim of an offense for any damage to or loss or destruction of victim's property.
The interplay of both was discussed in a recent U.S. Court of Appeals, Second Circuit ruling, concerning a former Katten Muchin Rosenman LLP lawyer, Evan Greebel, who was convicted of conspiring with Martin Shkreli to commit securities fraud. During his employment at Katten Muchin Rosenman LLP and Fried, Frank, Harris, Shriver & Jacobson LLP, Greebel accumulated $921,000 in his retirement accounts. In the matter at hand, in addition to the conviction, the Court also issued a $10.4 million restitution order. The Court relied on a former Ninth Circuit decision in U.S. v. Novak (9th Cir. 2007) 476 F.3d 1041, in assessing whether Greebel's retirement accounts holding $921,000 may be garnished to satisfy the Court's MVRA restitution order. It concluded that, notwithstanding ERISA's anti-alienation provision which protects retirement savings in an employer-sponsored plan from being “assigned or alienated”, the government can enforce MVRA restitution orders against retirement plan benefits so long as Greebel could unilaterally demand a lump sum payment at the present time. Although Greebel raised an argument concerning his lack of unilateral right at the present time to withdraw money from his retirement plan, the Court rejected his argument and concluded that it was based on a “series of tortured contract interpretations.” The Court therefore held that Greebel's retirement plan savings could be reached to satisfy its MVRA restitution order of $10.4 million.
Essentially, the case at hand and previous decisions of this Court have established that the MVRA overrides ERISA's anti-alienation provision and permits a victim's reach into a defendant's retirement accounts in order to satisfy a restitution order.
If you have questions regarding creditor protections afforded to qualified retirement plan assets, Butterfield Schechter LLP is here to help. We are San Diego County's largest law firm with a focus on employee benefits law.