Sunday, February 25, 2007

En Banc 9th Cir.: MVRA Trumps ERISA's Anti-Alienation Rules

Gavel_4 The Ninth Circuit issued a significant opinion last week that permits a perpetrator's vested retirement benefits to be used to compensate a victim of a crime under the Mandatory Victim Restitution Act (MVRA). 

In United States v. Novak, 04-55838 (9th Cir. Feb. 22, 2007), the en banc Ninth Circuit found in a 10-5 decision that the MVRA trumps ERISA's anti-alienation provisions that normally would keep such retirement benefits from being disturbed by others.

In this regard, the court found:

Taking a close look at the statutory implementation of these two important policies [under ERISA and the MVRA], we conclude that criminal restitution orders can be enforced by garnishing retirement funds, but with the funds only payable when the defendant has a current, unilateral right to receive payments under the terms of the retirement plan.

In other words, a criminal victim may step into the shoes of the criminal perpetrator and recover as restitution whatever retirement funds the perpetrator is entitled to under their retirement plan.

This is not a decision without controversy. The Supreme Court's Shumate decision from 1992 seems to limit possible exceptions to ERISA's anti-alienation rules to two circumstances: qualified domestic relation orders (QDROs) and recoveries for wrongs committed against the employee benefit plan. Nevertheless, the Court's Guidry decision from 1990 holds out the prospect that Congress could choose to recognize another exception if it so choose.

Although language in the MVRA can be read broadly (and was so read) to characterize the language of the MVRA as another exception to ERISA's anti-alienation provisions, there is no direct citation of ERISA in the MVRA or its legislative history, which would seems to suggest the majority is stretching here a bit to find that Congress contemplated another exception.  At the very least, it is less than clear.

In any event, look for this debate to continue to percolate and if a circuit split evolves, this is an important enough issue to merit Supreme Court consideration.  Of course, it would be great if Congress would amend the MVRA to indicate its intent in this important area of overlap between criminal and employee benefit law.

Hat Tip:  Decision of the Day


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