IRA Could be Tapped To Cover Criminal Fines

May 31, 2006 ( - The US District Court for the Eastern District of Washington said in a memorandum opinion that an individual retirement account (IRA) could be considered part of a defendant's income, and might be used to cover a criminal fine.

Defendant Terry Smith argued that under Washington law, his IRA is “exempt from execution, attachment, garnishment, or seizure by or under any legal process.” He also cited a US Court of Appeals decision that found only Employee Retirement Income Security (ERISA)-governed retirement funds can be used to cover criminal fines, which excludes plans that are not employee benefit plans.

The court had to decide whether a federal preemption to pay criminal fines overrode Washingtonlaw exempting    IRAs from garnishment.  

In US District Judge Alan McDonald’s opinion , he wrote that “it is appropriate to consider the IRA funds as part of defendant’s income, earning capacity, and financial resources in determining whether to impose a fine.” The court found that, despite Washington’s exemption of IRAs, there was a “reasonable basis to believe” that Smith’s IRA could be used to settle the $5,000 fine.