Compliance October 20, 2003

IRS: Uncle Sam Can Collect Fine From K Plan Account

October 20, 2003 (PLANSPONSOR.com) - The federal government can garnish a participant's 401(k) plan account to pay a criminal fine without disqualifying the plan, the Internal Revenue Service (IRS) said.
Reported by

>According to a private-letter ruling issued earlier this year, attaching the 401(k) account to pay the fine imposed in federal court would not run afoul of requirements that benefits under a qualified plan not be assigned or alienated.

>IRS officials pointed to the outcomes in two 2003 federal court cases as supporting the notion that the federal government can collect criminal fines from a K plan account.

“After careful consideration…we are of the option that the general anti-alienation rule of Code 401(a)(13) does not preclude a court’s garnishing the account of a fined participant in a qualified pension plan in order to collect a fine imposed in a federal criminal action,” the IRS wrote.

The case is at http://benefitslink.com/IRS/plr200342007.pdf

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