Judge: Feds Can Seize IRA

June 2, 2003 (PLANSPONSOR.com) - An ERISA-governed individual retirement account (IRA) is not off limits to the federal government for the purposes of collecting a criminal fine, a federal judge has ruled.

>According to Washington-based legal publisher BNA, Anthony Grico was convicted by a federal jury of tax evasion and fined $75,000. Subsequent discovery by the federal government disclosed Grico owned a $30,065-IRA. The federal government sought to garnish the funds in Grico’s IRA under the Federal Debt Collection Procedure Act (FDCPA).

“Congress clearly defined its intention not to alter other laws, such as the (FDCPA), in ERISA’s saving clause provision,” wrote US District Judge Clarence Newcomer of the US District Court for the Eastern District of Pennsylvania.

>Noting the broad scope of the FDCPA, Newcomer said none of the statute’s limitations on the type of property that could be garnished applied to IRAs. Therefore, the court said, IRAs were the type of property that the federal government could reach through an FDCPA garnishment order.

>The court rejected Grico’s arguments that ERISA Section 206(d)(1), which states, “each pension plan shall provide that benefits provided under the plan may not be assigned or alienated,” barred the government from reaching the IRA funds. Treasury regulation Section 1.401(a)-13(b)(2)(ii) specifically states that the anti-alienation provision does not preclude “collection by the United States on a judgment resulting from an unpaid tax assessment,” the court said.

>Even had the Treasury regulation not specifically allowed garnishment for tax purposes under the FDCPA, Congress did not intend to limit the enforceability of the FDCPA, the court said. The decision by Congress to exclude IRAs from the types of property immune from garnishment indicated intent to allow garnishment of IRAs, the court said.

>The case is United States v. Grico, E.D. Pa., No. 99-20201, 5/22/03.