MI Free To Use Prisoner Pensions for Costs

January 13, 2004 (PLANSPONSOR.com) - Michigan's practice of depositing inmate pension payments directly in a prison's general account for disbursement will continue.

>Prisoners in Michigan have been involved in a long legal battle to preserve their pension payments.    However, with the US Supreme Court’s refusal to hear an appeal of the state court’s ruling, the lawsuit ends with the Michigan State Supreme Court’s decision, allowing for the collection of inmate pension payments to reimburse imprisonment costs, according to an Associated Press report.

Michigan taxpayers are on the hook for $26,000 per year per prisoner,” Mike Cox, Michigan’s attorney general, said in a news release. “This decision … allows our citizens to get back more of what criminals take.”

>The case, State Treasurer v. Abbott (See   Prisoner Pension Can Be Locked Into Prison’s Accounts ), arose when Michigan’s state treasurer, under the State Correctional Facility Reimbursement Act (SCFRA), sought to recover the costs of incarcerating Thomas Abbott, arguing his monthly pension payments should be sent to his prison address, deposited in his prison account, and appropriated by the warden.

A trial court granted the treasurer’s request, but the Michigan State Court of Appeals reversed.   On the reversal, the appellate court held that Employee Retirement Income Security Act’s (ERISA) antialienation provision barred the deposit of funds into Abbott’s prison account. Under ERISA Section 206(d)(1), benefits provided under a pension plan may not be assigned or alienated. This determination was based on State Treasurer v. Baugh , where a judge in the US District Court for the Eastern District of Michigan found a court order requiring a pension fund to make pension payments to a prisoner’s prison account against his will constituted an ERISA violation.

However, the Michigan State Supreme Court overturned the appeals court’s ruling.   Just because the prisoner in the earlier case did not agree to the deposit at his prison address, such a deposit did not create an assignment unless someone other than the beneficiary acquired a right in the payments, the state high court reasoned.   Relying on the treasury department’s definition, the court said it “plainly contemplates a transfer of the interest to another person, i.e., a person other than the beneficiary himself. Sending a pension payment to a beneficiary at his own address, and depositing it in his own account, does not assign that payment.”

In this case, the court noted the warden did not acquire a right in the pension payments, nor was the warden a receiver, since the warden did not fulfill a receiver’s requirements of managing, controlling, or preserving the funds. However, even if the warden were a receiver, he did not acquire a property interest, in that he would have no greater interest than the court itself. Under the court’s order, the warden was only required to deposit Abbott’s pension fund checks in Abbott’s account.

After deciding that requiring pension funds to be sent to Abbott’s prison address and deposited in his account did not violate ERISA, the court went on to hold that “once pension funds are deposited in an inmate’s account, ERISA does not protect them,” the court’s opinion held.