Compliance July 19, 2006

State Act to Recover Costs of Imprisonment not Completely Preempted by ERISA

July 19, 2006 (PLANSPONSOR.com) - The US District Court for the Eastern District of Michigan determined that a lawsuit filed by Michigan's state treasurer under the State Correctional Facility Reimbursement Act (SCFRA) should not be heard in federal court since the Act is not completely preempted by the Employee Retirement Income Security Act (ERISA).
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In its opinion, the court cited a case that said complete preemption occurs only when the action “is equivalent to a civil enforcement action” under US Code. The court in the previous case noted the claim sought redirection of benefits implicating ERISA’s anti-alienation provisions but was not completely preempted by ERISA and did not require removal from state court to a federal court.

The prisoner also argued that the state treasurer was a person and not an entity and that therefore, his request for the prisoner’s pension violated ERISA provisions that someone else cannot claim entitlement to his benefits. He also described the treasurer’s action as a “seizure” of his benefits, violating ERISA’s anti-alienation provision, according to the court document.

The court responded by saying that the treasurer was acting in his official capacity and was not an individual claiming entitlement to benefits. It also pointed out that the treasurer was moving to redirect assets and the move was consequently more like a “garnishment” of benefits.

According to the opinion, the move under SCFRA did not constitute a civil enforcement action and the case was remanded back to a Michigan state court.

The case is State Treasurer v. Timothy Sprague.

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