ERISA and Welfare Benefit Plans

29 U.S.C. § 1056(d)(1), commonly known as the "ERISA Anti-Alienation Provision" states that "[e]ach pension plan shall provide that benefits provided under the plan may not be assigned or alienated." This means that the assets in an ERISA pension plan are not available to creditors. Thus, pension planning provides a method for business owners to remove moneys from their businesses to an ERISA pension plan -- and to generate a sizeable tax deduction in the process -- and thereafter have those assets protected from most creditors (caution that in some circumstances spouses and the IRS may be able to get at the assets).

The three most common types of plans are:

• 412(i) Defined Benefit Plans
  Asset protection planning via tax-deductible contributions into a defined benefit plan that is protected from creditors under ERISA. Essentially, an asset protection plan that is subsidized by tax breaks given by Congress, and an easy and efficient solution for small businesses and their owners.

• 419A(f)(6) Employee Benefit Plans and
  Voluntary Employees' Beneficiary Associations (VEBAs)
  Asset protection planning via tax-deductible contributions into an employee benefit plan that is protected from creditors under ERISA.

• 419(e) Welfare Benefit Plans
  Funds that provide certain benefits for the welfare of employees that can be creditor protected by the ERISA anti-alienation benefits if organized as a trust.

Used together, these plans give business owners the opportunity to shift upwards of $500,000 per year out of their business in a tax deductible fashion, and thereafter protect those assets from creditors as a "nest egg" for retirement or to pass on to heirs. The plans represent fundamental planning techniques that are commonly overlooked by asset protection promoters who are looking to selling exotic big-dollar structures, which do not have the efficient and tested benefits of these plans.

Additional Resources

Statutory Law

• Complete Text of 29 U.S.C. § 1056(d)

U.S. Supreme Court Cases

• Raymond B. Yates, M.D. v. Hendon, No. 02-458 (03/02/2004)

• Patterson v. Shumate, 112 S. Ct. 2242, 119 L. Ed. 2d 519 (1992)

• Guidry v. Sheet Metal Workers Nat’l Pension Fund, 493 U.S. 365, 110 S. Ct. 680, 107 L. Ed. 2d 782 (1990)

• Mackey v. Lanier Collection Agency & Service, 486 U.S. 825, 108 S. Ct. 2182, 100 L. Ed. 2d 836 (1988)

U.S. Circuit Court of Appeals Cases

• IRS v. Snyder, ___ F.3d ___ (9th Cir. Appeal No. 02-15618, September 15, 2003)

• U.S. v. Taylor, ___ F.3d ___ ( 8th Cir. No. 01-2874, July 31, 2003)

• In re Nelson, 8th Cir. BAP Appeal No. 01-6072MN, March 21, 2002

• In re Weinhoeft, 275 F.3d 604 (7th Cir. 2001)

• In re Kim, Appeal No. CC-00-1123 (9th Cir. BAP 2000)

• Taunt v. General Retirement System, 233 F.3d 899, 2000 Fed.App. 0389, 36 Bankr.Ct.Dec. 293 (6th Cir. 2000)

State Cases

New Jersey

• Gilchinsky v. National Westminster Bank N.J., 732 A.2d 482 (N.J. 06/14/1999)

• Hawxzhurst v. Hawxhurst, 723 A.2d 58 (N.J.Super.App.Div. 12/29/1998)

North Dakota

• Daniel J. Chapman v. Mary E. Wells and Bradley P. Wells, No. 960108 (N.D. 12/04/1996)

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