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ERISA's Anti-Alienation Provisions

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ERISA's Anti-Alienation Provisions

Pension and Employee 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 two 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.

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.

The Coming Pension Crisis

Thirteen companies now owe retirees more than what the business would be worth in liquidation. Full Article ...

Category: General Retirement- @ 12:42 am 1/18/2005

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Excerpt: "ERISA health and welfare benefit plans that provide benefits through insurance policies or contracts must include information about the related fees and commissions on their Form 5500 annual reports. But plan administrators must rely on insurers to provide this information, and a recent Department of Labor advisory opinion indicates some insurers may be underreporting commission and fee payments made to brokers and agents."

DOL's New Website Devoted to Pension Legislation

The DOL has announced a new page on their website devoted to the Bush administration's proposal for pension reform:

As indicated in the President's FY 2006 Federal Budget, this Web site hosted by the Department of Labor is the official location for all Administration documents pertaining to the President's single employer defined benefit pension reform proposal. It will be regularly updated to include new documents from other Federal Agencies as well as the Department of Labor.

The website features testimony at today's hearing before the Senate Finance Committee. More on the hearing here, including these spirited comments from Senator Grassley here.

In addition, access the Joint Committee on Taxation's 81-page report entitled the "Present Law and Background Relating to Employer-Sponsored Defined Benefit Pension Plans and the Pension Benefit Guaranty Corporation ("PBGC")." (Source: The TaxProf Blog)

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