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Compliance May 31, 2006
IRA Could be Tapped To Cover Criminal Fines
May 31, 2006 (PLANSPONSOR.com) - The US District
Court for the Eastern District of Washington said in a
memorandum opinion that an individual retirement account
(IRA) could be considered part of a defendant's income,
and might be used to cover a criminal fine.
Reported by Adrien Martin
Defendant Terry Smith argued that under Washington law, his IRA is “exempt from execution, attachment, garnishment, or seizure by or under any legal process.” He also cited a US Court of Appeals decision that found only Employee Retirement Income Security (ERISA)-governed retirement funds can be used to cover criminal fines, which excludes plans that are not employee benefit plans.
The court had to decide whether a federal preemption to pay criminal fines overrode Washingtonlaw exempting IRAs from garnishment.
In US District Judge Alan McDonald’s opinion , he wrote that “it is appropriate to consider the IRA funds as part of defendant’s income, earning capacity, and financial resources in determining whether to impose a fine.” The court found that, despite Washington’s exemption of IRAs, there was a “reasonable basis to believe” that Smith’s IRA could be used to settle the $5,000 fine.