23 May 2006

ERISA Too Powerful?

The Employee Retirement Income Security Act pre-empts state law more broadly than almost any other statute in the books. Sometimes, when this pre-empts laws specific to the regulations of pensions, contrary to its policy to create a national pension market, this is sensible. But, when it pre-empts generally applicable state laws it can get ridiculous. For example, why should ERISA pre-empt laws that automatically invalidate beneficiary designations in favor of an ex-spouse upon a divorce? And, why should the slayer rule, that revokes beneficiary designations in favor of murderers, often found in the same statutory section, get different treatment?

Another case where the pre-emption is dubious is ERISA's bar on the garnishment of payments made to inmates at a non-institutional address. While spendthrift effect of protecting payments prior to the point at which they are made serves valid social purposes, even at the expense of creditors, the same policy should not apply to distributions once they have already been made when they become the sole property of the recipient. Yet, the 6th Circuit Court of Appeals has held, in light of the expansion nature of ERISA pre-emption, that ERISA pre-empts state efforts to garnish the income of prison inmates (normally to the tune of 90% towards their crime related debts.

Couldn't the tough on crime folks take some time out from putting street level pot dealers and peverts to download child porn for free from the Internet in prison for the rest of their lives to prevent ERISA from pre-empting crime related garnishments of pension payments once they become the property of the beneficiary? Interestingly, in this case, the divorcees have the upper hand, as Congressionally authorized qualified domestic relations orders allow ex-spouses to get the funds, even though criminal victims cannot.

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