II

104TH CONGRESS

2D SESSION S. 1570

To amend the Employee Retirement Income Security Act of 1974 and the

Internal Revenue Code of 1986 to provide that the restrictions on the

assignment or alienation of pension plan benefits shall not apply to

court-ordered criminal fines or victim restitution.

IN THE SENATE OF THE UNITED STATES

FEBRUARY 20 (legislative day, FEBRUARY 7), 1996

Mr. MCCAIN introduced the following bill; which was read twice and referred

to the Committee on Finance

A BILL

To amend the Employee Retirement Income Security Act

of 1974 and the Internal Revenue Code of 1986 to

provide that the restrictions on the assignment or alienation of pension plan benefits shall not apply to courtordered criminal fines or victim restitution.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. ASSIGNMENT OR ALIENATION OF PENSION

4 PLANS FOR PAYMENT OF CRIMINAL FINES

5 AND VICTIM RESTITUTION.

6 (a) AMENDMENTS TO ERISA.—
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1 (1) IN GENERAL.—Section 206(d) of the Em2 ployee Retirement Income Security Act of 1974 (29

3 U.S.C. 1056(d)) is amended by adding at the end

4 the following new paragraph:

5 ‘‘(4)(A) Paragraph (1) shall not apply to a

6 qualified criminal restitution order and each pension

7 plan shall provide for payments in accordance with

8 the applicable requirements of a qualified criminal

9 restitution order.

10 ‘‘(B) For purposes of this paragraph, the term

11 ‘qualified criminal restitution order’ means a judg12 ment, order, or decree—

13 ‘‘(i) which is issued by a Federal or State

14 court in connection with a criminal conviction

15 of a participant under a plan,

16 ‘‘(ii) which imposes a criminal fine on the

17 participant or which requires the participant to

18 make restitution to 1 or more victims of the

19 crime for which convicted,

20 ‘‘(iii)(I) which creates or recognizes a right

21 to attach all or a portion of the benefits payable

22 with respect to the participant under a plan, or

23 ‘‘(II) which creates or recognizes the exist24 ence of a victim’s right to, or assigns to a vic-
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1 tim the right to, receive all or a part of those

2 benefits, and

3 ‘‘(iv) with respect to which the require4 ments of subparagraphs (C) and (D) of para5 graph (3) are met (determined after application

6 of paragraph (3)(E)), except that in applying

7 such subparagraphs, the term ‘criminal restitu8 tion order’ shall be substituted for the term ‘do9 mestic relations order’.

10 ‘‘(C) The requirements of subparagraphs (G),

11 (H), and (I) of paragraph (3) shall apply to any

12 plan administrator or fiduciary of a plan to which

13 this paragraph applies.

14 ‘‘(D) Rules similar to the rules of subparagraph

15 (J) and (N) of paragraph (3) shall apply for pur16 poses of this paragraph.’’

17 (2) PREEMPTION.—Paragraph (7) of section

18 514(b) of such Act (29 U.S.C. 1144(b)(7)) is

19 amended by inserting ‘‘or to qualified criminal res20 titution orders (within the meaning of section

21 206(d)(3)(B))’’ before the period at the end.

22 (b) AMENDMENTS TO INTERNAL REVENUE CODE OF

23 1986.—

24 (1) IN GENERAL.—Paragraph (13) of section

25 401(a) of the Internal Revenue Code of 1986 (relat-
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1 ing to assignment of benefits) is amended by adding

2 at the end the following new subparagraph:

3 ‘‘(C) SPECIAL RULES FOR CRIMINAL RES4 TITUTION ORDERS.—Subparagraph (A) shall

5 not apply to a qualified criminal restitution

6 order (within the meaning of section 414(u)).’’

7 (2) QUALIFIED CRIMINAL RESTITUTION

8 ORDER.—Section 414 of such Code is amended by

9 adding at the end the following new subsection:

10 ‘‘(u) QUALIFIED CRIMINAL RESTITUTION ORDER.—

11 For purposes of this title—

12 ‘‘(1) IN GENERAL.—The term ‘qualified crimi13 nal restitution order’ means a judgment, order, or

14 decree—

15 ‘‘(A) which is issued by a Federal or State

16 court in connection with a criminal conviction

17 of a participant under a plan,

18 ‘‘(B) which imposes a criminal fine on the

19 participant or which requires the participant to

20 make restitution to 1 or more victims of the

21 crime for which convicted,

22 ‘‘(C)(i) which creates or recognizes a right

23 to attach all or a portion of the benefits payable

24 with respect to the participant under a plan, or
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1 ‘‘(ii) which creates or recognizes the exist2 ence of a victim’s right to, or assigns to a vic3 tim the right to, receive all or a part of those

4 benefits, and

5 ‘‘(D) with respect to which the require6 ments of paragraphs (2) and (3) of subsection

7 (p) are met (determined after application of

8 subsection (p)(4)), except that in applying such

9 paragraphs, the term ‘criminal restitution

10 order’ shall be substituted for the term ‘domes11 tic relations order’.

12 ‘‘(2) PLAN AND FIDUCIARY.—The provisions of

13 paragraphs (6) and (7) of subsection (p) shall apply

14 to any plan administrator or fiduciary of a plan to

15 which this paragraph applies.

16 ‘‘(3) SPECIAL RULES.—Rules similar to the

17 rules of paragraphs (9), (10), (11), and (12) of sub18 section (p) shall apply for purposes of this sub19 section.’’

20 (3) TAX TREATMENT OF DISTRIBUTIONS.—

21 (A) Section 402(e)(1) is amended by add22 ing the end the following new subparagraph:

23 ‘‘(C) CRIMINAL RESTITUTION ORDERS.—

24 Rules similar to the rules of subparagraphs (A)

25 and (B) shall apply to payments or distribu-
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1 tions to victims of a criminal offense pursuant

2 to a qualified criminal restitution order de3 scribed in section 414(u).’’

4 (B) Section 72(m)(10) is amended—

5 (i) by adding at the end the following

6 new sentence: ‘‘The preceding sentence

7 shall also apply to payments or distribu8 tions made to victims of a criminal offense

9 pursuant to a qualified criminal restitution

10 order described in section 414(u).’’, and

11 (ii) by inserting ‘‘or qualified criminal

12 restitution orders’’ after ‘‘orders’’ in the

13 heading.

14 (C) Subparagraph (J) of section 402(d)(4)

15 is amended by adding at the end the following

16 new sentence: ‘‘This subparagraph shall also

17 apply to any distributions or payments to vic18 tims of a criminal offense pursuant to a quali19 fied criminal restitution order described in sec20 tion 414(u).’’

21 (c) EFFECTIVE DATE.—The amendments made by

22 this section shall apply to qualified criminal restitution or23 ders issued on and after the date of the enactment of this

24 Act.

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