United States Court of Appeals

For the Eighth Circuit

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No. 13-3682

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In re: Joseph Matthias Miller

lllllllllllllllllllllDebtor

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Terri A. Running

lllllllllllllllllllllAppellant

v.

Joseph Matthias Miller

lllllllllllllllllllllAppellee

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National Association of Consumer Bankruptcy Attorneys

lllllllllllllllllllllAmicus on Behalf of Appellee(s)

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Appeal from the United States Bankruptcy

 Appellate Panel for the Eighth Circuit

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 Submitted: October 9, 2014

 Filed: February 13, 2015

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Before MURPHY, SMITH, and GRUENDER, Circuit Judges.

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GRUENDER, Circuit Judge.

TerriRunning, a bankruptcy trustee, appeals froma decision ofthe Bankruptcy

Appellate Panel (“BAP”) that affirmed the bankruptcy court’s conclusion that an 1

annuity owned by bankruptcy debtor Joseph Miller is exempt from the bankruptcy

estate. We affirm.

The relevant facts are not in dispute. Miller purchased an annuity from

Minnesota Life Insurance Company (“Minnesota Life”). Under the annuity contract,

Miller agreed to make a lump-sum “Purchase Payment” of $267,319.48 to Minnesota

Life. Miller used funds from his individual retirement account to make this payment. 

In return, Minnesota Life agreed to make an annual “Income Payment” of $40,497.95

to Miller for the next eight years. Miller later filed for Chapter 7 bankruptcy and

claimed that the annuity was exempt from the bankruptcy estate. Running objected

to this classification. The bankruptcy court overruled her objection, and the BAP

affirmed. This appeal followed.

When reviewing an appeal from a decision of the BAP, “we act as a second

reviewing court of the bankruptcy court’s decision, independently applying the same

standard of review as the BAP.” In re Lasowski, 575 F.3d 815, 818 (8th Cir. 2009). 

The relevant facts here are not disputed, and we review the bankruptcy court’s

conclusions of law de novo. Id.

The Honorable Gregory F. Kishel, Chief Judge, United States Bankruptcy

1

Court for the District of Minnesota.

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In his bankruptcy petition, Miller identified the funds in his annuity as exempt

from the bankruptcy estate under 11 U.S.C. § 522(b)(3)(C). This exemption allows

a bankruptcy debtor to protect from creditors “retirement funds to the extent that

those funds are in a fund or account that is exempt from taxation under

section . . . 408 . . . of the Internal Revenue Code.” Id. Section 408 of the Internal

Revenue Code, in turn, provides that an individual retirement account and an

individual retirement annuity are exempt from taxation; that is, they are qualified

retirement plans. 26 U.S.C. § 408(a), (b), (e)(1); Griswold v. Comm’r, 85 T.C. 869,

871 (T.C. 1985). Thus, if retirement funds are held in either of these qualified

retirement plans, then the funds can be exempted from creditors’ claims in

bankruptcy. This exemption generally applies even if the debtor transferred the

retirement funds to the qualified retirement plan from another qualified retirement

plan. 11 U.S.C. § 522(b)(4)(C) (“A direct transfer of retirement funds from 1 fund

or account that is exempt from taxation under section . . . 408 . . . shall not cease to

qualify for exemption under [§ 522(b)(3)(C)] . . . by reason of such direct transfer.”);

id. § 522(b)(4)(D) (explaining that § 522(b)(3)(C) applies if “[a]ny distribution

that . . . has been distributed from a fund or account that is exempt from taxation

under section . . . 408 . . . and [] to the extent allowed by law, is deposited in such a

fund or account not later than 60 days after the distribution of such amount”).

There is no dispute that the funds used to purchase Miller’s annuity were

retirement funds that came from Miller’s individual retirement account, which was

a qualified individual retirement account under 26 U.S.C. § 408(a). If Miller simply

had left these funds in his individual retirement account, there is no question that the

funds would be exempt from the bankruptcy estate. See 11 U.S.C. § 522(b)(3)(C). 

However, because Miller used the funds to purchase his annuity, Running contends

that the funds became the property of the bankruptcy estate. Critical to Running’s

argument is her assertion that Miller’s annuity is not a qualified individual retirement

annuity as defined by 26 U.S.C. § 408(b). This provision enumerates several

requirements for an annuity to be a qualified individual retirement annuity, two of

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which are at issue here. First, “[u]nder the contract . . . the premiums are not fixed.” 

Id. § 408(b)(2)(A). And second, “[u]nder the contract . . . the annual premium on

behalf of any individual will not exceed the dollar amount in effect under section

219(b)(1)(A) [of the Internal Revenue Code].” Id. § 408(b)(2)(B). This amount was

$6,000 for the taxable year in question. Id. § 219(b)(1)(A), (b)(5)(A), (b)(5)(B).

Running argues that Miller’s annuity fails both ofthese requirements. Because

Miller’s annuity contract required him to pay a lump-sum amount to Minnesota Life,

$267,319.48, Running characterizes the annuity’s “premium[]” as “fixed,” in

violation of § 408(b)(2)(A). And because the annuity contract allowed Miller to pay

more than $6,000 in one year for the annuity, Running urges that the annuity’s

“annual premium” exceeds the limitset by §§ 408(b)(2)(B) and 219(b)(1)(A). Miller

responds that the funds he used to purchase the annuity, which came from his

qualified individual retirement account, were not a “premium” subject to § 408(b). 

We conclude that Miller has the better of this argument. A premium does not

include funds, such as Miller’s, that are taken from a qualified individual retirement

account to pay for an individual retirement annuity. Though § 408 does not define

the term “premium,” § 408(b)(2)(B) sets the maximum annual premium by

incorporating the amount from § 219(b)(1)(A). This linkage of statutory provisions

is significant, for it conveys that an annual premium does not encompass funds that

already were contributed to a qualified retirement plan. To explain, § 219(b)(1)(A)

lists the maximum “qualified retirement contribution[]” that is “allowed as a

deduction . . . for the taxable year.” Id. § 219(a), (b)(1)(A). Section 219 defines a

qualified retirement contribution as “any amount paid in cash for the taxable year by

or on behalf of an individual to an individual retirement plan for such individual’s

benefit.” Id. § 219(e)(1). Section 219(b)(1)(A) thus concerns retirement

contributions being made for the first time, not the disposition of retirement

contributions that were made in the past. See also id. § 219(d)(2). By incorporating

this provision, § 408(b)(2)(B) connotes that its annual-premium limitation applies

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only to funds that are being contributed to an individual retirement annuity in the first

instance. It therefore follows that the term “premium” in § 408(b) does not include

funds that are taken from a qualified individual retirement account to purchase an

individual retirement annuity.

The distinction that § 408 draws between a “rollover contribution” and a

“premium” buttresses this interpretation of § 408(b). As relevant here, § 408(d)(3)

defines a rollover contribution as “any amount paid or distributed out of an individual

retirement account . . . to the individual for whose benefit the account . . . is

maintained . . . [that] is paid into an . . . individual retirement annuity [within sixty

days].” Section 408 makes clear that a rollover contribution is distinct from a

premium. Starting with the obvious, § 408 uses different terms to describe each type

of payment, which, at a minimum, implies that the terms have different meanings. Cf.

United States v. Bean, 537 U.S. 71, 76 n.4 (2002) (“The use of different terms within

related statutes generally implies that different meanings were intended.” (quoting 2A

Norman Singer, Sutherland on Statutes and Statutory Construction § 46:06 (6th ed.

2000)). Furthermore, a rollover contribution can be “any amount,” 26 U.S.C.

§ 408(d)(3)(A), whereas the amount of an annual premium is expressly limited, id.

§ 408(b)(2)(B). Lastly, § 408 provides that “excess contributions” to an individual

retirement annuity each year are taxed but specifically excludes a rollover

contribution from the calculus for determining how much an individual contributed

in excess of “the amount allowable as a deduction under section 219.” See id.

§§ 408(r), 4973(a), (b)(1). For these reasons, a rollover contribution is not a

premium, thus bolstering our conclusion that a premium does not include funds from

a qualified individual retirement account that are used to purchase an individual

retirement annuity.

Indeed, Running concedes in her brief that “if the Annuity qualifies as an

individual retirement annuity under [§ 408(b)], the proceeds from the sale of the

individual retirement account . . . would qualify as a ‘rollover contribution’ and

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would be tax exempt” and therefore exempt fromthe bankruptcy estate. To avoid the

effect of this admission, Running simply restates her position that Miller’s annuity

was not a qualified individualretirement annuity because Miller’s lump-sumpayment

of $267,319.48 was “fixed” by the annuity contract and exceeded the $6,000 limit for

an annual premium. But this argument assumesthat Miller’s payment for his annuity

constituted a premium. Because we rejected this proposition for the reasons outlined

above, Running effectively concedes that Miller’s payment for his annuity using

funds from his qualified individual retirement account was a rollover contribution

under § 408(d)(3).

The only other court to consider this issue reached a similar conclusion. In In

re LeClair, 461 B.R. 86 (Bankr. D. Mass. 2011), the court considered a bankruptcy

trustee’s argument that the bankruptcy debtor’s payment of $86,000 for an annuity

exceeded the $6,000 limit in § 408(b)(2)(B). Id. at 90. The court agreed with the

bankruptcy trustee that this contribution exceeded the limit from § 408(b)(2)(B) but

reasoned that “[t]he trustee has adduced no evidence that the $86,000 payment was

a cash contribution subject to the $6,000 limitation as opposed to a rollover from

some other retirement vehicle.” Id. at 90-91. The LeClair court therefore recognized,

as we do here, the difference between using funds from a qualified retirement plan to

buy an annuity and paying a premium subject to the limitations of § 408(b). See id.

at 91.

In support of her contrary position, Running refers us to several cases holding

that an annual premium in excess of § 408(b)(2)(B)’s limit disqualifies an annuity

frombeing treated as a qualified individualretirement annuity. But Running admitted

during oral argument that none of her favored cases involved the use of funds from

a qualified individual retirement account to pay for the annuity, asthis case does. See

In re Cherwenka, 508 B.R. 228, 233, 240-41 (Bankr. N.D. Ga. 2014); In re Ludwig,

345 B.R. 310, 312-13, 317 (Bankr. D. Colo. 2006); In re Rogers, 222 B.R. 348, 349-

50 (Bankr. S.D. Cal. 1998).

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Running raises one additional argument. She contends that even if Miller’s 

use of funds fromhis qualified individual retirement account complied with § 408(b),

his annuity contract still violates § 408(b)(2)(B) because it does not require Miller to

pay an annual premium. As Running puts it, § 408(b)(2)(B) requires Miller to pay

“multiple, annual premiums” in order for his annuity to be a qualified individual

retirement annuity. We disagree. Section 408(b)(2)(B) merely states that “[u]nder

the contract . . . the annual premium on behalf of any individual will not exceed

[$6,000].” This provision does not mandate the payment of an annual premium for

an unspecified number of years; rather, it requires that the annuity contract limit the

funds being contributed in the first instance. Cf. Sadberry v. Comm’r, 153 F. App’x

336, 340 (5th Cir. 2005) (per curiam) (“Because the [annuity] at issue does not limit

its annual premiums, it does not qualify as an individual retirement annuity according

to the Internal Revenue Code or for a tax-free rollover.”); LeClair, 461 B.R. at 88

(stating that “[t]here have been no other premiums paid” after the initial payment of

$86,000). Miller’s annuity agreement, which modifies his annuity contract,

accomplishes this requirement. The agreement states that Miller’s “annual cash

purchase payment,” i.e. his annual premium, may not exceed, as relevant

here, “$2,000, or such other maximum amount as may be allowed by law.” By

limiting Miller’s ability to pay an annual premiumin this manner, his annuity contract

complies with § 408(b)(2)(B).

For the reasons described above, we affirm.

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