# U ni te d S ta te s Co ur t of A pp ea ls
For the Eig hth Circu it

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No. 1 3- 36 82

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In re: Jo se ph Mat th ia s M il le r

ll ll ll ll ll ll ll ll ll ll l Deb to r

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Terri A. Run ni ng

ll ll ll ll ll ll ll ll ll ll l

App el la nt

v.

Jo se ph Mat th ia s M il le r

ll ll ll ll ll ll ll ll ll ll l

App el le e

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Nati on al Ass oc ia ti on of C on su m er Ba nk ru pt cy Att or ne y s

ll ll ll ll ll ll ll ll ll ll l

Amicu s o n Beh al

f o f Ap pe ll ee(s )

__ __ __ __ __ __ App eal fro m

th e Uni te d S ta te s B an kr

up tc y App el la te Pan el for th e Eig ht h C irc ui t

__ __ __ __ __ __

Su bm it te d: Octo be r 9, 2 01 4 Fil ed : Fe br ua ry

13 , 20 15

__ __ __ __ __ __Befo re MUR PHY, SMITH, an d GRUENDER, Ci rcu it Ju dg es

.

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GRUENDER, Circ ui t J ud ge

.

Terri Ru nn in g, a ba nk ru pt cy tru st ee, ap pe al s fro m a de ci si on of th e Ban kr up tc y App el l a t e Pan el (“ BAP”) th at affi rm ed th e ba nk ru pt cy co ur t’s co nc lu si on th at an 1

an n ui ty own ed by ba nk ru pt cy de bt or Jo se ph Mi ll er is ex em pt fro m th e ba nk ru pt cy

es ta te . W e aff

irm.

The rel ev an t fact s are no t in di sp ut e. Mi ll er pu rch as ed an an nu i ty fro m
Mi nn es ot a Life In su ran ce Co m pa ny (“ Mi nn es ot a Life ”). Und er th e an nu it y co nt ract
, Mi ll er ag reed to m ak e a lu m p- su m “ Pu rch as e Paym en t” of $2 67 ,31 9.4 8 to Mi nn es ot a Life

. Mi ll er us ed fu nd s fro m hi s in di vi du al ret ire m en t acco un t to m ak e th is pa y m en t.

In ret ur n, Mi nn es ot a Life ag reed to m ak e an an nu al “ In co m e Paym en t” of $4 0,4 97 .95

t o M i ll er fo r th e ne xt ei gh t y ears

. Mi ll er la te r fil ed fo r Ch ap te r 7 ba nk ru pt cy a n d

cl ai m ed th at th e an nu it y was ex em pt fro m th e ba nk ru pt cy es ta te

. Ru nn in g ob jecte d

to th is cl as si fic at io n

. Th e ba nk ru pt cy co ur t ov erru le d he r ob jecti on , an d th e BAP

affi rm ed . This ap pe al fol lo wed

.

W he n rev ie win g an ap pe al fro m a de ci si on of th e BAP, “ we act as a se co nd

rev ie win g co ur t of th e ba nk ru pt cy co ur t’s de ci si on , in de pe nd en tl y ap pl y in g th e sa m e

st an da rd of rev ie w as th e BAP.” In re La so ws ki

, 57 5 F.3 d 81 5, 81 8 (8 th Ci r. 20 09 ).

The rel e v a n t fact s he re are no t di sp ut ed

, an d we rev ie w th e ba nk ru pt cy co ur t’s

co nc lu si on s o f la w de no vo

. Id

.

The Hon or ab le Greg or y F

. Kis he l, Ch ie f Ju dg e, Uni te d St at es Ban kr up tc y 1
Co ur t fo r th e Dis tri ct of M in ne so ta

.

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-In hi s ba nk ru pt cy pe ti ti on , Mi ll er id en ti fie d th e fu nd s in hi s an nu it y as ex em pt
fro m th e ba nk ru pt cy es ta te un de r 11 U.S.C. § 52 2( b) (3 )(C)

. Thi s ex em pt io n al lo ws

a ba nk ru pt cy de bt or to pr ot ect fro m cred it or s “ ret ire m en t fu nd s to th e ex te nt th at
th os e fu nd s are in a fu nd or acco un t th at is ex e mp t f r o m t a xa ti on un de r

se ct io n

. . . 4 08

. . . o f th e In te rn al Rev en ue Co de .” Id

. Sect io n 40 8 of th e In te rn al

Rev en ue Co de

, in tu rn , pr ov id es th at a n i n di vi du al ret ire m en t acco un t an d an
in di vi du al r e t i r e ment an nu it y are ex em pt fro m ta xa ti on ; th at is

, th ey are qu al ifi ed

ret ire m en t pl an s. 26 U.S.C. § 40 8( a), (b ), (e)( 1) ; Gri sw ol d v. Co mm’r

, 85 T.C. 86 9,

87 1 ( T. C

. 1 9 8 5 )

. Thu s, if ret ire m en t fu nd s are he ld in ei th er of th es e qu al ifi ed

ret ire m en t pl an s, th en th e fu nd s can b e ex em pt ed fro m cred it or s’ cl ai m s in

ba nk ru pt cy

. Thi s ex em

pt io n ge ne ral ly ap pl ie s ev en if th e de b t o r tra ns ferr ed th e

ret ire m en t fu nd s to th e qu al ifi ed ret i r e men t pl an fro m an ot he r qu al ifi ed ret ire m en t pl an

. 11 U.S.C. § 52 2( b) (4 )(C) (“ A d ire ct t r a n s f er of ret ire m en t fu nd s fro m 1 fu nd

or acco un t th at is ex em

pt fro m tax at io n u nd er s ect io n . . . 40 8 . . . sh al l n ot ceas e to

qu al ify fo r ex em

pt io n un de r [§ 52 2( b) (3 )(C) ]

. . . by reas on of su ch di rect tra ns fer.” );

id

. § 52 2( b) (4 )(D) (ex pl ai ni ng th at § 52 2( b) (3 )(C) ap pl ie s if “ [a]ny di st rib ut io n
th at

. . . ha s be en di st rib ut ed fro m a fu nd or acco un t th at is e x e mp t f r o m ta xa ti on

un de r se ct io n .

. . 40 8 . . . an d [] to th e ex te nt all owe d b y law, is dep os it ed in su ch a fu nd or a cco un t n ot lat er t ha n 6 0 d ay s af te r th e d is tri bu ti on of s uc h a m ou nt ”).

The re is no di sp ut e th at th e fu nd s us ed to pu rch as e Mi ll er ’s a n n ui ty were

ret ire m en t fu nd s th at cam e fro m Mi ll er’s i n d i v i du al ret ire m en t acco un t, whi ch was

a qu al ifi ed in di vi du al ret ire m en t acco un t un de r 26 U.S.C. § 40 8( a). If Mi ll er si m pl y ha d le ft th es e fu nd s in hi s in di vi du al ret ire m en t acco un t, th ere is no qu es ti on th at th e fu nd s wou ld be ex em

pt fro m th e ba nk ru pt cy es ta te

. Se e 11 U.S.C. § 52 2( b) (3 )(C)

. Howev er, be cau se Mi ll er us ed th e fu nd s to pu rch as e hi s an nu it y , Ru nn in g co nt en ds

th at th e fu nd s be cam e th e pr o p ert y of th e ba nk ru pt cy es ta te

. Cri ti cal to Ru nn in g’s

arg um en t is he r as se rti on th at Mi ll er’s an nu it y is no t a qu al ifi ed in di vi du al ret ire m en t

an nu it y as de fin ed by 26 U.S.C. § 40 8( b)

. Thi s pr ov is io n en um erat es se ve ral

req ui rem en ts fo r an an nu it y to be a qu al ifi e d in di vi du al ret ire m en t an nu it y , two of

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-whi ch are at is su e he re. Fi rs t, “ [u ]nde r th e co nt ract

. . . th e pr em iu m s are no t fix ed .”

Id

. § 4 08 (b )(2 )(A). And se co nd

, “ [u ]nde r th e co nt ract

. . . th e an nu al pr em iu m on be ha lf of an y in di vi du al wil l no t ex ceed th e do ll ar am ou nt in effe ct un de r se ct io n
21 9( b) (1 )(A) [o f th e In te rn al Rev en ue Co de ]. ” Id

. § 40 8( b) (2 )(B)

. Thi s am ou nt was $6 ,00 0 fo r th e ta xa bl e y ear i n q ue st io n. Id

. § 2 19 (b )(1 )(A), (b )(5 )(A), (b )(5 )(B)

.

Ru nn in g arg ue s th at Mi ll er’s an nu it y fai ls bo th of th es e req ui rem en ts

. Bec au se
Mi ll er’s an nu it y co nt ract req ui red hi m to pa y a lu m p- su m am ou nt to Mi nn es ot a Life

, $2 67 ,31 9.4 8, Ru nn in g ch arac te riz es th e an nu it y ’s “ pr e m iu m []” as “ fix ed ,” in

vi ol at io n of § 40 8( b) (2 )(A). And be cau se th e an nu it y co nt ract al lo wed Mi ll er to pa y

m or e th an $6 ,00 0 in on e y ear fo r th e an nu it y , Ru nn in g ur g e s t h at th e an nu it y ’s

“ an nu al pr em iu m ” ex ceed s th e li m it se t by §§ 40 8( b) (2 )(B) an d 21 9( b) (1 )(A). Mi ll er

res po nd s th at th e f

u nd s he us ed to pu rch as e th e an nu it y , whi ch cam e fro m hi s

qu al ifi e d i n di vi du al ret ire m en t acco un t, were no t a “ pr em iu m ” su bjec t to § 40 8( b)

.

W e co nc lu de th at Mi ll er ha s th e be tt er of th is arg um en t. A pr em iu m do es no t
in cl ud e fu nd s, su ch as Mi ll er’s, th at are ta ke n fro m a qu al ifi ed in di vi du al ret ire m en t

acco un t to pa y fo r an in di vi du al re t ire m en t an nu it y

. Tho ug h § 40 8 do es no t de fin e
th e te rm “ pr em iu m ,” § 40 8( b) (2 )(B) se ts t h e maxi m um an nu al pr em iu m by

in co rp or at in g th e am ou nt fro m § 21 9( b) (1 )(A). Thi s li nk ag e of st at ut or y pr ov is io ns is si gn ifi can t, for it con ve y s th at an an nu al pr em iu m do es no t enco m pa ss fu nd s th at
al read y were con tri bu te d t o a qu al ifi ed ret ire m en t pl an

. To exp la in

, § 21 9( b) (1 )(A)

li st s th e m ax im

um “ qu al ifi ed ret ire m en t co nt rib ut io n[ ]” th at is “ al lo wed as a de du ct io n

. . . fo r th e t a x a b l e y ear.” Id

. § 21 9( a), (b )(1 )(A). Sect io n 21 9 de fin es a

qu al ifi ed ret ire m en t co nt rib ut io n as “ an y am ou nt pa id in cas h fo r th e ta xa bl e y ear by

or on be ha lf of an in di vi du al to an in di v i d u al ret ire m en t pl an fo r su ch in di vi du al ’s

be ne fit .” Id

. § 21 9( e)(1 ). Sect io n 21 9( b) (1 )(A) th us co n cern s ret ire m en t

c o nt rib ut io ns be in g m ad e fo r th e fir st ti m e, no t th e di sp os it io n of ret ire m en t

co nt rib ut io ns th at were m ad e in th e pa st

. Se e al so id

. § 21 9( d) (2 ). By in co rp or at in g
th is pr ov is io n, § 40 8( b) (2 )(B) co nn ot es th at it s an nu al -p rem iu m li m it at io n ap pl ie s

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-on ly to fu nd s th at are be in g co nt rib ut ed to an in di vi du al ret ire m en t an nu it y in th e fir st

in st an ce. It th eref

or e fo ll ows th at th e te rm

“ pr em iu m ” in § 40 8( b) do es no t in cl ud e fu nd s th at a r e t a k e n f

ro m a qu al ifi ed in di vi du al ret ire m en t acco un t to pu rch as e an
in di vi du al ret ire m en t an nu it y

.

The d i s ti nc ti on th at § 40 8 dr aws be twee n a “ ro ll ov er co nt rib ut io n” an d a

“ pr em iu m ” bu tt res se s th is in te rp ret at io n of § 4 08 (b ). As rel ev an t he re, § 40 8( d) (3 )

de fin es a ro ll ov er co nt rib ut io n as “ an y am ou nt pa id or di st rib ut ed ou t of an in di vi du al

ret ir e men t a c c o un t

. . . to th e in di vi du al fo r who se be ne fit th e acco un t

. . . is

mai n t a i n e d

. . . [ th at ] is pa id in to an

. . . i nd iv id ua l ret ire m en t an nu it y [wit hi n si xt y da y s].” Sect io n 40 8 m ak es cl ear th at a ro ll ov er co nt rib ut io n is di st in ct fro m a

pr em iu m

. St art in g wit h th e ob vi ou s, § 40 8 us es di ffer en t te rm s to de sc rib e each type
of pa y m en t, whi ch

, at a m in im

um , im pl ie s th at th e te rm s ha ve di ffer en t m ean in gs

. Cf

. Uni te d St at es v. Bea n , 53 7 U.S. 71

, 76 n.4 (2 00 2) (“ The us e of di ffer en t te rm s wit hi n rel at ed sta tut es ge neral ly im

pl ie s th at di ffer en t m ean in gs were in te nd ed .” (q uo ti ng 2A

Nor m an Sin ge r, Su th erl an d on St at ut es an d Stat ut or y Co ns tru ct io n § 46 :0 6 (6 th ed

. 20 00 )). Fu rth erm o r e, a ro ll ov er co nt rib ut io n can be “ an y am ou nt ,” 26 U.S.C. § 40 8 (d )(3 )(A), whe reas th e am ou nt of an an nu al pr em iu m is ex pr es sl y li m it ed

, id

. § 4 08 (b )(2 )(B) . Last ly, § 4 08 pro vi de s t ha t “ ex ces s co nt rib ut io ns ” to an in di vi du al

ret ire m en t an nu it y each y ear are ta xe d bu t sp eci fic al ly ex c l u d e s a ro ll ov er

co nt rib ut io n fro m th e cal cu lu s fo r de te rm in in g ho w m uc h an in di vi du al co nt rib ut ed

in ex ces s of “ th e am ou nt al lo wab le as a de du ct io n un de r se ct io n 2 1 9

. ” S e e i d. §§ 40 8( r), 49 73 (a), (b )(1 ). Fo r th es e reas on s, a ro ll ov er co nt rib ut io n is no t a

pr em iu m , th us bo ls te rin g ou r co nc lu si on th at a pr em iu m do es no t in cl ud e fu nd s fro m

a qu al ifi ed in di vi du al ret ire m en t acco un t th at are us ed to pu rch as e a n i nd iv id ua l

ret ire m en t an nu it y

.

In de ed

, R u nn in g co nc ed es in he r br ie f th at “ if th e Ann ui ty qu al ifi es as an
in di vi du al ret ire m en t a n n u it y un de r [§ 40 8( b) ], th e pr oc eed s fro m th e sa le of th e
in di vi du al ret ire m en t acco un t

. . . w o u l d q u a l i fy as a ‘roll ov er co nt rib ut io n’ an d

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-wou ld be ta x ex em pt ” an d th eref

or e ex em pt fro m th e ba nk ru pt cy es ta te

. To av oi d th e effe ct of th is ad m is si on , Ru nn in g si m pl y res ta te s he r p o si ti on th at Mi ll er’s an nu it y

w as no t a qu al ifi ed in di vi du al ret ire m en t an nu it y be cau se Mi ll er’s lu m p- su m pa y m en t
of $2 67 ,31 9.4 8 was “ fix ed ” by th e an nu it y co nt ract an d ex ceed ed th e $6 ,00 0 li m it fo r

an an nu al pr em iu m

. Bu t th is arg um en t as su m es th at Mi ll er’s pa y m en t fo r hi s an nu it y

co ns ti tu te d a pr em iu m

. Bec au se we reject ed th is pr op os it io n fo r th e reas on s ou tl in ed

ab ov e, Ru nn in g effe ct iv el y co nc ed es th at Mi ll e r ’s pa y m en t fo r hi s an nu it y us in g fu nd s fro m hi s qu al ifi ed in di vi du al ret ire m en t a c c o un t was a ro ll ov er co nt rib ut io n

un de r § 4 08 (d )(3 ).

The on ly ot he r co ur t to co ns id er th is is su e reac he d a si m il ar co nc lu si on

. In In

re LeCl ai r , 46 1 B .R. 86 (Ban kr

. D. Mas s. 20 11 ), th e co ur t co ns id ered a ba nk ru pt cy

tru st ee’s arg um en t th at th e ba nk ru pt cy de b t or ’s pa y m en t of $8 6,0 00 fo r an an nu it y

ex ceed ed th e $6 ,00 0 li m it in § 40 8( b) (2 )(B)

. I d

. a t 9 0

. The co ur t ag reed wit h th e ba nk ru pt cy tru st ee th at th is co nt rib ut io n ex ceed ed th e li m it fro m § 40 8( b) (2 )(B) bu t

reas on ed th at “ [t]he tru st ee h as ad du ced no ev id en ce t ha t t he $8 6,0 00 pa y m en t was

a cas h co nt rib ut io n su bjec t t o t h e $ 6 ,00 0 li m it at io n as op po se d to a ro ll ov er fro m

so m e ot he r ret ire m en t ve hi cl e.” Id

. at 90 -9 1. The LeCl ai r co ur t th eref or e reco gn iz ed

,

as we do he re, th e di ffer en ce be twee n us in g fu nd s fro m a qu al ifi ed ret ire m en t pl an to
bu y an an nu it y an d paying a pr em iu m su bjec t to th e li m it at io ns of § 40 8( b)

. Se e id

. at 91

.

In su pp or t of he r co nt rary po si ti on , Ru nn in g refe rs us to se ve ral cas es ho ld in g

t h at an an nu al pr em iu m in ex ces s of § 40 8( b) (2 )(B) ’s li m it di sq ua li fie s an an n u i t y
fr om be in g tre at ed as a qu al ifi ed in di vi du al ret ire m en t an nu it y

. Bu t Ru nn in g ad m itt ed

du rin g o ral arg um en t t ha t n on e o f he r fav or ed cas es in vo lv ed th e u se of f un ds fro m

a qu al ifi ed in di vi du al ret ire m en t acco un t to pa y fo r th e an nu it y , as th is cas e do es

. Se e
In re Ch er wen ka

, 50 8 B.R. 22 8, 23 3, 24 0- 41 (Ban kr

. N.D. Ga. 20 14 ); In re Lu dw ig

, 34 5 B.R. 31 0, 31 2- 13

, 31 7 (Ban kr

. D. Co lo

. 20 06 ); In re Rog er s , 22 2 B.R. 34 8, 34 9-

50 (Ban kr . S.D. Cal. 1 99 8)

.

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-Ru nn in g rai se s on e ad di ti on al arg ume n t

. Sh e co nt en ds th at ev en if Mi ll er’s

us e of fu nd s fro m hi s qu al ifi ed in di vi du al ret ire m en t acco un t co m pl ie d wit h § 40 8( b)

, hi s an nu it y co nt ract st il l vi ol at es § 40 8( b) (2 )(B) be cau se it do es no t req ui re Mi ll er to

pa y an an nu al pr em iu m

. As Ru nn in g pu ts i t
, § 4 0 8 ( b )(2 )(B) req ui res Mi ll er to pa y

“ m ul ti pl e, an nu al pr em iu m s” in or de r fo r hi s an nu i t y t o b e a qu al ifi ed in di vi du al

ret ire men t a n n u i ty. W e di sa gr ee. Sect io n 40 8( b) (2 )(B) m erel y st at es th at “ [u ]nde r
th e co nt ract

. . . th e an nu al pr em iu m on be ha lf of an y in di vi du al wi l l n o t e x ceed [$ 6,0 00 ]. ” Thi s p ro vi si on do es no t m an da te th e p ay m en t o f an an nu al pr em iu m for

an un sp eci fie d nu m

be r of y ears ; rat he r, it req ui res th at th e an nu it y co nt ract li m it th e fu nd s be in g co nt rib ut ed in th e fir st in st an ce. Cf

. Sa db er ry v. Co mm’r

, 15 3 F. App ’x

33 6, 34 0 (5 th Ci r. 20 05 ) (p er cu ria m ) (“ Bec au se th e [an nu it y ] at is su e do es no t li m it

it s an nu al pr em iu m s, it do es no t qu al ify as an in di vi du al ret ire m en t an nu it y acco rd in g

to th e In te rn al Rev en ue Co de or fo r a ta x- f r e e r o l l ov er.”) ; LeCl ai r , 46 1 B.R. at 88 (s ta ti ng th at “ [t]he re ha ve be en no ot he r pr em iu m s pa id ” aft er th e in it ia l pa y m en t of
$8 6,0 00 ). Mi ll er’s an nu it y a g r e e m en t, whi ch m od ifi es hi s an nu it y co nt ract
,

acco mp li sh es th is req ui rem en t. The ag reem en t st at es th at Mi ll er’s “ an nu al cas h

p u r c ha se pa y m en t,” i.e

. hi s an nu al pr em iu m , m ay no t ex ceed

, as rel ev an t
h e r e , “ $2 ,00 0, or su ch ot he r m ax im um am ou nt as m ay be al lo wed by la w.” B y li m it in g Mi ll er’s ab il it y to pa y an an nu al pr em iu m in th is m an ne r, hi s an nu it y co nt ract

co m pl ie s wi th § 4 08 (b )(2 )(B)

.

Fo r th e rea so ns de sc rib ed ab ov e, we affi rm

.

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