The Elder Law Forum

The Elder Law Forum by Professor Michael Myers Editor's Note: The Elder Law Forum is a public service of the University of South Dakota School of Law, an extension of the SENIOR LEGAL HOTLINE available at no cost to persons 60 and older at 605-677-6343 and during regular business hours. The Elder Law Forum delivers information and educational material by radio, a weekly newspaper column, and Law School research papers placed on the USD School of Law Web site. Professor Myers teaches Elder Law at the School of Law.

Law Protects Pension,

Social Security Benefits

"I have a male friend who is 67," said the USD Senior Hotline caller (1-800-747-1895; "He's involved in a legal dispute and is worried that if it does not go well his retirement benefits may be in jeopardy. He has two annuities. Can they be reached by a judgment creditor?" she asked.

"Does this involve a claim by a spouse, a dependent, or the government?" I asked. "No," she answered. "Were the annuities purchased as part of an employee benefit plan," I queried. Yes, she said.

"Then your friend should relax," I advised, citing Section 43-45-16 of South Dakota Codified Laws, which states: "Any person shall have the right to select and designate a total of $250,000 and the income and distribution therefrom from the employee's benefit plans as exempt from execution, attachment, garnishment, seizure, or taking by any legal process."

However, the statute has two exceptions: (1) Payments to a spouse or dependent pursuant to a domestic relations order, and (2) Judgments entered on behalf of the state of South Dakota or any of its political subdivisions.

Federal law also provides extensive protection against the attachment of pension benefits. For example, ERISA's "spend-thrift rule" provides that "Each pension plan shall provide that benefits provided under the plan may not be assigned or alienated." The Internal Revenue Code (IRC 401(a)-13) imposes a similar rule as a condition of the pension plan being tax qualified. And federal bankruptcy law contains similar protections.

O. J. Simpson is perhaps the best known example of the scope of protection afforded to pension funds. In that case, by virtue of the Retirement Equity Act of 1984, O.J.'s spouse could have tapped his pension monies, had she survived him; however, he made certain she did not.

Yet in such cases courts are free to apply a fundamental maxim of equity to override statutory protections: "The wrongdoer shall not profit from his own wrong."

Social Security payments are protected with the exception of domestic relations orders and offsets owed to the federal government, most notably unpaid student loans.

"So there you have it," I informed the caller. "Employment-based pension funds are protected except in the area of domestic relations, government liens, and wrongdoing." And for retirement funds not arising out of employment? Engage a lawyer.

Spendthrift and other anti-alienation language can achieve much of the same protection, depending upon the state.

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