In re Henderson
| Decision Date | 15 July 1993 |
| Docket Number | Bankruptcy No. 92-21183,92-21184. |
| Citation | 167 BR 67 |
| Parties | In re Joel Jerome HENDERSON. In re Frank John DANTONE. |
| Court | U.S. Bankruptcy Court — Northern District of Mississippi |
William R. Armstrong, Jr., Henderson, Dantone and Hines, P.A., Greenville, MS, for Joel Jerome Henderson and Frank John Dantone.
R. Michael Bolen, Sr. Atty., Jackson, MS, for U.S. Trustee Victoria E. Young.
Craig M. Geno, Holcomb, Dunbar, Connell, Chaffin & Willard, Jackson, MS, for Sunburst Bank.
David J. Puddister, Lake, Tindall and Thackston, Greenville, MS, for Magnolia Federal Bank for Sav.
On consideration before the court in each of the above captioned bankruptcy cases are objections by the Office of the U.S. Trustee to certain exemptions claimed by the debtors; responses to said objections having been filed by the debtors; memoranda of law having been submitted by the parties; and the court having considered same, hereby finds as follows, to-wit:
I.
The court has jurisdiction of the subject matter of and the parties to these proceedings pursuant to 28 U.S.C. § 1334 and 28 U.S.C. § 157. These are core proceedings as defined in 28 U.S.C. § 157(b)(2)(A), (B), and (O).
II.
The parties have stipulated to the following facts:
JOEL JEROME HENDERSON (92-21183)
1. Joel Jerome Henderson is a permanent resident citizen of the State of Mississippi and is forty-three (43) years of age.
2. Since 1974, Henderson has been an employee of a professional association for the practice of law located in Greenville, Washington County, Mississippi.
3. On March 1, 1980, Henderson's employer, Henderson, Duke, & Dantone, P.A., established a defined benefit pension plan and trust which was the subject of a favorable determination by the Internal Revenue Service (IRS) that the plan qualified for federal tax exemption pursuant to the provisions of § 401(a) of the Internal Revenue Code. The plan was terminated by the employer on December 31, 1986, following IRS approval, in order to establish a Simplified Employee Pension-Individual Retirement Account (SEP-IRA). Henderson's distributions upon termination were rolled over into the SEP-IRA account within thirty (30) days of receipt. On March 3, 1987, Henderson, Duke & Dantone, P.A., executed a 5305 SEP-IRA form pursuant to § 408(k) of the Internal Revenue Code.
4. Northwestern Mutual Insurance Company SEP-IRA individual retirement annuities, nos. 11659862, 11530037, 11388982, 10805275, and 12054106, qualify under § 408 of the Internal Revenue Code and are not governed by ERISA. They are simplified employee pensions within the meaning of 26 U.S.C. § 408(k)(1).
5. Deposit Guaranty Bank SEP-IRA account no. XXX-XX-XXXX OIC-119768 qualifies under § 408 of the Internal Revenue Code and is not governed by ERISA. It is a simplified employee pension within the meaning of 26 U.S.C. § 408(k)(1).
6. All contributions to Northwestern Mutual Insurance Company SEP-IRA account no. 11659862 are direct rollovers into a SEP-IRA annuity, within thirty days of receipt of a distribution from an IRS approved termination of an employer created defined benefit pension plan and trust, which had been qualified for federal tax exemption by the IRS under § 401 of the Internal Revenue Code. The employer was the source of all contributions to the defined benefit pension plan and trust.
7. All contributions to Northwestern Mutual Insurance Company SEP-IRA annuities, nos. 11530037, 1138982, 10805275, and 12054106, and a contribution of $10,747.24 to Deposit Guaranty National Bank SEP-IRA account no. XXX-XX-XXXX OIC-119768, were direct annual simplified employee pension contributions made by the employer pursuant to § 408(k) of the Internal Revenue Code and SEP-IRA contribution agreements which are exempt from federal income taxes under the laws of the United States.
8. The remaining contribution to Deposit Guaranty National Bank SEP-IRA account no. XXX-XX-XXXX OIC-119768, other than the annual direct employer simplified employee pension contributions, was a direct rollover within thirty days of the receipt of $16,974.10 on April 30, 1990, from an IRS approved termination of an employer created defined benefit pension plan and trust which had been qualified for federal tax exemption under § 401 of the Internal Revenue Code. The employer was the source of all contributions to the defined benefits pension plan and trust.
FRANK JOHN DANTONE (92-21184)
1. Frank John Dantone is a permanent resident citizen of the State of Mississippi and is forty-three (43) years of age.
2. Since 1977, Frank John Dantone has been an employee of a professional association for the practice of law located in Greenville, Washington County, Mississippi.
3. On March 1, 1980, Dantone's employer, Henderson, Duke, & Dantone, P.A., established a defined benefit pension plan and trust which was the subject of a favorable determination by the IRS that the plan qualified for federal tax exemption pursuant to the provisions of § 401(a) of the Internal Revenue Code. The plan was terminated by the employer on December 31, 1986, following IRS approval, in order to establish a Simplified Employee Pension-Individual Retirement Account (SEP-IRA). Dantone's distributions upon termination were rolled over into the SEP-IRA account within thirty (30) days of receipt. On March 3, 1987, Henderson, Duke & Dantone, P.A., executed a 5305 SEP-IRA form pursuant to § 408(k) of the Internal Revenue Code.
4. Morgan Keegan and Company, Inc., SEP-IRA account no. XXXXXXXXX, qualifies under § 408 of the Internal Revenue Code and is not governed by ERISA. It is a simplified employee pension within the meaning of 28 U.S.C. § 408(k)(1).
5. $39,426.71, plus accumulated earnings, deposited in Morgan Keegan and Company, Inc., SEP-IRA account no. XXXXXXXXX, was contributed as a direct rollover into the SEP-IRA account within thirty days of the receipt of its distribution. The distribution was the result of an IRS approved termination of an employer created defined benefit pension plan and trust, which had been qualified for federal tax exemption under § 401(a) of the Internal Revenue Code. The employer was the source of all contributions to the defined benefit pension plan and trust.
7. All contributions, other than the rollover referred to in paragraph 5. above, to Morgan Keegan and Company, Inc., account no. XXXXXXXXX, were made by the employer as direct annual simplified employee pension contributions pursuant to 408(k) of the Internal Revenue Code and SEP-IRA contribution agreements which are exempt from federal income taxes under the laws of the United States.
III.
As noted above, the retirement plans in these bankruptcy cases are known as Simplified Employee Pension-Individual Retirement Accounts, referred to herein as SEP-IRA's. Although SEP-IRA's are qualified under § 408 of the Internal Revenue Code, they are not considered as being qualified under the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Therefore, the recent United States Supreme Court decision, Patterson v. Shumate, 504 U.S. ___, 112 S.Ct. 2242, 119 L.Ed.2d 519 (1992), does not expressly apply to these proceedings.
The issue in Patterson v. Shumate was whether an anti-alienation provision in an ERISA-qualified pension plan constituted a restriction on transfer enforceable under "applicable nonbankruptcy law" for purposes of the § 541(c)(2) 11 U.S.C. § 541(c)(2) exclusion of property from the debtor's bankruptcy estate. A unanimous Court held that, plainly read, the provision encompassed any relevant nonbankruptcy law, including federal law such as ERISA.
Section 541(c)(2) of the Bankruptcy Code states that "a restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable nonbankruptcy law is enforceable in a case under this title."
After holding that ERISA could be "applicable nonbankruptcy law," the Court then determined that the anti-alienation provision contained in the ERISA-qualified plan at issue satisfied the literal terms of § 541(c)(2).
As such, because SEP-IRA's are not ERISA qualified, this court cannot conclude that they are excluded from property of the bankruptcy estates pursuant to § 541(c)(2). Accordingly, if they are to be protected from the creditors of the debtors' bankruptcy estates, they must qualify as exemptible assets under state law. The parties candidly recognize that because of the inapplicability of Patterson v. Shumate, that the issue in these proceedings has narrowed to the question of which of two Mississippi exemption statutes can be claimed by the debtors. The two statutes can produce remarkably different results depending on the financial circumstances of the debtors. The statutes are set forth in pertinent part below:
This statute, which was adopted on May 4, 1954, decades before the creation of SEP-IRA's in the Internal Revenue Code, could conceivably be interpreted...
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