National Bank of North America v. International Broth. of Elec. Workers Local No. 3, Pension and Vacation Funds

• Decision Date: 06 August 1979
• Citation: 69 A.D.2d 679,419 N.Y.S.2d 127
• Parties: , 1 Employee Benefits Cas. 2189 NATIONAL BANK OF NORTH AMERICA, Petitioner-Respondent, v. INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS LOCAL # 3, PENSION AND VACATION FUNDS, Respondent, Joint Industry Board of the Electrical Industry, Appellant, Martin J. Conlon, Judgment-Debtor.
• Court: New York Supreme Court — Appellate Division

Page 127

419 N.Y.S.2d 127

69 A.D.2d 679, 1 Employee Benefits Cas. 2189

NATIONAL BANK OF NORTH AMERICA, Petitioner-Respondent, v. INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS LOCAL # 3, PENSION AND VACATION FUNDS, Respondent, Joint Industry Board of the Electrical Industry, Appellant, Martin J. Conlon, Judgment-Debtor.

Supreme Court, Appellate Division, Second Department.

Aug. 6, 1979.

Donald F. Menagh, New York City (Norman Rothfeld, New York City, of counsel), for appellant.

Cole & Deitz, New York City (Andrea Catania, Edward N. Meyer, New York City, and Joseph DiBenedetto, Pleasantville, of counsel), for petitioner-respondent.

Before MOLLEN, P. J., and SUOZZI, RABIN and MARTUSCELLO, JJ.

PER CURIAM.

The basic issue on appeal is whether the vested benefits payable to a judgment debtor from an employee pension fund governed by the Federal Employment Retirement Income Security Act of 1974 (ERISA) (U.S.Code, tit. 29, § 1001 Et seq.) are exempt from the New York statutory procedures governing enforcement of money judgments (see, generally, CPLR art. 52). We believe that the statutory rights of a judgment creditor, including the mechanisms of levy and garnishment, are neither in conflict with nor pre-empted by the provisions of ERISA and, therefore, such vested benefits are not exempt.

I

On June 30, 1969 the petitioner, National Bank of North America (the Bank), obtained a money judgment against Martin Conlon in the sum of $1,478.10. Conlon is a retired pensioner of the International Brotherhood of Electrical Workers, Local No. 3, and is entitled to receive monthly payments of $325 from an electrical industry sponsored annuity fund and $159 from an electrical industry pension, hospitalization and benefit fund. These funds are administered by the appellant, the Joint Industry Board of the Electrical Industry (the Board), pursuant to collective bargaining agreements between electrical contractors and the union. In an effort to collect the unsatisfied judgment ^*, the Bank commenced the instant proceeding to levy upon the vested benefits held by the Board for payment to Conlon.

The Board resisted the petition on the general ground that the benefit plans are wholly governed by ERISA and are, therefore, not subject to State mechanisms for enforcing money judgments. Special Term rejected the Board's analysis and directed, Inter alia, that in accordance with CPLR 5205 (subd. (d)), the Board pay to the Bank from the vested benefits of the annuity and disability funds payable to Conlon, an amount equal to 10% Of said payments as they become due until the Bank's judgment is satisfied.

II

On appeal, the Board relies on two separate sections of ERISA for the proposition that ERISA-governed pension plans are not subject to the judgment enforcement mechanisms of CPLR article 52. It is first argued that ERISA generally pre-empts all State statutes which affect the regulation of pension plans. Reference is made to subdivision (a) of section 1144 of title 29 of the United States Code (ERISA § 514, subd. (a)), which provides:

"Supersedure; effective date

"(a) Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State Laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title. This section shall take effect on January 1, 1975."

The Board next argues that regardless of the general pre-emption resulting from the above supersedure section, the remedies of garnishment, levy, etc., are expressly prohibited by section 206 (subd. (d)) of ERISA (U.S.Code, tit. 29, § 1056, subd. (d)) which provides:

"Assignment or alienation of plan benefits

"(d)(1) Each pension plan shall provide that benefits provided under the plan may not be assigned or alienated.

"(2) For the purposes of paragraph (1) of this subsection, there shall not be taken into account any voluntary and revocable assignment of not to exceed 10 percent of any benefit payment, or of any irrevocable assignment or alienation of benefits executed before September 2, 1974. The preceding sentence shall not apply to any assignment or alienation made for the purposes of defraying plan administration costs. For purposes of this paragraph a loan made to a participant or beneficiary shall not be treated as an assignment or alienation if such loan is secured by the participant's accrued nonforfeitable benefit and is exempt from the tax imposed by section 4975 of Title 26 (relating to tax on prohibited transactions) by reason of section 4975(d)(1) of Title 26."

The Board notes that the Internal Revenue Code has been similarly amended to require that a trust plan must provide that benefits may not be assigned or alienated for purposes of qualifying for the tax advantages available to such plans (U.S.Code, tit. 26, § 401, subd. (a), par. (13)).

Allegedly in accordance with the above anti-alienation clause, the plans administered by the Board provide that the benefits payable to beneficiaries "cannot be assigned and shall not be liable to attachment, garnishment or other process and shall not be taken, appropriated or applied by legal or equitable process, or by operation of law, to pay any debt or liability" of the beneficiary.

The application of the above supersedure and anti-alienation sections is largely dependent upon the Congressional intent in drafting these sections. Pertinent to this determination of legislative intent is the Congressional statement of findings which led to the adoption of ERISA and declares the policy of the Act as follows (U.S.Code, tit. 29, § 1001):

"(a) The Congress finds that the growth in size, scope, and numbers of employee benefit plans in recent years has been rapid and substantial; that the operational scope and economic impact of such plans is increasingly interstate; that the continued well-being and security of millions of employees and their dependents are directly affected by these plans; that they are affected with a national public interest; that they have become an important factor affecting the stability of employment and the successful development of industrial relations * * * that it is therefore desirable in the interests of employees and their beneficiaries, for the protection of the revenue of the United States, and to provide for the free flow of commerce, that minimum standards be provided assuring the equitable character of such plans and their financial soundness.

"(b) It is hereby declared to be the policy of this Act to protect interstate commerce and the interests of participants in employee benefit plans and their beneficiaries * * * by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts."

III

Our analysis of the purposes of ERISA and the purposes of CPLR article 52 leads to the conclusion that there is no absolute pre-emption of our State's procedures for enforcing a money judgment by application of ERISA's supersedure clause (U.S.Code, tit. 29, § 1144, subd. (a)). At the outset we emphasize that the purposes of CPLR article 52 are wholly unrelated to the purposes of ERISA. Rather than seeking to affect the administration or regulation of employee benefit plans, CPLR article 52 is concerned with the fundamental problem of enforcing money judgments. Such mechanisms are absolutely essential to insure the integrity of our courts' judgments and without such procedures judicial redress would be frequently no more than an empty gesture. By allowing the instant exercise of judicial enforcement, there is no risk that an innocent person will be deprived of the financial security which he justly deserves after a lifetime of labor. Nor is there the risk that by enforcing the instant judgment Conlon will be reduced to poverty.

To the extent that the State enforcement procedures allow execution on pension benefits, the amount to be garnished is expressly limited to 10% Of the total benefit payments which are to be made to the judgment debtor. CPLR 5205 provides:

"(c) Trust exemption. Any property while held in trust for a judgment debtor, where the trust has been created by, or the fund so held in trust has proceeded from, a person other than the judgment debtor, is exempt from application to the satisfaction of a money judgment.

"(d) Income exemptions. The following personal property is exempt from application to the satisfaction of a money judgment, except such part as a court determines to be unnecessary for the reasonable requirements of the judgment debtor and his dependents:

1. ninety per cent of the income or other payments from a trust the principal of which is exempt under (subdivision (c))".

It is noteworthy that the 10% Limitation on garnishment coincides with the allowance of voluntary revocable assignments not to exceed 10% Which are authorized by section 206 (subd. (d), par. (2)) of ERISA (U.S.Code, tit. 29, § 1056, subd. (d), par. (2)).

The Congressional purpose in adopting ERISA was to provide minimum standards "assuring the equitable character of such plans and their financial soundness" (U.S.Code, tit. 29, § 1001, subd. (a)). The policy of the Act was further declared to be to protect "the interests of participants in employee benefit plans and their beneficiaries * * * by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts" (§ 1001, subd. (b)). It is clear from the foregoing and from an examination of the history of ERISA that its purpose was to protect the beneficiaries of the funds from mismanagement of those funds by the fiduciaries of the plans. By enacting ERISA Congress sought to correct...