If a plan operates in accordance with hair cut provisions on a case by case basis, must an employer turn over assets to a participant's bankruptcy estate?

Felicia, an ERISA "top hat" plan is exempt from the Act's anti-alientation requirement, so the participant's interest in the plan is not exempt property under the Bankruptcy Code's "applicable nonbankruptcy law" exception for that reason. However, it might be exempt under generally applicable state law. This depends on whether the plan's trust is a spendthrift trust under State law. This is problematic if the plan document lacks an anti-alienation provision. Many states have enacted laws that exempt some or all of the amounts held or controlled by a private retirement plan for payment as an annuity or pension. For example, See Cal. CCP Sec. 704.115(a)(2). In one bankruptcy court decision applying state law, the court held that the participant/debtor's exercisable right to receive a distribution from a plan exempt from ERISA's anti-alienation requirement caused the plan not to be a spendthrift trust and the creditor was entitled to payment of the benefit at the time the debtor became entitled to a distribution. See In re Silldorff, 96 BR 859 (C.D.Ill. 1989).

[This message has been edited by PJK (edited 06-23-2000).]