GARNISHMENT OF
401(k) ACCOUNTS
Prepared by: Debra L. Mackey, Esq.
In Private Letter Ruling
200342007, the IRS ruled that a 401(k) Plan does not violate Code § 401(a)(13)
(the anti-alienation rule) by honoring a court ordered garnishment against a
participant’s 401(k) account in order to satisfy a fine assessed as a result of
conviction of a federal crime. Although
a couple of district court cases previously reached this conclusion, this marks
the first statement of the IRS on the issue.
The ruling is based on three principals of federal tax law: (1) a federal criminal fine is treated as if
it were a federal tax lien; (2) federal law permits the United States to
enforce a fine against all property except that which is specifically exempt
from tax levy, and the specific exemptions do not include qualified retirement
plans; and (3) regulations under Code § 401(a)(13)
permit collection by the United States on a judgment resulting from an unpaid
tax assessment. Therefore, the
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