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Michigan’s Law Attaching Prisoner Retirement Benefits Trumped By Federal Law
Michigan's Law Attaching Prisoner Retirement Benefits Trumped By Federal Law
Michigan requires financially able prisoners to contribute up to 90% of monies received at their prison address to the state's coffers as an offset to the cost of their incarceration. Moreover, state law prohibits prisoners from maintaining bank accounts other than their prison accounts. A conflict arose, however, when a federally protected pension plan of Daimler- Chrysler Corporation (Chrysler) was ordered to deliver pension benefits to the prisoners at their prison address, without the prisoners' written authorization. The Sixth Circuit U.S. Court of Appeals held that federal law (Employee Retirement Income and Security Act) (ERISA) preempted all state laws that might attempt to attach these retirement funds. (This protection is called "anti-alienation.")
Four Michigan prisoners were ordered by state court action brought by Michigan's Attorney General to comply with the State Correctional Facility Reimbursement Act (SCFRA) and notify Chrysler of their prison address so that Chrysler could mail their pension checks there. One complied; the other three did not. Chrysler, in turn, responded in the matter of the remaining three that under their fiduciary responsibility to pensioners, they were constrained by ERISA to ignore all such confiscatory state laws. The U.S. District Court agreed, declaring that the anti-alienation provisions of ERISA were superior to claims raised under SCFRA.
On appeal to the Sixth Circuit, Michigan argued that their action only notified Chrysler of the prisoners' addresses, which was not per se an attachment action. But Chrysler replied that even the mere act of address change notification was protected under their fiduciary responsibility, wherein only the pensioner could request such a change. For the three prisoners who so refused, the state could not compel Chrysler to bend its rules.
This then left the question as to how Michigan could get its hooks on the prisoners' money. If the prisoners instead directed the funds be sent to another Michigan address, the court observed that under state law, Michigan could then seek attachment of those funds under SCFRA, because once the funds had been disbursed by Chrysler, they were no longer under Chrysler's federally protected fiduciary control. But not before the court, and not stated, was whether the prisoners could safely direct Chrysler to send pension benefit checks to an out-of-state address. A better defensive move might be to have the benefits transferred to another person (if they are transferable) or to instruct Chrysler to retain them until the prisoner paroles. See: Daimler Chrysler Corporation v. Cox, 447 F.3d 967 (6th Cir. 2006).
Michigan requires financially able prisoners to contribute up to 90% of monies received at their prison address to the state's coffers as an offset to the cost of their incarceration. Moreover, state law prohibits prisoners from maintaining bank accounts other than their prison accounts. A conflict arose, however, when a federally protected pension plan of Daimler- Chrysler Corporation (Chrysler) was ordered to deliver pension benefits to the prisoners at their prison address, without the prisoners' written authorization. The Sixth Circuit U.S. Court of Appeals held that federal law (Employee Retirement Income and Security Act) (ERISA) preempted all state laws that might attempt to attach these retirement funds. (This protection is called "anti-alienation.")
Four Michigan prisoners were ordered by state court action brought by Michigan's Attorney General to comply with the State Correctional Facility Reimbursement Act (SCFRA) and notify Chrysler of their prison address so that Chrysler could mail their pension checks there. One complied; the other three did not. Chrysler, in turn, responded in the matter of the remaining three that under their fiduciary responsibility to pensioners, they were constrained by ERISA to ignore all such confiscatory state laws. The U.S. District Court agreed, declaring that the anti-alienation provisions of ERISA were superior to claims raised under SCFRA.
On appeal to the Sixth Circuit, Michigan argued that their action only notified Chrysler of the prisoners' addresses, which was not per se an attachment action. But Chrysler replied that even the mere act of address change notification was protected under their fiduciary responsibility, wherein only the pensioner could request such a change. For the three prisoners who so refused, the state could not compel Chrysler to bend its rules.
This then left the question as to how Michigan could get its hooks on the prisoners' money. If the prisoners instead directed the funds be sent to another Michigan address, the court observed that under state law, Michigan could then seek attachment of those funds under SCFRA, because once the funds had been disbursed by Chrysler, they were no longer under Chrysler's federally protected fiduciary control. But not before the court, and not stated, was whether the prisoners could safely direct Chrysler to send pension benefit checks to an out-of-state address. A better defensive move might be to have the benefits transferred to another person (if they are transferable) or to instruct Chrysler to retain them until the prisoner paroles. See: Daimler Chrysler Corporation v. Cox, 447 F.3d 967 (6th Cir. 2006).
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Related legal case
Daimler Chrysler Corporation v. Cox
| Year | 2006 |
|---|---|
| Cite | 447 F.3d 967 (6th Cir. 2006) |
| Level | Court of Appeals |
| Injunction Status | N/A |