The case of United States Securities & Exchange Commission v. Moskop, Case No. 10 C 7462 (N.D. Ill. 2011) involves an attempted application of ERISA’s anti-alienation rule, found in section 206(d)(1) of ERISA (29 U.S.C. § 1056(d)(1)), and under which pension plan benefits may not be assigned or alienated. In this case, the United States Securities and Exchange Commission had alleged that the defendants, Edward Moskop (“Moskop”) and Financial Services Moskop & Associates (together, the “Defendants”), had engaged in investment fraud for more than 20 years. On November 27, 2010, an Order was entered freezing all of the Defendants’ accounts and assets. The Defendants then moved to exempt the monthly pension payments that Moskop receives from Prudential from this asset freeze. Moskop receives this pension for his work at Prudential from January 1970 through April 1981. Every month, Moskop receives a $337.95 payment from this pension, which is deposited directly into a frozen bank account.
The question for the Court was whether the ERISA anti-alienation rule requires that the pension payments be exempt from the asset/account freeze. The Court said that it did not. All but one circuit (the 4th Circuit) which has considered this issue has held the ERISA anti-alienation rule applies to retirement benefits when they are held by the plan administrator, not when they reach the beneficiary. A district court in this circuit (the 7th circuit) has adopted the majority rule. The problem in this case is that Moskop does not currently have access to the funds once they are deposited into his bank account, as the account is frozen. Thus, these funds do not reach him. However, if the funds are removed from the frozen account, they would enter into Moskop’s possession, at which time the ERISA’s anti-alienation rule would cease to apply. The Court concluded that the pension payments are not protected from the asset freeze by the ERISA anti-alienation rule, and it denied the Defendants motion to exempt them from the freeze.