On appeal from the Superior Court, Law Division, Bergen County.
Pressler, O'Brien and Scalera. The opinion of the court was delivered by Pressler, P.J.A.D.
[230 NJSuper Page 64] The issue of first impression raised by this appeal is whether a so-called Keogh retirement plan maintained by a self-employed professional for his own exclusive account may be levied upon by a judgment creditor under a writ of execution. The trial judge, concluding that such an account is not exempt from
execution, issued a turnover order requiring the depository bank to transfer to the Sheriff funds from such an account sufficient to pay the judgment. The judgment debtor appeals, and we affirm.
Plaintiff Aronsohn and Springstead is a law firm in Bergen County. Plaintiff Richard H. Aronsohn, a partner in the firm, represented defendant Jonas Weissman, a physician, in marital litigation. Weissman was dissatisfied with Aronsohn's bill for legal services, and this dispute was ultimately arbitrated by a District Fee Arbitration Committee pursuant to R. 1:20A. The Committee issued its written determination on March 21, 1988 finding that Aronsohn was entitled to $18,081.60, the full amount of the balance due on his final bill. That determination was reduced to judgment on May 20, 1988. Aronsohn thereafter obtained a writ of attachment authorizing the Bergen County Sheriff to attach Weissman's property, and on June 14, 1988, the Sheriff reported his attachment of "all the right, title and interest of the defendant, Jonas Weissman, in and to monies of the aforementioned defendant in a Keogh Account Number 22-625265," in the amount of $18,081.60, located at Columbia Savings & Loan Association, in Fair Lawn. The total amount of the account is about $175,000. On notice to defendant and the bank, a writ of execution issued, and following a hearing on the return date of an order to show cause, the turnover order here appealed from was entered.
The only issue before the trial court and before us is whether a qualified "Keogh"*fn1 account is subject to execution by a judgment creditor. Defendant argues that it is immunized from execution by the Internal Revenue Code (Code) and, more particularly, 26 U.S.C.A. § 401(a)(13)(A), which conditions qualification
of a retirement trust for the favorable income tax treatment afforded by the Code upon the plan's express provision that the benefits provided thereby "may not be assigned or alienated." Defendant also relies on the implementing regulation, 26 C.F.R. § 1.401(a)-13(b)(1), which further provides that the trust will not be qualified unless the plan stipulates "that benefits provided under the plan may not be anticipated, assigned (either at law or in equity), alienated or subject to attachment, garnishment, levy, execution or other legal or equitable process."
Defendant's thesis is further predicated on the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.A. § 1001, et seq., enacted to regulate and protect welfare and pension plans created and maintained by employers or employee associations for the benefit of employees. ERISA, he argues, by reason of 29 U.S.C.A. § 1056(d)(1), which is virtually identical in verbiage to 26 U.S.C.A. § 401(a)(13)(A), clearly insulates an employee's interest in a retirement plan from creditors. See, e.g., Helmsley-Spear, Inc. v. Winter, 74 A.D. 2d 195, 426 N.Y.S. 2d 778 (1980), aff'd o.b. 52 N.Y. 2d 984, 438 N.Y.S. 2d 79, 419 N.E. 2d 1078 (Ct.App.1980). And see Mackey v. Lanier Collections Agency, 486 U.S. , 108 S. Ct. 2182, 100 L. Ed. 2d 836 (1988). He contends that the anti-alienation language of 26 U.S.C.A. § 401(a)(13)(A) should be accorded the same exemption consequence in respect of the self-settled "Keogh" trusts of self-employed persons. He further points out that a breach of the anti-alienation provisions of the Code and implementing regulation which might be affected by execution on his Keogh account would result in its disqualification for favorable tax treatment and the imposition upon him pursuant to the Code of the consequent burden of the tax penalties therein provided.*fn2
Congressional policy, he argues, would be violated by such disparate treatment of beneficiaries of employer-created plans and beneficiaries of self-settled plans.
We disagree. We start from the premise that the Internal Revenue Code, and particularly 26 U.S.C.A. § 401(a)(13)(A), speaks only to the federal income tax consequences of premature alienation of a Keogh trust. Thus, the Code does not forbid involuntary alienation by execution under state law but only provides for the tax consequences thereof. The question then, as we see it, is essentially one of basic trust law and the only effect of the Code is whether those consequences are of sufficient moment to require a contrary result.
The self-employed person's qualified Keogh plan is, in effect, a self-settled trust in which the funds are provided by the settlor, who retains control over their management and who is exclusively entitled thereto. He is also free to terminate the trust and to withdraw the accumulated funds at any time subject only to payment of a tax penalty if he does so prior to the retirement age stipulated in the plan.*fn3 See, e.g., Rayndon and Anderson, "Attachment of Keogh Plan Assets -- A Confusion in the Law and the Courts," 61 Taxes 525 (1983). These characteristics of a Keogh trust are, of course, in complete contradistinction to an ERISA retirement plan created by a ...