When the bankruptcy courts applied the Segal-Lines-Kokoszka test to self-settled pension plans, some courts found such plans similar to "future earnings" and any claim upon such funds an entangling encumbrance to be eliminated by excluding the plan from the property of the estate. Matter of Turpin, 644 F.2d 472 (5th Cir. 1981); In re Nunnally, 506 F.2d 1024 (5th Cir. 1975); Matter of Parker, 473 F. Supp. 746 (W.D.N.Y. 1979); and some courts found such plans similar to savings accounts under the bankrupt's control and rooted in the pre-bankruptcy past. Matter of Baviello, 12 B.R. 412 (Bankr.E.D.N Y 1981). While most courts paid lip service to the Segal-Lines-Kokoszka test, little balancing actually occurred. Matter of Short, 507 F.2d 425 (8th Cir. 1974).
Congress enacted ERISA to "establish a comprehensive federal regulatory scheme designed to protect the growing number of employees who were participating in private pension plans." In re Parker, 473 F. Supp. 746, 750 (W.D.N.Y. 1979). The purposes of the legislation were described as follows in the House Report:
It can hardly be disputed that on their face, the 1974 statutory prohibition of assignment, the plan provision implementing this prohibition, and the Treasury Department's legislative regulation were, prior to the Bankruptcy Reform Act of 1978, broad enough to preclude a pay-status participant in a qualified pension plan from assigning his benefits to a Chapter 13 Trustee. The issue remains, however, whether the ERISA prohibition on alienation is sufficient to overcome the clearly expressed intention of Chapter 13 of the Bankruptcy Code and thus preclude a Bankruptcy Court from enforcing a section 1325(b) withholding order against a qualified pension plan. In its amicus curiae brief arguing against enforcement of the Court's Order of May 18, 1982, the United States cites the case of In the Matter of Parker, 473 F. Supp. 746 (W.D.N.Y. 1979), as supporting the proposition that a bankrupt's contributions to a qualified pension plan would not constitute property of the estate which would pass to the trustee in Bankruptcy under the old Bankruptcy Act. In reaching its conclusion that such contributions did not pass to the bankruptcy trustee, the District Court stated that "the first and foremost factor in [its] decision [was] the purpose underlying ERISA of preserving income for retirement years."
N.Y.Civ. Prac. Law § 5205(c) (McKinney 1978) (emphasis supplied). Applying this standard, the court, in Matter of Parker, 473 F. Supp. 746 (W.D.N.Y. 1979), held that the bankrupt-employee's contributions to a qualified ERISA pension plan did not constitute property of the estate which would pass to the trustee in bankruptcy under section 70(a) of the Act. The pension trust at issue in Parker was funded by wage dividends declared by the bankrupt's employer.
See, e.g., In re Turpin, 644 F.2d 472 (5th Cir. 1981) (under old Act, not property of estate); In re Parker, 473 F. Supp. 746 (W.D.N.Y. 1979) (under old Act, not property of estate); In re Threewitt, 24 B.R. 927 (Bkrtcy.D.Kan. 1982).See, e.g.
Gulf States urges this Court to apply the law of New York, under which a trust similar to Gulf States' was held not to be property of the bankrupt estate. See In the Matter of Parker, 473 F. Supp. 746 (W.D.N.Y. 1979) (interpreting Section 70(a)(5) of the Bankruptcy Act). Gulf States bases its argument on the Fifteenth item of the Trust Agreement which states that New York law shall govern the agreement. The Trustee, relying on the actual plan, contends that Alabama law should be applied.
The Pension Fund cites several decisions under the Bankruptcy Act of 1898 which held that a debtor's interest in a trust fund containing a provision against alienation did not constitute property of the estate. See e.g., Mason v. Eastman Kodak Co. (In re Parker), 473 F. Supp. 746 (W.D.N.Y. 1979). The court finds these cases to be unpersuasive.
Soc.Sec. § 110's anti-assignment provision precluded the pension fund proceeds from becoming part of the estate is tenable under § 70(a) of the Act, not simply because the anti-assignment provision prevented the trustee from assuming the title to the proceeds, but more correctly because these proceeds are needed for a "fresh start." See Matter of Parker, 473 F. Supp. 746 (W.D.N.Y. 1979). However, here we are dealing with the new Code — not the Act.
From 1974 until the effective date of the Bankruptcy Reform Act in 1979, ERISA-qualified pension plans were commonly thought to be exempt from creditors' claims both before and after a beneficiary filed a petition in bankruptcy. Turpin v. Wente (In re Turpin), 644 F.2d 472, 474 (5th Cir., 1981); Mason v. Eastman Kodak Co. (In re Parker), 473 F. Supp. 746, 748 (W.D.N.Y., 1979). Initially, the passage of the Bankruptcy Reform Act of 1978 was not thought to alter this result.
for her support. In re Werner, 31 B.R. 418, 9 C.B.C.2d 371, 376-377 (Bkrtcy.Minn., 1983); In the Matter of Parker, 1 C.B.C.2d 103, 473 F. Supp. 746 (D.C.W.D.N.Y., 1979). Furthermore, the contributions and pension plan cannot fall into any of the three exceptions set forth in Sec. 522(d)(10)(E). Since Debtor has not shown entitlement to the objected exemption in accordance with the cited law, the Court hereby orders the Clerk to schedule a hearing to consider this matter.