Asbestos Workers Local No. 23 Pension Fund ex rel. Norcross v. U.S. 303 F.Supp.2d 551 (2004)

Background

Richard Kelley was employed under a collective bargaining agreement which included a pension benefit plan covered under ERISA. Kelley selected the payment option under the ERISA plan which guaranteed him monthly benefits throughout his life and, if he died before receiving 120 payments, the remainder of the 120 payments would be paid to a designated beneficiary. Kelley designated his son as the beneficiary as he was not married. In 1996, Kelley retired and began receiving monthly pension benefits. In 1997, after Kelley failed to satisfy tax obligations, the IRS filed a lien which attached to his property including his interest in the pension benefits under the plan. In compliance with the lien, the pension fund remitted a portion of Kelley's monthly pension benefits to the IRS. In June 2001, Kelley died. Both the IRS and the designated beneficiary claimed the funds under the ERISA plan. The pension fund filed an interpleader action in the United States District Court for the Middle District of Pennsylvania against the IRS and the designated beneficiary. The IRS filed a counterclaim against the fund and a crossclaim against the designated beneficiary.

Solution

Stephen Feinour represented the designated beneficiary, arguing that, because the plan was an ERISA plan, Kelley's property interest extended only to his monthly payments and did not extend to the death benefits payable to the designated beneficiary. They further argued that the IRS' lien only attaches to the property of Richard Kelley; it did not attach to the property of the designated beneficiary, i.e. the death benefit.

Result

The United States District Court for the Middle District granted the designated beneficiary's motion for summary judgment and agreed that the lien did not attach to the death benefits as it did not meet the federal definition of being Kelley's property. Therefore, the IRS was unable to collect the death benefits under the plan.

Nauman Smith Shissler & Hall, LLP
200 North 3rd Street, 18th Floor
Harrisburg, PA 17101
717.236.3010
fax: 717.234.1925
info@nssh.com