HOUSE BILL REPORT

SB 5080

BYSenators Halsan, Newhouse, Talmadge and Nelson

Changing provisions relating to exempt pension money.

House Committe on Financial Institutions & Insurance

Majority Report:  Do Pass.  (13)

      Signed by Representatives Lux, Chair; Zellinsky, Vice Chair; Betrozoff, Chandler, Crane, Day, Dellwo, Ferguson, P. King, Meyers, Niemi, Nutley and Winsley.

House Staff:John Conniff (786-7119)

AS PASSED HOUSE APRIL 8, 1987

BACKGROUND:

Current state law protects the pension benefits of federal and state employees from creditors, whether in or outside bankruptcy.  Recent amendments to the federal bankruptcy law override the protections enacted in the Employee Retirement Income Security Act of 1974 (ERISA), that keep a private employee's pension benefits exempt from seizure.  As a result, the creditors of private employees who are involved in bankruptcy proceedings are being permitted to take the bankrupt employee's pension benefits, whether or not they are presently being paid to the employee.  The employee is left without retirement benefits, and there are severe tax consequences for the employer's pension plan and all fellow employees who are participants in the plan.

SUMMARY:

The pension benefits of private employees are exempt from seizure by the employee's creditors, whether in or outside of bankruptcy proceedings, when the benefits plan is regulated by Employee Retirement Income Security Act of 1974 (ERISA) or subject to the federal tax code.  The pension fund which pays the employee's benefits is also exempt. 

The employee's pension benefits are payable to a spouse, former spouse, child or other dependent of an employee to satisfy family support obligations, if provided for in a court order which satisfies the requirements of ERISA and the tax code.

The provisions which exempt the pension benefits of private employees from seizure by the employee's creditors do not apply to any plan excluded from the federal Employees Retirement Income Security Act of 1974.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    Richard Hopp, Washington State Bar Association.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    Current state law exempts state employees, school teachers, and law enforcement and firefighter pension benefits from execution, attachment or seizure to satisfy debts.  This bill extends the same protection to private employees.  Without this bill, private pension plans can be disrupted when a creditor successfully gains access to one employee's pension rights.

House Committee - Testimony Against:      None Presented.