In United States v. Frank, No. 20-6706, __F.4th__, 2021 WL 3504049 (4th Cir. Aug. 10, 2021), the Fourth Circuit considered whether the government can garnish a defendant’s ERISA-governed 401(k) retirement account under the Mandatory Victims Restitution Act of 1996 (“MVRA”) to satisfy a criminal restitution order against the defendant. The court agreed with the district court that the MVRA permits seizure of the defendant’s 401(k) account because the MVRA expressly provides that restitution orders may be enforced against all property or rights to property notwithstanding any other Federal law. See 18 U.S.C. § 3613(a). In so holding, the Fourth Circuit joined the Second, Fifth, Seventh, and Ninth Circuits in finding that retirement funds can be used to satisfy criminal restitution orders.
The court noted that the district court did not consider exactly what is the defendant’s property interest in his 401(k) account. The court explained that the government stands in the shoes of the defendant and has the same rights to the 401(k) account as the defendant. This means that the government’s access to the 401(k) funds is subject to the terms of the governing plan document, including any early withdrawal penalties to which the defendant would be subject. Because the district court did not consider this issue, the court remanded the matter to the district court to consider the defendant’s property right in his 401(k) account and what account funds the government may garnish.
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