JOHN H. MACKEY, ET AL., PETITIONERS V. LANIER COLLECTION AGENCY AND SERVICE, INC. No. 86-1387 In the Supreme Court of the United States October Term, 1987 On Writ of Certiorari to the Supreme Court of Georgia Brief For the United States as Amicus Curiae Supporting Petitioners TABLE OF CONTENTS Question Presented Interest of the United States Statement Summary of argument Argument: Section 514(a) of ERISA preempts state garnishment laws insofar as they authorize garnishment of employee benefit plans other than to satisfy certain family obligation A. Section 514(a) of ERISA perempts laws "relat(ing) to" ERISA plans B. Garnishment laws "relate to" ERISA plans insofar as they authorize garnishment of ERISA plans C. Section 206(d) does not mandate, by negative implication, that states permit garnishment of ERISA plans Conclusion QUESTION PRESENTED Whether Section 514(a) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1144(a), preempts state laws insofar as they permit judgement creditors to garnish employee benefit plans covered by ERISA to satisfy debts of plan participants. INTEREST OF THE UNITED STATES Respondent is a collection agency that seeks to recover judgments against 23 longshore workers by garnishing, pursuant to state-law procedures, the employees' interests in a vacation benefits plan governed by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. (and Supp. III) 1001 et seq. Petitioners, the trustees of the plan, object to the garnishment, in part because the agreement establishing the trust prohibits payments to creditors of beneficiaries of the plan. The Secretary of Labor is charged with enforcing the fiduciary obligations that ERISA imposes on the trustees of employee benefit plans, which include the duty to expend funds only to provide benefits or to pay reasonable adminsitrative expenses, and he therefore has a substantial interest in the resolution of this case. Moreover, the decision of the Georgia Supreme Court in this case is inconsistent with opinion letters issued by the United States Department of Labor concluding that ERISA's preemption provision bars creditors from levying upon the assets of employee benefit plans. The United States previously filed a brief in this case at the Court's invitation urging that certiorari be granted to reverse the decision of the Georgia Supreme Court. STATEMENT 1. Petitioners are the trustees of the South Atlantic ILA/Employers Vacation and Holiday Fund ("the Fund"), which provides vacation and holiday benefits to longshore workers and other employees of several southeastern stevedoring companies (Pet. App. Ay, A19). The Fund is an employee welfare benfit plan as defined in Section 3(1) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1002(1). /1/ Employees' qualifications for participation in the Fund and their entitlement to benefits are determined annually (Pet. App. 21). The Fund is a multiemployer plan coving some 5,000 employees who work at 13 ports in the states of Florida, Georgia, North Carolina, and South Carolina (1984 Form 5500 at 2; Trust Agreement at 1). /2/ It is administered by a board of trustees, composed of six employer-appointed members and six union-appointed members (Trust Agreement at 11-12). The Fund is a type of forced savings plan, or spendthrift trust, designed to insure that the employee participants do not dissipate the vacation benefits they are eligible to receive through the Fund until they actually receive each year's lump sum payment. To that end, the Trust Agreement expressly provides that the "Fund shall not be liable for or subject to the debts, contracts or liabilities of the * * * employees (or) beneficiaries" (id. at 19). Respondent, Lanier Collection Agency and Service, Inc., obtained money judgments against 23 employee-beneficiaries of the Fund. The collection agency then instituted garnishment proceedings in the State Court of Chatham County pursuant to Ga. Code Ann. Section 18-4-60 (1982), seeking to garnish the employees' Fund entitlements. /3/ The Fund's trustees maintained that the Fund is exempt from garnishment by G. Cole Ann. Section 18-4-22.1 (1982), which provides that "(f)unds or benefits of a pension, retirement, or employee benefit plan or program subject to (ERISA) shall not be subject to the process of garnishment * * * (2) unless such garnishment in based upon a judgment for alimony or for child support * * *." It is undisputed that the judgments that the collection agency seeks to enforce do not arise from such family obligations (Pet. App. A6). 2. The trail court held that the Fund is subject to garnishment (Pet. App. A11-A21). It concluded that the Georgia legislature intended, in enacting Section 18-4-22.1, "to make the Georgia law idenitcal to the federal law" (Pet. App. A20). While stating that "(t)he federal decisions are in conflict," the court concluded that (the trend of the law seems to be that only pension funds and not vacation funds are exempt from garnishment) under ERISA (id. at A19). Accordingly, the trial court held that the Georgia statute does not exempt the Fund from garnishment, and ordered the trustees to pay into the court amounts owed to the collection agency by the Fund's beneficiaries (id. at A21). The Georgia Court of Appeals reversed (Pet. App. A6-A10). Although the court of appeals agreed with the trial court that ERISA does not protect the Fund from garnishment (id. at A7-A8), it concluded that the Georgia legislature intened Section 18-4-22.1 "to protect vacation plans like the Fund from garnishment even though ERISA does not provide such protection" (Pet. App. A8). The court of appeals therefore concluded that state law exempts the Fund from garnishment (id. at A9). The Supreme Court of Georgia reversed (Pet. App. A1-A5). It first agreed with the court of appeals that Section 18-4-22.1 "exempts all ERISA funds and benefits from garnishment except for alimony or child support judgments" (Pet. App. A1-A2). The court then noted that Section 206(d) of ERISA, 29 U.S.C. (and Supp. III) 1056(d), expressly prohibits alienation of pension benefits but does not apply to welfare plans (Pet. App. A2). /4/ It concluded that the Georgia statute, by protecting welfare plan funds from garnishment, "prohibits that which the federal statute permits and is therefore in conflict with it" (Pet. App. A4, citing Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504 (1982)). It accordingly held, relying on ERISA's express preemption provision, Section 514(a), 29 U.S.C. 1144(a), which provides that ERISA "supersede(s) any and all State laws insofar as they * * * relate to any employee benefit plan," that Section 18-4-22.1 "insofar as it conflicts with ERISA is preempted by federal law" (Pet. App. A5). Thus, according to the Georgia Supreme Court, ERISA mandates that welfare benefit plans be subject to garnishment. SUMMARY OF ARGUMENT Section 514(a) of ERISA preempts "any and all State laws * * * (which) relate to any employee benefit plan" covered by ERISA. This Court has held repeatedly that "relate to" must be given a "common-sense meaning" such that any state law having a connection with an employee benefit plan is preempted to the extent that it affects such a plan. Pilot Life Ins. Co. v. Dedeaux, No. 85-1043 (Apr. 6, 1987), slip op, 6; Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 729 (1985); Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 98 (1983). Garnishment laws "relate to" employee benefit plans insofar as they authorize garnishment of those plans, and hence are preempted by Section 514(a). A garnishment action obviously relates to an employee benefit plan in that such actions determine who will receive payments from the plan; it is difficult to think or a more significant effect. Furthermore, Section 403(c)(1) and 404(a)(1)(A) of ERISA specifically prohibit payments of plan benefits other than to beneficiaries or for reasonable administrative purposes. Since a garnishment order directs payments to third parties, such an order conflicts with those specific provisions of ERISA, and would be preempted even in the absence of an express preemption provision. Garnishment laws "relate to" employee benefit plans in another way, by imposing significant burdens on plan administrators. As the Georgia garnishment state illustrates, the trustees of a fund that is the object of a garnishment action are subject to a number of burdens as defendants in the action, even if there is no serious dispute concerning the beneficiary's indebtedness. Those burdens are multiplied in cases involving a serious legal issue, such as this case. And, as trustees of a multiemployer plan operating in four states, the plan adminstrators here are potentially subject to conflicting requirements if state garnishment laws are not preempted, contrary to a basic purpose underlying ERISA's broad peremption provision. In light of the fact that garnishment proceedings determine who will receive plan benefits and impose substantial burdens on plan administrators, there can be no serious argument that the effect of garnishment on employee benefit plans is so tenuous as to aviod preemption under Section 514(a). In any event, Congress's enactment in 1984 of Section 514(b)(7), 29 U.S.C. (and Supp. III) 1144(b)(7), which authorizes garnishment of employee benefit plans to satisfy certain family obligations, makes clear that garnishment for other purposes is prohibited. That amendment to the statute would have been unnecessary if Congress did not understand that state garnishment laws are generally preempted, and the legislative history of Section 514(b)(7) confirms that Congress intends Section 514(a) generally to preempt state garnishment laws. The Georgia Supreme Court read far too much into Section 206(d), which prohibits voluntary or involuntary alienation of pension benefits, in concluding by negative implication that provision mandates that states subject benefit plans to coverage by garnishment statutes. Section 206(d) simply does not govern welfare benefit plans, While it overlaps with Section 514(a) in that both sections prohibit involuntary alienation of pension benefits, Section 206(d) is not rendered superfluous under our reading of Section 514(a) since it generally prohibits voluntary alienation of pension benefits, which is not prohibited by Section 514(a). Unlike the opinion of the Georgia Supreme Court, the language of the Georgia statute appears to reflect a correct understanding of Section 514. The statute, Ga. Code Ann. Section 18-4-22.1 (1982), provides that employee benefit plans "shall not be subject to the process of garnishment" except to enforce "alimony or * * * child support" judgment. That is consistent with Section 514, since Section 514(a) preempts state garnishment laws to the extent that they authorize garnishment of employee benefit plans, except that Section 514(b)(7) permits garnishment to satisfy certain family obligations. Since the garnishment here is on behalf of general creditors rather that dependents, the result is that garnishment is not authorized by Section 18-4-22.1. ARGUMENT SECTION 514(a) OF ERISA PREEMPTS STATE GARNISHMENT LAWS INSOFAR AS THEY AUTHORIZE GARNISHMENT OF EMPLOYEE BENEFIT PLANS OTHER THAN TO SATISFY CERTAIN FAMILY OBLIGATIONS A. Section 514(a) of ERISA Preempts Laws Relat(ing) To" ERISA Plans As previously chronicled by this Court, Congress enacted ERISA following nearly a decade of studying the operation of private employee pension and welfare benefit plans. Central States v. Central Transport, Inc., 472 U.S. 559, 569 and n.9 (1985); Nachman Corp. v. PBGC, 446 U.S. 359, 361 (1980). Congress found that there had been enormous growth in employee benefit plans in recent years and that "the continued well-being and security of millions of employees and their dependents are directly affected by these plans." 29 U.S.C. 1001(a). Due to the inadequacy of existing minimum standards under state law, however, Congress found that "the soundness and stability of plans with respect to adequate funds to pay promised benefits may be endangered" (ibid.). Congress therefore established in ERISA a comprehensive regulatory framework to "assur(e) the equitable character of such plans and their financial soundness" (ibid.), and thereby to "protect * * * participants in employee benefit plans and their beneficiaries" (29 U.S.C. 1001(b)). At the same time that it created in ERISA a federal scheme of regulation of employee benefits plans, Congress expressly preempted "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" (Section 514(a), 29 U.S.C. 1144(a)). Congress broadly defined "State law" to include "all laws, decisions, rules, regulations, or other State action having the effect of law (Section 514(c), 29 U.S.C. 1144(c)). As this Court has repeatedly instructed, Section 514(a) is "deliberately expansive, and designed to'establish pension plan regulation as exclusively a federal concern.'" Pilot Life Ins. Co. v. Dedeaux, No. 85-1043 (Apr. 6, 1987), slip op. 4 (quoting Alessi v. Raybestos-Manhattan, Inc., 451 U.S. at 523). "The preemption provision was intended to displace all state laws that fall within its spere, even including state laws that are consistent with ERISA's substantive requirements." Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739 (1985). Not, as this Court has emphasized, is preemption "limited to 'state laws specifically designed to affect employee benefit plans.'" Pilot Life, slip op. 6 (quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 98 (1983)). Rather, the phrase "relate to" must be "given its broad common-sense meaning, such that a state law 'relate(s) to' a benefit plan 'in the normal sense of the phrase, if it has a connection with or reference to such a plan.'" Pilot Life, slip op. 6 (quoting Metropolitan Life, 471 U.S. at 739, quoting Shaw, 463 U.S. at 97). As this Court explained in Shaw (463 U.S. at 98-100), the legislative history of ERISA confirms that Congress intended to occupy the field of employee benefit plans by superseding any and all state laws afecting such plans, and not just those state laws governing subjects covered by the federal statute. The Conference Committee deliberately rejected the approach employed in earlier House and Senate versions of the bill, which preempted only matters actually regulated by ERISA, in favor of the broad preemption of all state laws relating to plans covered by the statute. See H.R. Conf. Rep. 93-1280, 93d Cong., 2d Sess. 383 (1974). Describing the conferees' intent to the House of Representatives, Congressman Dent explained that "the provisions of Section 514 would reach any rule, regulation, practice, or decision of any State * * * which would affect any employee benefit plan" covered by ERISA. 120 Cong. Rec. 29197 (9174) (emplasis added). As this Court recently noted in Fort Halifax Packing Co. v. Coyne, No. 86-341 (June 1, 1987), slip op. 9, one effect of ERISA's broad preemption of state law is that it "afford(s) employers the advantages of a uniform set of administrative procedures governed by a single set of regulations." Congress recognized that "employers establishing and maintaining employee benefit plans are faced with the task of coordinating complex administrative activities," and that if "(f)aced with the difficulty or impossibility of structuring administrative practices according to a set of uniform guidelines, an employer may decide to reduce benefits or simply not to pay them at all." Id. at 8, 11; see also Shaw, 463 U.S. at 105 n.25. ERISA's broad preemption provision encourages the formation of private employee benefit plans "by eliminating the threat of conflicting and inconsistent State and local regulation." 120 Cong. Rec. 29197 (1974) (remarks of Rep. Dent); see also id. at 29933 (remarks of Sen. Williams). B. Garnishment Laws "Relate To" ERISA Plans Insofar As They Authorize Garnishment Of ERISA Plans The three courts below all erred in concluding that ERISA does not protect welfare benefit plans from garnishment pursuant to state laws. State garnishment laws "relate to" welfare benefit plans insofar as they authorize garnishment of those plans, and therefore are preempted by Section 514(a). 1. Like the employment discrimination law involved in Shaw, garnishment statutes, although also giverning other matters, may "relate to" welfare benefit plans by affecting such plans. Most obviously, a garnishment law may affect welfare benefit plans by authorizing judgment creditors to appropriate plan assets before they are disbursed as benefits to plan participants or beneficiaries. Garnishment actions brought against welfare benefit plans depend entirely upon the participants' or beneficiaries' rights to recover benefits, /5/ and act to reduce pro tanto the participants' or beneficiaries' claims under ERISA. In a real sense, such actions thus determine whether and to what extent participants or beneficiaries will receive plan benefits. Because garnishment directly affects the distribution of plan assets and may bar participants' and beneficiaries' claims for benefits, garnishment laws plainly "relate to" welfare benefit plans insofar as they authorize garnishment of those plans. Indeed, permitting garnishment of ERISA plans on behalf of general creditors would not merely affect such plans, it would conflict with specific provisions going to the heart of ERISA. Congress enacted ERISA to ensure that employees and their beneficiaries actually receive promised fringe benefits. See 29 U.S.C. 1001(a); Alessi v. Raybestos Manhattan, Inc., 451 U.S. at 510 and n.5. /6/ To ensure that fringe benefits are actually paid, Section 403(c)(1) and 404(a)(1)(A) of ERISA, 29 U.S.C. 1103(a)(1) and 1104(a)(1)(A), require trustees to hold and expend trust funds "for the exclusive purposes of providing benefits" and "defraying reasonable expenses of administering the plan" (emphasis added). A payment to a general creditor of a beneficiary is not made for the purpose of providing benefits and is not the payment of an administrative expense, and therefore is contrary to those provisions. /7/ Because paying funds held in trust by ERISA plans to persons other than plan participants is contrary to specific provisions of ERISA -- and, indeed, "stands as an obstacle to the accomplishment and execution of the full purposes and objectives" of ERISA (Hines v. Davidowitz, 312 U.S. 52, 67 (1941)) -- garnishment of ERISA plans on behalf of general creditors would be barred even in the absence of ERISA's broad express preemption provision. /8/ 2. Garnishment also "relate(s) to" employee benefit plans by imposing burdens on trustees. Under Georgia law, garnishment commences with the filing of an affidavit by the plaintiff creditor (Ga. Code Ann. Section 18-4-61 (1982)) and the issuance of a summons of garnishment by the clerk of court (Section (8-4-62(a) (Supp. 1987)). The garnishee -- in this case, the trustees of the Fund -- must file an answer to the summons no sooner than 30 days and no later than 45 days after it is served (Section 18-4-62(a)), describing the money or property in the garnishee's possession that is subject to garnishment (Section 18-4-82). If the garnishee for any reason is unable to provide the required information, the answer must "plainly, fully, and distinctly set forth" all the facts concerning the inability to answer (Section 18-4-82). A garnishee who fails to answer within 45 days is automatically in default (Section 18-4-90), and failure properly to answer may subject the garnishee to disallowance of any otherwise reimbursable expenses (Section 18-4-92, 18-4-97 (and Supp. 1987)). Along with the answer, the garnishee must deliver to the court all money or property subject to garnishment (Section 18-4-84). Service of the summons operates as a lien on the garnishee's indebtedness to the judgment debtor -- here, the participants in the Fund -- at the date of service, and upon all future indebtedness accruing up to the date of the answer, at which time the garnishee's status of indebtedness becomes fixed (Section 18-4-20(b) (Supp. 1987); Estridge v. Hanko, 96 Ga. App. 246, 99 S.E.2d 682, 687 (1957); Anderson v. Ashford and Co., 174 Ga. 660, 663 S.E. 741 (1932)). Section 18-4-20(d) (and Supp. 1987), however, exempts a proportion of a debtor's "aggregate disposable earnings" from post-judgment garnishment. /9/ A garnishee paying over exempt earnings must assert the debtor's right to an exemption or the judgment and satisfaction in garnishment will not bar an action by the debtor against the garnishee on the underlying indebtedness. See Cale v. Eastern Air Lines, Inc., 159 Ga. App. 630, 284 S.E.2d 647, 648 (1981), (citing Studdard v. Barge-Thompson Co., 44 Ga. App. 349, 350, 161 S.E. 638 (1931)). Moreover, a garnishee also must comply with the federal garnishment restrictions set by Title II of the Consumer Credit Protection Act (CCPA), 15 U.S.C. 1641 (and Supp. III) et seq., to the extent they are more restrictive that the provisions of state law. See 15 U.S.C. 1677; Hodgson v. Cleveland Municipal Court, 326 F. Supp. 419 (N.D. Ohio 1971). /10/ Given the complexity of the state garnishment procedures, their application to ERISA plans imposes significant burdens on plan trustees. Here, even absent any dispute on the merits of the garnishments, the trustees of the Fund would be required, for each of the 23 individual participants involved, to confirm the identity of the defendant debtor, calculate his or her maximum entitlement from the Fund for the period between the service date and the reply date of the summons of garnishment, compute and apply any relevant exemptions from garnishment, determine the amount that each individual owes to respondent, file timely and complete answers, and make payment into state court of the lesser of the amount owed to respondent or the amount of the individual's nonexempt entitlement. See Pet. App. A21. And, in the event of a context over, for example, the validity of the garnishment, the liability of the garnishee, or priorities among garnishments and other levies, plan trustees may be subject, as in this case, to major litigation. In addition, as trustees of a multiemployer welfare plan covering participants in several states, petitioners are potentially subject to multiple garnishment orders under varying or conflicting state laws. The Fund is potentially subject to garnishment in any of four states, each of which imposes different rules for the processing of garnishments, the determination of exemptions from garnishments, and the duties and liabilities of garnishees. The trustees therefore might by "required to accommodate conflicting regulatory schemes in devising and operating a system for processing claims and paying benefits -- percisely the burden that ERISA preemption was intended to avoid." Fort Halifax, slip op. 7. /11/ 3. In Shaw, this Court acknowledge that "(s)ome state actions may affect employee benefit plans in too tenuous, remote, or peripheral a manner to warrant a finding that the law 'relates to' the plan" (463 u.s. at 100 n.21). This case, however, like Shaw, "plainly does not present a borderline question" (ibid.) because garnishment of welfare benefit plans directly interferes with the distribution of plan assets and burdens plan administration to a significant extent. It is difficult to imagine a more direct effect on a trust fund than that of a law that determines who will receive payments from the trust. Moreover, permitting garnishment frustrates the overall purpose of ERISA to assure that participants and beneficiaries receive the benefits to which they are entitled under the plan. And the substantial and potentially conflicting burdens imposed by state garnishment laws interfere with the administration of employee benefit plans. Therefore, this case involves precisely the "sort of interference with the administration of employee benefit plans" that "ERISA's comprehensive preemption of state law was meant to minimize" (id. at 105 n.25). The Ninth Circuit concluded in Franchise Tax Board v. Construction Laborers Vacation Trust, 679 F.2d 1307 (1982), vacated, 463 U.S. 1 (1983), the ERISA preempted a California tax collection law insofar as it permitted state authorities to levy on funds held in trust under a vacation benefit plan. The court of appeals correctly reasoned that the purpose of a vacation benefits plan is "to provide accumulated money to a worker for future beneficial use" and that it would conflict with that purpose to allow the money set aside in trust to be used for other purposes (679 F.2d at 1309). The court did not find merit to the dissent's unsupported argument that "the administrative burden entailed in litigating a levy's validity * * * is simply too minor" to warrant preemption (id. at 1312). /12/ Although this Court vacated the court of appeals' judgment in Franchise Tax Board for lack of jurisdiction, holding that the case had been improperly removed from state to federal court, it noted that "the Court of Appeals may well be correct that ERISA precludes enforcement of the State's levy in the circumstances of this cases" (463 U.S. at 26). /13/ A recent congressional enactment conclusively shows that Congress does not consider the application of state garnishment laws to ERISA plans to have a tenuous effect on those plans, but instead understands Section 514(a) generally to prohibit garnishment of ERISA plans. In 1984 Congress adopted Section 514(b)(7), which provides that Section 514(a) "shall not apply to qualified domestic relations orders (within the meaning of (29 U.S.C. 1056(d)(3)(B)(i)))." Retirement Equity Act of 1984, Pub. L. No. 98-397, Section 104(b), 98 Stat. 1436, 29 U.S.C. (and Supp. III) 1144(b)(7). The 1984 amendment codified a line of cases in which the courts had found an implied exception permitting garnishment of ERISA plans to satisfy family support and community property obligations contained in state court orders. /14/ Similarly, the Department of Labor had interpreted Section 514(a) to preempt state judicial or administrative agency processes to levy upon benefits due a participant or beneficiary under an employee welfare benefit plan, except for the enforcement of certain domestic relations orders. See, e.g., Op. Dep't of Labor No. 79-90A (Dec. 28, 1979); Op. Dep't of Labor No. 80-39A (June 27, 1980). The basis for recognizing this exception to the preemptive effect of Section 514(a) prior to the enactment of Section 514(b)(7) was Congress's express declaration in ERISA that "the continued well-being and security of millions of employees and their dependents are directly affected by (the) plans" (Section 2(a), 29 U.S.C. 1001(a) (emphasis added)), so the "(m)embers of the families of employees are included in the class which ERISA protects) (Stone v. Stone, 450 F. Supp. 919, 926 (N.D. Cal. 1978), aff'd, 632 F.2d 740 (9th Cir. 1980), cert. denied, 453 U.S. 922 (1981)). /15/ Congress expressed no similar concern for general creditors such as respondent. In enacting Section 514(b)(7), Congress made clear that Section 514(a) otherwise preempts state garnishment laws. The House Report stated that "the Committee emphasizes that, except as expressly provided, nothing in the bill is intended to limit or otherwise change the original broad intent behind ERISA's rule of preemption. That intent has always been to preempt state or local government laws or actions of any type which directly or indirectly relate to any employee benefit plan." H.R. Rep. 98-655, 98th Cong., 1st Sess. Pt. 1, at 42 (1984). Indeed, Congress specifically endorsed the Ninth Circuit's holding in Franchise Tax Board, stating that "the Committee reasserts that a state tax levy on employee welfare benefit plans is preempted by ERISA (see the holding of the 9th Circuit in Franchise Tax Board * * *)" (ibid.). As one congressman stated, the exception codified by Section 514(b)(7) "preserves and clarifies the original broad preemption of State law under ERISA section 514 while carving out an appropriate and well-defined exception for domestic relations orders meeting specific standards" (130 Cong. Rec. H8756 (daily ed. Aug. 9, 1984) (remarks of Rep. Erlenborn)). /16/ C. Section 206(d) Does Not Mandate, By Negative Implication, That States Permit Garnishment Of ERISA Plans The Georgia Supreme Court concluded that ERISA prohibits garnishment of pension plans but permits (indeed, mandates) garnishment of welfare plans. See Pet. App. A2. It based its conclusion that ERISA prohibits garnishment of pension plans on Section 206(d)(1) of ERISA, 29 U.S.C. 1056(d)(1), which requires that "(e)ach pension plan shall provide that benefits provided under the plan may not be assigned or alienated," so that both voluntary and involuntary assignments of pension benefits are prohibited. /17/ Since ERISA contains no similar provision pertaining to welfare plans, the court concluded, by negative implication, that welfare benefits may be garnished. Indeed, it concluded that Section 206(d) bars the states from excepting welfare plan assets from general garnishment laws, so that ERISA preempts state laws such as Ga. Code Ann. Section 18-4-22.1 (1982), which prohibits garnishment of ERISA plans except to enforce certain family obligations. The Georgia Supreme Court read too much into Section 206(d). It is correct that Section 206(d) deals only with pension plan assets and does not prohibit garnishment of welfare plan assets. Rather than affirmatively authorizing garnishmnet of welfare plan assets, however, Section 206(d) simply does not apply to welfare plans. At the same time, Section 514(a) preempts state laws relating to both pension and welfare plans, including those which would be invoked to effect involuntary assignments of plan assets. Thus, while garnishment of welfare plans pursuant to state law is not prohibited by Section 206(d), it is prohibited by Section 514(a). /18/ There is some overlap between Section 206(d) and Section 514(a), since both generally prohibit involuntary assignment of pension benefits. /19/ This overlap results from the fact that early versions of ERISA contained provisions prohibiting the alienation of pension benefits, /20/ whereas the broad and partially redundant preemption provision was added by the Conference Committee (see Shaw, 463 U.S. at 98 and n.18). Our interpretation of the two provisions renders neither superfluous, however, since Section 206(d) prohibits voluntary alienation of pension benefits, which is not prohibited by Section 514(a), while Section 514(a) preempts a variety of state laws relating to ERISA plans that are not affected by Section 206(d). The Georgia Supreme Court turned Section 514(a) on its head. That provision broadly preempts state laws insofar as they affect ERISA plans. It does not mandate state laws authorizing the garnishment of welfare plans. In light of ERISA's broad preemption provision and the express exception to it for certain domestic relations orders in Section 514(b)(7), there is no basis for the Georgia Supreme Court's conclusion that Section 206(d) implicitly demonstrates that Congress intended to mandate garnishment of welfare plan assets. The language of the Georgia statute, on the other hand, appears on its face to be fully consistent with ERISA. Intending "to make Georgia law identical to federal law" (Pet. App. A20), the Georgia legislature provided that "(f)unds or benefits of a pension, retirement, or employee benefit plan or program subject to (ERISA) shall not be subject to the process of garnishment * * * (2) unless such garnishment is based upon a judgment for alimony or for child support" (Ga. Code Ann. Section 18-4-22.1 (1982)). This is in complete harmony with the preemptive effect of Section 514(a) in barring garnishment of ERISA plans, except to satisfy certain domestic relations obligations. Under both Section 18-4-22.1 and Section 514(a), general creditors such as respondent may not garnish welfare benefit plans. CONCLUSION The judgment of the Supreme Court of Georgia should be reversed. Respectfully submitted. CHARLES FRIED Solicitor General DONALD B. AYER Deputy Solicitor General CHRISTOPHER J. WRIGHT Assistant to the Solicitor General GEORGE R. SALEM Solicitor of Labor ALLEN H. FELDMAN Associate Solicitor CAROL A. DE DEO Deputy Associate Solicitor BETTE J. BRIGGS Attorney AUGUST 1987 /1/ ERISA governs welfare benefit plans as well as pension benefit plans. Section 3(1) (emphasis added) defines employee welfare benefit plan to include those providing "medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits." /2/ A "Form 5500) is the annual report filed by the Fund with the Department of Labor as required by 29 U.S.C. 1023-1024. These reports are public documents that are available for inspection in the public document room of the Department of Labor pursuant to 29 U.S.C. 1026. The "Trust Agreement" is the Agreement and Declaration of Trust and Plan of the South Atlantic ILA/Employers Vacation and Holiday Fund, the organizing and operational document of the Fund; it was submitted to the Internal Revenue Service in support of the Fund's application for tax exempt status under 26 U.S.C. 501(a), and is open to public inspection pursuant to 26 U.S.C. 6104(a)(1)(A). We have lodged copies of the Fund's 1984 Form 5500 and the Trust Agreement with the Clerk of this Court and served them upon counsel for petitioners and respondent. /3/ Section 18-4-60 provides that "(i)n all cases where a money judgment shall have been obtained in a court of this state or in a federal court sitting in this state, the plaintiff shall be entitled to the process of garnishment." Under Georgia law garnishment proceedings are governed exclusively by state statute. See Ga. Code Ann. Section 18-4-60 (1982); Grande Carpet Co. v. Bedco Associates No. 1, 171 Ga. App. 33, 318 S.E.2d 767 (1984); Diversified Mortgage Investors v. Georgia-Carolina Industrial Park Venture, 463 F. Supp. 538, 539 (N.D. Ga. 1978). /4/ Section 206(d)(1) requires that "(e)ach pension plan shall provide that benefits provided under the plan may not be assigned or alienated." Welfare plans are expressly excluded from coverage of the anti-alienation clause and other participation and vesting requirements by Section 102(a), 29 U.S.C. 1051(1). /5/ See, e.g., Scarboro v. Ralston Purina Co., 160 Ga. App. 576, 287 S.E.2d 623 (1981) (position of garnishing plaintiff creditor depends upon defendant debtor's right to recover assets in hands of garnishee); Goodyear Tire and Rubber Co. v. New Amsterdam Casualty Co., 101 Ga. App. 577, 114 S.E.2d 546 (1960) (where no debt is owed by garnishee to defendant debtor, there is no basis for garnishment). /6/ Congress, in enacting ERISA, was particularly concerned with "the 'great personal tragedy' suffered by employees whose vested benefits are not paid when pension plans are terminated" (Nachman Corp., 466 U.S. at 374 (footnote omitted) (quoting from a statement by Senator Bentsen)), and, accordingly, imposed greater requirements on pension plans than on welfare plans. See 29 U.S.C. (and Supp. III) 1051-1086 (participation, vesting, and funding provisions). But evidence before Congress also reflected abuse involving misuse and mismanagement of welfare benefit funds -- see, e.g., Private Welfare and Pension Plan Legislation: Hearings on H.R. 1045, H.R. 1046, and H.R. 16462 Before the General Subcomm. on Labor of the House Comm. on Education and Labor, 91st Cong., 1st and 2d Sess. 463, 470-472 (1970) (statement of George Shultz, Secretary of Labor) -- and ERISA's fiduciary responsibilities and trust requirements apply equally to pension and welfare plans. See 29 U.S.C. (and Supp. III) 1101-1113. /7/ In addition, Section 404(a)(1)(D) requires that payments be made "in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of (Title I)." Payment of trust funds to creditors of a beneficiary violates specific provisions of the Trust Agreement establishing the Fund, since Article VII, section 5 of the Trust Agreement provides that "said Fund shall not be liable for or subject to the debts, contracts or liabilities of the * * * employees (or) beneficiaries." The trustees of the Fund could be subject to personal liability for breach of fiduciary responsibility for failure to observe the terms of ERISA or the Trust Agreement. See 29 U.S.C. 1109 and 1132. /8/ This is not to suggest that ERISA prohibits a general creditor from proceeding against a debtor to recover money once it has been distributed to him by the Fund. /9/ "Earnings" generally include "compensation paid or payable for personal services" (Section 18-4-20(a)(2) (and Supp. 1987)). The term "aggregate disposable earnings" refers to those earnings remaining after deduction of "amounts required by law to be withhold" (Section 18-4-20(a)(1) (and Supp. 1987)), and has been interpreted to include only those items or sources of earnings within the control or possession of the garnishee. See Parham v. Lanier Collection Agency and Service, Inc., 178 Ga. App. 84, 341 S.E.2d 889 (1986). While the Georgia courts have not considered whether vacation pay constitutes "earnings" under the Georgia statute, this Court has suggested that vacation pay is protected by the Consumer Credit Protection Act under the similarly defined exemptions from garnishment contained in that statute (15 U.S.C. 1671). See Lines v. Frederick, 400 U.S. 18, 20 (1970) (per curiam) (holding that vacation pay is a part of wages and therefore not property under control of the bankruptcy trustee); Riley v. Kessler, 2 Ohio Misc. 2d 4, 441 N.E.2d 638 (1982) (vacation pay constitutes "earnings" within the meaning of 15 U.S.C. 1672); but cf. Pallante v. Int's Venture Investments, Ltd., 622 F. Supp. 667 (N.D. Ohio 1985) (severance pay was not "earnings" in view of its nonperiodic, lump-sum nature). /10/ Title II of the CCPA establishes certain minimum restrictions on garnishments (15 U.S.C. 1673), and prohibits the discharge of any employee because his or her earnings have been subject to garnishment for any one indebtedness (15 U.S.C. 1674(a)). Significantly, Congress established the protections against discharge in response to evidence that wage garnishment constitutes a heavy and costly administrative burden for employers and that "(m)any employers, rather than undertake the costly procedure to garnishee wages, will discharge the worker." Hearings on H.R. 11601 Before the Subcomm. on Consumer Affairs of the House Comm. on Banking and Currency, 90th Cong., 1st Sess. 754, 757 (1967) (statement of I. W. Abel, President, United Steelworkers of America). See also 114 Cong. Rec. 1832 (1968) (remarks of Rep. Halpern); id. at 1837-1838 (letter from H. D. Lumb, Vice President, Corporate Relations and Public Affairs, Republic Steel Corp.). /11/ As Congress found in another context, federal regulation of garnishment is necessary because "(t)he great disparities among the laws of the several States relating to garnishment have, in effect, destroyed the uniformity of the bankruptcy laws and frustrated the purposes thereof in many areas of the country." 15 U.S.C. 1671(a)(3). /12/ Other courts, following the dissenting opinion in Franchise Tax Board, have allowed garnishment of employee benefit plans. See St. Paul Fire and Marine Ins. Co. v. Cox, 752 F.2d 550, 552 n.3 (11th Cir. 1985); Local Union 212, IBEW Vacation Trust Fund v. Local 212, IBEW Credit Union, 735 F.2d 1010 (6th Cir. 1984) (per curiam, aff'g 549 F. Supp. 1299, 1302 (S.D. Ohio 1982); Electrical Workers, Local No.1 Credit Union v. IBEW-NECA Holiday Trust Fund, 583 S.W.2d 154, 159 (Mo. 1979);First National Bank of Commerce v. Latiker, 432 So.2d 293, 296 (La. Ct. App. 1983). Those courts, however, reasoned that the states are free to regulate employee benefit plans in areas not regulated by ERISA, contrary to this Court's decisions in Alessi, Shaw, Metropolitan Life, and Pilot Life (see page 8-9, supra). Moreover, Congress has specifically endorsed the decision in Franchise Tax Board, making clear that Section 514(a) generally prohibits garnishment of welfare benefit plans (see pages 18-19, infra). /13/ The case is currently pending on remand to the Superior Court of the State of California for the County of Los Angeles (No. C-326040). /14/ AT&T Co. v. Merry, 592 F.2d 118 (2d Cir. 1979); Operating Engineers' Local #428 Pension Trust Fund v. Zamborsky, 650 F.2d 196 (9th Cir. 1981) (collecting cases); Tenneco Inc. v. First Virginia Bank, 698 F.2d 688 (4th Cir. 1983); Bowen v. Bowen, 715 F.2d 559 (11th Cir. 1983) (per curiam); Stone v. Stone, 450 F. Supp. 919 (N.D. Cal. 1978), aff'd, 632 F.2d 740 (9th Cir. 1980), cer. denied, 453 U.S. 922 (1982); In re the Marriage of Campa, 89 Cal. App. 3d 113, 152 Cal. Rptr. 362 (1979), appeal dismissed, 444 U.S. 1028 (1980). /15/ The creation of an implied exception from preemption for family obligations also was supported by a line of decisions of this Court recognizing domestic relations as uniquely the province of state law and requiring the utmost clarity before concluding that a domestic relations law is preempted. As this Court recently stated, "'(o)n the rare occasion when state family law has come into conflict with a federal statute, this Court has limited review under the Supremacy Clause to a determination whether Congress has "positively required by direct enactment" that state law be pre-empted.'" Rose v. Rose, No. 85-1206 (May 18, 1987), slip op. 5 (quoting Hisquierdo v. Hisquierdo, 439 U.S. 573, 581 (1979), quoting Wetmore v. Markoe, 196 U.S. 68, 77 (1904)). /16/ This Court cited Merry, one of the cases authorizing garnishment to satisfy family obligations, as analogous support for the proposition that some state laws may affect employee benefit plans so tenuously that they are not preempted, in Shaw (463 U.S. at 100 n.21). It seems clear, however, that Congress has clarified that state garnishment laws are preempted by Section 514(a) insofar as they authorize garnishment of employee benefit plans, except that garnishment is permissible to fulfill family obligations. /17/ Most courts have held that Section 206(d)(1) prohibits garnishment of pension plans. See, e.g., Tenneco, Inc. v. First Virginia Bank, 698 F.2d 688 (4th Cir. 1983); General Motors Corp. v. Buha, 623 F.2d 455 (6th Cir. 1980); Commercial Mortgage Ins., Inc. v. Citizens Nat'l Bank, 526 F. Supp. 510 (N.D. Tex. 1981); Gelmsley-Spear, Inc. v. Winter, 74 A.D. 2d 195, 426 N.Y.S.2d 778 (1980) aff'd, 52 N.Y.2d 984, 419 N.E.2d 1078, 438 N.Y.S.2d 79 (1981); contra, Nat'l Bank v. IBEW Local #3, 69 A.D. 2d 679, 419 N.Y.S.2d 127 (1979), appeal dismissed as moot, 48 N.Y.2d 752, 397 N.E.2d 1333, 422 N.Y.S.2d 666 (1979). That conclusion is supported by the fact that the identical provision in Section 401(a)(13) of the Internal Revenue Code of 1954 (26 U.S.C. (& Supp. III)) has been interpreted in a Treasury regulation to prohibit both voluntary assignments and garnishment by operation of law. 26 C.F.R. 1.401(a)-13(b)(1) (1954 Code). /18/ Section 514(a) does not, however, bar voluntary assignments by plan participants since voluntary assignments do not rely on provisions of state law. See, e.g., Misic v. Building Service Employees Health & Welfare Trust, 789 F.2d 1374, 1377 (9th Cir. 1986) (permitting assignment by a beneficiary of his right to reimbursement under a health care plan to the health care provider); see also 29 C.F.R. 2909.78-1 (interpreting ERISA to permit voluntary assignment of vacation plan benefits, provided that plan documents expressly permit a participant to make such an assignment and certain other conditions are met). /19/ Section 206(d) was amended in 1984, like Section 514(b)(7), to authorize alienation of pension plan benefits to satisfy certain family obligation. See 29 U.S.C. (& Supp. III) 1056 (d)(3), added by Pub. L. No. 98-397, Tit. I, Section 104(a), 98 Stat. 1433. /20/ See S.4, 93d Cong., 1st Sess. (1973) as reported by the Senate Committee on Labor and Public Welfare, S. Rep. 93-127, 93d Cong., 1st Sess. 23-24 (1973), and H.R. 12481, 93d Cong., 2d Sess. (1974) as reported by the House Committee on Ways and Means, H.R. Rep. 93-779, 93d Cong., 2d Sess. 77-78 (1974).