memorandum
By:
Mark A. Bogdanowicz
Subject:
Impact of Bankruptcy Reform Legislation on
Qualified Retirement Savings Plan Exclusions / Exemptions
April
20, 2005
I.
Introduction and Scope of Memorandum
This is an overview of the state of the law as to exemptions
covering employee benefits under the Bankruptcy Code of 1978 and how these
provisions will be affected under the recent bankruptcy reform legislation,
the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCA").[1]
II.
Overview of Exemptions In Bankruptcy
Individuals have received protection of property
essential to life and livelihood both in and outside of bankruptcy. Certain property is "excluded from the
bankruptcy estate" or "exempt" under state and federal law. In either case, the practical result is the same:
an individual debtor's assets remain outside the reach of creditors. In the bankruptcy context, section 522(b) of
the Bankruptcy Code of 1978 (the "Code") authorizes individual
debtors to exempt property from the bankruptcy estate. Exemptions are available under any Chapter
under which an individual files—Chapters 7, 11, 12, or 13. In a Chapter 7, an individual is only allowed
to keep exempt property; all other property is liquidated to satisfy creditors'
claims. In all other Chapters, which
allow individual debtors to keep their property, exemptions play an important
role in determining the minimum amount that creditors receive under the
debtors' reorganization plans. Under
such plans, creditors must receive as much as they would have received if all
non-exempt property had been liquidated.
Under the prior Bankruptcy Act of 1898, the protections
afforded to individual debtors were limited to those provided under state
exemption statutes and federal non-bankruptcy law. In 1978, the Code created a separate federal
exemption list contained in § 522(d). Under
the Code, individuals may exempt either (1) property contained on the federal
list in the amount specified in that list; or (2) property exempt under non-bankruptcy
federal law, state and local law, and jointly-owned property that is exempt
from process under non-bankruptcy law, such property held as tenants by the
entireties. At the same time, however,
the Code allows individual States to limit bankrupt debtors to the second
option—the so-called "opt-out" provision under the Code.
Most states, including Indiana,
have "opted-out" of the federal scheme.[2] Thus, for any changes to have a consistent nationwide
impact upon exemptions in bankruptcy, they must be superimposed upon the state
exemption scheme. As discussed in more
detail below, BAPCA, in its present form, will achieve such a result.
III.
Current Status of Law Governing Federal Retirement Plan Exemption
A.
Retirement Plans Excluded From The Bankruptcy
Estate
When a bankruptcy petition is filed, an estate is
created that is comprised of "all legal or equitable interests of the
debtor in property as of the commencement of the case." 11 U.S.C. § 541(a). Bankruptcy courts, however, will give effect
to "a restriction on the transfer of a beneficial interest of the debtor
in a trust that is enforceable under applicable non-bankruptcy law". 11 U.S.C. § 541(c)(2). The United States Supreme Court has construed
this provision to mean that interests in trusts containing such provisions are
excluded from property of the estate. See Patterson v. Shumate, 504 U.S.
753 (1992). Thus, the debtor need not
affirmatively claim such interests as exempt in order to shield them from
creditors.[3]
The United States Supreme Court has made clear that
the ERISA-qualified plans never become part of the debtor's bankruptcy
estate. See Patterson v. Shumate, 504 U.S. 753 (1992); see also In re Lucas, 924 F.2d 597 (6th Cir. 1991)
(401(a) plan not property of the estate); In
re Nolen, 175 B.R. 214 (Bankr. N.D. Ohio 1994)
(403(b) plan is not property of the estate); In re Pierce, 1994 WL 266381 (Bankr. W.D.
Pa. 1994) (401(k) plan is not property of the estate). In that light, several courts have held that
the termination of debtors' employment does not bring ERISA-qualified plan into
the estate. See In re Parks, 225 B.R.
768 (Bankr. D. Utah
2000); In re Nudo, 147 B.R. 68 (Bankr. N.D.N.Y. 1992); In
re Dunham, 147 B.R. 13 (Bankr. E.D.N.C.
1992). By contrast, retirement plans
which are not ERISA-qualified become property of the estate and are outside of
the reach of creditors only if they fall within a federal or state exemption
statute. See In re Hall, 151 B.R. 412 (Bankr. W.D.
Mich. 1993) (Keogh plan part of estate but exempt under 522(d)(10)(E) to the
extent reasonably necessary for support of debtor and dependents). For the exclusion to be effective, non-ERISA
funds must be held in trust at the time the petition is filed. See In
re Leadbetter, 992 F.2d 1216 (6th Cir.
Apr. 30, 1993) (funds held
in 457 plan, by definition not a trust, are property of the estate); In re Barnes, 264 B.R. 415 (Bankr. E.D. Mich. 2001).
B.
Retirement Plans That Are Included In the
Bankruptcy Estate, But Otherwise Exempt
Even if a debtor's interest in a retirement plan
becomes property of the debtor's estate, this does not necessarily mean that it
will be subject to creditors' claims.
One of the current federal exemptions covers debtors' rights to receive
certain employment-related benefits. The
relevant provision of the Code provides as follows:
The following property may be exempted under subsection
(b)(1) of this section:
* * *
(10) The debtor's right to receive –
* * *
(E) a payment under a stock bonus, pension, profit sharing,
annuity, or
similar plan or contract on account of illness,
disability, death,
age, or length of service, to the extent
reasonably
necessary for the support of the debtor and any
dependent of the
debtor, unless –
(i) such plan
or contract was established by or under the
auspices of an
insider that employed the debtor at the time
the debtor's
rights under such plan or contract arose;
(ii) such payment is on account of age or
length of
service; and
(iii) such plan or contract does not qualify
under section
401(a), 403(a),
403(b), or 408 of the Internal Revenue Code
of 1986.
11 U.S.C. § 522(d)(10)(E). Thus, the Code exempts certain long-term
employment benefits to the extent necessary to reasonably provide for the
support of the debtor and the debtor's dependents. Certain plans that are created by an
"insider"[4]
of the debtor and that are not tax-deferred under the
above-referenced Federal Tax Code provisions do not qualify for the exemption.
Until very recently, there had been a split of
authority as to whether IRAs are within the scope of 11 U.S.C. § 522(d)(10)(E).[5] Compare
In re Brucher, 243 F.3d 242 (6th Cir.
2001) (holding that IRAs are exempt); In
re Carmichael, 100 F.3d 375 (5th Cir. 1996) (same); In re Dubroff,
119 F.3d 75 (2d Cir. 1997) (same); In re McKown, 203 F.3d 1188 (9th Cir. 2000) (same)
with In re Huebner, 986 F.2d 1222 (8th
Cir. 1993) (holding that IRAs not exempt where debtor can withdraw fund at any
time); see also Individual Retirement Accounts As Exempt
Property in Bankruptcy, 133 A.L.R. Fed 1 (1999). The question arises whether IRAs are "similar
plan[s] or contract[s] on account of illness, disability, death, age, or length
of service". Those courts that have
answered in the affirmative have reasoned that IRAs are substitutes for future
earnings; that the exclusion created for plans or contracts that do not qualify
under section 408 of the Internal Revenue Code (the provision specifically
addressing IRAs) suggests that Congress intended for IRAs to be considered
"similar plans or contracts"; that there is no evidence that Congress
intended to penalize the retirement benefits of self-employed individuals; and
that including IRAs within this exemption is consistent with the policy of
providing honest debtors with a "fresh start". On April
4, 2005, the Supreme Court expressly adopted the majority rule,
holding that IRAs are exempt from the bankruptcy estate under 11 U.S.C. §
522(d)(10)(E). Rousey v. Jacoway, 125 S. Ct.
1561 (2005).
C.
The Effect Of Transfers Or Rollovers
There is a split of authority as to the exempt status
of funds that are transferred from one type of retirement fund to another,
i.e., when funds are rolled-over or transferred. Several courts have held that when funds are
distributed from various exempt retirement funds and eventually deposited into
IRAs, they are no longer exempt. See In re Rousey,
347 F.3d 689 (8th Cir. 2003) (IRA did not meet requirements of
522(d)(10)(E)); In re Barshak,
106 F.3d 501 (3d Cir. 1997) ("contributions"[6] from 401(a) plan
to IRA capped for exemption purposes under Pennsylvania exemption statute); In re Ekanger,
1999 WL 671866 (Bankr. E.D. Va.
May 17, 1999); In re Houck, 181 B.R. 187 (Bankr. E.D. Pa. 1995); In
re Goldman, 182 B.R. 622 (Bankr. D. Mass.
1995), aff'd 192 B.R. 1 (D. Mass. 1996); In re Mann, 134 B.R. 710 (Bankr. E.D.N.Y. 1991).[7] Others have held that the mere fact of
transfer does not extinguish the exempt character of the initial retirement
fund. See In re Youngblood, 29 F.3d 255 (5th Cir. 1994)
(tax-exempt rollovers from 401(a) fund to IRA remain exempt under Texas
law); In re Kim, 257 B.R. 680 (9th
Cir. BAP 2000) (post-petition transfers to IRA exempt under California
exemption statute);[8]
In re Ladd, 258 B.R. 824 (Bankr. N.D. Fla. 2001) (requiring that the transfer be
traceable to exempt funds); In re Bresnahan, 183 B.R. 506 (Bankr.
S.D. Ohio 1995) (pre-petition transfers into checking account became property
of the estate, but maintained their exempt status under Ohio
law); In re Mann, 135 B.R. 710
(E.D.N.Y. 1991) (rollovers from ERISA-qualified plan into IRA retained
spendthrift trust protection under New York
statute and were excluded from property of the estate). In each instance, the outcome has turned upon
a resolution of state exemption law leading to much uncertainty for entities
that administer retirement funds on a national level.
IV.
Impact of BAPCA on Qualified Retirement Plan Exemption Provisions
BAPCA resolves the issue of whether certain retirement
funds are exempt assets and expands the coverage of the existing exemption
relating to retirement funds. BAPCA
achieves the same result with respect to the unsettled status of rollovers and
distributions. The scope of the
bankruptcy exemption of retirement funds is coextensive with the scope of
federal taxation exemption of retirement funds.
BAPCA sets forth the specific ways in which the debtors may demonstrate
that such assets are tax-exempt. In addition, BAPCA effectively pre-empts state
laws regulating the bankruptcy treatment of tax-exempt retirement funds: the
ability of states to "opt-out" of the federal exemption scheme will
not longer affect such assets and subject them to different treatment. Finally, BAPCA makes the exemption of certain
retirement funds subject to a bright-line statutory cap.
A.
Tax-exempt Retirement Funds Are Exempt In
Bankruptcy
BAPCA resolves the uncertainty created by section
522(d)(10)(E) of the Code and the cases construing it. BAPCA makes explicitly clear that all
retirement funds that are exempt from taxation under sections 401, 403, 408,
408A, 414, 457, or 501(a) of the Internal Revenue Code of 1986 (the
"IRC") ("Qualified Retirement Funds") are likewise outside
the reach of creditors. To the extent
that retirement funds do not fall within any of the foregoing tax exemptions,
they will only qualify for exemption in bankruptcy if they meet the
requirements of 522(d)(10)(E)[9]
or an applicable State statute. In
effect, BAPCA statutorily overrules the line of cases holding that IRAs, which
are exempt from taxation under section 408 of the IRC, are not exempt in
bankruptcy. An equally important change
is the lower burden for debtors to claim such assets as exempt. For Qualified Retirement Funds, debtors will
not have to demonstrate that they are "reasonably necessary" for the
support of the debtor or the debtor's dependents as they would have in order to
invoke protection under section 522(d)(10)(E).
BAPCA also resolves the issue of how rollovers and
contributions are treated in bankruptcy.
Bankruptcy exemption is not lost when Qualified Retirement Funds are
directly transferred under section 401(a)(31).
Similarly, eligible rollover distributions do not lose their exempt
status by reason of that distribution.
Eligible rollover distributions include rollovers that qualify under
section 402(c) of the IRC. Other
eligible rollovers are those that are distributions from Qualified Retirement
Funds and deposited in another Qualified Retirement Fund. Such a deposit must occur within 60 days of
the distribution.
B.
Procedures: Bankruptcy Determination Whether
Claimed Retirement Funds Qualify For Exemption
Debtors have several options available to them in
demonstrating that the retirement funds are exempt from taxation under sections
401, 403, 408, 408A, 414, 457, or 501(a) of the IRC. Where the retirement fund in question has
received a favorable determination under section 7805 of the IRC and that
determination remains effective when the debtor files for bankruptcy, the funds
will be presumed to be exempt.[10] If no determination has been made, then the
debtor must demonstrate that no adverse determination as to the retirement
fund's tax-exempt status has been made by either a court or the IRS. In addition, the debtor must demonstrate
either that (a) the retirement fund is in substantial compliance with the IRC
or (b) the debtor is not materially responsible for any failure of the fund to
comply.
C.
Uniform Exemptability
of Retirement Funds Under State And Federal Exemption Law
BAPCA also makes the treatment of qualified retirement
funds uniform in bankruptcy by making them exempt in both "opt-out"
jurisdictions and jurisdictions that have not opted out of the federal
exemption scheme. As discussed above in
Section II, the Code allowed states by legislative act to restrict debtors
domiciled in their jurisdiction from electing the federal list of bankruptcy
exemptions. Instead, such debtors only
could exempt property that is otherwise exempt under non-bankruptcy federal
law, exempt under state and local law, and jointly-owned property that is
exempt from process under non-bankruptcy law.
As to retirement funds that are not subject to ERISA, this meant (in
many cases) that debtors' abilities to exempt such funds were subject to the
various state exemption laws and the cases construing them. Under BAPCA, even for "opt-out"
jurisdictions, debtors may still exempt retirement funds that are exempt from
taxation under sections 401, 403, 408, 408A, 414, 457, or 501(a) of the
IRC. BAPCA adds an identical exemption
to the list of federal exemptions. Thus,
BAPCA makes the treatment of qualified retirement funds uniform regardless of
where a particular debtor happens to be domiciled and whether the debtor elects
the state or federal exemptions where the debtor has the option to do so.
D.
Statutory Cap On Exempt Individual Retirement
Accounts
BAPCA makes individual retirement accounts subject to
a clear statutory cap that did not exist under prior bankruptcy law, other than
leaving the outer boundaries of this exemption to the vagaries of what is
"reasonably necessary" for the support of debtors and their
dependents. Assets contained in
individual retirement accounts described in sections 408 and 408A of the IRC
are subject to a qualified exemption.
This exemption is limited in aggregate value to $1,000,000 determined
without regard to amounts attributable to rollover contributions under sections
402(c), 402(e)(6), 403(a)(4), 403(a)(5), and 403(b)(8) of the IRC and earnings
thereon. BAPCA's
bright-line statutory cap is subject to a few exceptions. First, it neither applies to simplified
employee pension plans under section 408(k) of the IRC, nor to simple
retirement accounts under section 408(p) of the IRC. Second, the debtor may petition the
bankruptcy court for relief from the statutory cap. The bankruptcy court has the discretionary
power to grant such relief "if the interest of justice so requires". In short, while BAPCA removes the murky
"reasonableness" requirement under 522(d)(10)(E), it brings the
extent of the IRA exemption within defined boundaries. At the same time, however, it still leaves
bankruptcy courts room to stretch the boundaries of the exemption under the
appropriate set of facts.
V.
Conclusion
The bankruptcy reform legislation, in its present form,
resolves many of the conflicting decisions construing the bankruptcy exemption
statute and State exemption statutes where states have opted-out of the federal
bankruptcy scheme. The law remains
the same as to ERISA-qualified plans under Patterson. Such assets never
become property of the bankruptcy estate and are outside the reach of creditors.
BAPCA, however, significantly changes the exempt status of retirement
funds that are not subject to ERISA (and become part of the estate), but qualify
for tax-deferment. Regardless of whether individuals are claiming
exemptions under the Code or under non-bankruptcy law (especially relevant
for "opt-out" States), Qualified Retirement Funds will be exempt
in bankruptcy. Similarly, transfers
to such Qualified Retirement Funds receive protection in bankruptcy.
IRAs, however, are still likely to generate litigation for funds exceeding
$1 million. In such instances, we can expect a new line
of cases considering what set of facts qualifies as adequate grounds to depart
from the statutory cap.
Appendix A
Selected
Provisions of The Bankruptcy Abuse Prevention and Consumer Protection Act of
2005
SEC. 224. PROTECTION OF RETIREMENT SAVINGS IN
BANKRUPTCY.
(a) IN GENERAL- Section 522 of
title 11, United States Code, is amended--
(1) in subsection (b)--
(A) in paragraph (2)--
(i) in
subparagraph (A), by striking `and' at the end;
(ii) in subparagraph (B), by
striking the period at the end and inserting `; and';
(iii) by adding at the end the
following:
`(C) retirement funds to the
extent that those funds are in a fund or account that is exempt from taxation
under section 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue
Code of 1986.'; and
(iv) by striking `(2)(A) any
property' and inserting:
`(3) Property listed in this
paragraph is--
`(A) any property';
(B) by striking paragraph (1) and
inserting:
`(2) Property listed in this
paragraph is property that is specified under subsection (d), unless the State
law that is applicable to the debtor under paragraph (3)(A) specifically does
not so authorize.';
(C) by striking `(b)
Notwithstanding' and inserting `(b)(1) Notwithstanding';
(D) by striking `paragraph (2)'
each place it appears and inserting `paragraph (3)';
(E) by striking `paragraph (1)'
each place it appears and inserting `paragraph (2)';
(F) by striking `Such property
is--'; and
(G) by adding at the end the
following:
`(4) For purposes of paragraph
(3)(C) and subsection (d)(12), the following shall apply:
`(A) If the retirement funds are
in a retirement fund that has received a favorable determination under section
7805 of the Internal Revenue Code of 1986, and that determination is in effect
as of the date of the filing of the petition in a case under this title, those
funds shall be presumed to be exempt from the estate.
`(B) If the retirement funds are
in a retirement fund that has not received a favorable determination under such
section 7805, those funds are exempt from the estate if the debtor demonstrates
that--
`(i) no
prior determination to the contrary has been made by a court or the Internal
Revenue Service; and
`(ii)(I) the retirement fund is in
substantial compliance with the applicable requirements of the Internal Revenue
Code of 1986; or
`(II) the retirement fund fails to
be in substantial compliance with the applicable requirements of the Internal
Revenue Code of 1986 and the debtor is not materially responsible for that
failure.
`(C) A direct transfer of
retirement funds from 1 fund or account that is exempt from taxation under
section 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code
of 1986, under section 401(a)(31) of the Internal Revenue Code of 1986, or
otherwise, shall not cease to qualify for exemption under paragraph (3)(C) or
subsection (d)(12) by reason of such direct transfer.
`(D)(i)
Any distribution that qualifies as an eligible rollover distribution within the
meaning of section 402(c) of the Internal Revenue Code of 1986 or that is
described in clause (ii) shall not cease to qualify for exemption under
paragraph (3)(C) or subsection (d)(12) by reason of such distribution.
`(ii) A distribution described in
this clause is an amount that--
`(I) has been distributed from a
fund or account that is exempt from taxation under section 401, 403, 408, 408A,
414, 457, or 501(a) of the Internal Revenue Code of 1986; and
`(II) to the extent allowed by
law, is deposited in such a fund or account not later than 60 days after the
distribution of such amount.'; and
(2) in subsection (d)--
(A) in the matter preceding
paragraph (1), by striking `subsection (b)(1)' and inserting `subsection
(b)(2)'; and
(B) by adding at the end the
following:
`(12) Retirement funds to the
extent that those funds are in a fund or account that is exempt from taxation
under section 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue
Code of 1986.'.
(b) AUTOMATIC STAY- Section 362(b)
of title 11, United States Code, is amended--
(1) in paragraph (17), by striking
`or' at the end;
(2) in paragraph (18), by striking
the period and inserting a semicolon; and
(3) by inserting after paragraph
(18) the following:
`(19) under subsection (a), of
withholding of income from a debtor's wages and collection of amounts withheld,
under the debtor's agreement authorizing that withholding and collection for
the benefit of a pension, profit-sharing, stock bonus, or other plan
established under section 401, 403, 408, 408A, 414, 457, or 501(c) of the
Internal Revenue Code of 1986, that is sponsored by the employer of the debtor,
or an affiliate, successor, or predecessor of such employer--
`(A) to the extent that the
amounts withheld and collected are used solely for payments relating to a loan
from a plan under section 408(b)(1) of the Employee Retirement Income Security
Act of 1974 or is subject to section 72(p) of the Internal Revenue Code of
1986; or
`(B) a loan from a thrift savings
plan permitted under subchapter III of chapter 84 of title 5, that satisfies
the requirements of section 8433(g) of such title;
but nothing in this paragraph may
be construed to provide that any loan made under a governmental plan under
section 414(d), or a contract or account under section 403(b), of the Internal
Revenue Code of 1986 constitutes a claim or a debt under this title;'.
(c) EXCEPTIONS TO DISCHARGE-
Section 523(a) of title 11, United States Code, as amended by section 215, is
amended by inserting after paragraph (17) the following:
`(18) owed to a pension,
profit-sharing, stock bonus, or other plan established under section 401, 403,
408, 408A, 414, 457, or 501(c) of the Internal Revenue Code of 1986, under--
`(A) a loan permitted under
section 408(b)(1) of the Employee Retirement Income Security Act of 1974, or
subject to section 72(p) of the Internal Revenue Code of 1986; or
`(B) a loan from a thrift savings
plan permitted under subchapter III of chapter 84 of title 5, that satisfies
the requirements of section 8433(g) of such title;
but nothing in this paragraph may
be construed to provide that any loan made under a governmental plan under
section 414(d), or a contract or account under section 403(b), of the Internal
Revenue Code of 1986 constitutes a claim or a debt under this title; or'.
(d) PLAN CONTENTS- Section 1322 of
title 11, United States Code, is amended by adding at the end the following:
`(f) A plan may not materially
alter the terms of a loan described in section 362(b)(19) and any amounts
required to repay such loan shall not constitute `disposable income' under
section 1325.'.
(e) ASSET LIMITATION-
(1) LIMITATION- Section 522 of
title 11, United States Code, is amended by adding at the end the following:
`(n) For assets in individual
retirement accounts described in section 408 or 408A of the Internal Revenue
Code of 1986, other than a simplified employee pension under section 408(k) of
such Code or a simple retirement account under section 408(p) of such Code, the
aggregate value of such assets exempted under this section, without regard to
amounts attributable to rollover contributions under section 402(c), 402(e)(6),
403(a)(4), 403(a)(5), and 403(b)(8) of the Internal Revenue Code of 1986, and
earnings thereon, shall not exceed $1,000,000 in a case filed by a debtor who
is an individual, except that such amount may be increased if the interests of
justice so require.'.
(2) ADJUSTMENT OF DOLLAR AMOUNTS-
Paragraphs (1) and (2) of section 104(b) of title 11, United States Code, are
amended by inserting `522(n),' after `522(d),'.
SEC. 225.
PROTECTION OF EDUCATION SAVINGS IN BANKRUPTCY.
(a) EXCLUSIONS- Section 541 of title
11, United States Code, is amended--
(1) in subsection (b)--
(A) in paragraph (4), by striking
`or' at the end;
(B) by redesignating
paragraph (5) as paragraph (9); and
(C) by inserting after paragraph
(4) the following:
`(5) funds placed in an education
individual retirement account (as defined in section 530(b)(1) of the Internal
Revenue Code of 1986) not later than 365 days before the date of the filing of
the petition in a case under this title, but--
`(A) only if the designated
beneficiary of such account was a child, stepchild, grandchild, or stepgrandchild of the debtor for the taxable year for which
funds were placed in such account;
`(B) only to the extent that such
funds--
`(i) are
not pledged or promised to any entity in connection with any extension of
credit; and
`(ii) are not excess contributions
(as described in section 4973(e) of the Internal Revenue Code of 1986); and
`(C) in the case of funds placed
in all such accounts having the same designated beneficiary not earlier than
720 days nor later than 365 days before such date, only so much of such funds
as does not exceed $5,000;
`(6) funds used to purchase a
tuition credit or certificate or contributed to an account in accordance with
section 529(b)(1)(A) of the Internal Revenue Code of 1986 under a qualified
State tuition program (as defined in section 529(b)(1) of such Code) not later
than 365 days before the date of the filing of the petition in a case under
this title, but--
`(A) only if the designated
beneficiary of the amounts paid or contributed to such tuition program was a
child, stepchild, grandchild, or stepgrandchild of
the debtor for the taxable year for which funds were paid or contributed;
`(B) with respect to the aggregate
amount paid or contributed to such program having the same designated
beneficiary, only so much of such amount as does not exceed the total
contributions permitted under section 529(b)(7) of such Code with respect to
such beneficiary, as adjusted beginning on the date of the filing of the
petition in a case under this title by the annual increase or decrease (rounded
to the nearest tenth of 1 percent) in the education expenditure category of the
Consumer Price Index prepared by the Department of Labor; and
`(C) in the case of funds paid or
contributed to such program having the same designated beneficiary not earlier
than 720 days nor later than 365 days before such date, only so much of such
funds as does not exceed $5,000;'; and
(2) by adding at the end the
following:
`(e) In determining whether any of
the relationships specified in paragraph (5)(A) or (6)(A) of subsection (b)
exists, a legally adopted child of an individual (and a child who is a member
of an individual's household, if placed with such individual by an authorized
placement agency for legal adoption by such individual), or a foster child of
an individual (if such child has as the child's principal place of abode the
home of the debtor and is a member of the debtor's household) shall be treated
as a child of such individual by blood.'.
(b) DEBTOR'S DUTIES- Section 521 of
title 11, United States Code, as amended by section 106, is amended by adding
at the end the following:
`(c) In addition to meeting the
requirements under subsection (a), a debtor shall file with the court a record
of any interest that a debtor has in an education individual retirement account
(as defined in section 530(b)(1) of the Internal Revenue Code of 1986) or under
a qualified State tuition program (as defined in section 529(b)(1) of such
Code).'.
SEC. 323.
EXCLUDING EMPLOYEE BENEFIT PLAN PARTICIPANT CONTRIBUTIONS AND OTHER PROPERTY
FROM THE ESTATE.
Section 541(b) of title 11, United
States Code, as amended by section 225, is amended by adding after paragraph
(6), as added by section 225(a)(1)(C), the following:
`(7) any amount--
`(A) withheld by an employer from
the wages of employees for payment as contributions--
`(i)
to--
`(I) an employee benefit plan that
is subject to title I of the Employee Retirement Income Security Act of 1974 or
under an employee benefit plan which is a governmental plan under section
414(d) of the Internal Revenue Code of 1986;
`(II) a deferred compensation plan
under section 457 of the Internal Revenue Code of 1986; or
`(III) a tax-deferred annuity
under section 403(b) of the Internal Revenue Code of 1986;
except that such amount under this
subparagraph shall not constitute disposable income as defined in section
1325(b)(2); or
`(ii) to a health insurance plan
regulated by State law whether or not subject to such title; or
`(B) received by an employer from
employees for payment as contributions--
`(i)
to--
`(I) an employee benefit plan that
is subject to title I of the Employee Retirement Income Security Act of 1974 or
under an employee benefit plan which is a governmental plan under section 414(d)
of the Internal Revenue Code of 1986;
`(II) a deferred compensation plan
under section 457 of the Internal Revenue Code of 1986; or
`(III) a tax-deferred annuity
under section 403(b) of the Internal Revenue Code of 1986;
except that such amount under this
subparagraph shall not constitute disposable income, as defined in section
1325(b)(2); or
`(ii) to a health insurance plan
regulated by State law whether or not subject to such title;'.
SEC. 446. DUTIES
WITH RESPECT TO A DEBTOR WHO IS A PLAN ADMINISTRATOR OF AN EMPLOYEE BENEFIT
PLAN.
(a) IN GENERAL- Section 521(a) of
title 11, United States Code, as amended by sections 106 and 304, is amended--
(1) in paragraph (5), by striking
`and' at the end;
(2) in paragraph (6), by striking
the period at the end and inserting `; and'; and
(3) by adding after paragraph (6)
the following:
`(7) unless a trustee is serving
in the case, continue to perform the obligations required of the administrator
(as defined in section 3 of the Employee Retirement Income Security Act of
1974) of an employee benefit plan if at the time of the commencement of the
case the debtor (or any entity designated by the debtor) served as such
administrator.'.
(b) DUTIES OF TRUSTEES- Section
704(a) of title 11, United States Code, as amended by sections 102 and 219, is
amended--
(1) in paragraph (10), by striking
`and' at the end; and
(2) by adding at the end the
following:
`(11) if, at the time of the
commencement of the case, the debtor (or any entity designated by the debtor)
served as the administrator (as defined in section 3 of the Employee Retirement
Income Security Act of 1974) of an employee benefit plan, continue to perform
the obligations required of the administrator; and'.
(c) CONFORMING AMENDMENT- Section
1106(a)(1) of title 11, United States Code, is amended to read as follows:
`(1) perform the duties of the
trustee, as specified in paragraphs (2), (5), (7), (8), (9), (10), and (11) of
section 704;'.