2001 Legislation
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SENATE BILL NO. 1118 – IRAs, community property interest

SENATE BILL NO. 1118

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Daily Data Tracking History



S1118................................................by JUDICIARY AND RULES
INDIVIDUAL RETIREMENT ACCOUNTS - Amends existing law to further define
"employee benefit plan"; and to further govern community property interest
in an individual retirement account.
                                                                        
02/12    Senate intro - 1st rdg - to printing
02/13    Rpt prt - to Com/HuRes
02/16    Rpt out - rec d/p - to 2nd rdg
02/19    2nd rdg - to 3rd rdg
02/22    3rd rdg - PASSED - 32-0-3
      AYES -- Andreason, Boatright, Branch(Bartlett), Bunderson,
      Burtenshaw, Cameron, Danielson, Darrington, Davis, Dunklin, Frasure,
      Geddes, Goedde, Hawkins, Ingram, Ipsen, Keough, Lee, Lodge, Noh,
      Richardson, Risch, Sandy, Schroeder, Sims, Sorensen, Stegner,
      Stennett, Thorne, Wheeler, Whitworth, Williams,
      NAYS -- None
      Absent and excused -- Brandt, Deide, King-Barrutia
    Floor Sponsor -- Bunderson
    Title apvd - to House
02/23    House intro - 1st rdg - to Jud
03/20    Rpt out - rec d/p - to 2nd rdg
03/21    2nd rdg - to 3rd rdg
03/26    3rd rdg - PASSED - 62-0-8
      AYES -- Barraclough, Barrett, Bedke, Bell, Bieter, Black, Boe, Bolz,
      Callister, Chase, Clark, Collins, Crow, Deal, Denney, Ellis,
      Ellsworth, Eskridge, Field(13), Field(20), Gagner, Gould, Hadley,
      Hammond, Hansen, Harwood, Henbest(Farley), Higgins, Hornbeck, Jaquet,
      Jones, Kellogg, Kendell, Kunz, Lake, Langford, Mader, Marley,
      McKague, Meyer, Montgomery, Mortensen, Moss, Moyle, Pearce, Pomeroy,
      Raybould, Ridinger, Roberts, Robison, Schaefer, Sellman, Shepherd,
      Smith, Smylie, Stevenson, Stone, Tilman, Trail, Wood, Young, Mr.
      Speaker
      NAYS -- None
      Absent and excused -- Bradford, Bruneel, Campbell, Cuddy, Loertscher,
      Pischner, Sali, Wheeler
    Floor Sponsor -- Sellman
    Title apvd - to Senate
03/28    To enrol
    Rpt enrol - Pres signed
03/29    Sp signed - to Governor
04/02    Governor signed
         Session Law Chapter 288
         Effective: 07/01/01

Bill Text


                                                                        
                                                                        
  ||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
 Fifty-sixth Legislature                  First Regular Session - 2001
                                                                        
                                                                        
                                       IN THE SENATE
                                                                        
                                    SENATE BILL NO. 1118
                                                                        
                              BY JUDICIARY AND RULES COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO RETIREMENT BENEFITS; AMENDING SECTION 11-604A, IDAHO CODE, TO FUR-
  3        THER DEFINE "EMPLOYEE BENEFIT PLAN" AND TO FURTHER GOVERN COMMUNITY  PROP-
  4        ERTY  INTEREST  IN  AN INDIVIDUAL RETIREMENT ACCOUNT AND TO MAKE TECHNICAL
  5        CORRECTIONS.
                                                                        
  6    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
  7        SECTION 1.  That Section 11-604A, Idaho Code, be, and the same  is  hereby
  8    amended to read as follows:
                                                                        
  9        11-604A.  PENSION MONEY EXEMPT. (1) It is the policy of the state of Idaho
 10    to  ensure  the  well-being of its citizens by protecting retirement income to
 11    which they are or may become entitled. For that purpose generally and pursuant
 12    to the authority granted to  the  state  of  Idaho  under  11  U.S.C.  section
 13    522(b)(2),  the exemptions in this section relating to retirement benefits are
 14    provided.
 15        (2)  Unless otherwise provided by federal law, any money received  by  any
 16    citizen  of  the state of Idaho as a pension from the government of the United
 17    States, whether the money be in the actual  possession  of  a  citizen  or  be
 18    deposited  or loaned, shall be exempt from execution, attachment, garnishment,
 19    seizure, or other levy by or under any legal process whatever. When  a  debtor
 20    dies,  or  absconds,  and leaves his family any money exempted by this subsec-
 21    tion, the money shall be exempt to the family as provided in this  subsection.
 22    This  subsection  shall  not apply to any child support collection actions, if
 23    otherwise permitted by federal law.
 24        (3)  The right of a person to a pension, annuity, or retirement  allowance
 25    or  disability  allowance,  or death benefits, or any optional benefit, or any
 26    other right accrued or accruing to any citizen of the state of Idaho under any
 27    employee benefit plan, and any fund created by the benefit  plan  or  arrange-
 28    ment,  shall  be  exempt  from execution, attachment, garnishment, seizure, or
 29    other levy by or under any legal process whatever. This subsection  shall  not
 30    apply  to any child support collection actions, if otherwise permitted by fed-
 31    eral law. This subsection  shall  permit  benefits  under  any  such  plan  or
 32    arrangement  to be payable to a spouse, former spouse, child, or other depend-
 33    ent of a participant in the plan to the extent expressly  provided  for  in  a
 34    qualified  domestic  relations  order  that  meets  the requirements for those
 35    orders under the plan, or, in the  case  of  benefits  payable  under  a  plan
 36    described  in  sections 403(b), 408 or 408A of the iInternal rRevenue cCode of
 37    1986, as amended, or section 409 of the iInternal rRevenue cCode as in  effect
 38    before  January 1, 1984, to the extent provided in any order issued by a court
 39    of competent jurisdiction that provides for maintenance or support. This  sub-
 40    section  shall  not  prohibit actions against an employee benefit plan or fund
 41    for valid obligations incurred by the plan or fund for the benefit of the plan
 42    or fund.
 43        (4)  For the purposes of this section, the term  "employee  benefit  plan"
                                                                        
                                           2
                                                                        
  1    means:
  2        (a)  Assets  held, payments made, and amounts payable under a stock bonus,
  3        pension, profit-sharing, annuity, or similar plan or  contract,  providing
  4        benefits by reason of age, illness, disability, or length of service;
  5        (b)  Any  plan  or arrangement, whether funded by a trust, an annuity con-
  6        tract, an insurance contract, or an individual account, that is  described
  7        in  sections 401(a), 403(a), 403(b), 408 or 408A of the iInternal rRevenue
  8        cCode of 1986, as amended, or section 409 of the iInternal rRevenue  cCode
  9        as in effect before January 1, 1984. The term "employee benefit plan" also
 10        means any rights accruing on account of money paid currently or in advance
 11        pursuant  to  a college savings program described in chapter 54, title 33,
 12        Idaho Code. The  term  "employee  benefit  plan"  shall  not  include  any
 13        employee  benefit plan that is established or maintained for its employees
 14        by the government of the United States, by  the  state  of  Idaho  or  any
 15        political  subdivision of the state, or by any agent or instrumentality of
 16        any of the foregoing.
 17        (5)  An employee benefit plan shall be deemed to be a  spendthrift  trust,
 18    regardless  of  the  source of funds, the relationship between the beneficiary
 19    and the trustee or custodian of the plan, or the  ability  of  the  debtor  to
 20    withdraw, borrow or otherwise become entitled to benefits from the plan before
 21    retirement.  This  subsection  shall  permit  benefits  under any such plan or
 22    arrangement to be payable to a spouse, former spouse, child, or other  depend-
 23    ent  of  a  participant  in the plan to the extent expressly provided for in a
 24    qualified domestic relations order  that  meets  the  requirements  for  those
 25    orders  under  the  plan,  or,  in  the  case of benefits payable under a plan
 26    described in sections 403(b), 408 or 408A of the iInternal rRevenue  cCode  of
 27    1986,  as amended, or section 409 of the iInternal rRevenue cCode as in effect
 28    before 1984, to the extent provided in any order issued by a court  of  compe-
 29    tent jurisdiction that provides home maintenance or support.
 30        (6)  Unless  contrary to applicable federal law, nothing contained in sub-
 31    section (3), (4) or (5) of this section shall be construed as a termination or
 32    limitation of a spouse's community property interest in an individual  retire-
 33    ment  account  held  in  the  name of, or on account of, the other spouse, the
 34    "account holder spouse". At the death of the non-account  holder  spouse,  the
 35    account holder spouse may transfer or distribute the community property inter-
 36    est of the non-account holder spouse in the account holder spouse's individual
 37    retirement  account  to  the  non-account holder spouse's estate, testamentary
 38    trust, inter vivos trust, or other successor or  successors  pursuant  to  the
 39    last will of the non-account holder spouse, or the law of intestate succession
 40    if  applicable, and that distributee may, but shall not be required to, obtain
 41    an order from a court of competent jurisdiction, including a nonjudicial  dis-
 42    pute  resolution  agreement,  or other order, entered to confirm the distribu-
 43    tion. For purposes of subsection (3) of this section, the distributee  of  the
 44    non-account  holder  spouse's  community  property  interest  in an individual
 45    retirement account shall be considered a person entitled to the  full  protec-
 46    tion  of  subsection (3) of this section. The non-account holder spouse's con-
 47    sent to a beneficiary designation by the account holder spouse with respect to
 48    an individual retirement account shall not, absent clear and  convincing  evi-
 49    dence to the contrary, be deemed a release, gift, relinquishment, termination,
 50    limitation  or  transfer of the non-account holder spouse's community property
 51    interest in an individual retirement account. For purposes of this subsection,
 52    the term "non-account holder spouse" means the spouse of the person  in  whose
 53    name  the  individual  retirement  account is maintained. The term "individual
 54    retirement account" includes an individual retirement account and an  individ-
 55    ual  retirement annuity both as described in section 408 of the Internal Reve-
                                                                        
                                           3
                                                                        
  1    nue Code of  1986,  as  amended,  a  Roth  individual  retirement  account  as
  2    described  in  section  408A of the Internal Revenue Code of 1986, as amended,
  3    and an individual retirement bond as described in section 409 of the  Internal
  4    Revenue Code as in effect before January 1, 1984.

Statement of Purpose / Fiscal Impact



                       STATEMENT OF PURPOSE
                                
                            RS 11002

11-604A protects certain retirement income of Idaho residents, by
exempting such income from execution, attachment, garnishment,
seizure and so forth.  However, college savings programs, described
in 33-5401, Idaho Code, were not clearly covered.  Additionally,
there was no clear provision as to treatment of community property
rights of the spouse of the account holder, especially when the
spouse died before the account holder, and it was unclear whether
the spouse of an account holder was protected by this statute in
the same manner as the account holder.  Further, since the spouse
was required to consent to a beneficiary designation for the
account, some authorities held that the spouse had released or
gifted his or her interest in the account.  Finally, it was unclear
whether the statute covered some more recent variations of the
basic IRA such as individual retirement annuities, Roth IRA's, and
individual retirement bonds.  This bill clarifies all the foregoing
to provide: (1)  college savings plans are covered; (2) the spouse
retains his or her community interest in the account, which can be
transferred at the death of the spouse pursuant to the will of the
deceased spouse or by intestacy if there is no will; (3) the spouse
is fully protected by the terms of this statute; (4) a consent by
the spouse to a beneficiary designation is not a gift, release, or
waiver, etc.; and, (5) the alternate variations of IRA's are
covered by this statute.

                          FISCAL NOTE
This bill should have no effect on revenues or expenditures.

CONTACT:
          Robert L. Aldridge, Chairman,
          Legislation Committee, Taxation, Probate & Trust Section
          Idaho Tax & Business Lawyers Association, Inc.
          1209 North Eighth Street
          Boise, Idaho 83702-4297
          Telephone: office: (208) 336-9880  home: (208) 888-4668
          Fax: (208) 336-9882 


STATEMENT OF PURPOSE/FISCAL NOTE                     S 1118