ORDER DENYING DEBTOR'S MOTION TO AVOID LIEN

        The debtor has filed a motion to avoid his former wife's judicial lien in his state benefit system and deferred compensation accounts, which he has declared exempt under AS 09.38.025 and 09.38.017. (Although the debtor's motion refers, loosely, to his "SBS account", this court will assume he intends both his supplemental benefits account and deferred compensation account, because the divorce decree which is the subject of this motion gives debtor's former wife an interest in both accounts.) His motion simply states that the judicial lien against these accounts (hereinafter collectively referred to as the "SBS accounts") impairs his exemption rights in these accounts, and that he is entitled to avoid the lien pursuant to 11 U.S.C. § 522(f).

        The debtor's former wife, Jacqueline, has advanced several arguments in opposition to the motion. However, neither party provided copies of the plans which created the SBS accounts. At a combined hearing on both this motion and trial in a related adversary proceeding, debtor testified that the SBS accounts cannot be liened, indicating that they may be spendthrift trusts. A valid     2 ABR 225  spendthrift trust under state law is not an asset of the bankruptcy estate, pursuant to 11 U.S.C. § 541(c) (2), and a debtor may not claim such a trust exempt, nor pursue a lien avoidance action against such a trust under § 522(f). See, Kowalski v. Arnesen (In re Kowalski), A89-00983-001-HAR, Proceeding Memo filed Nov. 8, 1991, Docket No. 48.

        By order dated November 21, 1991, this court directed the parties to supplement the record by filing copies of the plans describing the supplemental benefits system and deferred compensation accounts as a joint exhibit. The parties complied by filing copies of these plans as a joint exhibit (Docket No. 42).

Analysis

        The debtor is an Alaska state trooper who, by virtue of his employment with the state, is entitled to participate in various benefit plans. The plan which the parties have loosely referred to as the SBS plan actually consists of two plans: a supplemental benefits plan and a supplemental annuity plan. The supplemental annuity plan is in lieu of the Federal Social Security System, and is not optional to a covered employee. The annuity plan is intended to qualify as a defined contribution plan under 26 U.S.C. § 401(a) [see Supplemental Annuity Plan, Article VII, Paragraph C.1(b) and Article VIII, Paragraph D]. Contributions to the plan are made by the employer, State of Alaska [Article III].     2 ABR 226  The employee's account in the plan is fully vested and nonforfeitable [Article V, Paragraph A], and the funds are held for the benefit of the employees, not the employer [Article VII, Paragraph C]. The employee is eligible to receive benefits from the plan after termination of employment, or his beneficiaries may receive benefits on his death.

        The supplemental benefit plan is optional and permits the employee to select from several benefit options (i.e., accidental death, disability, life insurance, optional health benefits). The premiums for these optional benefits are paid by deduction from the employee's salary.

        At the outset, it should be noted that neither of these supplemental plans are governed by ERISA. 29 U.S.C. § 1003(b) specifically exempts from ERISA's coverage "governmental plans," which are defined in 29 U.S.C. § 1102(32) as "a plan established or maintained for its employees by
. . . the government of any State or political subdivision thereof." Because both the supplemental benefit and supplemental annuity plans were established by the State of Alaska for its employees, neither one is covered by the provisions of ERISA. See, Shirley v. Maxicare Texas, Inc., 921 F.2d 565, 567 (5th Cir. 1991); Roy v. Teachers Insurance and Annuity Assn., 878 F.2d 47 (2nd Cir. 1989); In re Bharucha, 115 B.R. 671, 673 (Bankr. D. Ariz. 1990). Accordingly, the issue of whether debtor's claimed exemption in his retirement and other     2 ABR 227  benefits is preempted by ERISA does not arise. In re Bharucha, 115 B.R. 671, 673 (Bankr. D. Ariz. 1990); see also Pitrat v. Garlikov, 947 F.2d 419 (9th Cir. 1991).

        Each of these plans contains a "safeguard provision", both of which are substantially identical. For example, in the Supplemental Annuity Plan, at Article VIII, Paragraph C, this provision states:

C. Safeguard Provision

Neither the State of Alaska, Employer nor the carrier shall recognize any attempt to alienate amounts held on behalf of, or payable to, an Employee or other person who is or who might become eligible for benefits under the Plan. Such amounts are not subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge of any kind, either voluntary or involuntary, before being received by the person entitled to the amount under the terms of the Plan. An attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, or otherwise dispose of a right to amounts held under the plan is void. Except as provided in AS 09.38.065, amounts held on behalf of, or payable to, an Employee or other person who is or who might become eligible for benefits under the Plan are exempt from garnishment, execution, or levy.

        The safeguard provision for the Supplemental Benefits Plan may be found in Section 7, General Provisions, at Paragraph 7.02. This plan does not have a provision recognizing the transference of benefits under a QDRO but does provide that amounts credited to participants' accounts shall only be used for payment of premiums or reimbursement of eligible expenses [Section 6, Paragraph 6.02].

        Based upon the anti-alienation and other provisions contained in these two plans, I conclude both plans qualify as spendthrift trusts under Alaska law. In re Anderson, 2 A.B.R. 82 (Bankr. D. Alaska 1991). As the plans are valid spendthrift trusts under state law, they are not property of the estate, pursuant to 11 U.S.C. § 541(c)(2). Id. The debtor may only claim exemptions in property of the estate. 11 U.S.C. § 522(b). Since the Supplemental Benefit and Supplemental Annuity Plans are not property of the estate, he may not bring a § 522(f) lien avoidance action with reference to these plans. See, Kowalski v. Arnesen (In re Kowalski), A89-00983-O01-HAR, Proceeding Memo filed Nov. 8, 1991, Docket No. 48.

        The Deferred Compensation Plan is completely separate from the SBS plans. The plan is to be construed, administered and governed in accordance with 26 U.S.C. § 457 (deferred compensation plans of state and local governments and tax-exempt organizations). This plan is voluntary, and permits an employee to defer receipt of     2 ABR 229  a portion of his income until retirement. Benefits are not distributed until 60 days after an employee terminates employment or dies, but the plan does have a provision for "hardship withdrawals for an unforeseeable emergency" (See Article V, Payment of Benefits, Paragraphs C and D). The plan also contains the following provisions:

A. Nonvesting of Rights of Participant

Prior to any date on which the Employer becomes obligated to make Deferred Compensation payments, no participant or Beneficiary has vested rights in this Plan or in the Deferred Compensation provided for under the terms of the Plan.
[Article V, Paragraph A]

B. Nonassignability Clause

It is agreed that neither a Participant nor a Beneficiary nor any other designee shall have any right to commute, sell, assign, transfer or otherwise convey any rights to receive any payments hereunder which payments and contingent rights thereto as set forth in this Plan are expressly declared to be nonassignable and nontransferable by operation of law.
[Article VIII, Paragraph B]

C. Prohibition Against Funding

All amounts of Deferred Compensation under the Plan, all property and rights purchased with such amounts and all income attributable to such amounts, property, or rights, shall remain (until made available to a Participant or Beneficiary) solely the property and rights of the Employer (without being restricted to the provision of benefits under the Plan) subject only to the claims of the Employer's general creditors. It is expressly understood     2 ABR 230  and agreed that neither the Participant nor any Beneficiary shall have any right with respect to, or claim against, such amounts, property or rights on account of any Deferred Compensation under this Plan.
[Article VIII, Paragraph C]

D. Prohibition Against Escrow

It is expressly understood and agreed that this Plan does not create an escrow account or trust fund or any form of asset segregation by the Employer for the benefit of the Participant or any Beneficiary.
[Article VIII, Paragraph D]

The plan expressly states that it is not a trust. The plan also provides that, until an employee is eligible to receive funds, all compensation paid into the plan remains the property of the Employer.

        In spite of the anti-alienation provisions in the Deferred Compensation Plan, this plan does not constitute a spendthrift trust and, therefore, is property of the estate pursuant to 11 U.S.C. § 541(a)(1). Other courts which have considered this issue have reached the same conclusion. See, In re Council, 122 B.R. 64, 67 (Bankr. S.D. Ohio 1990); Matter of Osburn, 56 B.R. 867, 873-874 (Bankr. S.D. Ohio 1986) [these two cases considered whether the Ohio Public Employees Deferred Compensation Program, established under 26 U.S.C. § 457, was property of the estate or a spendthrift trust excluded from estate property under § 541(c) (2)]; In re Vann, 113 B.R. 704, 707 (Bankr. D. Colo. 1990) [debtor's interest in Dean Witter Reynolds, Inc., Capital     2 ABR 231  Accumulation/Deferred Compensation Plan found to be property of estate]; In re Connally, 94 B.R. 908, 911 (Bankr. W.D. Tex. 1989) [interest in Ford Motor Company's Deferred Compensation Plan found to be property of estate].

        As Foster's interest in the Deferred Compensation Account is an asset of the estate, the question then becomes whether he is entitled to claim this asset exempt pursuant to either AS 09.38.025 or AS 09.38.017⁽¹⁾. Foster has claimed his interest in this account exempt pursuant to these two state exemptions. AS 09.38.017(a) permits a debtor to exempt his interest in a retirement plan, and the money and other assets payable to him from the retirement plan. This state exemption is not helpful to debtor, because retirement plan is defined, in AS 09.38.017(d) (3) as "a retirement plan that is qualified under 26 U.S.C. 401(a), 26 U.S.C. 403(a), 26 U.S.C. 403(b), 26 U.S.C. 408, or 26 U.S.C. 409 (Internal Revenue Code)." The state deferred compensation plan was created pursuant to 26 U.S.C. § 457 and, therefore, is not the type of retirement plan for which the exemption contained in AS 09.38.017(a) was created.

        AS 09.38.025(a) permits an individual to exempt "unmatured life insurance and annuity contracts owned by the     2 ABR 232  individual." However, if the contracts have "accrued dividends and loan values available to the individual aggregating more than $10,000," a creditor may obtain a court order directing payment of any value in excess of this amount. The deferred compensation plan which Foster seeks to exempt under this statute is intended to be "an eligible State Deferred Compensation Plan within the meaning of Section 457(bb) [sic] of the Internal Revenue Code." (See Plan, Article VII, Miscellaneous, Paragraph F) The plan is clearly not a life insurance contract. Nor is it an annuity contract. The plan provides for several different benefit options in Article V, but specifically provides:

The benefit payable under any form of annuity payment elected shall be based upon the annuity purchase rates available from the Carrier at the time the benefit is determined, and shall be provided through the purchase of an annuity contract issued by an insurance company (emphasis added).

Conclusion

        Steven J. Foster cannot claim an exemption in either the state supplemental benefit plan or the state supplemental annuity plan, because neither of these plans are property of the estate. Furthermore, he cannot exempt his interest in the state deferred compensation plan, although it is an asset of the estate, because this plan does not qualify for exemption under either of the state exemption statutes on which he has relied. Jacqueline's judicial lien does not impair assets in which debtor would otherwise be entitled to claim an exemption. Therefore,

        IT IS ORDERED that debtor's motion to avoid judicial lien, pursuant to 11 U.S.C. § 522(f), is denied.

        Dated: December 23, 1991.

BY THE COURT




DONALD MacDONALD IV
United States Bankruptcy Judge

N O T E S:

    2 ABR 231  1. No objections to the debtor's claim of exempt property were filed by any party. Mrs. Foster's failure to object to an exemption is not a bar to review of the exemptions for purposes of § 522(f), however. In re Fladland, 1 A.B.R. 1 (Bankr. D. Alaska 1990)