Appeals Court Rules Federal Spousal Protections Limit Government’s Access to Thrift Savings Plan, Vacates Lump-Sum Restitution Order
The U.S. Court of Appeals for the Ninth Circuit on Friday partially halted the government’s attempt to seize the entire contents of a convicted murderer’s federal retirement account—a Thrift Savings Plan (TSP)—to pay restitution to his victims’ families.
The court ruled that federal law protecting a spouse’s interest in the retirement funds prevents the government from cashing out the account in a lump sum without spousal consent.
The ruling in United States v. Wells pertains to James Michael Wells, who was convicted of murdering two co-workers at a U.S. Coast Guard facility in Alaska in 2012. While Wells was ordered to pay over $1.9 million in restitution, the Ninth Circuit found the district court erred by authorizing the government to collect the entire TSP account balance of nearly $450,000 in one payment.
Spousal Rights Override Lump-Sum Seizure
The panel, in an opinion authored by Judge Jennifer Sung, held that the Mandatory Victims Restitution Act of 1996 (MVRA) only allows the government to seize property that the defendant is legally entitled to at the time of the order. Because the Federal Employees’ Retirement Systems Act (FERSA) requires spousal consent for Wells to unilaterally cash out his TSP account, the government is also barred from doing so.
The opinion reaffirms the Ninth Circuit’s earlier reasoning in an ERISA case, noting that the MVRA is limited to the defendant’s own “property or rights to property” and cannot override protections designed to safeguard the interests of “blameless’ dependents.”
Remand for ‘Earnings’ Determination
The court vacated the district court’s amended restitution orders and sent the case back for further proceedings. The lower court must now determine if Wells’s TSP funds constitute “earnings” under the relevant federal statute. If they are classified as earnings, any garnishment to satisfy the restitution order will be limited to 25% of the periodic payments, another significant restriction on the government’s collection efforts.
Judicial Dissatisfaction Expressed
In a separate concurring opinion, Judge Richard R. Clifton agreed with the legal necessity of the ruling but expressed strong dissatisfaction with the outcome. Judge Clifton highlighted the inherent unfairness in allowing a defendant to invoke spousal protections to reduce and delay payments to the victims’ families, especially when the spouse’s claim might only be for a portion of the funds.
“It is illogical that restitution for the victims’ families, including their grieving spouses, be limited and delayed in these circumstances,” Judge Clifton wrote, urging Congress to consider amending the law. He questioned why a future spousal interest in a portion of the funds should prevent any of the total account from being available now for immediate restitution.
The ruling mandates that for the government to fully access a married federal employee’s TSP funds for MVRA restitution, the employee’s spouse must first waive their legal right to a survivor annuity, an action that Wells’s wife has not taken.
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