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March 03, 2004
Owners May Participate in Pension Plans, High Court Rules
The U.S. Supreme Court ruled on Tuesday that small business owners may legally participate in retirement pension plans set up for their workers.

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The unanimous decision, stemming from bankruptcy proceedings against the owner of a Tennessee medical practice, should help settle conflicts in the federal court system over the ability of business owners to qualify for employee protections under the Employee Retirement Income Security Act of 1974, according to the Dow Jones Newswires.

"If the plan covers one or more employees other than the business owner and his or her spouse, the working owner may participate on equal terms with other plan participants," Justice Ruth Bader Ginsburg wrote for the court.

Dow Jones reports that the case, Yates v. Hendon, came to the Supreme Court after Raymond B. Yates, a Knoxville, Tenn., doctor, was forced into Chapter 7 bankruptcy in 1996. Yates had just repaid $50,467 to his practice's retirement plan to cover a loan he took against it. His creditors sought the funds in the bankruptcy proceedings.

A federal bankruptcy court, a federal judge, and the 6th U.S. Circuit Court of Appeals in Cincinnati all ruled that Yates was an employer, rather than an employee, and therefore couldn't protect the loan repayment in bankruptcy. But the Supreme Court reversed all of those those decisions and remanded the case for further proceedings.


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