MATTER OF GOFF

JERRE S. WILLIAMS, Circuit Judge.

This appeal is from a final order of the Bankruptcy Court for the Western District of Texas.1 It presents a new facet of the question whether, and under what circumstances, a bankrupt's pension trust may be exempt from the "property of the estate" subject to the reach of the trustee in bankruptcy on behalf of the bankrupt's creditors. Debtors, Elbert Wayne Goff and Gloria Jane Schadoer Goff, seek refuge for their self-employed retirement (Keogh) plans2 under Section 541(c)(2) of the new Bankruptcy Code,3 which exempts property subject to restrictions on alienation which are enforceable "under applicable nonbankruptcy law." The Goffs argue that this reference to "applicable nonbankruptcy law" was intended to reach broadly by encompassing restrictions on transfer recognized in other federal statutory law as well as traditional state trust law. Their argument presents a question of first impression to this Court. The contention is that Section 541(c)(2) exempts all pension trusts which are qualified under the Employee Retirement Income Security Act of 1974 (ERISA),4 because of ERISA's restrictions on assignment and alienation of qualified trusts. 26 U.S.C. § 401(a)(13); 29 U.S.C. § 1056(d)(1). For the reasons set out below, we conclude that Congress did not intend Section 541(c)(2) to have the extensive reach urged by appellant-debtors and that ERISA's anti-alienation provisions do not operate by their own force to shelter pension funds in bankruptcy.

Debtors, husband and wife, filed a voluntary joint petition in bankruptcy, under Chapter 7 of the Code, on March 20, 1980. Pursuant to Section 522(b)(2)(A), 11 U.S.C. § 522(b)(2)(A), they elected to avail themselves of the state rather than the federal (11 U.S.C. § 522(d)) bankruptcy exemptions, presumably because of the high equity value of their homestead which could be retained under Texas law but not the federal law. Tex.Stat.Ann. art. 3833, 3836 (Vernon 1966 & Supp. 1982-1983).5

The subjects of this appeal are the Goffs' self-employed retirement trusts (Keogh Plan), administered by City National Bank pursuant to an ERISA-qualified pension plan.6 At the time of the proceedings below, the Keogh trusts were valued at over $90,000, including a $2,878 contribution made by the Goffs only three days prior to declaration of bankruptcy.

The trust agreement provided:

No withdrawals were ever made although the trust agreement arguably granted Dr. Goff the right to withdraw funds prematurely, i.e., prior to either retirement, sale or termination of his business, or death, subject only to the ten percent tax penalty exacted by the Internal Revenue Code, 26 U.S.C. § 72(m)(5). The Goffs excluded these Keogh trusts from the "property of the estate" to be relinquished in bankruptcy. 11 U.S.C. § 541.

After the creditors' committee opposed a compromise proposed by the trustee in bankruptcy,7 the bankruptcy court entered its Memorandum Order and Opinion from which this appeal was taken. The court denied the trustee's application to compromise, and held that the corpus of both trusts were to be considered "property of the estate," as they were not subject to the exclusion contained in Section 541(c)(2) of the Code, 11 U.S.C. § 541(c)(2), as property subject to restrictions on alienation enforceable under "applicable nonbankruptcy law." We agree. Our examination of the Bankruptcy Code's provisions and of discernible congressional intent reveals that applicable nonbankruptcy law was intended as a narrow reference to state "spendthrift trust" law and not as a broad reference to all other law, both federal and state, including ERISA.

I.

A. "Property of the Estate"

The Bankruptcy Code was intended to create a more uniform and comprehensive scope to "property of the estate" which is subject to the reach of debtors' creditors than had previously existed under the old Bankruptcy Act.8 Under Section 70(a) of the earlier Act,9 the inclusion of an asset within the estate varied in accordance with (1) an individual examination of the legal nature of the asset (2) in light of the purposes of the Bankruptcy Act. This two part test reflected the dual and often conflicting policies woven into the Act. These policies were to secure for the benefit of creditors everything of value the bankrupt might possess in alienable or leviable form, but to permit a bankrupt to accumulate new wealth after the date of his petition and to allow him an unencumbered fresh start. Relying upon these competing considerations, the Supreme Court developed a rule that where property "is sufficiently rooted in pre-bankruptcy past and so little entangled with the bankrupts' ability to make an unencumbered fresh start ... it should be regarded as `property' [of the estate]." Segal v. Rochelle, 382 U.S. 375, 380, 86 S.Ct. 511, 515, 15 L.Ed.2d 428 (1966). See Kokoszka v. Belford, 417 U.S. 642, 646, 94 S.Ct. 2431, 2434, 41 L.Ed.2d 374 (1974) ("[T]he crucial analytical key [is] not ... an abstract articulation of the statute's purpose, but ... an analysis of the nature of the asset involved in light of those principles"); Lines v. Frederick, 400 U.S. 18, 91 S.Ct. 113, 27 L.Ed.2d 124 (1970); Nunnally v. Nunnally, 506 F.2d 1024 (5th Cir.1975) (finding that Navy retirement benefits, under applicable Texas law, were "property" in the bankruptcy estate). See also Lockwood v. Exchange Bank, 190 U.S. 294, 23 S.Ct. 751, 47 L.Ed. 1061 (1903).

The enactment of the Bankruptcy Code undertook to obviate this analytical conundrum. Under Section 541 of the Code, all property in which a debtor has a "legal or equitable interest" at the time of bankruptcy comes into the estate, 11 U.S.C. § 541(a)(1). This is so "notwithstanding any provision [except as recognized in subsection (2)] that restricts or conditions transfer of such interest by the debtor." Id. § 541(c)(1)(A). The sweeping scope of this automatic inclusion was intended to remedy much of the old Act's perceived deficiencies: "[The Act was] a complicated melange of references to State law, and [did] little to further the bankruptcy policy of distribution of the debtor's property to his creditor in satisfaction of his debts." H.R.Rep. No. 95-595, 95th Cong., 2d Sess. 175 (1977), reprinted in 1978 U.S.Code Cong. & Ad.News 5963, 6136. See S.Rep. No. 95-989, 95th Cong., 2d Sess. 82, reprinted in 1978 U.S.Code Cong. & Ad.News 5787, 5868.10

B. Exemption and Exclusions

Of relevance to the question posed herein, two sections of the Code — Sections 522 and 541(c)(2) — permit a debtor to retain certain assets which would otherwise remain subject to the reach of his creditors. The property exempted pursuant to Section 522 initially enters the estate, and is subsequently excluded pursuant to the section's provisions. By contrast, Section 541(c)(2) property never enters the estate.

1. Section 522: Exemptions

Section 522(b) permits a bankrupt a choice between a "federal" or "state" exemption system.11 The debtor may elect to exempt either as the "federal" exemption the property set out in subsection (d) of Section 522 of the Code, or as the "state" exemptions the property specified as exempted under the law of his domicile, plus property exempted by "Federal law, other than subsection (d)."12 The election choice of federal versus state exemptions is the debtor's to make.13 The choice, obviously, will hinge upon the debtor's individual assessment of which exemption system would permit him to retain a larger share of his assets. This decision, in turn, will often depend upon the type of property held by the debtor, as state exemptions may vary in kind as well as degree from the federal bankruptcy exemptions.

In the immediate case, debtors selected the state exemption option, which does not provide in terms at least a partial exemption for Keogh plans as does the federal exemption. Under Section 522(d)(10)(E), 11 U.S.C. § 522(d)(10)(E), a debtor who elects the federal exemption may exempt his "right to receive a payment under a ... pension ... plan ... to the extent reasonably necessary for the support of the debtor and any dependent of the debtor," unless the plan demonstrates three disqualifying characteristics.14 The Goffs' plans did not contain the disqualifying characteristics and would have been covered by Section 522(d)(10)(E) to the extent "reasonably necessary" for the Goffs' support.15

2. Section 541(c)(2): Exclusion

The second relevant code provision, Section 541(c)(2), is the focus of the immediate dispute. The claim of the Goffs is raised solely under this provision. Section 541(c)(1)(A) provides, with one caveat, that "any provision" "that restricts or conditions transfer" of property by the debtor is ineffective in bankruptcy to keep the property from becoming part of the estate. 11 U.S.C. § 541(c)(1)(A). The caveat situation, in which a restriction will keep property free from the estate, is set out in subsection (2):

11 U.S.C. § 541(c)(2) (emphasis added). The Goffs claim that their ERISA-qualified16 Keogh plans are excluded from the property of the estate by operation of this provision. The Goffs argue that the restrictions against assignment or alienation in their plans, included pursuant to ERISA, 26 U.S.C. § 401(a)(13)17 and 29 U.S.C. § 1056(d)(1),18 are "enforceable under applicable nonbankruptcy law" as that latter term was intended. We find, however, that Congress did not evidence an intent, by reference to "applicable nonbankruptcy law" to include an ERISA plan exemption. Rather, we find that Congress intended to exclude only trust funds in the nature of "spendthrift trusts" from the property of the estate.

In general terms, a spendthrift trust is a trust created to provide a fund for the maintenance of a beneficiary, with only a certain portion of the total amount to be distributed at any one time. The settlor places "spendthrift" restrictions on the trust, which operate in most states to place the fund beyond the reach of the beneficiary's creditors, as well as to secure the fund against the beneficiary's own improvidence. Although a given state's nonbankruptcy law of spendthrift trusts might afford protection to a particular pension trust, it is clear in the immediate case that appellant's self-settled trust did not constitute a spendthrift trust entitled to exclusion under relevant state law.

Our conclusion is reached through a three step analysis. First, we examine the explicitly narrow legislative intent behind the facially broad reference in Section 541(c)(2) to "applicable nonbankruptcy law." Second, we consider the overall congressional scheme embodied in the Bankruptcy Code, particularly the exemption system election provision, Section 522, which directly addresses the degree to which pensions may therein be exempted and also explicitly references "Federal law" and ERISA. Third, we assess the relationship and effect upon ERISA of the intent of the Bankruptcy Code. The indicia of legislative intent, along with existing case law, lead to the inexorable conclusion that Section 541(c)(2)'s reference to "applicable nonbankruptcy law" was an acknowledgement of traditional state spendthrift trust law, and not of ERISA.

II.

A. "Applicable Nonbankruptcy Law": Statutory Intent

The legislative history of Section 541(c)(2) indicates that Congress had something very specific in mind with its facially broad reference to "applicable nonbankruptcy law" as the benchmark for assessing the enforceability of trust restraints on alienation in bankruptcy. In its section-by-section analysis, the House Report accompanying their bill, H.R. 8200, explained:

H.R.Rep. No. 95-595, 95th Cong., 2d Sess. 369 (1977), reprinted in 1978 U.S.Code Cong. & Ad.News 5963, 6325 (emphasis added). Even more significant, in providing an overview comparison of the proposed Code to the old Act, the House Report said:

Id. at 176, 1978 U.S.Code Cong. & Ad.News at 6136 (emphasis added).

The Senate Report, accompanying S. 2266, similarly explained that Section 541(c)(2) "preserves restrictions on a transfer of a spendthrift trust ... enforceable [under] nonbankruptcy law." S.Rep. No. 95-989, 95th Cong., 2d Sess. 83, reprinted in 1978 U.S.Code Cong. & Ad.News 5787, 5869 (emphasis added). The Senate version of the Code, however, was dissimilar to that proposed by the House, in that it limited the extent to which Section 541(c)(2) property would be insulated from the estate, to that "reasonably necessary for the support of a debtor and his dependents." Id.20 This even narrower Senate version was rejected in the final enacted version, which followed the position taken in the House bill.21

In summary, from the legislative history of Section 541(c)(2), it is clear that Congress intended by its reference to "applicable nonbankruptcy law" to exempt from the estate only those "spendthrift trusts" traditionally beyond the reach of creditors under state law. This provision carries over from the old Act the previously recognized exemption for spendthrift trusts. See, e.g., In re Witlin, 640 F.2d 661 (5th Cir.1981) (recognition, under the applicable prior Act, that spendthrift trusts were exempt pursuant to state trust law).

B. The Overall Scheme and the Federal-State Exemption Election

The specific legislative intent behind Section 541(c)(2) is reinforced by a consideration of the overall congressional scheme embodied in the Bankruptcy Code. Appellant debtors argue for an expansive definition of "nonbankruptcy law" in Section 541(c)(2) to include federal laws which prohibit alienation. We find that the other provisions of the Code negate this intent because the Code explicitly makes reference to "federal law" or pension laws, including ERISA, when federal as opposed to state law is the subject of the reference.

The most telling example lies with Section 522 and its legislative history. As summarized above, Section 522 provides debtors a choice between the "state" or the "federal" exemption systems. If the "state" system is selected, a debtor may also exempt property pursuant to "Federal law other than subsection (d)." 11 U.S.C. § 522(b)(2)(A).22 The Goffs, who made the state election, did not attempt to claim exemption of their ERISA-qualified Keogh plans under this other "Federal law" exemption.23 The applicability of this exemption, therefore, is not directly involved in this appeal. Yet we do find a consideration of this provision helpful in understanding this case because we find that Congress did not intend to do ambiguously in Section 541 that which it clearly did not do directly in Section 522, although Section 522 explicitly addresses the extent to which other "Federal law" and retirement benefit exemptions would be recognized.

The House and Senate Reports, in explanation of the other "Federal law" provision which was subsequently enacted in Code § 522(b)(2)(A), provide a list of illustrative property which might be exempted under federal laws other than the Bankruptcy Code:

S.Rep. No. 95-989, 95th Cong., 2d Sess. 75, reprinted in 1978 U.S.Code Cong. & Ad. News 5787, 5861; H.Rep. No. 95-595, 95th Cong.2d Sess. 360 (1977), reprinted in 1978 U.S.Code Cong. & Ad.News 5963, 6316. The reports provide no further insight into which other, if any, federal laws were intended to be brought within this provision's scope.

The restrictive nature of the exemption listed is marked. Yet two recent cases have been decided in bankruptcy courts which reach diametrically opposite interpretations of the scope of this provision relative to ERISA-qualified pension plans. Compare In re Graham, 24 B.R. 305 (Bkrtcy.N.D. Iowa 1982) (not exempt under § 522(b)(2)(A)) with In re Hinshaw, 23 B.R. 233 (Bkrtcy.D.Kan.1982) (exempt under § 522(b)(2)(A)). In both cases, the bankruptcy courts were presented with ERISA-qualified retirement trusts, which contained provisions prohibiting assignment or alienation as required for qualification under the Act, 26 U.S.C. § 401(a)(13);24 29 U.S.C. § 1056(d)(1).25 Similarly, in both cases, debtors selected the state exemption option, and then argued that the other "Federal law" exemption under the state election included ERISA.

In Graham, the court considered the listing of statutes in the legislative history, and concluded that Congress did not intend to include ERISA within the statutory exemption. First, the court reasoned, "[e]ven though ERISA was in effect at the time the Bankruptcy Code was debated and passed, ERISA is notably absent from the listing of other federal exemptions." 24 B.R. at 311-12. Second, the court compared the federal laws listed in the legislative history with the ERISA provisions at issue and found them to be significantly distinguishable:

5 U.S.C. § 8346 (moved from 5 U.S.C. § 2265). In this provision Congress directly exempted the Civil Service Benefits from creditors. In contrast, ERISA only requires that the plan contain a restriction on alienation and assignment in order to qualify for ERISA tax benefits. That requirement is not an exemption from creditors' process provided by federal law. If Congress had intended that ERISA would provide such an exemption, a provision similar to the provision quoted above could have been enacted. The fact that they did not do so leads this Court to conclude that an ERISA fund is not within the exemption from the bankruptcy estate provided by other federal law under § 522(b)(2)(A). See In re Watson, 13 B.R. 391 (Bkrtcy.M.D.Fla.1981).

Id. at 312.

By contrast, the court in Hinshaw, after examining the same congressional list of representative federal laws, concluded that ERISA-qualified plans were covered by the exemption. While the Hinshaw court similarly undertook an analysis of the statutory provisions cited by Congress, it reached a different conclusion and relied upon different statutes than did the Graham court. The Hinshaw court began its analysis by reasoning:

23 B.R. at 235.26 Further, it found the analysis of the court in Commercial Mortgage Insurance Inc. v. Citizens National Bank of Dallas, 526 F.Supp. 510 (N.D.Tex. 1981) persuasive.27 While the issue in that case was whether ERISA precluded nonbankruptcy garnishment of pension benefits, the Hinshaw court found the reasoning applicable:

23 B.R. at 236. Thus the court in Hinshaw concluded that tax-qualified ERISA plans were exempt under 11 U.S.C. § 522(b)(2)(A).

A careful evaluation of this issue leads us to the result reached by the bankruptcy court in Graham. We find that Congress did not intend to include ERISA-qualified plans among those "exempt under Federal law," pursuant to 11 U.S.C. § 522(b)(2)(A).

The failure of Congress to include ERISA in its listing of illustrative federal statutes is highly probative of congressional intent that ERISA was not within the group of "federal law" based exemptions. ERISA, a comprehensive and much-debated statute with sweeping coverage was enacted in 1974; the House and Senate reports on the subsequently enacted Bankruptcy Code Section 522(b)(2)(A) were issued in 1977 and 1978, respectively. Congress knew of the previously-enacted ERISA when drafting Section 522(b)(2)(A), yet neither the House nor the Senate deemed fit to include it within their respective illustrative lists. Congress did refer to ERISA where it wanted to do so in other provisions of the Code. Of similar relevance is the specific reference in another subsection of Section 522 itself to the very ERISA provision relied upon by appellants as constituting a "Federal law" exemption. 11 U.S.C. § 522(d)(10)(E)(iii) (reference to pension benefit exemption when the federal exemptions are elected by the debtor). See also H.Rep. No. 95-595, 95th Cong., 2d Sess. 455 (1977), reprinted in 1978 U.S.Code Cong. & Admin.News 5963, 6411.

Certainly, therefore, Congress did not "overlook" ERISA. Given the extensive and general reach of ERISA-qualified plans, it is highly improbable that Congress intended their inclusion without mention in the Section 522(b)(2)(A) exemption in the midst of a listing of significantly less comprehensive and less well known statutes. The often-stated admonition that it may be treacherous to attach great weight to congressional silence in interpreting its laws does not apply in this case in light of the comprehensive consideration of this issue which is revealed by this history.

Further, we stress that ERISA's anti-assignment and alienation provisions are different in kind from those contained in the statutes listed in the Code's legislative history. We do not see across-the-board differences in the explicitness of the restraints against alienation in the listed statutes and in ERISA.28 But we do find that the contingent nature of ERISA's restraints on alienation differs markedly from the absolute prohibitions contained in the listed statutes. ERISA merely provides that as a condition of obtaining qualified status — with its attendant tax and other benefits — a pension plan must preclude alienation or assignment of its benefits. It does not prohibit pension funds from permitting alienation or assignment; rather, while it encourages and favors qualified plans, it envisions that "disqualified" plans may be formed which are still subject to ERISA's regulatory scheme but which do not restrict alienation or assignment. By contrast, the listed statutes which establish or guarantee certain benefits directly preclude all such benefits from alienation or assignment.29

As additional reenforcement of our view of the Section 522 exemptions, we find that "property" covered by ERISA differs in nature from that covered under the enumerated statutes. While it is true that ERISA and the cited statutes share the common denominator of "pension and welfare" benefits, the private pension and welfare benefits sweepingly regulated by ERISA30 differ considerably from the public funded and/or created pension and welfare systems,31 or the few exceptional, traditionally guarded industries32 covered by the illustrative listings. We believe that these latter, narrow characteristics of the cited statutes, rather than the broad, common trait of private pension and welfare legislation, was intended as the operative thread by which other federal statutes — overlooked or yet to be enacted — might be included. Thus, we conclude that Congress did not intend to include ERISA-qualified plans within the other "Federal law" exemption of the Section 522 election provision.

C. "Applicable Nonbankruptcy law" under Section 541 and ERISA

Flowing out of this discussion is clear indication of a congressional intent that Section 541(c)(2) — the exemption relied upon by the Goffs' on appeal — was never intended to include ERISA in its reference to "applicable nonbankruptcy law." Congress made reference to federal law and pension benefits when such a characterization was intended; yet it did not do so in Section 541(c)(2). As we have pointed out above, Congress while well aware of ERISA, specifically considered the role of pension benefits in bankruptcy proceedings in Section 522, and did not grant a broad exemption. The only reasonable inference to draw is that Congress intended that pensions provided for by federal law be insulated from bankruptcy only to the extent recognized in Section 522. While pensions might be excludable from the property of the estate pursuant to Section 541(c)(2), the state law exemption, their exclusion under that section is provided solely by state spendthrift trust law and not by the operation of ERISA.33

It is well to make a final telling observation on the relationship between ERISA and the Bankruptcy Code. While ERISA preempts state law, 29 U.S.C. § 1144(a), it clearly was not intended to affect the operation of other federal law. It provides: "Nothing in this [Act] shall be construed to alter, amend, modify, invalidate, impair, or supersede any law of the United States [except pre-existing federal pension law] or any rule or regulation issued under such law." 29 U.S.C. § 1144(d). As we have already discussed, the Bankruptcy Code was, generally, intended to broaden the "property of the estate" available to creditors in bankruptcy and, specifically, intended to limit any exemption of pension funds. These policy-based provisions of the Code would be frustrated were ERISA's anti-alienation and assignment provisions applied with a sweeping brush. Thus, ERISA's specific provision precluding interference with the operation of federal law renders the Bankruptcy Code effective over any ERISA provisions to the contrary.

Having reached this conclusion we must nevertheless stop short of an arbitrary interpretation urged by the trustee in bankruptcy. The trustee argues that the inclusion in Section 522(d) of a pension benefit exemption, 11 U.S.C. § 522(d)(10)(E), for those making a federal election, negatives any congressional intent to include any ERISA pensions at all within the ambit of Section 541. The trustee reasons that the Section 522(d)(10)(E) exemption would be surplusage if Section 541 had the effect of keeping all possible ERISA-qualified plans from ever entering the estate.34 While, as set out above, we find the wording and breadth of Section 522 enlightening of congressional intent for other reasons, we cannot agree with appellees' proffered construction. Section 522(d)(10)(E) reaches a broad array of employment benefits,35 and exempts both qualified and unqualified pension plans, to the extent such benefits are reasonably necessary for the support of debtor and his dependents. Given this much broader exemption of benefits available only to those making a federal election, we find no reason to doubt that ERISA-qualified pension funds are included in Section 541 if they qualify as spendthrift trust plans under state law. Cf. In re Threewitt, 24 B.R. 927, 930 & n. 4 (D.Kan.1982) (reasoning that Section 522(d)(10)(E) is broader than Section 541, and that it is not "remarkable that Congress did not bother to further complicate an already complex code by taking pains to insure that there was no overlap" between sections). We thus conclude that Section 522(d)(10)(E) does not preclude consideration of qualified pension plans under the Section 541 exclusion provision so long as they qualify as a "spendthrift trust" under the applicable state law.

III.

We have now concluded that Section 541(c)(2) was intended to exempt only "spendthrift trust" assets from the bankruptcy estate. We now consider whether the Goffs' Keogh plans can fall within the spendthrift trust definition. The general rule is well established that if a settlor creates a trust for his own benefit and inserts a "spendthrift" clause, restraining alienation or assignment, it is void as far as creditors are concerned and they can reach the settlor's interest in the trust. In re Witlin, 640 F.2d 661, 663 (5th Cir.1981) (see also the cases and treatises cited therein). This general proposition is the law in Texas, which in this case provides the "applicable nonbankruptcy law." See, e.g., Bank of Dallas v. Republic National Bank of Dallas, 540 S.W.2d 499 (Tex.Civ.App. — Waco 1976, writ ref'd n.r.e.); Glass v. Carpenter, 330 S.W.2d 530 (Tex.Civ.App. — San Antonio 1959, writ ref'd n.r.e.); Long v. Long, 252 S.W.2d 235 (Tex.Civ.App. — Texarkana 1952 writ ref'd n.r.e.). See also In re Howerton, 21 B.R. 621, 622 n. 1, supplemented, 23 B.R. 58 (Bkrtcy.N.D.Tex.1982).

Our reasoning in the Witlin case is persuasive. There we held that self-settled Keogh plans were not exempt under the spendthrift trust provision of the old Bankruptcy Act. We said: "There is ... a strong policy that will prevent any person from placing his property in what amounts to a revocable trust for his own benefit which would be exempt from the claims of his creditors." 640 F.2d at 662. See Glass v. Carpenter, 330 S.W.2d 530, 534 (Tex.Civ. App. — San Antonio 1959, writ ref'd n.r.e.). Here, as in Witlin, appellant-debtors attempted such a revokable trust for their own benefit. They retained the freedom to withdraw their Keogh plan assets, yet purported to insulate those assets from their creditors.36 If this dichotomous treatment were to be recognized, the strong common law policy of spendthrift trusts, as well as the Bankruptcy Code's intent, would be subverted. Debtors could shelter funds in Keogh plans immediately before declaring bankruptcy — as did the Goffs with at least some of their funds — and immediately after discharge of all debts withdraw such funds for their own benefit.37 Whatever might be the rule in a nonbankruptcy setting involving ERISA's provisions38 we hold that neither law nor equity would afford self-settled Keogh plans "spendthrift trust" exemption in bankruptcy.39

Finally, appellants argue that reliance upon traditional spendthrift trust law results in disparate treatment of self-employed and employer-created pension trusts which, in turn, offends both law and reason. Appellants contend that since ERISA requires that all qualified plans include restraints on alienation, and its provisions extend equally to guarantee all workers the benefits of their contributions in retirement years, distinctions in bankruptcy exemption status according to employment status would conflict with ERISA's statutory intention to treat all retirement plans the same way. Further, the Goffs argue, since employees may quit their employment post-bankruptcy and thus be entitled to withdraw their pension contributions under ERISA, any bankruptcy distinction made on the basis of the revokable, self-settled nature of self-employed pension plans is arbitrary.

We are not persuaded by appellants' arguments. In analyzing the effectiveness in bankruptcy of spendthrift provisions in pension plans, the courts have generally concluded that those contained in employer-created plans were effective40 similar provisions in self-settled plans were not.41 The latter conclusion is inescapable since, as discussed earlier, the traditional law of spendthrift trusts has rejected the notion of effective spendthrift provisions in self-settled trusts. As to the former, without passing upon the exact limits of plans which could properly be characterized "spendthrift trusts," the employer-created-and-controlled nature of those plans may well make them analogous to a spendthrift trust.

We find that this difference is contrary to neither law nor logic. First, whether or not ERISA bestows equal treatment upon both types of plans is not at issue. As discussed previously, ERISA was not intended to affect the operation of other federal laws including federal bankruptcy laws. If a distinction is created by operation of bankruptcy law, which might conflict with ERISA, bankruptcy law prevails. Even assuming arguendo that the court-drawn distinction conflicts with federal pension law, it is nonetheless enforceable if valid under federal bankruptcy law.

Second, we disagree with appellants' characterization that the degree of beneficiary control over both types of pension plans is indistinguishable, thus rendering their separate treatment unreasonable. Under appellants' self-employed Keogh plans considerable control, including withdrawal authority, was retained. The only limitation upon withdrawal was a ten percent tax penalty. We find this to be significantly different from the usual case of employer-created funds in which the beneficiary employee has little or no control during the term of his employment, and may only withdraw funds upon termination of employment. He must quit his job in order to gain premature access to his retirement funds. We cannot equate a "tax penalty" with "employment termination" as equal restraints upon withdrawal of pension funds.42 We thus find the court-drawn distinction a reasonable one, and appropriately made under the Bankruptcy Code.

In Conclusion

After considering the legislative history of Section 541(c)(2) specifically, and of the Bankruptcy Code generally, as well as the statutory framework within which Section 541(c)(2) appears, it is apparent that Congress did not intend by reference to "applicable nonbankruptcy law" to exempt ERISA-qualified pension plans from the bankruptcy estate by virtue of ERISA's provisions precluding assignment or alienation. Rather, it is clear that Congress intended a limited exemption for "spendthrift trusts," as defined by reference to state law. Since we find that the self-settled Keogh plans at issue do not qualify as "spendthrift trusts" under state law, we affirm the bankruptcy court's inclusion of the pension trusts in the bankrupts' estate.

AFFIRMED.