Asset Protection Through ERISA Protected Accounts – Do You Qualify?

As part of the federal legal scheme to encourage workers to save for retirement, The Employee Retirement Security Act of 1974 (ERISA) provides asset protection for certain qualified retirement plans by preventing the execution of judgments against plan assets. Qualified plans are those covered plans that fall under ERISA regulation, specifically 401(k) and 403(b) plans, defined benefit plans, money-purchase plans and profit-sharing plans.

For plans qualified under ERISA, the protections for account assets against creditor claims are possibly the strongest protection available under federal law; however, there are exceptions granted for federal tax liens, judgment for embezzlement from the plan, criminal fines or penalties, and alimony or child support claims. For all other claims, no creditor can reach the assets by execution of a judgment or other court order.

Beyond the protections afforded by ERISA, the Bankruptcy Act also exempts assets held in ERISA governed accounts or IRA’s from the claims of creditors in bankruptcy cases. This exemption in the bankruptcy code provides protection for accounts up to one million dollars in value. Any individual dealing with creditor’s demands should carefully weigh the costs and benefits of filing for bankruptcy before using any retirement funds to pay creditors. ERISA and the Bankruptcy Act together provide a powerful framework of tools to resolve creditor’s claims without sacrificing the income security provided by your retirement accounts.

If a creditor is trying to enforce a judgment against you or your retirement assets, an experienced asset protection attorney at Nielsen Law Group is available for a complimentary review of your asset situation and the possible solutions. You can also schedule your initial consultation by calling (480) 888-7111 or submitting a web request here.