Qualified Plan & IRA Creditor Protection Rules
Rev. 07/15/11; E-mail Alert 2011-10

Creditor protection rules differ between retirement accounts held within qualified plans subject to Title I of ERISA and Individual Retirement Accounts (IRAs).  Participants in qualified retirement plans that are subject to Title I of ERISA should consider the degree of creditor protection afforded when deciding whether to leave their accounts in the qualified retirement plan or rolling them out of the plan into an IRA.

Title I ERISA Plans
Under ERISA Title I, participant accounts in qualified retirement plans are protected from garnishment, levy, or attachment by creditors. There is limited protection against tax liens imposed by the federal or state governments.

IRAs and Non-Title I Plans
IRAs and Non-Title I plans, for example non-qualified deferred compensation plans and certain sole proprietor and partnership plans (see below) are not protected from   garnishment, levy or attachment by ERISA.  Whether a state provides creditor protection for these types of retirement accounts is determined on a state-by-state basis.

Sole proprietor plans with no employees other than an owner and spouse, and partnership plans with no employees other than the partners and spouses are not considered ERISA Title I plans. If there are "common law" employees (including children of the owners) covered by the plan, the protections of ERISA Title I apply to the plan.

The federal bankruptcy and state insolvency laws may provide limited protections based on the amount held in IRA accounts.

Click here for Qualified Plan and IRA articles relating to bankruptcy protection