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Re: 401k from old employer


@gilvkona wrote:

I guess I was trying to figure out was how much my umbrella policy should be.  Should it be for approximately my net worth or my net worth minus my tax deferred accounts.  Maybe I should start another topic?


+1

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Re: 401k from old employer


@Anitya wrote:

My memory could be wrong on this and others could correct but I think amounts rolled over from self employed workplace 401(k) does not count towards exempt rollover IRAs.  I think DC plans have to be ERISA covered too for the rollover IRAs to be exempt- I looked into this for somebody more than 10 yrs ago.


There are two separate Federal law provisions that protect retirement benefits from creditors claims. One is in the labor law portion of federal pension law (ERISA) that protects retirement benefits of Pension plans for common law employees who participate in the plan from claims of creditors. There is a similar provision in the IRC that requires all “qualified“ retirement plans to meet complex tax law provisions which permit the contributions to the plan to be tax deductible and not taxed to employees until distributed. All plans subject to the IRS rules must include a provision that prohibits a participant’s Retirement benefits from being subject to the claims of creditors. The difference between the labor and IRS provisions is that the IRS provision protects benefits of both common law employees as well as self employed owners of the business who participate in the plan from being seized by creditors.

Under the 2005 bankruptcy law, Retirement benefits of all Participants in plans that are “qualified“ under the provisions of the tax law,  E.g. 401k plans, including self employed persons, are protected from Claims of bankruptcy creditors. And these benefits will be protected from bankruptcy creditors after they are rolled over to an IRA regardless of the amount of the participants accrued benefit.

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Re: 401k from old employer


@yogibearbull wrote:

There are 2 things:

1. 2005 BAPCPA extended federal bankruptcy protections to IRAs - unlimited for "rollover" IRAs [i.e. with only workplace rollover money], and up to $1 million [inflation-adjusted every 3 yrs; so now $1.36 million] combined [T-IRA + R-IRA] for personal contributory IRAs.

2. For non-bankruptcy liabilities, protections for "rollover" IRAs still carryover from workplace plans. But more limited state protections apply for IRAs with personal contributions [or, that portion of IRA from personal contributions].

As has been mentioned, a divorce decree will split ANY IRA [or 401k/403b].



As I understand it , the protection of Retirement plan assets from non bankruptcy creditors is only available while The assets are held in the plan. Once the assets are transferred to a Rollover IRA only the unlimited protection from bankruptcy creditors is available. The protection from non bankruptcy creditors depends on state law.

Do you have a citation for #2 claim that non bankruptcy liability protection for assets In retirement plans under federal law is carried over to rollover IRA. 

Many states such as NY, NJ provide greater protection from non bankruptcy creditors for all IRA assets than the limited protection available for contributory IRAs and Roth’s available under federal bankruptcy law.

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Re: 401k from old employer


@Intruder wrote:

@Anitya wrote:

My memory could be wrong on this and others could correct but I think amounts rolled over from self employed workplace 401(k) does not count towards exempt rollover IRAs.  I think DC plans have to be ERISA covered too for the rollover IRAs to be exempt- I looked into this for somebody more than 10 yrs ago.


There are two separate Federal law provisions that protect retirement benefits from creditors claims. One is in the labor law portion of federal pension law (ERISA) that protects retirement benefits of Pension plans for common law employees who participate in the plan from claims of creditors. There is a similar provision in the IRC that requires all “qualified“ retirement plans to meet complex tax law provisions which permit the contributions to the plan to be tax deductible and not taxed to employees until distributed. All plans subject to the IRS rules must include a provision that prohibits a participant’s Retirement benefits from being subject to the claims of creditors. The difference between the labor and IRS provisions is that the IRS provision protects benefits of both common law employees as well as self employed owners of the business who participate in the plan from being seized by creditors.

Under the 2005 bankruptcy law, Retirement benefits of all plan Participants plans that are “qualified“ under the provisions of the tax law,  E.g. 401k plans, including self employed persons are protected from bankruptcy creditors. And these benefits will be protected from bankruptcy creditors if they are rolled over to an IRA.


Referring to your first paragraph, I presume you are alluding that the more beneficial provisions of the IRC control over the DOL provisions when seeking protection from general creditors.  Do you mind sharing IRC citation and any secondary authorities for the support that a self employed person’s contributions (and subsequent appreciation) to his self employed 401(k) are protected from general (non-bankruptcy) creditors?

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Re: 401k from old employer


@Anitya wrote:

@Intruder wrote:

@Anitya wrote:

My memory could be wrong on this and others could correct but I think amounts rolled over from self employed workplace 401(k) does not count towards exempt rollover IRAs.  I think DC plans have to be ERISA covered too for the rollover IRAs to be exempt- I looked into this for somebody more than 10 yrs ago.


There are two separate Federal law provisions that protect retirement benefits from creditors claims. One is in the labor law portion of federal pension law (ERISA) that protects retirement benefits of Pension plans for common law employees who participate in the plan from claims of creditors. There is a similar provision in the IRC that requires all “qualified“ retirement plans to meet complex tax law provisions which permit the contributions to the plan to be tax deductible and not taxed to employees until distributed. All plans subject to the IRS rules must include a provision that prohibits a participant’s Retirement benefits from being subject to the claims of creditors. The difference between the labor and IRS provisions is that the IRS provision protects benefits of both common law employees as well as self employed owners of the business who participate in the plan from being seized by creditors.

Under the 2005 bankruptcy law, Retirement benefits of all plan Participants plans that are “qualified“ under the provisions of the tax law,  E.g. 401k plans, including self employed persons are protected from bankruptcy creditors. And these benefits will be protected from bankruptcy creditors if they are rolled over to an IRA.


Referring to your first paragraph, I presume you are alluding that the more beneficial provisions of the IRC control over the DOL provisions when seeking protection from general creditors.  Do you mind sharing IRC citation and any secondary authorities for the support that a self employed person’s contributions (and subsequent appreciation) to his self employed 401(k) are protected from general (non-bankruptcy) creditors?


Back in the day when I was self employed I adopted IRS approved Qualified profit sharing plans that contained all of the IRS provisions that were required for me to take a tax deductIon on the contributions I made to the plans. The first plan was a prototype sponsored by JPM. The second was a Schwab Prototype.  Both plans contained the IRS non alienation provision required by IRS regulation 1.401(a)-13 (a) and (b).

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