Reply To: Creditor Protection of ERISA Assets in Rollover IRA

Home Fairmark Forum Retirement Savings and Benefits Creditor Protection of ERISA Assets in Rollover IRA Reply To: Creditor Protection of ERISA Assets in Rollover IRA

Alan S.

IRA creditor protection is determined by individual state statutes. There is never ERISA protection of an IRA balance. That said, some states that do not protect IRAs fully may adopt some of the federal bankruptcy Act of 2005 provisions, for which there are no limits for rollover IRAs but around 1.4 mm for contributory accounts. Bankruptcy must be filed in appropriate court to receive this protection, therefore it is inferior to ERISA protection for qualified plan balances.

For mixed IRAs, the amount of protection depends on the individual case. For CA residents, the courts in at least one case provided state protection without limit for rollover IRA accounts, but for contributory IRA accounts protection remains very limited to the amount needed for basic support. That amount is estimated to be around 100k. There is some question about the rollover IRA protection however, and past court findings have not been consistent.

In states that provide total protection, while not ERISA, it is pretty equivalent. There are also a couple states that under state law provide inferior protection for Roth IRA balances. There are also some states that have passed statutes providing creditor protection for inherited IRAs following loss of such protection at the federal level.

There are numerous gray areas when it comes to IRA creditor protection.