Rollover IRA into 401k

Submitted by Brian Macauley on Wed, 2017-02-08 21:19

I have 2 Rollover IRA accounts (100% pretax) and 1 Individual IRA account (100% pretax) that I would like to consolidate into my current 401k. The 401k has both pretax (95%) and Roth (5%) contributions in it (Paychex is administrator). Two related questions:

1) Will the IRA assets receive full ERISA/401k creditor protections in the 401k as if they were assets native to that 401k, or do they receive diminished asset protection for some reason?

2) Years from now when I eventually roll all the assets back into a IRA/Roth IRA, will all the assets receive rollover IRA creditor protection, effectively upgrading the Individual IRA’s asset protection status?

Thanks,

Brian
(in D.C.)



Submitted by Alan - IRA critic on Wed, 2017-02-08 23:57

  1. They receive full ERISA creditor protection.
  2. Yes, they will be considered rollover IRAs for states that use the federal bankruptcy Act of 2005 for creditor protection. However, many states provide complete asset protection under state law that would apply to all IRA money in most states. Some states might not protect money deposited into the IRA in the last 60 or 90 days before a judgement, so check your state IRA creditor protection.
  3. The IRA money you roll into the 401k also receives the penalty waiver for separation in the year you reach 55 or later. If those funds were in an IRA, the penalty would apply up to 59.5.

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