Do plans that cover the owner of a one person business who has no employees (single member DB Plan, Profit Sharing Plan with only the owner as a participant…etc…) receive the same creditor protection as other ERISA plans such as a company 401-K?
This question applies to both general creditor protections and bankruptcy protections.
I am in California.
Thank you.
A one-participant 401k plan is not an ERISA Title I plan. It does not have federal anti-alienation creditor protection. However, it does have unlimited federal bankruptcy protection.
Creditor protection will be provided by state law. While CA provides very limited IRA creditor asset protection, I believe they consider a one-participant 401k plan a “private retirement plan” receiving unlimited creditor asset protection.
You should verify this with a local legal professional.
Permalink Submitted by Alan - IRA critic on Wed, 2021-04-28 18:02
Outside of BK, there are opposite conclusions about this. CA courts have not been consistent, so I would not be comfortable with any indication other than “it depends”.