401k Protection besides bankruptcy
Besides bankruptcy protection, what other protections, if any, exist for 401k accounts? I understand that 401k plans are covered under ERISA which includes fiduciary management. I’m looking for reasons, other than bankruptcy, to not rollover a 401k account to an IRA account.
Permalink Submitted by Bruce Steiner on Wed, 2012-05-30 20:56
IRAs are protected against creditors in many but not all states.
Qualified plans can invest in life insurance, with certain limitations, but IRAs can’t.
Purchase money indebtedness generates unrelated business taxable income in an IRA but not in a qualified plan.
A qualified plan may have investment choices not available in an IRA, and vice versa.
A nonspouse beneficiary can roll a qualified plan benefit into an inherited IRA, which can be an inherited Roth IRA, but a nonspouse beneficiary cannot convert an inherited IRA into an inherited Roth IRA.
Of course, there are reasons one might nevertheless roll a qualified plan benefit into an IRA.
Permalink Submitted by Alan Spross on Wed, 2012-05-30 21:53
[quote=”[email protected]“]Besides bankruptcy protection, what other protections, if any, exist for 401k accounts? I understand that 401k plans are covered under ERISA which includes fiduciary management. I’m looking for reasons, other than bankruptcy, to not rollover a 401k account to an IRA account.[/quote]
The ERISA anti alienation provisions for qualified plans are much broader than just protecting your balance if you file BK. There is also protection if the company gets into financial trouble, and for your interests even if you do NOT file BK.
However, neither ERISA plans or IRAs provide protection against:
1) Marital settlements
2) IRS levies
3) Fraud on your part
ERISA protection is not affected by state statutes, but IRA protection can vary by state. Look up your state in the following list:
http://www.assetprotectionbook.com/forum/viewtopic.php?f=142&t=1566