Thrift Account Creditor Protection

Submitted by Vlad Portnoy on Fri, 2020-10-30 20:16

Good afternoon,

I recently read your article on the IRA creditor protection.

https://irahelp.com/slottreport/how-safe-creditors-your-401k-money-if-you-roll-it-ira

I have a slightly different problem and was wondering if you could point me in the right direction. My Client is in New York. He was a Federal Employee, and has a Thrift Account. From what I understand it is akin to the IRA except it’s what it is called for the Federal Employees. As such, this type of account may not be invaded, except voluntarily by the owner or by the Court during matrimonial proceedings. Recently, a creditor adult living facility made an application in a NY state Court and demanded that the State Court compel payment from the Federal Reserve’s Thrift Account. I objected because I do not think the assets can be reached. Anyone dealt with this type of a matter or can shed some light on the situation? Please advise. Thank you.



Submitted by Alan - IRA critic on Fri, 2020-10-30 21:10

Submitted by Vlad Portnoy on Mon, 2020-11-30 21:45

Alan, thank you. However, that link is to the bankruptcy page. My situation is different because there is no bankruptcy. I am a guardian for someone with a potential creditor who went to Court to compel me to get the money out of the TSP to satisfy the debt. I do not believe I have that obligation. 

Submitted by Alan - IRA critic on Mon, 2020-11-30 23:05

  • You are correct. There is some confusion regarding TSP creditor protection since govt plans are not covered by ERISA and it’s anti alienation clause. However, that does not matter since the TSP offers creditor protection both in and out of bankruptcy. The prior page I posted did not make that clear because the question posed only addressed the bankruptcy situation. Here is another link – see bottom of p 4.
  • 0041029.pdf (irs.gov)

Submitted by William Tuttle on Mon, 2020-11-30 23:25

  • While the Fact Sheet is for Bankrupty Information, the protections referenced in 5 USC 8437 also apply to creditor protection outside of bankruptcy.
  • 5 USC 8437 (e)(2) “Except as provided in paragraph (3), sums in the Thrift Savings Fund may not be assigned or alienated and are not subject to execution, levy, attachment, garnishment, or other legal process.”
  • These are the same anti-alienation protections as apply to a 401k plan through ERISA. The TSP receives full protection except against child support, alimony, IRS tax liens and other exceptions listed in 5 USC 8437 (e)(3).
  • Bottom Line: The TSP has full anti-alienation creditor protection.

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