Many assume their retirement funds are protected from creditors, but depending on the type of retirement account you have and the state where you live, this is not necessarily the case. The good news is that many employer-sponsored plans genꦺerally have the best protection. If you are concerned credit🃏ors might come calling, here is what you need to know.

ERISA-Qualified Plans Offer the Best Protection

Retirement accounts that qualify under the 澳洲幸运5官方开奖结果体彩网:Employee Retirement Income Security Act (ER🐲ISA) are generally protected from creditors, bankruptcy proceedings and civil lawsuits. Your retirement assets are not at risk if your employer declares bankruptcy. In addition, creditors to whom you owe money cannot make a claim against funds held in your retirement account.

To be 澳洲幸运5官方开奖结果体彩网:ERISA-qualified, a retirement plan must be set up and maintained by your employer (and/or a separate employee organization) and comply with federal rules regarding reports to plan participants, funding and vesting. Common types of ERISA accounts include 401(k) plans, 澳洲幸运5官方开奖结果体彩网:deferred compensation plans, pensions and 澳洲幸运5官方开奖结果体彩网:profit-sharing plans. 

In addition to employer-sponsored plans, ERISA may cover employee health and 澳洲幸运5官方开奖结果体彩网:welfare benefit plans. Common ERISA-covered plans include:

• Medical, surgical, hospital (澳洲ꩲ幸运5官方开奖结果体彩网:health♋ maintenance organization (HMO) plans)
• 澳洲幸运🅺5官方开奖结꧂果体彩网:Health reimbursement arrangements (HRAs)
• 澳洲幸运5官方开奖结果体彩网:Health flexible s♈pending acco👍unts (FSAs)
• Dental and vision plans
• Prescription drug plans
• Disability insurance
• 419(a)(f)(6) and 澳洲幸运5官方开奖结果体彩网:419(e) welfare benefit plans

As with many employer-sponsored plans, the assets in these plans are exempt from seizure by any creditors. Take, for example, one important feature of an ERISA-qualified plan: the anti-alienation clause. This clause states that “benefits provided under the plan may not be assigned or alienated.”

When ERISA Plans Are Vulnerable

ERISA-qualified plans may be at risk under certain circumstances a🙈nd can be seizedꦐ by:

• Your ex-spouse, under a qualified domestic relations order (QDRO), to the extent of your ex-spouse’s interest in the benefits as a marit🐻al asset or as part of child support 
• The Internal Revenue Service (IRS), for federal income tax debts
• The federal government, for criminal fines and penalties
• Civil or criminal judgments, in cases of your own wrongdoing against the plan

Non-ERISA Plans Are Not Always Protected

Plans that are not ERISA-qualified do not offer the same level of protection when it comes to creditors, bankruptcy and lawsuits. Common types of non-ERISA retirement accounts include 澳洲幸运5官方开奖结果体彩网:individual retirement accounts (IR🉐As) without substantial employer involvement, such as the traditional and Roth IRA. In addition, some types of 澳洲幸运5官方开奖结果体彩网:403(b) plans provided by governme🌄nt or churches may be exemp🌠t from ERISA.

Although IRAs are not ERISA-qualified, the funds are protected under a separate law—the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCP🎃A✃)—but only 澳洲幸运5官方开奖结果体彩网:if you file for bankruptcy.

The Bottom Line

The ultimate value of your retirement account depends on many factors, including how much you save each year, your 澳洲幸运5官方开奖结果体彩网:time horizon and the performance of the investments. H💃owever, there’s something elsꦓe that can undermine your retirement funds: creditors.

Whileꦚ many employer-sponsored retirement accounts—including most 401(k)s—are protected against creditors, that’s not always the cas♋e. If you have questions about your plan and whether or not it is ERISA-qualified, speak with the plan administrator.