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PrintUnprotected IRAs
SIMPLE and SEP retirement plans can represent an excellent strategy that small business owners can use in an asset exemption plan to shield assets from creditors. However, the retirement fund exemption available for ERISA-qualified (the federal Employee Retirement Income Security Act) retirement plans will not apply to IRAs established through these plans. IRAs that are established privately, or by business owners in a SIMPLE or SEP plan, are not considered ERISA-qualified.
But there is good news. New federal law as of October 17, 2005, states that IRA contributions and earnings up to $1,000,000 are exempt from creditor attachment; rollover IRAs converted from qualified plans have no dollar limitation. It doesn't matter whether a debtor chooses state of federal exemptions.
Moreover, the federal law also exempts educations savings through education IRAs and 529 savings plans. If the savings were established more than two years prior to filing, the entire amount is exempt; if established between 365 and 730 days before filing, the exemption is limited to $5,000.
