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Creditor Protection: SEP-IRA vs. Profit Sharing Plan???


chris
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To what extent are SEP-IRA's protected from a participant's creditors (judgment or otherwise)? To what extent, if any, does 401(a)(13) apply to SEP-IRA's? I would think that the normal IRA rules would apply.

I have a small medical practice considering going from a profit sharing plan to SEP-IRA's and the issue has come up. I have already pointed out the other differences, e.g., 100% vesting, comp to comp allocation, etc.. but this one is the important one to the doc's.

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I agree with Bill but wish to add that some state's debtor-creditor laws treat traditional IRAs diferently than IRA-based plans (SEP-IRAs, SIMPLE IRAs, Ed IRAs and Roth IRAs). Nealy all states grant exemptions for traditional IRAs (except NH, unlear in DC, IA, MS, NM, & WY). SEP IRAs and SIMPLE IRAs are not exempt in NH, unclear in DC, IA, MS, NM, NY (but SIMPLE IRA is exempt in NY), and WY). Hope this helps.

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