One Participant Retirement Plan

[Guest John Sample]

A doctor has left a medical group and started his own practice. He would like to set up a qualified plan and rollover his distribution into the new plan. He will be the only participant in the new plan. The main reason he wants to do this is to protect these assets from future lawsuits (I don't know why he thinks he will be sued, but this seems to be a concern).

However I think I recall that a one participant plan is not covered by a part of ERISA and that these assets would be subject to attachment if a lawsuit or something would happen. So, he may be better off leaving these assets in the old medical group's plan if a lawsuit is such a concern.

Is this true?

Thank you.

[Guest earthy]

This is true. The Patterson v Shumate decision spoke only to an "ERISA qualified plan" when interpreting both 206(d) of ERISA and the assignment and alienation provisions of Code Section 401(a)(13).

ERISA cannot be breathed into the Internal Revenue Code and hence if you have a partnership or a sole owner proprietor with their own pension or profit-sharing plan, and such plan is not an "employee benefit plan", then their is no relief from bankruptcy, etc.

See: In Re Watson 161 F. 3d 593 (9th Circuit - 1998).

earthy