Protection against creditors upon bankrupty

[alexa]

An employee is rolling over his terminated money purchase plan account balance to a conduit IRA

Since former retirement plan monies, is this protected against creditors should a personal bankrupty occur?

The employee also has the option to rollover the balance to employer's 401(k) plan

Would this be a safer route to go?

[MGB]

If they can wait awhile (e.g., use a conduit and later roll to 401(k) if appropriate), they would have a much clearer answer.

Both the House and Senate passed bankruptcy reform bills early last year. When it went to conference committee, the Senate couldn't agree on who to assign to the committee (this was when there was still a 50-50 split). It is still sitting there on the back burner (isn't there some way to kick these elective officials in the butt to do their jobs?).

The problem is that there is different language in each version of the bills on protecting retirement assets. Therefore, the final version may be different than what is expected. Then again, it could all die and revert to current law, or they could go back to the drawing boards and start all over again.

One of the more troubling aspects with respect to retirement plans is a clause that requires the plan to have a "current" determination letter from the IRS in order to be protected.

[alexa]

What are the current rules?

He did put in conduit IRA and has optino to transfer to 401(k) at a later date

[Belgarath]

If the money is in an IRA when bankruptcy occurs, the protection depends upon state law. Funds that represent a rollover of a distribution from an ERISA plan do enjoy a higher level of protection, in general, then "regular" IRA funds, but it still varies greatly. I'd check with an attorney for whatever state you are in.

[KJohnson]

I agree, check with an attorney. However, for general information here is a survey done based on the status of state laws in 1999 regarding IRA protection:http://www.ici.org/issues/99_state_ira_bnkrptcy.html