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Does ERISA Creditor Protection Apply to Self-Directed Solo 401k?

11/14/2020

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In the wake of the Coronavirus (Covid-19) pandemic,more businesses are struggling and many are ultimately going under. As a result, many self-employed individuals with solo 401k plans are rightfully concerned if their plans are protected from creditors under the employee Retirement Income Security Act (ERISA).

While solo 401k plans are fully protected from bankruptcy creditors pursuant to the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, solo 401k plan are not protected from general creditors (lawsuits) under ERISA because solo 401k plans are for owner-only businesses. However, solo 401k plans are protected from creditors based on state law.  Therefore, if you live in a state that affords self-employed plans such as SEP IRAs, SIMPLE IRAs and solo 401k plans protection from general creditors, you won't need to consider an LLC.



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    George Blower is a principal of My Solo 401k Financial LLC and also serves as the General Counsel with responsibility for providing all legal services to the organization.  

    Prior to joining My Solo 401k Financial, he served as general counsel for a subsidiary of a Fortune 500 financial services company.  

    He received his bachelor’s degree in economics at the University of Michigan in 1998 with honors. He received his juris doctorate from Harvard Law School in 2001. He is a member of the Michigan and Ohio bar associations.

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