ERISA Does Not Apply to Solo 401k Plans and IRAs
ERISA it is an acronym for the Employee Retirement Income Security Act of 1974. ERISA falls at the federal level and is law that applies to full-time employer 401(k) plans, pensions, and certain 403(b) plans. However, ERISA does not cover IRAs or owner-only plans such as solo 401k plans.
ERISA impose the following requirements to the employer and health plans that are fall under it:
ERISA does not apply to solo 401k plans because they only benefit the owner and the owner's spouse, not common-law employees (non-business owners).
Because solo 401k plans and IRAs are not covered by ERISA, state law will determine if they are shielded from creditors. Your state of residence will determine the level of creditor protection afforded to your solo 401k plan, with some providing full creditor protection similar to ERISA and others providing partial protection.
IMPORTANT NOTE: Non-ERISA plans including solo 401k plans have unlimited protection if the participants declares bankruptcy.
ERISA impose the following requirements to the employer and health plans that are fall under it:
- Filing annual reports with the IRS;
- Providing summary plan description to participants;
- Adhering to the eligibility, vesting and plan funding rules;
- Managing the plan and investing plan assets solely in the interest of plan participants; and
- Maintaining a procedure for plan participants to file claims and appeals of denied claims.
ERISA does not apply to solo 401k plans because they only benefit the owner and the owner's spouse, not common-law employees (non-business owners).
Because solo 401k plans and IRAs are not covered by ERISA, state law will determine if they are shielded from creditors. Your state of residence will determine the level of creditor protection afforded to your solo 401k plan, with some providing full creditor protection similar to ERISA and others providing partial protection.
IMPORTANT NOTE: Non-ERISA plans including solo 401k plans have unlimited protection if the participants declares bankruptcy.