Is Your 403(b) Account Safe from Creditors?


403(b) plans are employee-funded retirement savings plans offered by educational institutions and 501(c)(3) charitable organization.  While the plans of private schools are automatically covered by the Employer Retirement Income Security Act 0f 1974 (ERISA), public schools and universities are exempt.  While this exemption means less regulation to worry about, there is disadvantage to employees.

ERISA, which is a federal law, protects covered retirement plans from creditors of account owners.  Thus, this protection does not rely on state law.  For non-ERISA 403(b) plans, however, there is no federal protection.  We thus have to look to state law to see if the plans are protected from creditors.
North Carolina law protects traditional and Roth IRAs from the claims of creditors.  N.C.G.S. Section 1C-1601(9).  403(b) plans are not included in this protection.
Therefore, if you work for a public educational institution and have a 403(b) account, you should be aware that it may not be protected should you ever be sued.
Retirement Assets with no automatic creditor protection:
  • SEP IRAs
  • Inherited IRAs
  • 403(b) Plans (public school employees)
If you have any of these accounts with substantial funds, see an asset protection attorney about how you might be able to protect the account.
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