Rolling tIRA into 403b for asset protection

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Klewles
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Rolling tIRA into 403b for asset protection

Post by Klewles » Mon Sep 23, 2019 3:28 am

I'm considering rolling assets from a tIRA into the 403b plan of University of California (a past employer). Motivation is asset protection -- UC describes the plan as protected from creditors, which I'm guessing means it is an ERISA plan (see page 16, Assignment of Benefits, in
https://ucnet.universityofcalifornia.ed ... iption.pdf).

Two questions:

(1) How do I determine authoritatively that the UC 403b is an ERISA plan?

(2) If I roll tIRA assets into an ERISA 403b plan, are those assets protected in the same way as assets from employer/employee contributions? It seems like a pretty big backdoor -- e.g., I only worked at UC a couple of years, so my 403b balance is small, but I can make it much bigger by rolling assets from a lifelong tIRA.

lakpr
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Re: Rolling tIRA into 403b for asset protection

Post by lakpr » Mon Sep 23, 2019 6:29 am

I don’t believe 403b plans are ERISA protected.
Secondly, are you sure that your ex employer would allow you to roll tIRA in when you are no longer employed there?

If they do allow, it is still a good idea to roll the tIRA to 403b, since the IRAs are not protected in California. Rolling it over gives you at least SOME federal protections.
Last edited by lakpr on Tue Sep 24, 2019 4:37 am, edited 1 time in total.

Spirit Rider
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Re: Rolling tIRA into 403b for asset protection

Post by Spirit Rider » Mon Sep 23, 2019 9:59 am

IRS regulations allow but do not require a 403b plan to accept IRA rollovers:
  • Most 403b plans do not allow any rollovers from separated participants.
  • Some 403b plans still do not accept IRA rollovers from any participant.
  • You need to determine if an IRA rollover to this 403b is even an option.
403(b) plans sponsored by governmental and public education employers are always exempt from ERISA. The UC 403b is a governmental plan, therefore it "should" be a non-ERISA plan. That is why I am confused by this statement in the UC 403b SPD implying ERISA anti-alienation asset protection.

"Generally, 403(b) Plan benefits payable to participants, beneficiaries or survivors cannot be attached by creditors, nor can anyone receiving benefits assign payments to others. Plan benefits are intended solely for the benefit of participants
and their beneficiaries and survivors."


IANAL and have no specific knowledge in CA, but the CA code of civ. proc. §704.115. Provides no inclusion of a 403b plan in the list of a defined "private retirement plan” that is fully exempt from creditors. My reading of this implies even if your UC 403b accepts IRA rollovers from separated participants.

Those assets would receive no greater creditor protection than a contributory IRA. This means that only that amount when taking into account all sources necessary to provide support for themselves, their spouse and dependents when they retire is exempt from creditors.

Given these conflicts you need an authoritative answer probably from a CA lawyer with experience in this area.

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Klewles
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Re: Rolling tIRA into 403b for asset protection

Post by Klewles » Tue Sep 24, 2019 2:53 am

Thanks much for the responses. Some remarks:

- I should have mentioned that the UC 403b does accept rollovers from tIRA. This is on page 14 of the SPD (link above): "The 403(b) Plan accepts rollovers of pretax distributions from ... traditional IRAs."

- Good point about separated versus active participant. I looked it up in the plan document and verified that a separated participant like me is okay.

- UC 403b is administered by Fidelity and they echo the language in the SPD: "It [UC 403b] offers broader creditor protection under federal law than an IRA." (Fidelity also provides online initiation of rollover from a tIRA.)

- I found this document https://ucnet.universityofcalifornia.ed ... inutes.pdf that suggests UC 403b voluntarily complies with ERISA, on page 4: "... while the UC Retirement Savings Program plans were not subject to ERISA, UC has historically complied with ERISA rules". Perhaps it is their voluntary compliance that leads them to describe assets as protected.

I'll pursue clarification on ERISA status with UC and Fidelity and post here if I learn anything definitive. If not, then the advice to contact a lawyer seems the only route.

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