Creditor protection of retirement plans & affiliated service groups. (Last Word On 401(k) Plans).

Last month I discussed how creditor protection under ERISA is affected when the only participant in a retirement plan is a sole stockholder (or sole proprietor) and spouse. This month let's apply that discussion to a single plan covering two or more separate entities when at least one of the entities covers only a stockholder (and spouse). These structures are frequently referred to as partnerships of PAs (or PCs).

As noted last month, certain interests in a trust are protected under the Bankruptcy Code (BC). The BC provides that a debtor's interest in a "trust" which is subject to a restriction on transfer enforceable under "applicable non-bankruptcy law" is excluded from the debtor's bankruptcy estate. ERISA, the federal law governing retirement plans, mandates the "restriction on transfer" referred to in the BC. This protection was confirmed in the U.S. Supreme Court's decision in Patterson v. Shumate. As a result, ERISA-qualified plans are excluded from the …