How important is ERISA protection?

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  • Avatar Ju 
    Status: Physician
    Posts: 2
    Joined: 09/21/2018

    Thrift Savings Plan (TSP) isn’t ERISA protected.  I have accounts at Fidelity and other brokerages that are ERISA protected. How important is ERISA protection?  I’d like to consolidate all my accounts at TSP, but don’t know whether to do so because TSP isn’t ERISA protected.  Thank you!

    #230399 Reply
    Avatar Peds 
    Status: Physician
    Posts: 4405
    Joined: 01/08/2016

    I would not worry about the creditors of the us govt.
    This should not be a factor in your decision.
    Never fully close your tsp either.

    #230401 Reply
    Liked by ENT Doc, Peds
    Avatar jacoavlu 
    Status: Physician, Small Business Owner
    Posts: 2374
    Joined: 03/01/2018

    it’s not about creditors of the US gov

    it’s about asset protection against a potential creditor of the OP and whether assets moved into the TSP would be less protected than in their present location

    That said I don’t know the answer to the OPs question other than to say asset protection doesn’t matter, until it does

    The Finance Buff's solo 401k contribution spreadsheet:

    #230403 Reply
    Liked by Peds
    Avatar Peds 
    Status: Physician
    Posts: 4405
    Joined: 01/08/2016

    Duly noted.

    #230405 Reply
    Kon Litovsky Kon Litovsky 
    Status: Financial Advisor
    Posts: 920
    Joined: 01/09/2016
    Thrift Savings Plan (TSP) isn’t ERISA protected

    Click to expand…

    Your brokerage accounts are NOT under ERISA, unless they are part of a group retirement plan.  Individual 401k plans fall under state law, so it can be worse than ERISA protection, though in some states the laws are better than in other states.  IRAs are also under state law (limited protection, usually around $1M, but need to read the fine print), and you might have an FDIC insured account such as money market savings (also not ERISA).

    It is true that TSP was established under Federal Employees’ Retirement Security Act of 1986, not ERISA, and there. I found this document that actually explains some of the legal procedures as they relate to the TSP plan:

    Definitely worth a read for anyone with this type of plan.

    Kon Litovsky, Principal, Litovsky Asset Management | [email protected]
    -401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

    #230932 Reply
    Liked by ENT Doc

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