Orange County Blog

Tuesday, March 29, 2016


Most people are aware that ERISA Qualified retirement plans are exempt from judgments.  The problem, of course, is that there are many rules, regulations, and limitations on ERISA plans such as 401k, 403b, etc. plans.  However, for many clients, a California Statutory Private Retirement Plan works very nicely.

Authorized in our law under section 704.115 of the California Code of Civil Procedure, a California Statutory Private Retirement Plans is a retirement savings and asset protection plan that is entirely exempt from judgments and bankruptcy. 

Contributions made to a California Statutory Private Retirement Plans are not tax- tax-deductible, and interest earned on plan investments is not tax-deferred.  In fact, the CSPRP does not enjoy any special tax treatment and therefore does not have to comply with ERISA rules.  Therefore a business owner can fund a CSPRP with almost any kind of valuable asset such as account receivables, real estate, stocks, mutual funds, or even Limited Liability Company interests.

 Compared to tax-deferred ERISA plans:

*    There is no a limit on how much one can contribute into the plan, as long as the plan is properly structured and the need for sufficient retirement assets is correctly documented.

*    Other employees do not need to be covered (the business owner can be the only participant in the plan).

*    No IRS annual filings.

*    There are no substantial restrictions on the types of investments in the plan.

*    Late starters can “catch up” with large, yearly contributions.

*    You can put the assets in any financial institution you wish.  

*    You can manage the investments yourself or use a financial planner.

Under section 704.115, to qualify as exempt from creditors, a CSPRP must be "designed and used for retirement purposes”.  Misuse of the plan (such as withdrawing funds prior to retirement) will disqualify it as a CSPRP under California Law. 

One of the most remarkable and beneficial characteristics of a CSPRP is that not only are assets held in the plan protected from creditors, even distributions OUT of the plan are 100% protected, if they can be traced back to the CSPRP.

To maintain and protect the statutory exemption  of plan assets, a private retirement plan must be sponsored by a business and structured like a pension with targeted benefits and 3rd party administration.  With the right guide and proper management, a CSPRP can provide the greatest defense for asset protection in retirement. 

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