How California retirement accounts can be protected from judgment collection

Leaving a hospital can put a physician's retirement money in motion: an old 401(k), a new employer plan, an IRA rollover, and sometimes a distribution check. Those choices can have different collection consequences. Start with the account that holds the money now, not the label on the money when it was earned.

An exemption can keep specified property out of some judgment-collection processes. It does not prevent a lawsuit, erase a judgment, or answer every creditor claim. The governing account type, the kind of claim, the form of the funds, and the evidence available all matter.

Start with the account, the claim, and the money's location

Use three questions before treating a retirement balance as protected:

Is the money still in an employer plan, in an IRA, or already paid out?
Is the collection claim an ordinary money judgment, or does a different rule apply, such as a support obligation or a federal collection right?
Can the account holder prove the balance and any transferred funds came from the claimed source?

The answer can change when money moves. A physician should review a rollover before it happens, not after a levy arrives.

Employer plans can use a federal rule

Many employer retirement plans fall under the Employee Retirement Income Security Act, or ERISA. Federal law requires a covered pension plan to prohibit assignment or transfer of its benefits. This anti-alienation rule can restrict collection on an ordinary civil judgment while money remains in a covered plan.

The plan type matters. A hospital 401(k), pension, or employer 403(b) can qualify for the federal rule. An individual retirement account, or IRA, does not become an ERISA plan because its money came from an employer plan. Identify the exact plan before you assess its protection.

The rule has exceptions, including qualified domestic-relations orders and some federal collection rights. A covered ERISA plan is not protected from every claim. It is also different from a revocable living trust, which does not create this federal anti-alienation protection.

California applies different rules to plans and IRAs

California Code of Civil Procedure section 704.115 defines several retirement-plan categories. It broadly exempts amounts held, controlled, or in process of distribution by qualifying private retirement and profit-sharing plans for retirement benefits.

The same section treats self-employed plans, traditional IRAs, Roth IRAs, and some other tax-favored accounts differently. Subject to the statute's separate rules, the exempt amount can be limited to what is necessary for retirement support for the debtor, spouse, and dependents after the court considers likely resources. The statute also supplies a federal-tax-code-based minimum for a defined personal-debt category. That amount can change and can be aggregated across retirement plans in the debtor's name.

This is why "retirement money" is not a complete answer. Identify the account type, the exact collection context, and the consequence of a proposed transfer before moving funds.

A rollover can change the protection

A physician who leaves a hospital has several choices for an old 401(k). The money can stay in the former employer plan. It can move to a new employer plan or an IRA. It can also be distributed. Each choice affects fees, administration, investments, and creditor protection.

A rollover into an IRA can replace the federal anti-alienation rule with California's IRA rule. The prior source does not change the account type after the transfer. Review the collection consequences before the rollover is complete.

Before a rollover, record the current plan, the proposed account, legal owner, beneficiary, and source of each balance. Keep the statements and confirmations that document the transfer. A financial, tax, and legal review may each be appropriate; this page addresses only the collection question.

Keep records that trace the money

Tracing means proving where money came from. Code of Civil Procedure section 703.080 says an exempt fund can remain exempt when traced into cash, a deposit account, or an equivalent, subject to limits in the particular exemption. The person claiming the exemption has the burden to trace the fund.

Keep plan statements, rollover confirmations, distribution records, and statements from the receiving account. Avoid treating a bank balance as self-proving. Mixing a distribution with other money can make tracing harder; California generally uses the lowest-intermediate-balance approach for a deposit account unless a different approach better serves justice and equity.

Use the current California forms

California Judicial Council form EJ-155 lists common exemption categories. Form EJ-156 gives current amounts for exemptions with dollar limits. California updates those amounts. Use the current forms rather than a number copied from an old article or worksheet.

Home equity, vehicles, household property, tools, benefits, and other property use different rules. Some exemptions apply automatically. Others require a timely claim and supporting evidence after a levy.

Keep every collection notice. A bank levy, wage garnishment, and property lien can use different processes. Read the notice, identify the response deadline, and obtain California legal advice promptly when a claimed exemption matters.

Record each retirement account

List every account on your physician liability worksheet. For each account, record:

The legal owner and beneficiary.
The plan or account type.
The employer or plan sponsor, if any.
The potential federal or California protection source.
The origin of transferred funds.
The statements needed to trace them.
Any proposed rollover or distribution.

Do not combine all retirement balances into one entry. A useful record lets an advisor answer four practical questions quickly: what account holds the money, what rule may apply, where transferred funds came from, and what evidence proves it. Review the current account before closing it or moving its funds.