Benefits: new bankruptcy law directly impacts plans.

• Author: Marshall, Jeffrey
• Position: Retirement Benifits - Brief Article

The Bankruptcy Abuse Prevention and Consumer Protection Act, signed by President Bush on April 20, has a direct bearing on employee benefit plans, according to the Segal Co.:

Funded non-ERISA (Employee Retirement Income Security Act) pension plans that are tax-exempt under the Internal Revenue Code such as public-sector retirement programs, Section 457 plans, [section]403(b) arrangements--as well as individual retirement accounts (IRAs)--are now protected from creditors in bankruptcy. There is, however, a $1 million ceiling on the protection for amounts held in IRAs, except for amounts rolled over from qualified plans.

Amounts deducted from an employee's wages for contributions to a retirement, health or cafeteria plan and held by the employer are protected from claims by the employer's creditors.

Individuals in personal bankruptcy proceedings can continue repaying loans taken from their retirement plans within the limits set by ERISA or the IRS.

Cuts made in retiree health...