To what extent are SEP-IRA's protected from a participant's creditors (judgment or otherwise)? To what extent, if any, does 401(a)(13) apply to SEP-IRA's? I would think that the normal IRA rules would apply.

I have a small medical practice considering going from a profit sharing plan to SEP-IRA's and the issue has come up. I have already pointed out the other differences, e.g., 100% vesting, comp to comp allocation, etc.. but this one is the important one to the doc's.

It is my understanding that IRAs, SEPs and SIMPLEs do not get protection of 401(a)(13). Thus, these account are part of the person's bankruptcy estate which limits the protection to state rules. A profit-sharing plan's assets are protected if it is an ERISA qualified plan

I agree with Bill but wish to add that some state's debtor-creditor laws treat traditional IRAs diferently than IRA-based plans (SEP-IRAs, SIMPLE IRAs, Ed IRAs and Roth IRAs). Nealy all states grant exemptions for traditional IRAs (except NH, unlear in DC, IA, MS, NM, & WY). SEP IRAs and SIMPLE IRAs are not exempt in NH, unclear in DC, IA, MS, NM, NY (but SIMPLE IRA is exempt in NY), and WY). Hope this helps.