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Understanding Creditor Protections forFannie Mae Employees

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'Fannie Mae employees must be aware that while ERISA-qualified plans provide significant protection from creditors, non-ERISA accounts like IRAs are more vulnerable, and it's crucial to understand state-specific laws to ensure full asset security as you approach retirement,' says Tyson Mavar, a representative of The Retirement Group, a division of Wealth Enhancement Group.

'As retirement approaches, Fannie Mae employees should consider not only the strength of their ERISA-qualified plans but also the potential vulnerabilities of non-ERISA accounts, and seek guidance from legal and financial experts to ensure their assets are fully protected,' advises Tyson Mavar, a representative of The Retirement Group, a division of Wealth Enhancement Group.

In this article, we will discuss:

The protection of retirement savings under ERISA-qualified plans.
The limitations of ERISA protection, including potential risks from creditors.
The role of state laws in protecting non-ERISA retirement accounts like IRAs.

For employees at Fannie Mae, an important issue is the security of retirement savings, especially when employees approach the retirement age or are retired. It is generally assumed that all retirement assets are protected from creditors. Nevertheless, the extent to which these assets are protected differs greatly depending on the type of retirement plan and the laws of the state. In this article, we explore the specifics of asset protection.

Plans Covered by ERISA: A Stronghold Against Creditors
Most of the retirement plans that meet the eligibility requirements of the Employee Retirement Income Security Act (ERISA) are generally safe. Such ERISA-qualified plans are also usually safe from the reach of creditors in the event of bankruptcy or civil suits. Importantly, this protection is maintained even if the company sponsoring the plan goes bankrupt. These assets are usually out of the reach of personal creditors.

To meet the ERISA requirements, a retirement plan must be offered by an employer or an employee organization and must meet certain federal requirements regarding membership reporting, funding, and vesting. Typical ERISA-qualified plans include profit-sharing plans, pensions, deferred compensation plans, and 401(k)s.

Furthermore, ERISA applies to some employee health and welfare benefits, such as:

Hospital, surgical, and medical coverage through Health Maintenance Organization (HMO) plans.
Health care Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs).
Dental and vision plans.
Prescription drug programs.
Disability insurance.
Specific welfare benefit plans under sections 419(a)(f)(6) and 419(e).

The anti-alienation clause in these plans prohibits the assignment of benefits and thus keeps the assets beyond the reach of most creditors.

Weaknesses of ERISA-Qualified Plans
Although they are very strong, ERISA plans are not foolproof. They can be subject to claims by:

A former spouse for child support or divorce settlements, with a Qualified Domestic Relations Order (QDRO).
The Internal Revenue Service (IRS) for any unpaid federal income taxes.
The federal government in cases involving fines and penalties for crimes.
Creditors in the event that a plan participant breaches the terms of the plan.

The State of Non-ERISA Plans
The protection of retirement accounts that are not covered by ERISA, such as traditional and Roth IRAs, is not uniform. Some 403(b) plans offered by government or religious organizations may also not be ERISA plans.

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BAPCPA provides some protection for IRA funds in bankruptcy, but such funds are not protected by ERISA.

State Laws and IRA Security
The protection of IRAs and other non-ERISA plans against creditors can vary greatly by state. Some offer little protection, while others offer almost none. It is imperative to know these nuances in order to manage the risk of potential creditor claims. Fannie Mae employees are encouraged to seek the advice of experienced local attorneys in order to navigate these complex legal situations.

Conclusion
The legality of protecting retirement funds from creditors depends on the type of retirement account, state laws, and certain exemptions. Although most employer-sponsored retirement plans are relatively safe, the legal framework is complex, and it is advisable to seek legal advice early to maximize the protection of retirement assets.

Sources:

Mavar, Tyson. The Retirement Group, a Division of Wealth Enhancement Group . Interview. January 2025.

'ERISA: A Guide to Employee Retirement Income Security Act.' U.S. Department of Labor , 2024, www.dol.gov/general/topic/retirement/erisa . Accessed 31 Jan. 2025.

'How Bankruptcy Affects Retirement Accounts.' National Bankruptcy Forum , 2023, www.nationalbankruptcyforum.com/affects-of-bankruptcy-on-retirement-accounts . Accessed 31 Jan. 2025.

'State Laws and IRA Protection.' Retirement Law Journal , vol. 12, no. 4, 2024, pp. 47-52.

'Understanding Qualified Domestic Relations Orders (QDROs).' Internal Revenue Service , 2023, www.irs.gov/retirement-plans/plan-participant-employee/understanding-qualified-domestic-relations-orders . Accessed 31 Jan. 2025.

What type of retirement savings plan does Fannie Mae offer to its employees?

Fannie Mae offers a 401(k) Savings Plan to help employees save for retirement.

How can Fannie Mae employees enroll in the 401(k) Savings Plan?

Fannie Mae employees can enroll in the 401(k) Savings Plan through the company’s benefits portal during the enrollment period.

Does Fannie Mae match employee contributions to the 401(k) Savings Plan?

Yes, Fannie Mae provides a matching contribution to employee contributions made to the 401(k) Savings Plan, subject to specific limits.

What is the maximum contribution limit for Fannie Mae employees in the 401(k) Savings Plan?

The maximum contribution limit for Fannie Mae employees is determined by the IRS annual limits, which can change each year.

Can Fannie Mae employees change their contribution percentage to the 401(k) Savings Plan?

Yes, Fannie Mae employees can change their contribution percentage at any time through the benefits portal.

What investment options are available in Fannie Mae's 401(k) Savings Plan?

Fannie Mae's 401(k) Savings Plan offers a variety of investment options, including mutual funds, target-date funds, and other investment vehicles.

Is there a vesting schedule for the employer match in Fannie Mae's 401(k) Savings Plan?

Yes, there is a vesting schedule for the employer match in Fannie Mae's 401(k) Savings Plan, which determines when employees fully own the matched contributions.

Can Fannie Mae employees take loans against their 401(k) Savings Plan balance?

Yes, Fannie Mae allows employees to take loans against their 401(k) Savings Plan balance, subject to specific terms and conditions.

What happens to my 401(k) Savings Plan if I leave Fannie Mae?

If you leave Fannie Mae, you have several options for your 401(k) Savings Plan balance, including rolling it over to another retirement account or cashing it out.

How often can Fannie Mae employees review their 401(k) Savings Plan statements?

Fannie Mae employees can review their 401(k) Savings Plan statements quarterly, and they can also access their account information online at any time.

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.

Fannie Mae is a government-sponsored enterprise that supports housing finance in the United States by providing liquidity and stability to the mortgage market.

Fannie Mae provides RSUs to certain employees. The RSUs vest over a specific period, supporting employee retention.