New Update: Healthcare Costs Increasing by Over 60% in Some States. Will you be impacted?

Navigating Bankruptcy Protections: A Guide for WestRock Employees

Brent Wolf, a representative of The Retirement Group, a division of Wealth Enhancement, emphasizes the importance of tailored financial planning to help safeguard WestRock employees' long-term retirement goals when navigating federal IRA protections and strategic rollovers amidst rising bankruptcy trends.

Kevin Landis, a representative of The Retirement Group, a division of Wealth Enhancement, says WestRock employees may want to proactively engage with financial experts to navigate the intricate legal and financial terrains of IRA protections, especially in light of the recent updates under BAPCPA, to craft a robust defense against unforeseen economic challenges.

In this article, we will discuss:

Federal protections for IRAs under ERISA and BAPCPA, including recent updates and limits.
How rising bankruptcy trends may impact older individuals and IRA assets.
Strategic considerations for WestRock employees when rolling over retirement accounts.

The intersection of financial planning and legal protections is often complex, especially during challenging times, such as when bankruptcy events are on the rise. For those working at WestRock and contemplating the future, understanding the scope and limits of protections available for Individual Retirement Accounts (IRAs) is vital. This article explores the federal safeguards in place for IRAs and how effectively they may shield your retirement assets from creditors.

Federal Retirement Fund Protection

For employees at WestRock, it's important to know how different retirement accounts, including IRAs, are shielded from creditors and legal actions. Under the Employee Retirement Income Security Act (ERISA), traditional pensions and 401k plans enjoy robust protection against both corporate and personal bankruptcy. Additionally, individual accounts up to $250,000 are covered against bank failures by the Federal Deposit Insurance Corporation (FDIC).

Before the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), protection levels for IRAs varied by state compared to 401k plans. With BAPCPA, a uniform level of protection across states has been set, although it varies depending on the IRA type and the amounts involved.

Current Bankruptcy Trends

Bankruptcy filings have seen a significant rise, with the Administrative Office of the U.S. Courts noting a 14.2% increase in 2024 over the previous year, including 494,201 non-business cases. Notably, individuals aged 65 and older are filing for bankruptcy at the fastest rate, reflecting the financial challenges this group often faces.

Causes of the Increase in Bankruptcies

For older individuals, economic instability may lead to reduced income and unexpected medical expenses. Surveys indicate that 78% of bankruptcies were triggered by income reductions, while 65% were due to medical debts.

BAPCPA Protections for IRAs

BAPCPA provides critical protections for IRA holders, applying specific exemptions in bankruptcy cases, such as those under Chapters 7 and 13. The exemption cap has been raised significantly to $1,711,975 for both Roth and traditional IRAs from 2025 to 2028, reflecting inflation adjustments every three years to help maintain ongoing protection of retirement funds. However, amounts exceeding this cap might still be claimed by bankruptcy estates.

Particular Attention to Inherited IRAs and Rollovers

Protection extends to IRAs if transferred to another qualifying retirement plan within 60 days, a point particularly relevant for those transitioning from employer-sponsored plans like 401ks. However, inherited IRAs, especially non-spousal ones, enjoy less protection, as highlighted in the 2014 Supreme Court ruling in Clark v. Rameker.

Legal Defenses Not Included in Bankruptcy

Beyond bankruptcy, state laws may shield IRA funds from creditor claims, with ERISA’s anti-alienation clause safeguarding employer-backed pensions from being transferred to third parties. Still, individual retirement accounts receive varying protections depending on state legislation.

Exclusions from Protections

While federal laws provide substantial safeguards, they can be overridden by specific legal claims related to divorce, child support, QDROs, federal crimes, unpaid taxes, and penalties, making them not entirely unassailable.

Strategic Aspects

WestRock employees with qualified plans governed by ERISA should weigh the level of creditor protection when deciding to keep funds in an existing employer plan or roll them over into an IRA. Opting to roll over to a new employer’s 401k may introduce stronger ERISA protections.

In Conclusion

The BAPCPA has significantly enhanced IRA protection against bankruptcy creditors, offering a lifeline during financial crises. However, these protections are not absolute. WestRock employees must navigate the complexities of legal landscapes to help effectively manage their financial futures. Consulting a financial advisor or legal specialist is recommended to align retirement planning with both financial goals and legal constraints.

Additional Reading

For further insights into retirement planning and legal protections, consider these resources:

- Employee Retirement Income Security Act Turns 50: Protecting Your Plans

- The Average IRA Balance by Age

- How to Roll Over a 401(k) in Five Steps

These resources provide valuable analysis and practical advice on managing your retirement funds, critical for those nearing retirement age at WestRock. Understanding the tax implications of IRA withdrawals in bankruptcy contexts is crucial, as the IRS mandates these distributions to be taxed as ordinary income, potentially complicating financial situations during challenging times. Proper timing of withdrawals, thus, becomes as crucial as understanding legal protections.

Articles you may find interesting:

Sources:

To support the content of this article on IRA protections under ERISA and BAPCPA, the following five sources offer valuable insights:

Kiplinger - This source offers a broad overview of IRA protections under BAPCPA, noting that, as of 2025, traditional and Roth IRAs have an exemption limit of $1,711,975 from the bankruptcy estate. It also details the challenges facing retirees, particularly the rising trend of bankruptcies among older adults. The source is beneficial for understanding how BAPCPA may protect IRA assets during bankruptcy, helping to provide a measure of financial security to retirees (Kiplinger, 2024)

kiplinger.com
The Tax Adviser - This article elaborates on how BAPCPA has changed the landscape for protecting IRA assets from creditors. It emphasizes the uniform protection provided across states, which contrasts with the pre-BAPCPA era where IRA protections could vary significantly by state. This source is particularly useful for detailing the legislative background and practical implications for retirees, helping them stay well-informed about their rights under federal law (The Tax Adviser, 2020)

thetaxadviser.com
Blake Harris Law - By discussing state versus federal protections, this source highlights Colorado's robust IRA protections that exceed federal limits. It offers retirees insights into how state laws can complement federal protections, helping to safeguard retirement funds against creditors, even beyond the federal exemption caps (Blake Harris Law, no date)

blakeharrislaw.com
Rosenblatt Law Firm - This source provides a comprehensive look at how different types of IRAs are treated under bankruptcy, including the distinction between ERISA-qualified plans and IRAs when it comes to creditor protections. It’s particularly valuable for retirees looking to understand the nuances of IRA protections and the implications of rolling over ERISA-protected funds into IRAs (Rosenblatt Law Firm, 2019)

rosenblattlawfirm.com
Investopedia - This article confirms the protection levels for various types of IRAs under BAPCPA, noting the specific caps and the full protection afforded to SEP and SIMPLE IRAs, as well as rollover IRAs. It's instrumental for retirees in planning and understanding how their retirement accounts might be treated in the event of bankruptcy, helping them make informed financial decisions (Investopedia, 2021)

investopedia.com

Each of these sources contributes significantly to defending the arguments about IRA protections for retirees, offering both legal insights and practical advice to help enhance financial stability in retirement.

How does the WestRock Company Consolidated Pension Plan specifically calculate the Normal Retirement Benefit for its employees, and what considerations should employees be aware of regarding the Final Average Pay calculation used by WestRock Company?

Normal Retirement Benefit Calculation: The WestRock Company calculates the Normal Retirement Benefit based on the employee's Final Average Pay. This is defined as the average of the employee's highest five years of earnings over the last ten years of employment before termination. Earnings included in the Final Average Pay are most wages, bonuses, commissions, and amounts deferred under the company’s 401(k) plan. Employees should be aware that earnings after December 31, 2015, are excluded unless they qualify under the Rule of 75(WestRock Company_Issued…).

What are the specific eligibility requirements for the Disability Retirement Pension under the WestRock Company plan, and how does this differ for Legacy Mead and Legacy Westvaco participants within the WestRock Company workforce?

Disability Retirement Pension Eligibility: To qualify for a Disability Retirement Pension, an employee must have earned at least five years of Vesting Service and be deemed "totally and permanently disabled" according to specific criteria. Legacy Mead and Legacy Westvaco participants are subject to special rules detailed in the Legacy Supplement. Legacy Mead employees must apply separate criteria from Legacy Westvaco employees(WestRock Company_Issued…).

In what ways can employees at WestRock Company manage and maximize their Vesting Service to ensure they receive the full benefits from the companyâ€™s pension plan, particularly for those with interrupted service or re-employment?

Vesting Service Maximization: WestRock employees can manage their Vesting Service by ensuring that they complete at least five years of service, which guarantees their right to pension benefits. Employees with interrupted service can still receive credit for Vesting Service if they return within five years. Additionally, employees who leave and return within a year will receive credit for the time they were absent(WestRock Company_Issued…).

How does the WestRock Company handle the transition of benefits for employees who transfer between different positions within the company, and what impacts could this have on their eventual retirement benefits?

Transfer Between Positions: When WestRock employees transfer between different positions, their retirement benefit is calculated based on the greater of two methods. The first method calculates the benefit accrued at each position separately, while the second method applies the total benefit service across positions. Vesting Service is always combined, regardless of location or position(WestRock Company_Issued…).

How does the WestRock Company plan ensure that pension benefits are protected, particularly through the Pension Benefit Guaranty Corporation (PBGC), and what should employees know about their rights and guarantees under this insurance?

Pension Benefit Protection (PBGC): The WestRock Pension Plan is insured by the Pension Benefit Guaranty Corporation (PBGC). This federal insurance guarantees that employees will receive their vested pension benefits even if the plan is terminated. Employees should understand that PBGC coverage has limits, and benefits might be reduced under certain circumstances(WestRock Company_Issued…).

What are the consequences for WestRock Company employees who choose to withdraw from their pension plan or to rollover their benefits upon retirement or termination? How can they navigate these options effectively to avoid penalties?

Withdrawals and Rollovers: Employees can withdraw or roll over their pension benefits upon retirement or termination. Lump-sum withdrawals may be subject to taxes unless rolled over into a qualifying retirement account. Employees should consult the WestRock Benefits Center to avoid penalties and ensure compliance with federal tax regulations(WestRock Company_Issued…).

How does the WestRock Company maintain compliance with federal regulations and best practices under ERISA, and what specific rights do employees have concerning their pension benefits?

ERISA Compliance: WestRock complies with the Employee Retirement Income Security Act (ERISA), ensuring that employees' pension rights are protected. Employees have the right to receive information about their benefits, act prudently, and enforce their rights through the claims and appeals process outlined in the plan(WestRock Company_Issued…).

What resources are available to employees of WestRock Company for understanding their benefits under the Consolidated Pension Plan, and how can they utilize these resources to ensure they make informed decisions about their retirement?

Resources for Understanding Benefits: WestRock provides employees access to the WestRock Benefits Center, where they can obtain information on their pension plan. Employees are encouraged to review the Summary Plan Description and consult with the Benefits Center for clarification on their benefits and to make informed retirement decisions(WestRock Company_Issued…).

How will the integration of employee benefits from various company acquisitions impact current staff at WestRock Company, and what steps is the company taking to communicate these changes effectively to its employees?

Impact of Acquisitions on Benefits: WestRock has acquired various companies over time, and employees from these acquisitions may have different pension rules applied to them. WestRock takes steps to integrate these employees and communicates any changes through the WestRock Benefits Center. Special rules may apply based on the previous employer’s pension plan(WestRock Company_Issued…).

How can employees of WestRock Company get in touch with the WestRock Benefits Center to seek clarification about the Summary Plan Description, and what are the best practices to follow when requesting information regarding their pension plan?

Contacting the Benefits Center: Employees can contact the WestRock Benefits Center for clarification on the Summary Plan Description. Best practices include having detailed questions prepared, reviewing the SPD in advance, and requesting copies of documents or forms that clarify specific aspects of their pension plan(WestRock Company_Issued…).