California Retirement Account and IRA Protection

An ordinary judgment creditor cannot reach a Californian’s employer retirement plan, but can reach an IRA. A private retirement plan or a retirement-purpose profit-sharing plan is exempt in full, whatever the balance. An IRA, a Roth IRA or a self-employed plan is exempt only up to what a judge decides the owner will need in retirement.

Two other rules decide what an IRA owner keeps. Since 2025 a consumer-debt judgment cannot take an IRA below a floor tied to the federal bankruptcy cap, but a malpractice, business or fraud judgment gets no floor. And the exemption has to be claimed, in most cases within days of the levy.

Which Retirement Plans California Exempts in Full

California exempts every dollar a private retirement plan holds, and every dollar in a profit-sharing plan run for retirement, with no cap and no support test. The statute exempts “all amounts held, controlled, or in process of distribution by a retirement plan” (Cal. Civ. Proc. Code § 704.115(b)). Money the plan has already paid out stays exempt too. A 401(k) an employer set up and runs is such a plan, and the employee’s own contributions share the exemption.

A fully exempt plan is one an employer or an employee organization set up. In In re Simpson, 557 F.3d 1010 (9th Cir. 2009), the Ninth Circuit held that the private retirement plan exemption reaches only plans an employer or a union established or maintains. An arrangement a person sets up for himself, an annuity included, falls outside it whatever he meant it for.

A one-person plan can still qualify when a corporation the owner controls adopts it. In In re Rucker, 570 F.3d 1155 (9th Cir. 2009), the Ninth Circuit accepted that a plan set up by a corporation the debtor wholly owns is not disqualified on that ground. In In re Witwer, 148 B.R. 930 (Bankr. C.D. Cal. 1992), a physician’s one-man corporate profit-sharing plan kept $1.8 million exempt.

An ERISA-governed employer plan is protected without the debtor filing anything. In Coastline JX Holdings LLC v. Bennett, 80 Cal. App. 5th 985 (2022), the Court of Appeal held an ERISA profit-sharing plan exempt although the debtor had filed no timely claim of exemption. Federal law bars assigning a pension plan’s benefits. California keeps non-assignable property outside its enforcement law, and such property “is exempt without making a claim” (§ 704.210). The court did not decide whether ERISA preempts California’s enforcement law. No later decision has applied the holding.

A plan covering only the business owner is generally not an ERISA plan at all, so its protection outside bankruptcy comes from the California statute alone, and must be claimed.

A section 529 college savings account has no protection from a California levy. No exemption names it, and it exists for education rather than retirement, as the Court of Appeal held in O’Brien v. AMBS Diagnostics, LLC, 246 Cal. App. 4th 942 (2016).

Are IRAs Protected from Creditors in California?

Not in full. A traditional IRA, a Roth IRA, a self-employed plan, and a 403, 414 or 457 account “are exempt only to the extent necessary to provide for the support of the judgment debtor when the judgment debtor retires” (§ 704.115(e)(1)). Support for the spouse and dependents counts too. The court takes into account every other resource likely to be available then. A judge sets that amount, and whatever the account holds above it can go to the judgment.

The owner has to prove the need, with evidence. In Schwartzman v. Wilshinsky, 50 Cal. App. 4th 619 (1996), a stockbroker earning $476,000 a year claimed his IRA exempt and filed no financial statement. The court held that he had not carried his burden, and that the judgment’s size alone proved nothing about what he would need in retirement.

In the 2016 O’Brien decision the Court of Appeal listed the factors a judge weighs, drawing on bankruptcy decisions. They are the debtor’s:

• present and expected living expenses and income
• age and health
• ability to work and earn
• training and skills
• other assets and how readily they can be sold
• ability to save for retirement
• special needs

The trial court there had refused to consider what the debtor and his wife currently earned. That was the wrong legal standard, and the Court of Appeal sent the case back, because a healthy debtor years short of retirement who has earned a large salary can rebuild an account. So a working professional’s current income counts against the claim.

For an owner already retired, the question is present need. In Bagby v. Davis, No. B333649 (Cal. Ct. App. Feb. 17, 2026), the debtor was already retired, offered no evidence of need, and had reported income above $500,000 a year, so his IRAs were not exempt.

Moving out of state does not help, and the same decision says so. Davis had moved to Florida, where an IRA exemption has no limit, and claimed Florida’s exemption against a California levy. The court held that “California law applies to collection actions in California courts, regardless of where the judgment debtor lives.” Exemption law governs a court’s remedies, and a California court applies its own.

An IRA’s exemption also has a deadline, which an ERISA plan’s does not. The claim of exemption is due 15 days after the notice of levy is served in person. Where the notice comes by mail the deadline is 20 days (§ 703.520(a)). On a judgment for consumer debt a late claim is still allowed, though the levying officer may release the money to the creditor after 20 days (§ 703.520(c)).

In Coastline the same debtor whose profit-sharing plan needed no claim lost his SEP-IRA by missing the deadline. His claim arrived late, the sheriff returned it unprocessed, and the creditor took more than $100,000. The Court of Appeal held he had forfeited the point by not appealing that order. No hearing on his retirement needs was ever held.

When an IRA is applied to a judgment, the court must allow the debtor an added amount for the income tax the withdrawal triggers (§ 704.115(e)(3)). The allowance is claimed in the trial court or lost. The debtor in Bagby raised it first on appeal, and the court refused to consider it.

Which Judgments Get the 2025 Floor

Since January 1, 2025, a judgment on personal debt cannot take a California IRA below a floor, and a tort or business judgment can. Assembly Bill 2837 added the floor to the support test. For “personal debt,” the support amount cannot fall below the federal Bankruptcy Code’s IRA cap, as adjusted, and the floor can be added up across every retirement plan the debtor holds (§ 704.115(e)(2)). The IRA protection chart shows the current figure beside every other state’s rule.

Personal debt is a term the judgment-renewal section defines. It covers money a natural person owes on a transaction that was primarily for personal, family or household purposes. That section excludes any debt “incurred due to or obtained by tortious or fraudulent conduct” (§ 683.110(d)). It also excludes “judgments for unpaid wages, damages, or penalties owed to an employee.”

A malpractice judgment, a judgment on a business debt or a personal guaranty, and a fraud judgment all fall outside the definition. Against those creditors the IRA gets the bare support test. The floor can also shrink where its value traces to assets “the debtor disposed of with the intent to hinder, delay, or defraud a creditor” (§ 704.115(e)(2)). The reduction reaches only property that was not exempt in the debtor’s hands at the time. No court has yet construed any part of the floor.

The same amendment added accounts under sections 403, 414 and 457 of the tax code, on the support test rather than the full exemption, and left employer plans exempt in full. The 2025 change did not extend the support test to a 401(k).

Rollover IRAs Keep the Employer Plan’s Full Exemption

Money rolled from a genuine private retirement plan into an IRA keeps the plan’s full exemption in California. Most states treat the rolled-over money as an ordinary IRA. California’s tracing statute keeps an exempt fund exempt wherever it can be traced, and the retirement exemption puts no limit on that. McMullen v. Haycock, 147 Cal. App. 4th 753, 760 (2007), held that “the exempt private retirement plan funds retained their full exemption under section 704.115, subdivisions (b) and (d) after being rolled over into the IRA.” The support test never reached them.

One bankruptcy judge read the statute the other way. The decision, In re Mooney, 248 B.R. 391 (Bankr. C.D. Cal. 2000), applied the limited IRA exemption to a rollover. It was, by its own terms, a preliminary ruling. McMullen declined to follow it, and no court since has. The Court of Appeal agreed in the 2019 O’Brien decision, 38 Cal. App. 5th 553, 564: “we agree with McMullen that Mooney was wrongfully decided.” A California court applies McMullen.

The rule has one condition. In Bagby the court distinguished McMullen, because nobody there had disputed that the source plan was a real one. Where the source plan never qualified, “funds cannot carry an exemption with them if they have no exemption to carry.” Whoever claims the exemption must trace the money back to the plan and show the plan was genuine. That proof is simplest for a rollover kept in its own account, apart from later contributions.

When a Retirement Plan Is Not a Retirement Plan

A California plan is exempt for what it is used for, and a plan built to defeat a creditor is not a retirement plan whatever its documents say. The rule comes from Yaesu Electronics Corp. v. Tamura, 28 Cal. App. 4th 8, 13 (1994): “Without regard to its label, a plan not used and designed for retirement purposes is not a retirement plan.”

That plan was a defined-benefit plan whose main purposes were deferring tax and passing money to the debtor’s sons. The debtor gave the plan’s proceeds away one month after a $2.2 million verdict. The gift was a fraudulent conveyance because the money had never been exempt.

The court judges the plan as of the levy. In the 2019 O’Brien case the debtor had just been left with a partial exemption on his IRAs. Eighteen days later he formed an LLC, had it adopt a 401(k), signed the adoption as managing member and trustee, and rolled the IRAs in. He admitted the purpose was to protect the money.

The court found the plan had not been principally designed and used for retirement when the levy hit, so it was no private retirement plan. The money kept only the partial exemption it had carried in the IRAs, traced back under McMullen.

Leaving the money untouched is not enough. In Rucker the debtor owed $6.5 million on a judgment arising from criminally fraudulent conduct. He had funded a pension plan and several 401(k) plans through three corporations he owned, and had taken no loans and no withdrawals. The Ninth Circuit held, at 1161, that the absence of loans or withdrawals, “while significant, does not in itself guarantee that the plan was designed and used primarily for retirement.”

He had overfunded the plans past the tax code’s limits, by about 20 percent of what they held. He also understated his contributions to the IRS and lived rent-free in property the pension plan bought.

Overfunding past the federal limits, other breaches of the tax rules, contributions out of proportion to the wages the corporation paid, and the debtor’s own credibility all count, and none is required. A plan used partly to keep money from creditors stays exempt if it was designed and used primarily for retirement.

The exemption exists so a debtor can keep qualifying funds from creditors. A debtor whose conduct shows the plan was for something else loses it. The Ninth Circuit put it in one sentence in Simpson, at 1018: “while the debtor’s subjective intent cannot create an exemption, it may take one away.”

The debtor has to prove the plan is real. In Bagby the plan was a two-trustee law-firm pension and profit-sharing plan holding a single life insurance policy. Against that policy the debtor had borrowed more than a third of its value, with no explanation.

The Court of Appeal held that the plan claimed “must at least be a retirement plan,” principally designed and used for that purpose, and that the debtor bears the burden. That plan had not been shown to be one. The California asset protection case law on the retirement statute now spans thirty-two years, Yaesu to Bagby.

Which Creditors Still Reach a California Retirement Account

A support judgment and the IRS reach a California retirement account the ordinary judgment creditor cannot touch. When a child, family or spousal support judgment is enforced against money any retirement plan is about to pay, an employer plan included, the money is exempt only as far as the court allows under the support rules (§ 704.115(c)). A periodic payment can be taken by an earnings assignment order, within the limit a support withholding order carries.

No state exemption survives a federal tax levy. The regulation is direct: “No provision of a State law may exempt property or rights to property from levy” where a federal tax is being collected (26 C.F.R. § 301.6334-1(c)). Federal law exempts a short list of property from levy. An IRA is not on it, nor is a private employer plan, so the IRS can reach both. ERISA’s rule against assignment does not stop a tax levy.

An ordinary creditor who wins on the support test still faces one limit on collection. Where an IRA or self-employed plan pays out periodically, the creditor takes from each payment no more than the wage garnishment law allows against earnings of the same size (§ 704.115(f)). A Roth lump sum is measured the same way as a traditional one when the court decides how much can go to the judgment.

Retirement Accounts in a California Bankruptcy

California bars the federal exemption list in bankruptcy, so a debtor who files here uses state exemptions, and a separate federal rule still protects retirement funds. The debtor chooses between California’s ordinary exemptions and its bankruptcy-only set, and the two cannot be mixed. The choice is made after filing. Under In re Reaves, 285 F.3d 1152 (9th Cir. 2002), a debtor who claimed the ordinary exemptions against a pre-bankruptcy levy can still elect the other set once the case is filed.

Whichever California list the debtor takes, the Bankruptcy Code adds an exemption of its own for retirement money. It exempts “retirement funds” in a tax-exempt fund or account under the retirement sections of the tax code (11 U.S.C. § 522(b)(3)(C)). The exemption sits in the same part of the statute as the state-law exemptions, so a debtor in an opt-out state gets it.

For a traditional or Roth IRA that federal exemption is capped at a figure adjusted every three years. Rollover money from an employer plan stays outside the cap, and so do SEP and SIMPLE accounts. An ERISA plan is not even part of the bankruptcy estate, under Patterson v. Shumate.

An inherited IRA is different. In Clark v. Rameker, 573 U.S. 122 (2014), the Supreme Court held that money in an inherited IRA is not “retirement funds” under that federal exemption. California’s own statute names no inherited account, and no California court has decided whether the state exemption reaches one. Texas names inherited IRAs in its statute; California does not. A spouse who rolls an inherited account into her own IRA then owns an ordinary IRA, and Clark does not reach it.

What California Retirement Protection Comes To

An ordinary judgment creditor gets nothing from a Californian’s employer plan, in court or in bankruptcy, and an ERISA plan stays exempt without a claim. A judge decides how much of an IRA survives, and the claim is due within days of the levy. The 2025 floor helps only against consumer debt. A rollover from a genuine plan keeps the full exemption, and a plan set up after the fight starts gets none.

The share of an IRA a court will not protect is liquid money California leaves exposed. The rest of asset protection in California is about what covers it.