Say you work for a business that offers 401(k) plan. Investopedia says:

Under the Employment Retirement Income Security Act of 1974 (ERISA), the funds in your 401(k) only legally belong to you once you withdraw them as income. Until then, they're legally the property of the plan administrator—your employer—who cannot release them to anyone but you.
This ERISA protection means that savings held in a regular 401(k) are shielded from garnishment by commercial creditors, even if you file for bankruptcy.

Here's the bit I don't get: when we're talking about the portion of the 401(k) coming from employee contributions, is that portion protected identically to any portion that may come from matched employer contributions?

It would seem the answer is yes, but I'm trying to confirm this because it's not clear to me that "they're legally the property of the employer" is still an accurate premise for the portion of the 401(k) contributed by the employee... is that the case? (Links/citations would be appreciated.)

1 Answer 1


You are worrying unnecessarily; it is that last sentence in the quote that is the important part. Money in a 401(k) plan, whether "contributed by the employee via salary deductions", or by the employer via matching, or growth of the investments is all legally the employer's until you withdraw some or all of it. Technically, your contributions are due to a salary reduction agreement:you have asked your employer to pay you less as wages today and hold the difference to be paid to you at a later date. As the last sentence of the quote says, since the money does not belong to you legally, it cannot be garnished by creditors in bankruptcy or otherwise, e.g. if you have to pay damages in a liability case, the person to whom you have to pay damages can come after your IRAs but not your 401(k) money.

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