Bankruptcy Bill Threatens Retirement Assets

April 11, 2000 ( - A last-minute addition to a pending bankruptcy reform bill could put millions of Americans' retirement savings at risk.

Protection threatened

As currently written, the bill would allow individuals who sign up for a loan to waive the current protections on retirement assets provided by the Employee Retirement Income Security Act (ERISA). The Senate passed the bill earlier this year.

US Senate Finance Committee Chairman William Roth, R-Del., has asked that the offending provision be deleted in a letter dated April 11 to Sen. Charles Grassley, R-Iowa, the manager of the Senate bankruptcy reform bill.

“This type of waiver could be included as a term or condition of a credit or loan agreement at the insistence of a lender,” Roth told Dow Jones News Service. “If the individual accepts the condition, his or her retirement savings would be included in the bankruptcy estate subject to creditors.”


Current provisions of ERISA and the Internal Revenue Code generally protect retirement plan assets from creditors when participants declare bankruptcy.

Finance Committee experts recently discovered the provision during a detailed reading of the bill. The bill is likely to undergo a number of changes when legislators meet to reconcile the Senate version with one passed by the House of Representatives last year. Then both houses of Congress will have to work out a compromise before it goes to President Clinton for his signature.

– Nevin Adams