Increasing my contribution in 403(b)

[jamal67]

What is the name of your state? Florida
I live in Florida and work for the state. I have been contributing to my 403(b) plan offered by my employer since I joined the job several years ago. I became a judgment debtor one year back. The judgment creditor is my former friend. Now, I want to increase my amount of contribution to my 403(b) plan offered by my employer. Will this contribution be protected from the judgment creditor? I read Statue 222.21 http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0200-0299/0222/Sections/0222.21.html which essentially states

“any money or other assets payable to an owner, a participant, or a beneficiary from, or any interest of any owner, participant, or beneficiary in, a fund or account is exempt from all claims of creditors of the owner, beneficiary, or participant if the fund or account is: Maintained in accordance with a master plan, volume submitter plan, prototype plan, or any other plan or governing instrument that has been preapproved by the Internal Revenue Service as exempt from taxation under s. 401(a), s. 403(a), s. 403(b), s. 408, s. 408A, s. 409, s. 414, s. 457(b), or s. 501(a) of the Internal Revenue Code …”



However, someone warned me of fraudulent transfers: Chapter 726 http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0726/0726.html I am confused. I am the only financial source for my family and your response is greatly helpful.

 

[adjusterjack]

However, someone warned me of fraudulent transfers: Chapter 726 http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0726/0726.html

Whether your contribution is a fraudulent transfer or not depends on how much you owe and what your purpose is for increasing the contribution. However, I don't think fraudulent transfer applies because wage garnishment is based on your disposable income. Example: If you make $500 per week take home and you contribute $100 per week to the plan and increase it to $200 per week, the wage garnishment is based on the $500 per week. In other words, increasing your contribution to shield your money from your creditor isn't going to work.

However,

I am the only financial source for my family and your response is greatly helpful.

You may be exempt from wage garnishment under 222.11 head of the family:

http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&URL=0200-0299/0222/Sections/0222.11.html

 

[jamal67]

Thank you. However, I am already head of household therefore I am not worried about wage garnishment as I can prove this if my wage is garnished. I wish to increase my contribution in my 403(b) which would be the only source of my income after I retire. I am concerned if this increase will be considered as fraudulent transfer.

 

[LdiJ]

Thank you. However, I am already head of household therefore I am not worried about wage garnishment as I can prove this if my wage is garnished. I wish to increase my contribution in my 403(b) which would be the only source of my income after I retire. I am concerned if this increase will be considered as fraudulent transfer.

If you are not subject to wage garnishment then why do you think it might be a fraudulent transfer to put more into your 401k?

 

[jamal67]

If the salary is deposited into my bank account then, after 6 months, the creditor can take it even though I am head of household. However, if the same salary or part of it (which is supposed to come to my bank account) is transferred to 403(b) then the creditor cannot take it. Whether that transfer is fraudulent transfer OR 403(b) would protect me is my concern.

 

[LdiJ]

If the salary is deposited into my bank account then, after 6 months, the creditor can take it even though I am head of household. However, if the same salary or part of it (which is supposed to come to my bank account) is transferred to 403(b) then the creditor cannot take it. Whether that transfer is fraudulent transfer OR 403(b) would protect me is my concern.

The money will not be in your bank account because you used it to make a contribution to your 403(b). That is no different than spending the money in your account on things you need or want before it hits the six month mark.

 

[jamal67]

I cannot spend all my salary if it is in my bank account. Therefore the creditor can take it after 6 months. But if it is in 403(b), the creditor can never take it.

Currently, my salary is deposited into my account (single account). Based on your argument, can I deposit the salary in a joint account with my wife and, if the creditor claims fraudulent transfer then, can I claim that I would have spent that money even if it is deposited into my single account therefore, depositing into joint account is also not fraudulent transfer?

 

[Zigner]

All this wrangling...wouldn't it be easier (and, ya know, proper) to simply pay your judgment down?

 

[LdiJ]

I cannot spend all my salary if it is in my bank account. Therefore the creditor can take it after 6 months. But if it is in 403(b), the creditor can never take it.

Why can't you spend it all?

Currently, my salary is deposited into my account (single account). Based on your argument, can I deposit the salary in a joint account with my wife and, if the creditor claims fraudulent transfer then, can I claim that I would have spent that money even if it is deposited into my single account therefore, depositing into joint account is also not fraudulent transfer?

No, transferring it from one account that has your name on it, to another account that has your name on it, (even if that account also had your wife's name on it) would not protect the money.

 

[jamal67]

"Why can't you spend it all? " the issue is not on this matter. There is no rule or proof that states that I must or I will spend it!!

"The money will not be in your bank account because you used it to make a contribution to your 403(b). That is no different than spending the money in your account on things you need or want before it hits the six month mark. " can I give all that money to someone else and claim that I would have spent it if it is in my account therefore I did not do any fraudulent transfer by giving it to someone else? Obviously the answer is NO. My question is: whetehr 403(b) will provide any protection to me from fraudulent transfer claims.

 

[jamal67]

All this wrangling...wouldn't it be easier (and, ya know, proper) to simply pay your judgment down?

I cannot pay even 5% of that in my life time. I could not afford an attorney.

 

[Zigner]

I cannot pay even 5% of that in my life time. I could not afford an attorney.

If that is truly the case, then you may wish to consider filing bankruptcy.

 

[jamal67]

Unfortunately, I cannot do that also (I cannot explain here)

 

[Zigner]

Then you should pay towards what you owe. 5% is better than 0%.

 

[jamal67]

5 is better than 0, but now my concern is on 403(b)