The government can take money from your 401(k), but only in a narrow set of circumstances: the IRS can levy it for unpaid federal taxes, a family court can divide it through a Qualified Domestic Relations Order for divorce or child support, and federal prosecutors can reach it to collect criminal restitution. Outside of those situations, your 401(k) is one of the best-protected assets you own.
Why Ordinary Creditors Can’t Touch It
Most 401(k) plans are governed by a federal law called the Employee Retirement Income Security Act of 1974, or ERISA. ERISA contains an “anti-alienation” rule that prevents plan benefits from being assigned or transferred to someone else.1Office of the Law Revision Counsel. 29 U.S. Code 1056 – Form and Payment of Benefits The practical effect is broad: a credit card issuer, a hospital, someone who wins a lawsuit against you, even a bankruptcy trustee cannot force your plan to hand over your money.2U.S. Department of Labor. FAQs about Retirement Plans and ERISA
This shield is federal, so it works the same whether you live in Florida or Oregon. It has no dollar ceiling. A $5,000 balance and a $5 million balance are equally protected while the money stays inside the plan. In bankruptcy, ERISA-qualified plans keep that unlimited protection.
The government’s ability to reach 401(k) money comes from specific exceptions written into ERISA itself. Those exceptions cover federal tax collection, family court orders, and certain criminal penalties. Everything the government can do to your 401(k) lives inside those three doors.
IRS Levies for Unpaid Federal Taxes
The most common way the government reaches a 401(k) is through an IRS levy. The Internal Revenue Code gives the IRS authority to collect delinquent taxes by levying “all property and rights to property” belonging to the taxpayer, and federal regulations specifically list federal tax levies as an exception to ERISA’s anti-alienation rule.3Office of the Law Revision Counsel. 26 U.S. Code 6331 – Levy and Distraint4eCFR. 26 CFR 1.401(a)-13 – Assignment or Alienation of Benefits
A levy doesn’t happen without warning. The IRS has to assess your tax liability, bill you, and give you a chance to pay. If you don’t respond, a federal tax lien attaches to your assets, including retirement accounts. Before actually seizing anything, the IRS is required to send a final notice giving you at least 30 days and the right to request a hearing.5Taxpayer Advocate Service. Notice of Intent to Levy Only after that window closes can the levy notice go to your plan administrator, who is then legally required to turn the funds over.
Retirement Accounts Are a Last Resort in Practice
Even though the IRS has this authority, its own internal manual says agents should not levy retirement accounts unless the taxpayer’s behavior has been “flagrant.” The term isn’t defined in the tax code. IRS internal guidelines describe it with examples such as intentionally evading taxes or ignoring collection notices over a long period. If your conduct hasn’t been flagrant, the IRS is not supposed to touch the account. And even when conduct is flagrant, the agency is supposed to consider whether you depend on those retirement funds for basic living expenses. If you do, the policy says the account still shouldn’t be levied.6Internal Revenue Service. 5.11.6 Notice of Levy in Special Cases
This is an internal policy, not a legal right you can enforce in court. But it does mean that in practice, the IRS levying a 401(k) is genuinely rare, and usually reserved for people who have been actively dodging their tax obligations.
What a Levy Costs You in Taxes
When the IRS does levy a 401(k), the amount taken counts as taxable income for that year. The one break: distributions caused by an IRS levy are exempt from the 10% early withdrawal penalty that would normally apply if you’re under age 59½.7Office of the Law Revision Counsel. 26 U.S. Code 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts – Section: 72(t)(2)(A)(vii)8Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions Regular income tax still applies to whatever the IRS takes.
State Tax Authorities Are Locked Out
Only the federal government has this levy power over an ERISA-covered 401(k). ERISA’s anti-alienation rule preempts state law, so state and local tax authorities generally cannot reach your 401(k) the way the IRS can. If you owe state taxes, the state can go after bank accounts, wages, and other property, but the ERISA plan itself is off-limits.
Divorce, Child Support, and QDROs
The second door is family court. A Qualified Domestic Relations Order, or QDRO, is a court order that directs a 401(k) plan to pay a portion of one spouse’s retirement benefits to the other spouse, a child, or another dependent. It is the only mechanism through which a court can legally split an ERISA-protected retirement account.9Office of the Law Revision Counsel. 29 U.S. Code 1056 – Form and Payment of Benefits – Section: (d)(3)
QDROs come up most often in divorce, where retirement assets are divided between spouses. They can also enforce past-due child support or alimony. A court could, for example, direct that a portion of a participant’s 401(k) go to a state child support agency to cover arrears. The order has to identify the participants, the plan, the amount or formula, and the time frame; a general divorce decree that mentions retirement money isn’t enough on its own.10Office of the Law Revision Counsel. 29 U.S. Code 1056 – Form and Payment of Benefits – Section: (d)(3)(D) Once the plan administrator confirms the order qualifies, the funds are distributed as the order directs.
Federal Criminal Restitution
The third door opens only if you’re convicted of a federal crime. When a court orders restitution to victims or a fine to the government, the enforcement statute is 18 U.S.C. § 3613, which reaches “all property or rights to property” of the defendant, “notwithstanding any other Federal law.”11Office of the Law Revision Counsel. 18 U.S. Code 3613 – Civil Remedies for Satisfaction of an Unpaid Fine Courts have read that phrase to sweep past ERISA’s anti-alienation protections. The government can send a garnishment order directly to a 401(k) plan administrator to collect on a restitution judgment. The Justice Department’s own forfeiture manual acknowledges that “ERISA does not bar the garnishment for restitution of funds in ERISA-protected retirement plans.”12Department of Justice. Asset Forfeiture Policy Manual 2025
This exception is narrow. It applies to federal criminal convictions. It doesn’t reach civil debts or state criminal cases.
Civil Asset Forfeiture Sits in a Gray Area
Civil asset forfeiture is a separate process that lets the government seize property it believes is connected to criminal activity, sometimes without a conviction. Whether it can reach an ERISA-protected 401(k) is unsettled. The Justice Department’s Asset Forfeiture Policy Manual notes that “some courts have held that ERISA’s anti-alienation provision precludes seizure of funds in ERISA-protected retirement plans” and advises prosecutors to consult carefully before trying it.12Department of Justice. Asset Forfeiture Policy Manual 2025 Civil forfeiture lacks the “notwithstanding any other Federal law” override that criminal restitution has under 18 U.S.C. § 3613, so the clearer path for the government is a criminal conviction and a restitution order.
Once the Money Leaves the Plan, the Shield Comes Off
ERISA’s protections attach to money inside the plan. The moment you take a distribution and deposit it in a personal bank account, it becomes an ordinary asset, and any creditor with a judgment against you can garnish it.
The same weakening happens with rollovers to an IRA. IRAs do get some federal protection in bankruptcy, but the coverage is thinner in two important ways. Bankruptcy protection for IRAs is capped in dollar terms, while ERISA-qualified 401(k) plans have no dollar limit. And outside of bankruptcy, IRA protection against creditors depends on state law, while ERISA gives uniform protection nationwide.2U.S. Department of Labor. FAQs about Retirement Plans and ERISA If you’re carrying significant debt or facing potential legal claims, leaving the funds in an ERISA-covered employer plan keeps the strongest available shield in place.
Plans That Don’t Get the Full ERISA Shield
Not every plan labeled “401(k)” comes with the full ERISA protections above.
Solo 401(k) Plans
A solo 401(k) covers only a business owner and possibly their spouse, with no other employees. These plans are generally not covered by Title I of ERISA, which is where the anti-alienation rule lives. They still have to meet the Internal Revenue Code’s qualification rules, but the lack of ERISA Title I coverage can leave gaps in bankruptcy and against non-government creditors. If you’re self-employed with a solo 401(k), your state’s laws may determine how much protection the account actually gets from creditors other than the IRS or federal courts.
Government and Church Plans
ERISA explicitly does not cover plans established by government entities or churches.13U.S. Department of Labor. Employee Retirement Income Security Act (ERISA) If you work for a state or local government and participate in a 457(b) or similar plan, your creditor protections come from state law, and those protections vary significantly. If that describes your situation, check your own state’s rules rather than assuming you have the same shield that private-sector 401(k) participants enjoy.