Section 222.21 of the Florida Statutes exempts retirement plans that have been pre-approved by the IRS as exempt from taxation pursuant to Section 401(a) of the Internal Revenue Code. In a recent bankruptcy proceeding the court considered a debtor’s claimed exemption of his tax deferred Keogh plan. The Code Section 401 states that a qualified pension or trust includes a trust created or organized by an employer for the exclusive benefit of his employees. The debtor provided the court with letters from the IRS and Treasury Department supporting his position that his Keogh was a qualifying tax deferred pension plan. The bankruptcy court found that the issue is whether a self-employed debtor would qualify as a participant in a Keogh plan when he is the only participant who shares the benefits and protection of the plan.
The bankruptcy court cited a U.S. Supreme Court case for the proposition that a working owner of a business is not a “participant” in an ERISA pension plan sponsored by this corporation when he is the sole owner and employee. The bankruptcy court held that the Florida legislature did not contemplate exempt funds in a Keogh plan when the claimant is the sole shareholder and sole “participant” in the plan. In re Sarah Baker 9:08-bk-11158.
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Jon Alper is an expert in asset protection planning for individuals and small businesses.
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