401(k) Creditor Protection in Florida

A 401(k) plan in Florida is protected from creditors under both federal and state law. ERISA, the federal Employee Retirement Income Security Act, shields 401(k) assets through its anti-alienation provision, and Florida Statute 222.21 independently exempts 401(k) balances from creditor claims. There is no dollar cap under either source of protection, meaning the entire account balance is shielded regardless of size.

In Patterson v. Shumate (1992), the U.S. Supreme Court held that a debtor’s interest in an ERISA-qualified plan never enters the bankruptcy estate, because the required anti-alienation clause is a transfer restriction enforceable under nonbankruptcy law.

How ERISA Protects 401(k) Plans from Creditors

ERISA requires that a 401(k) plan’s assets sit in trust, held by one or more trustees rather than by the participant. Every plan must also provide that a participant’s benefits cannot be assigned or alienated. A garnishment served on the plan fails for that reason. The plan cannot lawfully pay a participant’s benefit over to his creditor.

Creditor protection applies to traditional 401(k) plans, Roth 401(k) plans, and solo 401(k) plans. Inherited 401(k) accounts are also covered under Florida law. The two sources of protection overlap but are not identical: ERISA does not cover every plan type, and it stops protecting funds after distribution. Florida’s statute picks up where ERISA leaves off.

ERISA protection does not depend on state law. A 401(k) plan that meets ERISA requirements is shielded from creditors in every state, regardless of how generous or restrictive that state’s exemption laws may be. This makes ERISA-qualified 401(k) plans different from IRAs, which rely entirely on state statute for creditor protection outside of bankruptcy.

The federal protection applies in bankruptcy as well. An ERISA-covered 401(k) interest is excluded from the bankruptcy estate, so the exemption caps in the Bankruptcy Code never reach it. An IRA is different: its federal exemption is capped at $1,711,975 as of April 2025. The cap counts only what the owner contributed and earned; a rollover from an employer plan sits outside it.

How Florida Statute 222.21 Extends 401(k) Protection

Florida provides an independent layer of protection through Section 222.21. The statute exempts money or other assets payable to a participant or beneficiary from any fund or account that qualifies under the Internal Revenue Code, including 401(k) plans.

Section 222.21 covers two situations that ERISA does not. First, it protects plans that ERISA does not reach. Solo 401(k) plans and other owner-only retirement plans may not qualify as ERISA plans because they lack non-owner employees. The Eleventh Circuit held in In re Baker (2009) that Florida’s amended exemption statute requires qualification under the Internal Revenue Code rather than ERISA compliance. A business owner with a solo 401(k) who faces a judgment can rely on Section 222.21 for protection that federal law may not provide.

Second, the Florida exemption may continue to protect 401(k) funds after distribution. ERISA’s anti-alienation provision applies only while funds remain in the plan. Once a participant takes a distribution, the federal protection ends. Florida Statute 222.21 may continue to shield those funds if they remain traceable to the retirement source. A required retirement account withdrawal, kept in its own account, has the strongest claim to continued protection, but no Florida appellate court has settled the question.

Can a 401(k) Be Garnished After a Cash-Out?

A 401(k) that has been cashed out can be garnished. Money inside the plan is beyond a judgment creditor’s reach, but the balance loses its federal shield the moment it leaves the plan. Whether Florida’s own exemption still covers the money depends on why it came out and where it went.

Under ERISA, protection ends at distribution. A creditor cannot intercept the distribution while the plan administrator is processing it, but once the funds land in the participant’s bank account, ERISA no longer applies. The creditor can then serve a writ of garnishment on the bank.

No Florida appellate court has decided whether Section 222.21 protects money after it leaves the plan, and the bankruptcy courts applying Florida law have split. Two facts have driven those decisions: whether the participant had to take the money, and whether it stayed in an account of its own. A required distribution kept apart has held the exemption. A voluntary withdrawal sitting in a checking account with wages and other deposits is the hardest case of all.

A participant facing a creditor claim is safest leaving the money in the plan and taking only the distributions the plan or the IRS requires. Where a distribution has to come out, it belongs in its own bank account holding nothing else, so every dollar can be traced back to the plan. Married couples have a second option. A tenancy by the entireties account is beyond the reach of a creditor whose judgment runs against only one of them.

Solo 401(k) Creditor Protection in Florida

Solo 401(k) plans (retirement accounts for self-employed individuals or business owners with no non-owner employees) are not treated the same as employer-sponsored plans. Most solo 401(k) plans do not qualify under ERISA because ERISA requires covered employees, and a plan that covers only the owner does not meet that threshold.

Without ERISA coverage, a solo 401(k) has no federal creditor protection outside of bankruptcy. In many states, that leaves the account exposed. Florida is different. Section 222.21 protects any account that qualifies under the Internal Revenue Code, and a solo 401(k) qualifies. The Eleventh Circuit’s decision in In re Baker confirmed that Florida’s amended statute does not condition the exemption on ERISA status, so an owner-only plan is judged on its tax qualification.

The difference is that a Florida business owner with a solo 401(k) has state-law creditor protection equivalent to what a W-2 employee receives under ERISA. A business owner in a state that lacks a comparable exemption may have no protection at all.

Do 401(k) Loans Affect Creditor Protection?

A 401(k) loan does not remove funds from the plan’s protection. The participant borrows against the account balance, but the remaining balance stays in the plan and remains protected under both ERISA and Section 222.21.

Defaulting on the loan does not hand a creditor anything. The plan offsets the unpaid balance against the account, a reduction treated as a taxable distribution. The loan runs between the participant and the plan, so no outside lender holds a claim on the account.

The risk arises when the participant separates from employment while a 401(k) loan is outstanding. Plans set their own repayment deadline, and it is usually short. A participant who cannot repay has the unpaid balance treated as a distribution. From there, the same protection questions apply as with any other 401(k) withdrawal.

Exceptions to 401(k) Creditor Protection

Neither ERISA nor Florida Statute 222.21 provides absolute protection. Several categories of creditors can reach 401(k) assets despite the general exemption.

Divorce. A qualified domestic relations order can direct the plan administrator to pay a portion of the participant’s benefit to a former spouse. Congress wrote that exception into the anti-alienation rule itself. Florida’s statute matches it: Section 222.21 does not exempt an account from the claims of an alternate payee under such an order.

Federal tax debt. The IRS can levy a 401(k) account to collect unpaid federal taxes. Federal law exempts nothing from an IRS levy except a short list in the tax code. Retirement accounts are not on that list. Neither ERISA nor Section 222.21 stops the levy. A state or local tax collector has no equivalent power and collects subject to the exemptions.

Federal criminal fines and restitution. A federal criminal fine or restitution order reaches all of a defendant’s property, whatever other federal law says. The exemptions Congress left in place do not include retirement accounts. A Florida restitution order is enforced like a judgment in a civil action, so Section 222.21 and ERISA’s anti-alienation rule apply to it.

A plan that loses its tax exemption. Section 222.21 protects an account held under a plan the IRS has preapproved or determined to be exempt from taxation. The Florida exemption ends if a final, nonappealable proceeding determines the plan is not tax-exempt. A plan the IRS never approved can still qualify if the owner proves it substantially complies with the tax-exemption rules.

Plans That Are Not Protected Under ERISA

ERISA covers most employer-sponsored retirement plans, but several common plan types fall outside its scope. Participants in these plans cannot rely on federal creditor protection and must look to state law instead.

Church plans. Retirement plans established by religious organizations are generally exempt from ERISA requirements. A church plan participant in Florida may still have protection under Section 222.21 if the plan qualifies under the Internal Revenue Code, but the automatic federal protection that comes with ERISA does not apply.

Government plans. Federal, state, and local government retirement plans are excluded from ERISA. These plans are typically governed by their own statutes, and creditor protection depends on the specific plan’s authorizing legislation.

Non-qualified deferred compensation. Deferred compensation plans that do not meet Internal Revenue Code qualification requirements, common among executives, are not protected under ERISA or under Florida Statute 222.21. The assets in a non-qualified plan are generally considered part of the employer’s general assets until distribution, leaving them exposed to both the employer’s creditors and the participant’s creditors.

401(k) vs. IRA Creditor Protection in Florida

A 401(k) offers stronger and more reliable creditor protection than an IRA. The comparison is relevant because participants who leave an employer often face a choice between leaving funds in the 401(k) or rolling them into an IRA.

ERISA-qualified 401(k) plans are protected under federal law nationwide, with no dollar limits and no dependence on state exemption statutes. IRAs are protected only under state law outside of bankruptcy, and the level of protection varies across states. In federal bankruptcy, the IRA cap of $1,711,975 covers only contributions and earnings; money rolled over from a 401(k) is uncapped, like the plan itself.

In Florida, the difference is smaller because Section 222.21 provides unlimited protection for both 401(k) plans and IRAs. But a Florida resident who rolls a 401(k) into an IRA and later moves to a state with capped or limited IRA protection could lose a portion of the protection that the 401(k) would have provided. Leaving assets in a former employer’s 401(k) plan preserves the stronger federal protection.

Feature	401(k) Plan	IRA
Federal ERISA protection	Yes, unlimited	No
Florida Statute 222.21	Yes, unlimited	Yes, unlimited
Federal bankruptcy cap	None for ERISA plans	$1,711,975; 401(k) rollovers uncapped
Protection after distribution	Ends under ERISA; uncertain under Florida law	Uncertain under Florida law
Divorce division	Yes, via QDRO	Yes, via equitable distribution
IRS tax levy	Yes, can reach funds	Yes, can reach funds

A participant weighing a rollover from a 401(k) to an IRA should factor in creditor protection alongside investment options and fees. The ERISA layer for 401(k) plans provides a federal floor that no state legislature can weaken. Florida’s exemptions are generous for both account types, but the additional federal protection makes the 401(k) the stronger vehicle from a creditor-protection standpoint.