Eleventh Circuit Court Affirms Exemption Of Single-Member Keogh Retirement Plan

The Eleventh Circuit Court of Appeals issued an interesting decision about exemption of self-employed businessmen’s pension plans. A self-employed Florida debtor filed Chapter 7 bankruptcy listing her Keogh plan as an exempt asset. Section 222.21 of the Florida statutes exempts debtors’ retirement plans. The Chapter 7 trustee objected to the exemption of the debtor’s Keogh retirement plan. The bankruptcy court concluded that the debtor could not claim the exemption, and that the debtor’s Keogh plan was part of the bankruptcy estate, because the debtor was the "sole shareholder and sole participant" in the Keogh plan. The debtor appealed to a local District Court which upheld the bankruptcy court’s result on the grounds that the the debtor’s Keogh plan was not and ERISA plan.

The appeals court reversed the lower courts and sustained the Keogh objection. The appellate court found that Section 222.21, Florida Statutes exempts all pensions sanctioned under Section 401(a) of the Internal Revenue Code. The court said that an "employee" in Section 401(a) includes a "self-employed individual." Then, the appeals court stated that in 2005 the Florida Legislature amended Section 222.21 to provide that an exempt pension does have to comply with ERISA. Therefore, the single-member Keogh plan is exempt even though it is not an ERISA sanctioned retirement plan. In re Sarah E. Baker 11^th Circuit, Case No. 09-13144.