Exemption of ESOP Plan Benefits in Florida

Jon Alper Florida Exemptions

Exemption of a debtor’s interest in ESOP plans depends upon statutory provisions and the terms of the company’s written plan documents. One of my clients asked me to evaluate his interest in an ESOP containing stock from Publix. He had accumulated Publix stock in an ESOP through his employment with Publix.

The issue of ESOP exemptions has come up infrequently in written court decisions. There are many more cases dealing with well-known pension plans, IRAs and other statutory exemptions. Florida Statute 222.21 provides for the creditor exemption of various retirement plans that comply with specific Internal Revenue Code requirements.

Florida courts that have considered in ESOP plans have evaluated their protection based upon the plans’ qualification as a spendthrift trust for the benefit of the debtor. Well-settled Florida law protects from creditors a debtor’s beneficial interest in a spendthrift trust provided the trust was created by someone other than the debtor. Whether a debtor’s ESOP interest is exempt on non-exempt depends upon the debtor’s right to access ESOP proceeds under plan documents. Courts have held that a debtor’s ESOP plan was a protected spendthrift trust when the debtor had no right to access his plan proceeds after terminating employment until he reached retirement age and was unable to borrow money from the plan. On the other hand, when a debtor’s interest fully vested upon termination of employment and when the debtor could demand withdrawal of proceeds at age 55 a court held that the debtor’s control and dominion over his benefits disqualified the plan as an exempt spendthrift trust arrangement.

My client’s Publix plan agreement gave the debtor the right to access plan assets upon termination of employment regardless of his age. My initial review suggests that the Publix ESOP is not a protected spendthrift trust arrangement.

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