Opinion ID: 4570917
Heading Depth: 2
Heading Rank: 1

Heading: Retirement Plan or Arrangement.

Text: ¶ 15 Subsection 20 specifically exempts any interest in a retirement plan or arrangement. The term retirement consistently modifies the phrase plan or arrangement each of the three times the Legislature used the phrase in Subsection 20. The logical conclusion based on the plain language of the statute is that every interest exempt under Subsection 20 must be a plan or arrangement designated for retirement purposes. The Tenth Circuit Court of Appeals previously supported this conclusion when it held Subsection 20 represents a rational policy choice in favor of debtor retirement funds. See In re Walker , 959 F.2d 894, 900 (10th Cir. 1992). The United States Bankruptcy Court for the Northern District of Oklahoma also concluded the intent of the Legislature in exempting retirement accounts is to allow debtors to preserve assets that they have earmarked for retirement in the ordinary course of the debtor's affairs. In re Sims , 241 B.R. 467, 471 (Bankr. N.D. Okla. 1999). The reasoning of these federal courts tracks our holding in Security Building & Loan Association v. Ward , 1935 OK 996, ¶ 32, 50 P.2d 651, 657. ¶ 16 Similarly, the United States Bankruptcy Court for the Northern District of Oklahoma in In re Gee , 124 B.R. 581 (Bankr. N.D. Okla. 1991), addressed whether an annuity from the debtor's employer as a result of a sales bonus was exempt pursuant to 31 O.S.1987, § 1(A)(20) (superceded 1998). Id . at 582-83. The bankruptcy court held that the annuity was not a retirement plan as contemplated under Subsection 20. Specifically, the bankruptcy court reasoned: But this annuity is not a retirement plan any more than it is wages. Debtor has a right to receive the payments even though he has not yet retired; he enjoys the right whether he retires or not; and the right was never offered to employees at large for purposes of retirement, but to a select few employees as a reward for salesmanship. Id . at 586; see also In re Cella , 128 B.R. 574, 578 (Bankr. W.D. Okla. 1991) (holding Subsection 20 is intended to apply only to retirement funds). In accordance with these persuasive federal court opinions and Security Building & Loan Association v. Ward , 1935 OK 996, ¶ 32, 50 P.2d 651, 657 , we conclude for Subsection 20 to apply, the plan or arrangement must be for retirement. 5 ¶ 17 The next question becomes whether the Deferred Bonus is a retirement plan or arrangement. Subsection 20 lists by way of example and not by limitation several retirement plans or arrangements that are exempt. An I.R.C. Section 409A plan, like the Deferred Bonus, is not listed. The stated examples are particularly helpful in determining the legislative intent as to what plans or arrangements are exempt. The majority of the retirement vehicles listed in Subsection 20 involve a trade-off: individuals invest their money with certain advantageous tax benefits in the future but must forfeit access to the money until retirement or face significant penalties for withdrawals or surrenders. 6 These plans or arrangements protect funds that a plan participant will rely upon for retirement. ¶ 18 The Section 409A Deferred Bonus does not share these characteristics. Section 409A applies to nonqualified deferred compensation, which it defines very broadly, and includes a present legally enforceable right to taxable compensation for services that will be paid in a later year. See 26 U.S.C. § 409A (2018). 7 The Deferred Bonus vested five years after the execution of the original Employment Agreement. The Restated Agreement specified that Adams would receive payments on January 1st of the subsequent five years (2020, 2021, 2022, 2023, and 2024). Payment of the deferred bonus was not designated for retirement purposes, and once received, the Deferred Bonus could be used for any purpose. The Deferred Bonus is more akin to the annuity in In re Gee : a short term investment vehicle that Adams used to increase his earnings not offered to employees at large for purposes of retirement. See In re Gee , 124 B.R. at 586. Holding such a plan or arrangement exempt does not fulfill the legislative intent of Oklahoma's exemption statute--to provide a debtor with the necessities of life. Sec. Bldg. & Loan Ass'n , 1935 OK 996, ¶ 32, 50 P.2d at 657. ¶ 19 Further, a Section 409A Deferred Bonus does not enjoy the same kind of fiduciary relationship between the employer and employee as other retirement plans. The whole structure of the Section 409A Deferred Bonus is that of a debtor-creditor, giving rise to contractual claims in the event of a breach, not that of a fiduciary and its beneficiary. See supra Restated Agreement, Section 3.3. 8 ¶ 20 We, therefore, hold that Subsection 20 exempts only those plans or arrangements designated for retirement, and the Section 409A Deferred Bonus does not meet the characteristics of a retirement plan or arrangement.