Gudgergirl Posted April 7, 2014 Share Posted April 7, 2014 401(k) Plan provides for safe harbor contributions and profit-sharing contributions. There is no last day rule or Year of service requirement. Employee is fired mid-year. He signs a severance agreement with a general yet broad release of all claims. Employer believes this means it doesn't have to make contributions to ex-employee under plan. Thoughts? Link to comment Share on other sites More sharing options...
Bird Posted April 7, 2014 Share Posted April 7, 2014 IMO (and I don't think there's any doubt), the employer must make the contributions. The plan itself has the conditions for receiving/not receiving contributions, and I am sure there's nothing in the plan that says "...unless the employee waives the right to such contributions." Bill Presson 1 Ed Snyder Link to comment Share on other sites More sharing options...
My 2 cents Posted April 7, 2014 Share Posted April 7, 2014 Speaking as a non-lawyer, wouldn't the severance agreement just preclude the ex-employee from suing the employer? Note that if the account balance in the 401(k) plan is less than what it should be, it would be the plan or the plan's administrator or trustee that the ex-employee would be suing, not the employer. Remember - the plan administrator and/or trustee have fiduciary obligations to the plan and its participants. If the employer tries to not make a required contribution to the ex-employee's account, the administrator and/or trustee would have the duty to go after the employer for required contributions that would not have been paid. Even if the employer is designated as the plan administrator, the ex-employee would not be precluded from suing the plan administrator for rights under the plan. Always check with your actuary first! Link to comment Share on other sites More sharing options...
MWeddell Posted April 7, 2014 Share Posted April 7, 2014 Must follow the allocation conditions in the written plan document. If the written plan document allows individual employees to waive their contributions, then you have to interpret the waiver. I doubt that the waiver clearly includes that the employee waived the right to receive contributions to the qualified retirement plan. Link to comment Share on other sites More sharing options...
BG5150 Posted April 7, 2014 Share Posted April 7, 2014 Most plan docs only allow waivers if the waiver is completed prior to becoming a participant in the plan. david rigby 1 QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left. Link to comment Share on other sites More sharing options...
Lou S. Posted April 7, 2014 Share Posted April 7, 2014 And an eligible participant for a safe harbor contribution can not waive his/her contribution for the year without blowing up the safe-harbor feature. Link to comment Share on other sites More sharing options...
Gudgergirl Posted April 8, 2014 Author Share Posted April 8, 2014 Thanks for you input. I agree that employer should make the contribution. I am just looking for some definitive black letter law on point. (Anti-alienation rule? Anti-cutback only applies to plan amendments? Follow the plan document or risk plan disqualification rule?) This is a pretty acrimonious situation and Employer (who is a lawyer) is not familiar with ERISA and is focused on the following language in the Severance Agreement FORMER EMPLOYEE hereby relinquishes and waives any rights to other forms of payment or benefits under any other agreement between FORMER EMPLOYEE and Company, whether written, oral, express or implied... Link to comment Share on other sites More sharing options...
GMK Posted April 8, 2014 Share Posted April 8, 2014 As Bird alluded to in post #2, the employer is not the plan, and the plan is not the employer. It may make sense to the employer to consider the difference in a person's status as an employee vs. as a plan participant. and maybe to check with another lawyer who is familiar with ERISA. Good luck. Link to comment Share on other sites More sharing options...
masteff Posted April 8, 2014 Share Posted April 8, 2014 http://www.shrm.org/LegalIssues/FederalResources/Pages/ERISA-Claim-Waived-General-Release.aspx "The appellate court distinguished between entitlement claims, which cannot be waived, and contested claims, which can be waived. An entitlement claim is one for a “vested benefit” to which the employee is “entitled under the terms of the pension plan itself”; whereas a contested claim is a claim for “additional benefits to which [a plaintiff] is not entitled to under the terms of the Plan itself.”" Per this, an entitlement claim cannot be waived. I would think your scenario would be an entitlement claim. EDIT: the top link may not work... for some reason that website lets you get to the article via google but not via the direct url. Here's a google search result, the SHRM.org article should be the top result: https://www.google.com/search?q=anti+allienation&sourceid=ie7&rls=com.microsoft:en-US:IE-Address&ie=&oe=#q=distinguished+between+entitlement+claims%2C+which+cannot+be+waived%2C+and+contested+claims%2C+which+can+be+waived.+An+entitlement+claim+is+one+for+a+“vested+benefit”+to+which+the+employee+&rls=com.microsoft:en-US:IE-Address In case the link gets messed up in the future, the court case in the article is: Hakim v. Accenture United States Pension Plan, 7th Cir., No. 11-3438 (May 23, 2013) Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra Link to comment Share on other sites More sharing options...
lalaland Posted April 9, 2014 Share Posted April 9, 2014 Aside from the right of the employee to make a claim, failing to make the safe harbor contribution for an eligible employee would be an operational failure and a potential disqualifying event for the plan. MoJo 1 Link to comment Share on other sites More sharing options...
david rigby Posted April 9, 2014 Share Posted April 9, 2014 Just curious: sibce the EE was fired (original post), and waived something (post #7), why did the EE sign a waiver? Is it because the ER paid him some cash? If so, does this create a CODA? (Not that it matters, since the ER should follow the plan document, as suggested more than once.) I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice. Link to comment Share on other sites More sharing options...
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