Employee Theft Options

[Guest_named_mjb_*]

Just thinking out loud... I know that in the case of QDROs an administrative hold is placed on an account. I wonder, given that the employer is prosecuting, if a judge could issue an order putting a hold on the account. It wouldn't delay providing forms but could delay the distribution itself. I don't know if it's possible legally, but something worth looking at.

I thought that state laws that relate to alienation of retirement benefits are preempted under ERISA which is why Congrress amended ERISA to permit restriction on distribution of benefits by an employee under a state divorce decree under the QDRO rules. In US v. Novak, 476 F3d 1041, the 9th circuit stated stated that the only two exceptions to the ERISA non alienation rule are qudros and to recover wrongs against the retirement plans. "ERISA broadly protects retirement benefits from dissipation through payment to third parites even if the payments are authorized by the participant or would otherwise be valid under the force of law." The only attachment or freezing of benefits permitted are those allowed under federal law.

[pmacduff]

Belgarath - I'm with you, I'm no attorney, but I do feel for the client and what they are going through. Not sure if I mentioned before, but this is a 3% SHNEC plan; the employee contributed some in the past, but the bulk of the account was Employer funded. (about 20% is employee portion and 80% is employer).

The client, while acknowledging that they probabaly could not withhold payment, was hoping to delay the payment pending the trial outcome.

My question to SRP...you mention ERISA in your post/case, was your case under State or Federal court? This client's case would be State (actually Local??) court and if I'm reading mjb correctly, if said State or Local court awarded the client the 401(k) account it really wouldn't be valid anyway??

[buckaroo]

I will also chime in that I am not an attorney and I am just brain storming as well, but how about amending the plan to a different distribution date/timing? What are the other choices in the proto-type? How long can it be delayed under those choices?

The other two questions are:

1) How will this affect other termianted employees? My answer is the distribution date/timing is probably a maximum. Maybe it says payout within x days/months etc... but does it say anything about paying it out earlier?

2) Is this a protected benefit under 411(d)6? By legally amending the plan and essentailly delaying the distribution, are you cutting back a participant's benefit? Something else to consider.

Again, just brain storming...

[Steelerfan]

The situation SRP is talking about is in Reg § 1.401(a)-13(e)(1):

An arrangement in which a participant or beneficiary directs the plan to pay all, or any portion, of a plan benefit payment to a third party (including the participant's employer), will not be an “assignment or alienation” if it is revocable at any time by the participant or beneficiary, and the third party files a written acknowledgment with the plan administrator. This acknowledgment must state that the third party has no enforceable right in, or to, any plan benefit payment or portion of any plan benefit payment (except to the extent of payments actually received under the terms of the arrangement).

There is no way to garnish the account or force the participant to make the assignment. The idea of delaying distribution I guess would be to buy time to get the judgement before the participant has time to move or spend the money. I wonder if the IRS would approve language allowing a delay pending the outcome of litigation.

This post has been edited by Steelerfan: Nov 29 2007, 03:45 PM

[Kabert]

A criminal restitution court order is also an exception to the 401(a)(13) anti-assignment/alienation rules. If you can get an order, you may be able to force a distribution from the 401(k) account to the employer. There's case law on this as well as IRS rulings.

[Guest_named_mjb_*]

A criminal restitution court order is also an exception to the 401(a)(13) anti-assignment/alienation rules. If you can get an order, you may be able to force a distribution from the 401(k) account to the employer. There's case law on this as well as IRS rulings.

Can you please provide the cites.