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Guest rightdsaidfred

Termination for Criminal Cause - Can Employer recover monies?

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Guest rightdsaidfred

A healthcare employee is in the process of being terminated for " time theft" - Facts are as follows:

Employee X was working the nightshift at a Nursing Facility with three different locations A,B. and C. - Each night this employee would clock in at location "A", immediately leave "A"'s premises, drive over to, and clock in at location "B", then immediately leave "B", and do the same at location "C". The employee ended up collecting three times his true salary as a result of this fraudulent no show shuffle.

Criminal charges have been filed and are pending with the District Attorney. Question is as follows:

Assuming that the employee winds up convicted (which is certain), Can the Nursing Facility employer attach any employer monies that were contributed into a Qualified plan on behalf of this former employee - or does ERISA preempt any attachments whatsoever?

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There can be attachments for a conviction for a crime involving the plan. You don't have that situation.

401(a)(13)©

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The contributions to the plan(s) might be an operational failure. No contribution should have been made to the extent the employee did not earn what what the contribution was based on. The correction is likely to recover quite a bit of the contributions.

I am not suggesting "mistake of fact," but others might.

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Assuming that contributions are based on hours worked, if it can be proven that this employee didn't work the hours he claimed to have worked, it should follow that the contribution made to the plan on that employee's behalf could be forfeited - held in suspense for use to reduce future contributions, or reallocated among remaining participants, depending on the terms of the plan.

Returning the contribution to the employer is a slightly more tricky issue. Once the assets have passed from the company to the plan, it's quite difficult to get the assets out of the plan.

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QDROphile:

Would you please point me to the provision in ERISA that permits a reversion to the employer of amounts that it contributed to a plan because of an "operational failure?"

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IDEA #1: For those employers that (1) suspect that not all of their employees will be honest and (2) are willing to vest their benefits sooner than statutorily required, you can include in the plan, a BAD BOY clause which merely puts the bad boy on a statutory vesting schedule. This works well for the participant who gets caught in year 4 where the vesting schedule for bad boys is a 5 year cliff.

IDEA #2: For contributions not yet allocated during the current year to the bad boy, you should be able to avoid allocation based any compensation that he did not earn, but I'm not sure that doing so would be consistent with their plan document nor ERISA. After all, many employers don't really think that their employees EARN their pay.

IDEA #3: After conviction, get the criminal court to include restitution to the employer in the sentence; and be sure to include the unearned, excess benefits in the amount of restitution.

IDEA #4: Get a civil judgment, and if there are no assets other than those of the plan, pay them out to the participant's non-IRA account but not until the Sheriff is waiting to attach them.

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If employee was not vested when terminated then benefits will be forfeited and are reallocatd under the terms of the plan. If the employee was vested then he has a right to the accrued benefits- what ever they may be based upon the facts, e.g, only pay for one job can be credited. Conviction or settlement with employee will not cancel benefits. Rev. Rul 81-141(?) holds that vested benefits cannot be forfeited for any reason other than suspension of benefits for rehired employee. Employer could obtain a confession of judgment and have employee assign benefits when they are payable from the plan under the non alienatoin regs.

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Mr. Maldonado:

Amounts that should not have been contributed to the plan are not reversions. If you don't like that theory, keep the amounts in the plan and credit them against contributions.

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QDROphile:

ERISA precludes reversions to employers unless they fit into a few very narrowly circumscribed exceptions (like mistake of fact).

Telling a client to undertake a reversion that violates the express rules of ERISA would result in a breach of fiduciary responsibility, a prohibited transaction, and would disqualify the plan.

But if you think that your theories trump the statutory rules of ERISA, the Code, and all of the guidance that has been issued since ERISA, go for it.

My recommendation is that you better make sure that your malpractice insurance is current, if you are advising clients to do things that clearly violate the the express terms of ERISA.

I'm not saying that I like the result, but I'm not going to tell a client to violate the express rules of ERISA just because I don't like the result that happens when you apply those rules.

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Mr. Maldonado:

Thank you for reminding readers of these Message Boards that what they find here is not legal advice nor any kind of advice that they can rely on directly. The contributors here respond without having very many facts, access to plan documents or the opportunity to investigate. The comments on the Boards vary from precise answers with authoritative citations in response to precise questions to "food for thought" that might be helpful as inspriation for other ideas or developed and evaluated further by the recipent, all depending on circumstances. The commentators have different qualifications, abilities, knowledge, experience and perspectives, put different degrees of effort into responses, and communicate with different degrees of skill. Reader beware!

Thank you also for illustrating that this medium offers latitude for passion, humor, irony, metaphor, circumlocution and dramatic flair in good faith efforts make reading interesting or to advance ideas or debates. I appreciate your contributions, both in substance and in style.

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QDROphile:

I think that you provided an excellent summary of how the Message Boards should function. It should be used as a mission statement and also as a caveat to all of the people who participate in the Boards.

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Mr. Maldonado:

After way too much puzzlement, I think I understand now why you responded so negatively to my posts. I did not make clear that I was not saying anything about recovering from the plan any amounts related to overpayment of wages or other ill-gotten gain outside of the plan. I was focused only on the contributions to the plan that were based on the amount of wages that should not have been paid. I did not respond to the full scope of the question and I may not have responded to what the original post was really after. My original post did not suggest removing money from the plan, either. For the sensitivity and complexity of the subject, it was a pithy response. I don't lisp, but some might see it that way, too.

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Guest rightdsaidfred

Thank you all for your opinions on this issue - they provide a good basis for talking points.

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Guest FYI411

May I suggest the company consult an attorney or their legal department for information on insurance fraud and fradulent acts/charges. How large is the company?

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