Employer holding on to my 401k

[Guest dillybar]

my friend was terminated from her job because she embezzeled company funds. She has not been charged to date. So she closed her 401k but the check was mailed to the employer. Who is holding the check until he does the research to fine out if he can legally keep it as a repayment.

So does anyone know if the company can do this.

Or, if the company can just hold the check until the case goes to court.

[Kimberly S]

The plan's requirements for the timing of distributions is spelled out in the documents that establish the plan. Each participant should receive a Summary Plan Description that would explain when they are supposed to receive their funds. Some plans pay immediately, others don't pay until after the participant has been gone from the company for a year and there are many options in between those two extremes.

[david rigby]

"my 401k"?

"my friend"?

No matter.

For other discussion on similar situations, http://benefitslink.com/boards/index.php?showtopic=33713

[masteff]

The plan processed the check when it was requested. It's impossible for the plan to have a delay for distribution but then process an actual payment. If the distribution were delayed per plan rules then the funds would continue to be help in investments and not in the form of a check.

A check earns no income and is not a form of plan investment. It is a potential breach of fiduciary duty for the company to hold her money in the form of a check.

The person in question should contact the nearest EBSA office and inform them that the plan has issued a distribution but the employer refuses to deliver the check.

Nearest office can be found here: http://www.dol.gov/ebsa/aboutebsa/org_chart.html#section13

Question: was the distribution a direct rollover or a cashout? If it's a cashout and the check is not delivered to her w/in 60 days, then she loses the right to do an indirect rollover. By depriving her of this right, she might then have a course of legal action against the employer.

[jpod]

Implicit in your question is the question of whether the employer can use "self-help" by taking your/your friend's 401k money, or sitting on the check as a means of pressuring you/your friend into repaying the amounts embezzled. The short answer is that unless the embezzlement involved an embezzlement of the plan in question, the employer should not be doing what you allege it is doing. Before trying to get medieval on the employer, however, you/your friend should seriously consider retaining criminal defense counsel.

[david rigby]

Before getting counsel, get the SPD.

[jpod]

David Rigby, I respectfully disagree.

Before contacting your employer (I mean before your friend contacts the employer), get defense counsel.

[Guest dillybar]

Let me correct the info, my friend, not I.

She closed her 401 and took the penalties. The check is in the hands of the employer. Her embezzelment had nothing to do with the 401 funds.

She has a defense attorney who does not want to charge her for researching pension law. The employer has said he would look into it.

So I was wondering if in her situation an employer can hold her check while he is conducting his research (of just holding it to pressure her), legal.

Are 401 pensions (like OJ Simpsons) pension couldn't be touched.

Does anyone know the pension laws enough to answer weather her employer is legally able to hold the check.

thanks for all the reponsives.

[JanetM]

Since you friend withdrew the account balance there are no protections. The only protection is that the funds, as long as they are in the plan, can not be attached by creditors.

The employer is making a mistake by holding the check. From what you have written it sounds like all the parties are in the wrong.

[jpod]

I think I can safely confirm that the employer has no legal basis to sit on the check. On the other hand, I'm not sure it's a good idea for her to be talking to her employer under the circumstances; let her mouthpiece do the talking.

[Steelerfan]

I don't think the employer can't legally hold the money either. As part of a settlement agreement, the participant can agree to have the 401k money be paid to the employer. How this works out in reality is unclear to me since the employer is apparently required to pay the money, but can't prevent the participant from spending or "hiding" it before a settement can be reached (or is there a way?).

[Guest Steve Eads CLU]

my friend was terminated from her job because she embezzeled company funds. She has not been charged to date. So she closed her 401k but the check was mailed to the employer. Who is holding the check until he does the research to fine out if he can legally keep it as a repayment.

So does anyone know if the company can do this.

Or, if the company can just hold the check until the case goes to court.

I agree with the others here...the the plan "Trustee" not the "Employer' has no more authority than that given him by the Plan Document..."Summary Plan Decription." Get it, read it or bettter yet get it and let an attorney read it before any contact with the trustee of the plan.

[Guest fender5150]

I have to say my sympathy is with the employer, given the limited information provided. However; The employer should probably distribute the funds.

Fiduciary responsibilities aside - Can they prove that she stole the funds? What if she is prosecuted and found innocent? There is an "innocent till found guilty issue here".

This is a post I never would have expected to see!

Please follow up and let us know how this turns out.

Thanks,

Fender

www.401ktest.com

[Kimberly S]

It's not as unusual as you might think. I had a plan some years ago where the participant wanted the distribution sooner than the plan allowed in order to pay an attorney to defend her against the embezzlement charges. Said defense attorney is reported to have told her that the employer could distribute the money sooner than what the document said if he wanted to.

[pmacduff]

Kim - we had a similar case, but the attorney wanted the distribution to be made directly to him & not the participant !

[Kimberly S]

Kim - we had a similar case, but the attorney wanted the distribution to be made directly to him & not the participant !

Apparently he was better at managing his own receivables than administering a retirement plan!

[Kevin C]

We've had a couple of similar cases. The employers offered the participant the chance to endorse the distribution check and give it back to the employer as partial payment towards the amount stolen. The employers agreed to take the payment into consideration when deciding how aggressively to push the local DA for criminal charges. One particpant accepted the offer and the other one skipped town without claiming the check.

[J Simmons]

Extracting $ under the threat of possible criminal prosecution would meet the definition of extortion or blackmail in many states.

Some states however give an affirmative defense to extortion and blackmail if all that is asked, here by the employer, is what was wrongfully taken from the employer.

Tread carefully. It would certainly add insult to injury if the employer who was embezzled against ended up facing extortion charges.