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Distributions restricted by Office of Foreign Access Control


ConnieStorer
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Hoping someone out there has also experienced a DB plan termination (covered by PBGC) where the investment firm has refused to cut checks to participants who are on the US Treasury's OFAC (Office of Foreign Access Control) list, presumably due to drugs or terrorists involvement.

In our client's case there are two participants, total lump sum = $110K.  The participants are working with an attorney who has signed distribution election forms on their behalf.  One or both of these individuals are no longer in this country.  They both have elected a lump sum payment.  Not sure that the PBGC missing participant program is a viable option since they are not missing.  In addition, the client is not happy that the cost under the missing participant program = $135K rather than the 110K lump sum amounts.

Does anyone have a suggestion.  The client wants to close out the plan as soon as possible but does not want to end up with a legal nightmare.   

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2 hours ago, Bri said:

Issue the payments back to a plan-labeled checking account and have the trustee write the checks off that?  Or does that make it worse?

I have no experience with OFAC, but I'm sure it does make it much worse. It likely has criminal sanctions for trying to evade, like FBAR.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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2 hours ago, Bri said:

Issue the payments back to a plan-labeled checking account and have the trustee write the checks off that?  Or does that make it worse?

Bad idea.  Please  get the client to involve an attorney with experience dealing with the Office of Foreign Asset Control. Plenty of white collar criminal lawyers in D.C. have OFAC experience. I can assure you that your client would much rather deal with the legal hassle of these participants than OFAC. 

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If something like this happens with not a defined-benefit pension plan but rather a terminated individual-account (defined-contribution) retirement plan:

 

Q1  Would prudently incurred expenses to confirm or clear the OFAC restriction be a proper plan-administration expense, chargeable against the plan’s assets?

 

Q2  If so, is the charge allocable to the individual account of the one participant who is the subject of the OFAC restriction?

 

Q3  Would you reason differently about Q2 if the OFAC listing is an error and the participant never had done anything that could justify any scrutiny?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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