Leslie Kalec Posted August 17, 2021 Share Posted August 17, 2021 I have a client whose employee was fired & convicted of embezzling company funds. There is still an outstanding restitution amount. Employee has a 100% vested benefit in the plan. It is a Safe Harbor Plan so employer contributions (match) are 100% vested. Anyone know I there is of a way to forfeit the employer portion of the benefit? I am almost 100% sure there is not. Link to comment Share on other sites More sharing options...
Lois Baker Posted August 17, 2021 Share Posted August 17, 2021 4th Circuit just ruled on that -- see https://benefitslink.com/news/index.cgi/view/20210811-166919 Bill Presson 1 Link to comment Share on other sites More sharing options...
Peter Gulia Posted August 17, 2021 Share Posted August 17, 2021 It might work if the participant is subject to a Federal criminal restitution order under the Mandatory Victims Restitution Act of 1996. 18 U.S.C. § 3613 http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title18-section3613&num=0&edition=prelim Such a restitution order gets a payment only if the participant could get the payment. If the employer/administrator pursues this, lawyer-up. Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com Link to comment Share on other sites More sharing options...
msmith Posted August 18, 2021 Share Posted August 18, 2021 I had this happen to one of my plans several years ago. Of course, the participant was fired. To avoid prosecution (and probably 15 months in prison). She obtained a cash distribution (had a large account balance) and paid the Employer the funds she embezzled. Link to comment Share on other sites More sharing options...
ESOP Guy Posted August 18, 2021 Share Posted August 18, 2021 1 hour ago, msmith said: I had this happen to one of my plans several years ago. Of course, the participant was fired. To avoid prosecution (and probably 15 months in prison). She obtained a cash distribution (had a large account balance) and paid the Employer the funds she embezzled. Way back in the early 2000's I saw this also. The plan sponsor worked with the prosecuting attorney to make taking a cash distribution and turning it over to the plan sponsor as a condition of the plea agreement. Based on the way the question is written that might be too late but might be worth having the plan's attorney reach out to the prosecuting attorney. Link to comment Share on other sites More sharing options...
Bird Posted August 19, 2021 Share Posted August 19, 2021 11 hours ago, ESOP Guy said: Way back in the early 2000's I saw this also. The plan sponsor worked with the prosecuting attorney to make taking a cash distribution and turning it over to the plan sponsor as a condition of the plea agreement. Based on the way the question is written that might be too late but might be worth having the plan's attorney reach out to the prosecuting attorney. We saw this too, recently. The embezzler still went to jail for a while. Ed Snyder Link to comment Share on other sites More sharing options...
imchipbrown Posted August 19, 2021 Share Posted August 19, 2021 I've seen this too. Distribution to participant, payment to the employer. Link to comment Share on other sites More sharing options...
MoJo Posted August 19, 2021 Share Posted August 19, 2021 I once took a check and distribution paperwork to the courthouse - minutes before a sentencing hearing. Participant signed the paperwork, I handed over the check, participant endorsed the back of the check over to the employer and then stood before the judge for sentencing (thinking his good will gesture would have an impact). He got the max (15 years) in Ohio's Lucasville prison. This produced a noticeable odor in the courtroom as the "Pillsbury Dough Boy" like new convict contemplated his fate (and the physique of his possible roommate).... Besides that, we every year or so get a MVRA order signed by a judge, presented by the AUSA for the district, and distribute the funds pursuant to the order.... But NOT without an appropriate MVRA order (and I've had judges issue "garnishment" orders that don't work against a retirement plan, and then have them threaten *me* with imprisonment....) Link to comment Share on other sites More sharing options...
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