Inalienability of Benefits

[Guest Kriso]

An employer fired an employee for embezzlement, criminal charges are pending. The employer would like to be reimbused for the stolen funds from the employees 401(k) plan balance. It is my understanding that this cannot be done. Am I right??

[KJohnson]

Right. (If he stole from the plan itself and you obtained a judgment the answer might be different).

[GBurns]

Aside from the fact that the employer cannot arbitrarily attach the employee's 401(k), has this employer considered that the employee has not been convicted as yet, in fact, not tried or even charged as yet?

What happens if this employer starts raising a stink, starts bad mouthing the employee, starts trying to take action, THEN the employee either does not get charged or even if charged does not get convicted?

This employer would be well advised to shut up and let his lawyer handle the issues or else he could very well end up with this employee as his new "boss".

[david rigby]

There are some earlier discussion threads that might be related, such as:

http://www.benefitslink.com/boards/index.p...=ST&f=20&t=4546

http://www.benefitslink.com/boards/index.p...t=ST&f=1&t=8846

http://www.benefitslink.com/boards/index.p...t=ST&f=1&t=8293

[mbozek]

The employer's only recourse is to sue the employee for conversion of the funds and after getting a judgment, recover the funds from any assets of the employee, e.g., bank accounts. The employee's 401(k) benefits cannot be attached until paid to the employee. The employer cound attach any nonqualified deferred comp benefits due the employee if permitted by the plan.

[Guest jfp]

The employee can make a voluntary assignment of the benefits to the employer. Check the regs under Section 401(a)(13).