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I got a call today from an advisor describing a problem he is having. I may not have all the details correct since this isn't my client, but I'm looking for some thoughts on how to tell him to proceed. It sounds to me like a client at one point in time had a profit sharing plan. The plan was terminated. Everyone got paid out. There were probably some illegal aliens with account balances, because they "remembered getting thousands of dollars from the plan." Fast forward years and the company is starting up a new Safe Harbor 401(k) plan utilizing the Safe Harbor Match. The record keeper (unknown which firm, but it sounded like a bank) has told the plan sponsor that they can not enroll some of their employees because either they didn't provide a social security number or the social security number provided was invalid. I don't know the detail of how the record keeper came to the conclusion the employees are likely illegal aliens. My gut feeling is that because the record keeper is a bank and maybe there are more stringent banking laws now that make them scrutinize who they are opening accounts for?? I'm kind of guessing here. I would have thought that a record keeper would just use whatever SSN was provided without doing any sort of due diligence, but maybe no SSN was provided and that's how we go to where we are now. I have never seen a plan that allows you to exclude illegal aliens. Regularly you can exclude non resident aliens, but we are talking about resident aliens (presumably living and working here illegally). Whether they are here illegally is not for me as a TPA to determine. I think the employer has an issue if they have employed illegal aliens, but maybe if they are not new hires and have been in their employ since before E-VERIFY that they are sort of grand fathered from checking?? This is outside of my concern. I'm not an attorney and can't advise them on this issue. I think they have a real problem though. These eligible participants (whether they are working in the US legally or not) are eligible for the plan. This whole thing came up because the (presumably) illegal aliens tried to enroll in the 401(k) plan. They tried to enroll in the 401(k) plan because they "remembered getting thousands of dollars from the last retirement plan." My thought is that ERISA is going to require that they be allowed to enroll in the plan. The fact that the record keeper won't allow them to enroll is not for the record keeper to decide. If there is some banking or financial law or procedure that is preventing them from enrolling now we just have conflicting laws and someone needs to decide which law not to follow, right? My thinking here is that #1 they should determine the legal status of the employee and if they are illegal they should terminate their employment. Assuming they won't do that, then #2 the employees should contact the Social Security Administration and apply for a Taxpayer ID Number. It is my understanding that under our current political leadership that an illegal alien can receive a Taxpayer ID Number without any consequences of Immigration being called. Assuming the (presumably) illegal alien won't take a chance of taking that step and risk deportation (even if it is safe today it may not be tomorrow), then #3 they should allow those participants to enroll in the plan and invest their money in a pooled balance forward type account. My thought is that the pooled account won't have an account in the participant's name. Then at distribution, whatever SSN/TIN the participant provides is what is used on the 1099. If it is a bogus number... well that's an issue for the IRS? If the participant gets deported or moves back home or whatever then the money could escheat back to the state and then the state can put them on the list of unclaimed property. What if the rest of the participants are not in a pooled account, but have their money at John Hancock? Obviously there is still a discrimination issue, but not allowing them to enroll seems like a worse discrimination issue. Take the whole plan to a pooled balance forward scenario? Ugh... Now MAYBE... just maybe... they can design the plan's eligibility so that they still pass 410(b) coverage and exclude these participants from participating in the plan. Yet, if they are already eligible, you'd be moving them to an ineligible class of employee. I don't know. It sounds messy. How do you describe a class of employees in a non discriminatory manner to exclude these people? Could you say "All Mexican citizens are excluded from the plan." That sounds horrible. Maybe "all non US citizens are excluded from the plan." At the end of the day, I'll hedge my answer and tell them they need to talk to an ERISA attorney, but I'd love to hear other's thoughts.