How to distribute vested benefits owed to illegal aliens?

[JDuns]

We have found a vested participant was not legally working in the US. However, we have determined that she has a vested right to receive these benefits (just as she has a right to a final paycheck reflecting wages for her actual work).

The question then becomes what to do with her vested account:

(1) Pay her benfeit and report the distribution using the inaccurate SSN - I am very uncomfortable with this option.

(2) Tell the participant that no distribution will be made until she presents us with a valid SSN or TIN. (So long as the participant has a balance in the plan, we must pay admin fees so this option is not ideal).

(3) Do number (2) but then treat her as a lost participant (even if we know where to find her) and forfeit her benefits to the plan, to be restored if she later presents her valid SSN or TIN. The problem with this is how to handle the required withholding and reporting on 1099-R and SSA on form 5500.

Does anyone have any other suggestions or opinions on the options listed above?

[Appleby]

Sounds like you have a bigger issue- it is illegal to hire illegal aliens.

You cannot treat her as lost, as she is not ( by definition of the regs). Remember that you are required to follow certain procedures for lost participants, for which the results must show you are unable to locate the participant

Regarding the valid SS#, since she is an illegal alien, she cannot obtain a SS#. She may however be able to obtain an ITIN.

http://www.irs.gov/individuals/article/0,,...d=96287,00.html

http://www.irs.gov/businesses/small/intern...d=96696,00.html

question aslo posted and followed-up here http://benefitslink.com/boards/index.php?s...t=0entry66529