Term'd participant is now perm. disabled

[doombuggy]

A client called and asked me about a participant who was disabled a couple of years back. He was out of work, and was eventually terminated in 2002. This person is apparently receiveing COBRA from this company, and was recently looking for an extension. This person apparently has turned in a letter from Social Security that states he is receiving benefits as a perm. disabled person. The letter is from October 2003. My client's question is this: Since he is condsidered perm. disabled by the gov't, should he be considered so in the 401(k) plan? My answer was no, because he was terminated prior to his status being changed to perm. disabled.

Your thoughts?

[JanetM]

What does the plan say? Should define disability. All mine say "become disabled while a participant". Just curious, if termed what is the issue? Participant can take funds at termination.

[Kirk Maldonado]

You need to look at the letter from the Social Security Administration to see as of what date it was determined that he was disabled. That is because those letters (at least the ones I've seen) are all issued on a retroactive basis.

The odds of it being retroactive that far back are slim, but you should still check it out.

[doombuggy]

What does the plan say? Should define disability.

The plan allows for matching and p/s allocations to persons who are totally & perm. disabled (and are not actively employed at pye). Also, the vesting schedule does not apply to a person who is totally & perm. disabled. I assume that this is the issue the client is worried about (they did not give me the partiicpant's name, so I am just assuming this).

I guess if his account is still active (meaning, he has not been paid out yet), and he is now listed as totally & perm. disabled, he would be entitled to the entire account balance, and not just what he is vested. Given that the SSA letter is retro prior to his termination from the company?