Employee Fraud

[ac]

We have a client that sponsors a defined benefit plan. An employee of the client is entitled to an accrued benefit under the defined benefit plan. The employee has committed fraud against the client. The client is pursuing both criminal and civil action against the employee. Can the client deny the employee his accrued benefit from the plan?

[rcline46]

The participant is entitled to what is in the plan document. The employer cannot change it nor deny it. If they try the participant will have recourse in the Federal Courts.

Or put differently, what does the 'bad boy' clause state in the document? The Plan Administrator must follow the terms of the document.

[SoCalActuary]

However, if the value of benefits exceeds $5,000, the plan sponsor can make the participant wait till all litigation is settled before offering a single dime.

[Guest merlin]

Under 1.401(a)-13(e)(1) a participant may make a voluntary assignment of all or a portion of a benefit payment to a 3rd party, including the employer, subject to certain conditions.This might be a viable option, especially if the participant is convicted, and has to make some sort of restitution.

[david rigby]

Several prior discussions on related topics. Try the Search feature.

[AndyH]

Seems to me that, absent a time machine which can beam the felon back into the days when bad boy clauses were legal, that all you can do is twist his arm as suggested here.

I worked on a case a few years back in which 1 of 2 owners embezzed big bucks, went to jail, got paroled, and later started his company pension despite the considerable efforts of the lawyers for owner #2.

[david rigby]

http://benefitslink.com/boards/index.php?showtopic=19562

http://benefitslink.com/boards/index.php?showtopic=21202

[WDIK]

Wow pax! I don't know if I've ever come across a three-tiered link. (In other words, a link that leads to another link that leads to another link.) If you ignore duplication, you could actually consider it a four-tiered link.

[mbozek]

Why not make the employee an offer he cant refuse? The employer will drop the criminal and civil charges if the employee makes restitution by transferring his retirement benefits to the plan sponsor under the a13 regs.

[Blinky the 3-eyed Fish]

Why not make the employee an offer he cant refuse?

Whew, I thought you were going to recommend cement shoes.

BTW, never go against the family.

[mbozek]

Blinky you should know better. Nobody uses cement shoes Look around you - its called sleeping with the fishes. On the Sopranos when some one disappears he is said to "enter the witness protection program".