Levy?

[Guest tintree73]

We are about to pay out on a levy (legal gave it the blessing) - but my question is if we have to send a participant a letter telling him that we are paying on the levy and/or "cc" the participant on the letter to the IRS? T

he participant is aware of the situation, the levy, etc. (he was served with the levy, has discussed it with the IRS, is past his time to appeal, etc.).

I know it is just a practical question, but any thoughts would REALLY be appreciated!

[david rigby]

Who is "we"?

What is "legal"?

[Ron Snyder]

Has ERISA been amended while I was napping? Participants' accounts may are not subject to "execution, levy or attachment" except by a letter purporting to be a tax levy from the IRS? I don't believe that IRS' letter has any legal effect on the plan.

The exception to this would be a governmental plan exempt from ERISA.

[Guest dbvail]

tintree - You did refer to an IRS levy, so it does not violate non-alienation etc. There is no protocol that I am aware of, other than common decency and courtesy. Were it I, a letter would go to the participant, from the Plan Administrator, a day or so ahead of actually deducting and transmitting the levy. You are kind to have considered this. Good luck.

[Kirk Maldonado]

I agree with the analysis of dbvail.

However, I would give the participant as much notice as possible. That is simply because there have been a few lawsuits brought against employers for complying with IRS levies. While the participants will invariably lose those lawsuits, my goal is to avoid having my clients get sued in the first place. The more notice that you give the participant, the less likely that he or she will sue you.

I don't see any downside to giving the person more notice. But if anybody spots something that I'm missing, please let me (and everybody else) know.

[mbozek]

While I agree that notice should be provided, I disagree that it will deter lawsuits against trustees. Participants who bring such lawsuits are usually tax protesters or persons who believe that the income tax cannot be enforced if a person declines to pay it, so they are going to sue the fiduciary regardless of whether notice is provided. In any event the IRS will provide the participant with advance notice that the assets will be seized to pay taxes.

[Kirk Maldonado]

mbozek:

Unfortunately, you are probably right; any person that would bring such a lawsuit wouldn't be deterred by having received (more) advance notice. I was being an optimist, but your pessimistic view is probably more accurate.

Although I've had clients consult with me about whether they should comply with a levy, I've not gotten involved in those transactions other than to advise the client that they can and should comply with the levy. Do you know how much prior notice that the IRS has to give to the (delinquent) taxpayer before actually levying upon the plan?

[Ron Snyder]

I have seen several such notices previously. They say "levy" on them and are mailed to the employer, not to the plan. And they don't meet the legal requirements of an actual levy.

We don't know: (i) is this a real levy? (ii) Was it served on the plan? (iii) is the participant in pay status? Until these issues are clarified I would be careful about telling the Administrator to honor the purported levy.

[Guest tintree73]

I'm sorry I didn't provide more detail. The levy (per legal counsel) is legitimate - signed in the correct place, specifically lists plan assets (there is a special box) and the participant is otherwise eligible for a distribution (so it is not in regard to a future benefit, etc.). Thank you for all of the replies! Very helpful!