Work Release Inmates Eligible to participate

[Guest Boots]

Hello and Happy Friday!

I had a client pose an interesting question regarding work release inmates - can they participate in a 401k plan. The document has the normal employee exclusions (union, non-resident aliens), eligiblity is age 21 and 1 year of service. Right now the client has not had any of the inmates meet the eligibility requirements, but will probably have some this summer.

The client would like the inmates to participate, they feel that it would help to rehabilitate them. However, the prison does not want the inmates to participate - it would be an administrative burden for them. So we have a big conflict with the plan document. The inmates do receive compensation for their work.

Has anyone else encountered this situation? I have not found anything in the regs to mandate the exclusion of inmates in retirement plans.

I appreciate any comments, reg sites, pros.... cons..... - run from plan?!?

I have been reading your message board for a long time, but this is the first posting. Thanks for the help!

[PensionPro]

With the limited info available, I would say the client and the prison officials need to come to an agreement on whether to include the work release employees.

1) if the consensus is to exclude, amend plan document to make work release employees an excluded class. Make sure you pass 410b.

2) if the consensus is to include, then include them.

[GMK]

And happy Friday to you, too.

Presumably the work release employees are paid by the prison. Otherwise, the "administrative burden" would fall on the client's payroll department, not the prison.

Might the prison find it more palatable if the client offered to do the deferral calculations? (is that even possible?)

Hmm? Who is the employer is a case like this? Are the work release employees really more like temps hired through an agency? Some 401(k)'s exclude temps from eligibility.

Here's to the hope that you can get this resolved before it matters for real.

[Guest Boots]

And happy Friday to you, too.

Presumably the work release employees are paid by the prison. Otherwise, the "administrative burden" would fall on the client's payroll department, not the prison.

Might the prison find it more palatable if the client offered to do the deferral calculations? (is that even possible?)

Hmm? Who is the employer is a case like this? Are the work release employees really more like temps hired through an agency? Some 401(k)'s exclude temps from eligibility.

Here's to the hope that you can get this resolved before it matters for real.

Well here's the crazy thing I just found out - the client actually pays the inmate but the check is made payable to the prison fbo inmate. I did get a copy of the prisons administrative regulations which do require the inmate to have 1/3 of their pay go into a savings account, then some of the pay goes into an "expense" account the inmate can use, they are also required to pay for some medical expenses.

The employer has a grain plant along the river so the inmates help load/unload barges and whatever. Very profitable client and he just wanted to give back and help the inmates. (I believe its a minimum security prison)

Thank you for everyone's time - I just wanted to make sure that someone did not know of a specific regulation - DOL, ERISA, Federal, State... that truly prohibit this.