forfeiture of account due to fraud

[Scuba 401]

i know you can't forfeit vested accounts due to fraud or theft but what if the employee used a fake social security number?? does that give the employer a way to prevent the employee from getting the money?

[ETA Consulting LLC]

Let's look at it like this, in order for the employer to alienate the employee from his ERISA protected benefit, there would have to be an established exception (i.e. QDRO, IRS Tax Levy) to the rule. The issue goes to what appears to be an individual being "hired" under false pretenses (which is an employment law issue). When it comes to qualified plans, it is merely the fact that he was an employee (however bad), he's entitled to his benefit.

Good Luck!

[EBDI]

I have a similar problem. This is a safe harbor plan that has a terminated employee who gave a false social security number. When the employer tried to deposit the funds, the financial institution rejected it because of the false ssn. The funds were returned to the employer. What should the employer do with the funds? They do not have a current address for the employee. The amount is under $500.

[mbozek]

i know you can't forfeit vested accounts due to fraud or theft but what if the employee used a fake social security number?? does that give the employer a way to prevent the employee from getting the money?

Employee is only entitled to receive benefit if employer has correct ID and SSN. Employee who uses fake SS has created fake ID which must be corrected with correct ID and SSN no. before benefits can be paid. Employer cannot pay benefits using fake ID/ssn. Funds remain in plan until proper ID and SSN or Tax ID are provided.

[ESOP Guy]

You might want to check the document. Most document also tell you what to do if you have a lost participant. In many cases you can forf the money, but have to restore the account and pay the benefit if the person comes back.

The hard part will be without a good SSN this person can't be reported on the SSA so how they will ever get notice to come collect seems remote.

By the way before you declare the person lost you need to be able to document you searched for the person to a level that meets the DOL rules.

[EBDI]

Thanks, those are good suggestions.

[Peter Gulia]

Beyond the preceding suggestions, consider also the possibility that the plan might not know the worker's name. If the taxpayer identification number furnished to the employer does not match the name furnished, it is also possibile that the name furnished is not the name of the person who performed the work.

[EBDI]

That makes sense that the name may be fake too. I hadn't considered that.

[mbozek]

That makes sense that the name may be fake too. I hadn't considered that.

The name will be a fake b/c the employee buys a false ID which includes the name and SS# of another individual. If the name and social are different there would be inquiries.

[John Feldt ERPA CPC QPA]

If the SSN was stolen, not fake, and the true individual whose identity was stolen actually shows up to collect the benefits, producing the valid ID and valid Social Security card, they are not actually entitled to the benefits, are they?

[mbozek]

If the SSN was stolen, not fake, and the true individual whose identity was stolen actually shows up to collect the benefits, producing the valid ID and valid Social Security card, they are not actually entitled to the benefits, are they?

No b/c that individual did not perform the services for the employer. To prevent the filing of a form 8955 under the name of the individual whose identity was stolen, the plan should withhold reporting vested deferred benefits to the IRS until the true identity/ tax ID of the imposter is determined. Otherwise the plan may wind up paying twice for the same benefits if the individual whose identity is stolen receives a notice of vested benefits from SS.

[Peter Gulia]

A related point for practitioners to ponder: If a retirement plan's administrator has contracted with a recordkeeper to process claims (often up to the point of the administrator "rubber-stamping" what the recordkeeper presents), a recordkeeper might receive what seems to be a good-order claim (with internal consistency of the name and taxpayer identification number), and might lack a way to test whether the squiggle in a box for the participant's signature is consistent with any other plan record or whether that squiggle belongs to a person who is a participant or is or was the employer's employee. The address in the plan's records might be an address of the impostor, or known to the impostor. A check made payable to the name in the plan's records is one that an impostor who has or had a fake or stolen identity document with that name could negotiate for money.