katie58 Posted October 15, 2011 Posted October 15, 2011 I have an employer with an employee planning on terminating service so that he can default on his loan and potentially withdraw additional dollars from his 401(k) Plan. The company then plans on rehring the employee. The employee is aware of the penalties and taxes associated with this type of withdrawal. The company has an internal policy that states employees termed and rehired within 30 days are reinstated for all benefits and senority. This just doesn't seem right. Any thoughts? I appreciate any insight you may share!
ETA Consulting LLC Posted October 15, 2011 Posted October 15, 2011 From a plan perspective, I'd leave it alone. If the employee terminates and is entitled to a distribution under the terms of the plan, then that's what will be done when the employer substantiates that he is terminated. This is not really a plan issue, but an employment issue. What does it mean sever employment with a company? I do not believe it is right and would easily argue that the employee has never terminated, but would not take that position from a pension administrator (TPA) perspective; you just can't hold yourself out to be the company's HR department. Good Luck! CPC, QPA, QKA, TGPC, ERPA
david rigby Posted October 15, 2011 Posted October 15, 2011 Let me get this straight: the employee and employer are agreeing to commit fraud? On a practical note, pay attention to the plan document and what it says about rehire. Also, see if it has a clause something like, "... distribution will not be made if the employee is rehired on or before the date of distribution..." I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
katie58 Posted October 16, 2011 Author Posted October 16, 2011 Thank you so much for your quick responses. I don't believe their document has any mention of this situation. Thanks again!
ESOP Guy Posted October 17, 2011 Posted October 17, 2011 I don't think the document needs to say anything about this situation. If on the day the payment is made if the person is rehired the payment can not be made. So depending on how long it takes for the payment to be made will drive how long the person has to stay unemployed. I have seen this before. Not saying it is right.
masteff Posted October 17, 2011 Posted October 17, 2011 I think a key search word here is: sham http://benefitslink.com/boards/index.php?s...475&hl=sham Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now