participant had fake SSN now has a real one

[k man]

the participant was illegal and used a fake social security number. subsequently with the assistance of an attorney she has obtained a real social security number and deferred action on her status. can we just transfer the funds to the new social security number?

another question is whether because at one point they were illegal is it a problem that they participated in the plan to begin with?

[Lou S.]

I don't see why not assuming the desposits to her account were correct except for the fact that SSN was wrong. I would treat it like a data correction.

If there were distributions reported under the "fake SSN" correct 1099-Rs may be required, otherwise I don't see much of an issue going forward just changing the SSN to the now correct number.

[My 2 cents]

Is there actually any possibility that, because the person was an undocumented alien, there would be no entitlement to the account balance? I don't remember seeing anything limiting participation in a qualified pension plan to citizens and those in the country with proper documentation.

Last time I looked, account balances for convicted murderers were not forfeitable, so why should balances arising from participation by undocumented aliens be subject to forfeit?

[masteff]

It's well discussed in prior threads on the topic of nonresident aliens (whether legal or illegal) that the plan generally doesn't care about citizenship if the person is eligible and has US-service-related compensation.

In threads on the topic of terminated NRAs with improper SSNs, the general advice is the plan should hold the money until the person can present proper tax identification to take a distribution. The only difference here is the employee is not terminated but rather continuing in the plan.

As Lou said, it's a data correction, no different than a misspelled name.

[Peter Gulia]

Would the analysis be different if the plan document defined an eligible employee to exclude an employee who is alien (even if the alien is admitted as a lawful permanent resident and is fully eligible for any employment)?

[My 2 cents]

1. Why would you want to do that? Presumably, everyone being hired is believed by the sponsor to have proper documentation, so why would the sponsor want to provide lesser benefits to a non-citizen than to an otherwise identical (hours, job responsibilities, compensation etc.) citizen?

2. For non-discrimination and coverage testing purposes, such a person would not be excludable, and, by not permitting them to participate, if there were enough such people, the plan could fail coverage under IRC Section 410.

[Kevin C]

Would the analysis be different if the plan document defined an eligible employee to exclude an employee who is alien (even if the alien is admitted as a lawful permanent resident and is fully eligible for any employment)?

I couldn't find it, but I recall a previous discussion where someone pointed out legal problems with discriminating against legal aliens. I found the following with a web search:

http://www.eeoc.gov/eeoc/publications/immigrants-facts.cfm

One section says:

The Immigration Reform and Control Act of 1986

Discrimination based on citizenship is expressly prohibited by the Immigration Reform and Control Act of 1986, commonly referred to as “IRCA.” IRCA also prohibits discrimination on the basis of national origin by employers with between four and fourteen employees.

[Peter Gulia]

My 2 cents, I don't want to do anything; I asked a question because I remember reading a plan, not one I drafted, that in its definition of excluded employees referred to an alien (and not with the usual lingo from Internal Revenue Code section 410).

Kevin C, thank you for the helpful information, which gives me a new way to think about this topic.

[My 2 cents]

Please revise my previous post to read "Why would one..." instead of "Why would you..." I did not mean to point any fingers!

[masteff]

http://www.eeoc.gov/laws/types/nationalorigin.cfm

[mbozek]

The reason for not paying benefits to someone who has used false documentation in an I-9 to obtain employment is not because they violated US immigration laws but to defer paying their benefits until their correct identification has been established and they have obtained a Tax Id in their own name, either a TIN or a SS which complies with US tax law.

If someone who has obtained employment as John Doe, SS # 123 is determined to be using someone else's identity, the plan can pay the benefits when John Doe provides a correct ID and a Tax ID. Otherwise the plan will never know if it is paying the benefits to correct person who earned them.

[Peter Gulia]

My 2 cents, thank you for your good grace. I understood your observation as 'why would anyone' want to .... I just wanted to help other readers understand that my inquiry really was just an inquiry.