Employee stole from company - Can ER go after her 401k assets?

[Santo Gold]

The subject line is really the question. The employee has signed a letter of confession stating that she stole money from the company. The theft did not involve the plan assets in any way. this is a small 6 life 401k plan. I do not think that the ER can encumber or in any other way get to her 401k assets regardless of the theft.

Not sure how much was stolen, but he is pretty sure she does not have nearly enough money outside of the plan to repay so he is looking at the 401k to get some of his money back.

[SFSD]

Technically speaking, no, the ER cannot get to the plan assets. However, I have heard of the EE and EE agreeing to the EE requesting a routine cash distribution. When the EE gets the check, she is supposed to go to the bank with the ER to cash it and they take it from there. If the EE doesn't want to repay this way, ER is out of luck.

[masteff]

Technically speaking, no, the ER cannot get to the plan assets. However, I have heard of the EE and EE agreeing to the EE requesting a routine cash distribution. When the EE gets the check, she is supposed to go to the bank with the ER to cash it and they take it from there. If the EE doesn't want to repay this way, ER is out of luck.

EE could also endorse the check over to the employer w/out having to go to the bank. In the endorsement area, she can write "pay to order of: xyz co." and then sign. The company then endorses and deposits as to their bank.

[ESOP Guy]

I once has a client where the court agreed to a reduced sentence if the person repaid the employer and the only source of money was the ESOP. So the person agreed to a distribution made to the same bank as the employer and then transferred the money to the employer. Then they person got sentenced by the judge.

So no they can not just take the account balance. However, if the sponsor's attorney talks to the prosecutor and judge maybe strong incentives can be created to make a deal that is legal.

[david rigby]

Several prior discussion threads on this topic. Try search terms such as "embezzle", "theft", etc.

[Santo Gold]

Thanks, I will look further, but my thinking was that they probably could not simply get the EE assets without their consent.

[Gadgetfreak]

Technically speaking, no, the ER cannot get to the plan assets. However, I have heard of the EE and EE agreeing to the EE requesting a routine cash distribution. When the EE gets the check, she is supposed to go to the bank with the ER to cash it and they take it from there. If the EE doesn't want to repay this way, ER is out of luck.

Just remember, there still needs to be a "distributable event". Though, if there was theft, I would assume the employee would be terminated which is a distributable event.

[david rigby]

If there was real theft, make sure there are real police involved.

One prior discussion:
http://benefitslink.com/boards/index.php?/topic/37085-employee-theft/

[My 2 cents]

Basic answer is no, the account balance cannot be seized. If there is a distributable event and the participant is willing (for whatever reason) to take a distribution and use it to reimburse the sponsor, that is OK, but otherwise non-alienable means it cannot be grabbed to satisfy any debts (other than under a tax lien). The only exception is if the participant's actions as a plan official harmed the plan.