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Forfeiture of account if participant cost employer money?


t.haley

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Client has nonqualified ERISA plan. Wants to amend the plan to provide that if a participant "cost the employer money" (i.e. losing a large account or other signiciant detrimental financial result), management could, at their discretion, remove the participant from the plan and reallocate the contributions for that participant to other participants. Can they do this? The plan already provides for forfeiture of non-vested account if participant is terminated for cause, and forfeiture of vested and non-vested account if participant is terminated due to conviction of embezzlement, etc. However, now they want forfeiture of vested and non-vested accounts if participant costs them money but is not terminated.

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Who would want to work for such an employer???

What, forfeiture of otherwise vested accounts for embezzlement and even termination for cause isn't enough? Loss of client as a result of actions or inactions that would not rise to a level that could justify termination for cause? How could anyone derive any sense of financial security in such an environment, and without that, what is the purpose between offering any plan at all?

Always check with your actuary first!

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My 2 cents - all good points. Not sure of the motivation of the employer. But I have been asked to whether they can amend their plan. I have seen some plans that provide for forfeiture if the employee engages in any activity that, in the opinion of the board of directors, is injurious to the corporation or not in the best interests of the corporation. Unless I can find something concrete that tells me they can't do it, I will prepare the amendment and let them deal with any employee morale issues!

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