Trustee is a convicted Felon and in Prison

[sbsfpension]

In December of 2014 - Trustee and business owner hosts a conference call with his spouse and legal counsel on the line and indicated that he was traveling out the country to attend to family overseas on an emergency and that he left discretion to the retirement plan to his wife.

Since then the TPA has received 2 requests for in-service distribution for him signed by him. The TPA verified the legitimacy of the request with his wife and his legal counsel.

However, due to the large requests for the in-service distributions, the compliance manager did some research due to a "gut" feeling and discovered that in Feb. 2014 the owner/trustee pled guilty to health care fraud. In August of 2014 the trustee / owner was sentenced to 15 months in federal prison and had to turn himself in in December of 2014. Part of his sentencing was to pay restitution in the amount of $325k. On March 31, 2015, the State Dept. of Health formally revoked his medical practice license. All of this was discovered on the internet via public records.

Since the TPA has yet to formally be notified by the "owner/trustee" or their spouse or legal counsel and has yet to receive any inquiry or notification by any government agency, what is the obligation of the TPA since the business and practice was shut down by the government?

Any feedback or help is appreciated

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[mbozek]

There are many federal laws that require/allow seizure of assets including pensions and IRAs to pay fines or restitution owed to US government. ERISA does not protect the participant's assets because ERISA does not preempt any other federal law. US Justice dept has an entire division devoted to seizing assets of felons.Only restriction is that a participants assets cannot be seized until the funds are payable to him as they are in this case. Since the compliance manager is on actual notice of the participant's conviction and restitution order the manager and TPA would be at risk of being personally liable if the retirement benefits are paid. Compliance manger should notify TPA of this issue and get counsel's advice of how to block any payment to convicted felon. Since the participant's only recourse to get paid would be to sue in federal court the blocking of payment is a no brainer.