Small Plan - Employees Provided False SSN

[DMincevich]

There is a small 401(k) Plan for a company where several employees provided false SSN in order to collect paychecks, etc. The company did not verify and as some time had passed, the employees that provided false SSN were able to get into the Plan. The company made contributions on their behalf. The Plan itself deems "non-resident aliens" are ineligible from entering the Plan. It was found out that said employees were in fact not of legal status to be in the United States.

(Still receiving further details.)

Would the employees just receive their contributions to the Plan, their contributions with the employer's contribution, and what would they be entitled to? I am seeing some cases where employees that fraudulently self-identified because of immigration/legal status had to go through Civil Claims. 

[C. B. Zeller]

20 minutes ago, DMincevich said:

The Plan itself deems "non-resident aliens" are ineligible from entering the Plan.

Are you sure that's what the plan says? Read the exact wording in your plan document. I bet it actually says something to the effect that non-resident aliens with no U.S.-source income are excluded. If someone worked in the U.S. then they would not fall under that excludable employee classification, even if they are not a citizen and not a permanent resident.

[Peter Gulia]

DMincevich, I imagine the hypothetical situation you describe has typical small-business facts under which the employer that sponsors a retirement plan also is the plan’s administrator.

The employer might want its lawyers’ advice about the employer’s duties under the Immigration Control and Reform Act of 1986, other Federal laws regarding employment, States’ laws about employing workers and paying wages, and Federal, State, and municipal laws about reporting wages for tax and other purposes. In particular, the employer might want advice about whether it must or should file Form W-2c and W-3c corrected wage reports for wages paid in 2022 and earlier years, and Form 941-X returns for periods with incorrectly reported wages.

The administrator might want its lawyers’ advice about the Employee Retirement Income Security Act of 1974, the Internal Revenue Code of 1986, and other Federal laws. That might include advice about how to correct carefully the plan’s records about a participant’s identity, and how to do it to not alter, discard, or conceal earlier records.

That a worker was an alien an employer ought not to have employed does not defeat the worker’s rights as a participant under an ERISA-governed retirement plan.

[FormsRstillmylife]

Upon plan termination, the PBGC will not take a missing participant account where the name is fake and the social security number is false.  There was also no luck having the person whose identity was stolen to take the money. (Didn't try it, but a thought in a weak moment.)  In that particular case, ICE had been called and no one thought to get the employee's real name as he was being hauled off.

[Patricia Neal Jensen]

I suggest those employees are resident aliens not non-resident.  Peter Gulia's advice is excellent.  I am assuming that the employees are terminated and that has occasioned the distribution to which you refer.