Possible Fraudulent Participant Cash Out Request

[DR_EA]

I have a client who just got a call from a "former participant" requesting to cash out his profit sharing plan account balance. 

However, the caller (1) mispronounced the participant's name, (2) lacked an accent even though the participant had a heavy accent, and (3) didn't seem to know the person he was talking to, even though she had worked with the participant for 20 years. 

 

She's "nearly 100%" sure the person she spoke to is therefore NOT the participant. She suspects it may be his adult son. 

 

Where do we go from here? My initial thought was to ask the caller to come to the client's office to sign benefit election paperwork in person, although I really don't like the idea of inviting the imposter into my client's place of business. 

 

I'm now leaning towards "requiring" that the forms be signed in the presence of a notary, then scrutinizing the signed forms (if he returns them) and reporting to EBSA if necessary. 

 

Anyone dealt with something like this?

 

[Paul I]

Since there are very good reasons to be suspicious of the request, you and the plan's fiduciaries need to protect the plan from potential fraud.  Otherwise, if the request is fraudulent, then there will be a lot of finger-pointing (and potentially litigation) about who will make the plan and participant whole. 

If there is a concern about inviting the individual into your office or the client's office, consider choosing a public, safe place to meet.  This could be at a bank or even at a police station, depending upon the level of concern.  The purpose is to arrange for a notary or plan representative to validate the individual's identity.  Ideally, someone who could recognize the participant could be available.

If the level of concern is at the level that the plan fiduciaries are comfortable just having an election form notarized without their being present, then consider listing on the document being notarized specific items for the notary to confirm was presented at the signing.  This could be at least one item with a picture (like a driver's license), and any additional documents that would acceptable like an original Social Security Card, Medicare ID or something similar.

Ultimately, it is the plan fiduciaries call on how to approach the issue, but you need to make it abundantly clear to them that you believe additional steps need to be taken to confirm the participant's identity.

We have not dealt with this particular set of circumstances, but have had a couple of incidents where we expressed our concerns to the plan fiduciaries and worked with them to document the participant's identity to their satisfaction.

These are just some thoughts and is not advice to anyone.

[Lou S.]

I agree with Paul's suggestions. Take reasonable precautions to prevent fraud since it is already suspected in this case.

[david rigby]

Comments from @Paul I are reasonable. and helpful.  

There may be another situation to consider (and prepare for).  Maybe the participant is "incapacitated", and the caller was a relative (perhaps an adult child) who is assisting with a legitimate disbursement.  Imagine, for example, that the participant has some cognitive issues, but there is not (yet) any formal diagnosis or power of attorney to allow the adult child to take unilateral action.  Of course, it's also possible that it's both:  a relative who is "helping" and also committing fraud.  Use your imagination to include any other scenarios that might require the plan sponsor to be wary and/or know what steps are required.