Subscribe (Free) to
Daily or Weekly Newsletters
Post a Job

Featured Jobs

Relationship Manager

Compass Retirement Consulting Group, Inc.
(Remote / NH)

Compass Retirement Consulting Group, Inc. logo

401(k) Distribution Manager

Nova 401(k) Associates
(Remote)

Nova 401(k) Associates logo

Retirement Plan Legal Specialist

Pentegra
(Remote / West Harrison NY)

Pentegra logo

Associate General Counsel

Central Pension Fund of the IUOE
(Washington DC)

Central Pension Fund of the IUOE logo

Distribution \ Loan Clerk

Retirement, LLC
(Remote / Oklahoma City OK)

Retirement, LLC logo

Retirement Plan Administrator

Nicholas Pension Consultants
(Remote / Corona CA / Rancho Cordova CA)

Nicholas Pension Consultants logo

Attorney

Central Pension Fund of the IUOE
(Washington DC)

Central Pension Fund of the IUOE logo

Retirement Plan Relationship Manager

ERISA Services, Inc.
(Remote)

ERISA Services, Inc. logo

Enrolled Actuary

Prime Pensions, Inc.
(Remote)

Prime Pensions, Inc. logo

Defined Benefit Calculation Specialist/Actuary

The Angell Pension Group, Inc.
(Remote / East Providence RI)

The Angell Pension Group, Inc. logo

Jr Retirement Plan Administrator/ Administrative Assistant

Hochheiser Deutsch & Co, Inc.
(Melville NY)

Hochheiser Deutsch & Co, Inc. logo

Quality Assurance Manager

Bates & Company
(Remote / Winter Park FL)

Bates & Company logo

Retirement Plan Consultant

Carpenter Morse Group
(Remote)

Carpenter Morse Group logo

Executive Compensation Lawyer

Trucker Huss, A Professional Corporation
(Remote / San Francisco CA)

Trucker Huss, A Professional Corporation logo

Client Service Manager

United 401(k) Plans, Inc.
(Remote)

United 401(k) Plans, Inc. logo

View More Employee Benefits Jobs

Free Newsletters

“BenefitsLink continues to be the most valuable resource we have at the firm.”

-- An attorney subscriber

Mobile App image LinkedIn icon
Twitter icon
Facebook icon

BenefitsLink > Q&A Columns >

Who's the Employer?

Answers are provided by S. Derrin Watson, JD, APM

Illegal Aliens As Employees

(Posted May 22, 2001)

Question 100: What action should be taken when it is discovered that participants are in a plan due to supplying false information supplied by illegal aliens to the employer (fake social security numbers)? These individuals participated in the plan and received contributions. What should be done with the money contributed for these "participants?" For plan purposes, should the illegal aliens who worked be considered employees and participants, even though they were not legally employed? Should this be treated as an operational error and corrected under SCP?

Answer: We start with the notion that the common law definition of employee is the basis for determining if someone is an employee for plan purposes. That common law definition, with all its various factors, does not consider whether someone is in America legally or not. In other words, if someone born and raised in this country would be considered an employee, then an illegal alien performing the same duties under the same conditions will also be considered an employee.

ERISA does not contain any exclusions for illegal aliens. IRC 410(b) does allow a plan to exclude nonresident aliens without U.S.-source income, but that does not apply here. These workers definitely have U.S.-source income. They earned it by working in this country for the employer and being paid a wage for their services.

I assume the plan does not contain a clause excluding from participation persons who are not U.S. citizens or who do not have a green card. (I’ve never seen such a clause.) Even if it had one, these workers would have to be counted in determining whether the minimum coverage test of IRC 410(b) was satisfied.

So, in the absence of such a clause, if these individuals were eligible to participate before you knew that they had misrepresented their eligibility for employment, then they were eligible to participate notwithstanding that misrepresentation. If the plan covered all employees, or all employees in a particular job classification, then they are eligible under the terms of the plan and are entitled to their vested accrued benefits, the same as with any other employee.

Hence there is no operational error to correct. The plan has been administered in accordance with its terms. The workers were employees and entitled to coverage.

Issues relating to employees, including a detailed discussion of those factors which are relevant in determining that status, are discussed in Chapter 2 of my book, Who's the Employer?.


Important notice:

Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner or to readers. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of this and similar situations.

The law in this area changes frequently. Answers are believed to be correct as of the posting dates shown. The completeness or accuracy of a particular answer may be affected by changes in the law (statutes, regulations, rulings, court decisions, etc.) that occur after the date on which a particular Q&A is posted.


Copyright 1999-2017 S. Derrin Watson
Related links:

(restricted access)

(restricted access)

© 2023 BenefitsLink.com, Inc.