Ethical Dilemma

Hypothetical situation:  Trustee terminates plan and takes all money, including monies due to employees.  Takes this money and transfers into a personal IRA for this trustee.  Believes he/she can get away with it since no reporting of benefits was ever done to participants.  What is the TPA or actuary's obligation in this situation?

MoJo, first, yes a plan did exist.  As I understand, there was a document and 5500 filings.  There was just never any statements distributed to employees by the employer.  Second, numbers 1 and 2 have been done, it is #3 that is the question.  I believe your comment on he DOL website is relevant.

Presumably, Trustee = Plan Administrator = owner of plan sponsor?

If you have any relationship with this person's attorney and/or accountant, perhaps they can be encouraged to contribute their own comments.

So it's fraud. Don't be a willing participant. Outline his EPCRS options, recommend an ERISA Attorney, resign if they don't want to do it.

Then the only question is do you want to report him to the DOL or not.

Must one keep a thief’s secret?

Professions’ conduct rules include a general principle of keeping confidential information one learned while working for one’s client. Those rules recognize an exception for giving testimony or producing documents as compelled by law.

Some might wonder whether a citizen must report a crime. The answer might be No.

There is a Federal statute, enacted in 1790 during the first Congress, for misprision of felony.

“Whoever, having knowledge of the actual commission of a felony cognizable by a court of the United States, conceals and does not as soon as possible make known the same to some judge or other person in civil or military authority under the United States, shall be fined under this title or imprisoned not more than three years, or both.”

18 U.S.C. § 4 http://uscode.house.gov/view.xhtml?req=misprision&f=treesort&fq=true&num=4&hl=true&edition=prelim&granuleId=USC-prelim-title18-section4.

Courts have interpreted this statute to find no crime unless one both has knowledge of the felony and actively concealed it.

A practical point about such a former client: Be careful not to destroy records any sooner than is regularly done under your firm’s records-retention and records-destruction procedures. Keeping your records regularly available shows you did not conceal anything.

If someone might plausibly assert the TPA or actuary is or was a fiduciary regarding the plan, consider one’s co-fiduciary responsibilities under ERISA § 405(a)(1)-(3).

ERISA § 405, 29 U.S.C. § 1105 http://uscode.house.gov/view.xhtml?req=(title:29%20section:1105%20edition:prelim)%20OR%20(granuleid:USC-prelim-title29-section1105)&f=treesort&edition=prelim&num=0&jumpTo=true.

About all these and several other points, an observing former service provider needs its own lawyer’s confidential advice.

Does the act of not furnishing statements (and probably SARs) disqualify a plan?  (I'm guessing this is a PSP)

And isn't part of having a plan communicating it to the EEs?  If the owner didn't give out SPDs, was there a plan to begin with?

And, Lou, I would add "theft" to your "fraud" diagnosis.

If you are a member of an organization with a code of conduct (e.g., ASPPA) and/or subject to Circular 230, I would consult those resources concerning professional and legal obligations.

Although all the details of your relationship(s) with the plan aren't provided, consider whether you may have responsibility/liability under the plan as a co-fiduciary that would require you to take action.  See ERISA.  Whether you think you may have such liability or not, others may.  What a mess!