Forfeiture Vested Funds due to embezzlement

I have a client whose employee was fired & convicted of embezzling company funds. There is still an outstanding restitution amount.  Employee has a 100% vested benefit in the plan. It is a Safe Harbor Plan so employer contributions (match) are 100% vested. Anyone know I there is of a way to forfeit the employer portion of the benefit?  I am almost 100% sure there is not. 

4th Circuit just ruled on that -- see  https://benefitslink.com/news/index.cgi/view/20210811-166919

It might work if the participant is subject to a Federal criminal restitution order under the Mandatory Victims Restitution Act of 1996.

18 U.S.C. § 3613 http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title18-section3613&num=0&edition=prelim

Such a restitution order gets a payment only if the participant could get the payment.

If the employer/administrator pursues this, lawyer-up.

I had this happen to one of my plans several years ago. Of course, the participant was fired. To avoid prosecution (and probably 15 months in prison). She obtained a cash distribution (had a large account balance) and paid the Employer the funds she embezzled.

1 hour ago, msmith said:

I had this happen to one of my plans several years ago. Of course, the participant was fired. To avoid prosecution (and probably 15 months in prison). She obtained a cash distribution (had a large account balance) and paid the Employer the funds she embezzled.

Way back in the early 2000's I saw this also.   The plan sponsor worked with the prosecuting attorney to make taking a cash distribution and turning it over to the plan sponsor as a condition of the plea agreement.   Based on the way the question is written that might be too late but might be worth having the plan's attorney reach out to the prosecuting attorney.  

11 hours ago, ESOP Guy said:

Way back in the early 2000's I saw this also.   The plan sponsor worked with the prosecuting attorney to make taking a cash distribution and turning it over to the plan sponsor as a condition of the plea agreement.   Based on the way the question is written that might be too late but might be worth having the plan's attorney reach out to the prosecuting attorney.  

We saw this too, recently.  The embezzler still went to jail for a while.

I've seen this too.  Distribution to participant, payment to the employer.

I once took a check and distribution paperwork to the courthouse - minutes before a sentencing hearing.  Participant signed the paperwork, I handed over the check, participant endorsed the back of the check over to the employer and then stood before the judge for sentencing (thinking his good will gesture would have an impact).  He got the max (15 years) in Ohio's Lucasville prison.   This produced a noticeable odor in the courtroom as the "Pillsbury Dough Boy" like new convict contemplated his fate (and the physique of his possible roommate)....

Besides that, we every year or so get a MVRA order signed by a judge, presented by the AUSA for the district, and distribute the funds pursuant to the order....  But NOT without an appropriate MVRA order (and I've had judges issue "garnishment" orders that don't work against a retirement plan, and then have them threaten *me* with imprisonment....)