Be Mindful of Who You Pay Out of Your 401(k)

One plan sponsor learned the hard way: Orthopedic Associates is on the hook for a participant’s $770,000 in benefits that the plan wrongfully distributed to his ex-wife.

The Second Circuit Court of Appeals held that the plan must pay the participant all of his accrued benefits, despite the fact it already paid those same benefits to his ex-wife. The plan sponsor argued it didn’t have to pay the participant until his ex-wife repaid the plan in full. The court didn’t buy it: it ordered the plan to pay the benefits again, costing nearly $800,000 of plan assets (that will presumably be made up by another contribution from the plan sponsor).

Always make sure you distribute plan assets correctly–it may become expensive if you have to do it twice!

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s