Can an employee with a felony conviction work with an employee benefits plan??


Tanya, an employee with extensive benefits knowledge, was recently convicted of a felony. Given her conviction, can she still play a role in your company's employee benefits plan?


Probably not. Under ERISA Sec. 411(a), a person is generally prohibited from serving in a fiduciary capacity for 13 years after the conviction. If Tanya was also imprisoned for her felony, the 13-year ban begins to toll after the end of her imprisonment.

This prohibition against felon involvement in employee benefit plans applies to anyone convicted of an assortment of crimes, not just financial crimes. The list is lengthy but includes such felonies as bribery, extortion, embezzlement, fraud, or any violation of ERISA, as well as crimes like murder, kidnapping, and arson, among others.

A person who has been convicted of a felony is prohibited from serving a plan in such capacities as plan administrator, consultant, custodian, trustee, agent, employee, or in any capacity involving decision-making authority or custody or control of the plan's assets.

Ban can be lifted. If a court determines that the individual could serve as a fiduciary without violating the purposes of ERISA's provisions on the protection of employee benefit rights, the ban could be lifted. For a federal offense, the sentencing judge would make this determination and, for a state offense, a U.S. district court would make the determination.

Penalty for violation. It is important for plans and employers to note that the penalty for intentionally violating the ban is a fine of up to $10,000, and/or imprisonment for up to five years.

Source: ERISA Sec. 411(a); Employee Benefits Management Newsletter, March 24, 2015.

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