Do you have to be of legal status to have a 401k?

Question

If you have a 401k and you are illegal in this country, will it affect you in the future when you are trying to use this money. My company is interested in starting 401k but one employ is illegal can he have a 401k and be ok with it in the long run.

Answer 1

What money he earns is his. Once he is located by immigration and deported they will still have to make arrangements to have his money either sent with him or to him in his country.

He may be breaking the law but the law still protects what he earns as his.

Answer 2

I'm hoping you are speaking on behalf of the illegal and not the company here...

plan can, and most do, exclude someone for being a non-resident alien. I'm assuming that said illegal has a fake ssn...so what will happen is that he will work and defer and the company will match....up until the day he quits or gets caught. If he quits he can apply for a distribution and he'll likely get his own money AND the companies match and/or profit sharing.

If he gets caught then the company will take back the portion that they contributed (match and/or profit sharing) and issue a check to the participant for the amount of money that he put into the plan. He would have to get an ITIN from the IRS to get it but those are simple enough.

So, it's ok for him to participate. It's a win-win situation for him. If he gets caught he gets his money and interest earned on it just like it was in a bank account. If he doesn't get caught and he quits then he gets his vested account.

Lastly there are no cross checking...only way he'd get caught is if the same SSN also had an account in the same place as your 401k....not very likely given the numbers of people involved. The SSN will get reported to the IRS upon distribution, but does it really matter at that point?

Answer 3

HE can if he'll never use credit cards. Always use cash. If it's hard to do, then process his papers so he'll be a legal citizen in your country. You have the money anyway.