Payment of Distributions to Employers (Posted December 22, 2000) Technical Tip 39: The following question and answer were from the IRS Q&A Session at the 1999 ASPPA Annual Conference: In some cases, when a distribution is requested, a mutual fund company may make the check payable to the employer. The employer then writes an equivalent check to the participant. The employer check is written and transmitted the same day the trust check is received. Is this permissible? IRS Response: This is legally incorrect and should not be done. Comment by the RLR&C ERISA Attorneys: Payment of the funds to the employer, rather than directly to the participant, is improper for a number of reasons: (1) It could be viewed by the IRS or the DOL as a prohibited transaction; (2) Under Title I of ERISA, it would violate the requirement that plan assets be held in trust; and (3) The DOL could view the payment as a breach of fiduciary duty by the employer. View all Tips © 2012 Reish Luftman Reicher & Cohen, a Professional Corporation Important notice: Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner's situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation.