Even if a company is upset by a whistle-blower's actions, it can't hold the person's retirement benefits hostage, according to Drinker Biddle.
Even if the person was fired for wrong doing or is falsely accusing the company of something, the employer must still pay out the benefits.
There are some exceptions, according to Drinker Biddle, but they are limited.
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A plan may contain a provision that changes the vesting schedule if a participant engages in certain acts that are adverse to the interests of the employer and are spelled out in the plan. This wouldn't apply to the employee's own deferrals, since those must always be 100 percent vested, but could be applied to employer contributions, such as a match or profit sharing contribution in a 401(k) plan.
Few plans have such a provision, Drinker Biddle found, and if it's not in the document, for benefits purposes, it doesn't exist. Trying to add it to a provider's document would likely cause it to lose prototype status. And once the employee has satisfied the vesting period, even if the provision is included, the benefits have to be paid out, no matter how bad the employee was.
Drinker added that a court would not permit enforcement of a plan document that included whistle-blower activity in the list of "bad boy" conduct.
If the employee steals from the plan, under certain circumstances, the plan may be able to seize the benefits to satisfy its claim. This doesn't help the employer, and the circumstances under which this can be done are very limited.
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