Save time with our cheat sheets, fact sheets, checklists & books!

February 18, 2009

Bad-Boy Clause

Your Guide

Print

Definition

A provision in a qualified plan, under which a participant would lose – usually unvested– benefits, if the participant engages in dishonest activity such as fraud, that involves the plan assets.

Referring Cite

Temp. Treas. Reg. §1.411(a)-4T, Revenue Ruling 85-31

Additional Helpful Information

  • Bad-boy clauses are not always enforceable.
  • The plan must usually define the circumstances under which benefits would be forfeited, before the circumstances occur. Otherwise, it may not be enforceable.
  • Bad-boy clauses cannot include time restrictions on vesting that goes beyond the vesting schedule. For instance, if the clause is non-competing in nature, it cannot provide that if the participant leaves to work for a competitor after the vesting period expires, the benefits would be forfeited.
More

Keep Learning

Domestic abuse distribution

A domestic abuse distribution is one that is made to domestic abuse victim, during the 1-year period beginning on any date on which the individual

Eligible retirement plan

The term “eligible retirement plan”, means a retirement plan to which a rollover contribution can be made. These are: (i)an individual retirement account described in

Qualified See-Through Trust beneficiary

Definition A qualified trust beneficiary is a trust that satisfies the requirements so as to be treated as a designated beneficiary.   For retirement accounts inherited

Saver’s Credit

Definition Also known as the Saver’s Tax Credit: Nonrefundable tax credit available to eligible individuals who make contributions to their retirement account. The saver’s credit

Be among the first to know when

IRA Rules
Change