USCIS Memo Pauses TPS, Asylum, EAD, Other Applications from Parolees
As confirmed by several news outlets and the American Immigration Lawyers’ Association, acting U.S. Citizen and Immigration Services Director Andrew Davidson issued an internal memorandum Feb. 14, 2025, ordering an agency-wide “administrative pause” on all “pending benefit requests” filed by applicants paroled through a parole program, including those seeking Temporary Protected Status (TPS) for migrants from crisis-stricken countries like Haiti, Ukraine, and Venezuela; asylum, which allows those fleeing persecution to gain a permanent safe haven in the United States; Employment Authorization Documents; and “green cards” or permanent residency processes.
Programs impacted:
Uniting for Ukraine: This program was set up under the Biden administration for displaced Ukrainians outside of the United States. Roughly 240,000 Ukrainians with American sponsors arrived in the United States under that process before President Donald Trump took office.
Cuban Haitian Nicaragua and Venezuela (CHNV) Parole Program: Through the CHNV Parole Program, over 530,000 Cubans, Haitians, Nicaraguans, and Venezuelans have lawfully and safely entered the United States with the help of U.S.-based sponsors.
Family Reunification Parole Programs: These programs permitted some Colombians, Ecuadorians, Central Americans, Haitians, and Cubans with American relatives to come to the United States to wait for a family-based green card to become available.
TPS for migrants from crisis-stricken countries; asylum, which allows those fleeing persecution to remain in the United States; and green cards for individuals seeing U.S. permanent residency.
USCIS cited fraud, public safety, and national security concerns that are not being properly flagged in adjudicative systems as reasons for the administrative pause.
According to the memo, the application freeze will remain in place indefinitely while government officials work to identify potential cases of fraud and enhance vetting procedures to mitigate concerns related to national security and public safety.
One Month into the New Administration, Employers Have a Lot to Think About
This past week marked the one-month anniversary of the new Trump Administration, and there have been many developments — including in just the past week — to which employers need to pay attention.
Secretary of Homeland Security revokes Temporary Protective Status (TPS) for Haitians and certain Venezuelans. The Secretary of Homeland Security may designate a foreign country for TPS due to conditions in the country’s that temporarily prevent the country’s nationals from returning safely. Currently, 17 countries have been granted TPS. Those granted TPS are entitled to work authorization (“EAD”). On February 1, 2025, Secretary of Homeland Security Kristi Noem decided to terminate TPS under the 2023 designation for Venezuela. If the termination stands, on April 7, 2025, a certain category of Venezuelans (approximately 350,000 people) previously granted TPS will lose status to remain in the U.S. And, on February 20, 2025, Secretary Noem revoked TPS for Haitian nationals (approximately 500,000 people) effective August 3, 2025. Unless revoked or blocked through court litigation, on the above dates, Venezuelans and Haitians here on TPS will lose their work authorization. Any employer who continues to employ a worker without valid work authorization can be subject to civil and criminal prosecution. It is possible workers from these two countries may have other legitimate bases, such a pending asylum petition, to remain in the country and remain employed. Employers who employ foreign nationals from these two countries should review each employee’s situation and determine strategies and/or options to keep them lawfully employed. In addition, employers should review their employees on TPS designation and stay vigilant other revocations in the weeks and months to come.
NLRB’s Acting General Counsel Revokes Certain Memos Issued by his Predecessor. On February 14, 2025, National Labor Relation Board (NLRB or “Board”) Acting General Counsel William B. Cowen issued a memo revoking various memos issued over the past three years by then NLRB General Counsel Jennifer Abruzzo, whom President Trump fired shortly after taking office. The general counsel (GC) of the NLRB supervises the regional offices and plays a key role in directing enforcement and persuading the NLRB members on policy issues. Of the many memos rescinded were the prior memos calling for “full relief” (including various types of compensatory damages and not just back pay when violations were found) as well as a memo suggesting noncompetes violate workers’ rights and guidance about the NLRB’s decision Cemex Construction Materials Pacific, LLC, which made it more difficult for employers to avoid representation elections. The revocation of the prior memos indicates an immediate and dramatic shift away from the pro-employee and union positions of the prior GC and Board under the Biden Administration.
President Trump Issues Executive Order requiring Independent Regulatory Agencies to Submit to Presidential Oversight. On February 18, 2025, President Trump issued an executive order entitled “Ensuring Accountability for All Agencies.” This order requires so-called independent agencies, such as the NLRB and perhaps the EEOC as well, to submit to more oversight from the White House on budgetary and regulatory matters and limits the legal positions they can take. Should this executive order stand the legal challenges that are likely to come, the president will be able to directly influence policy and enforcement activities more directly at these employment enforcement agencies.
Acting EEOC Chair Seeks to Protect Anti-American Bias. Signaling another dramatic shift in enforcement priorities at an employment related government agency, on February 19, 2025, U.S. Equal Employment Opportunity Commission (EEOC) Acting Chair Andrea Lucas announced “The EEOC is putting employers and other covered entities on notice: if you are part of the pipeline contributing to our immigration crisis or abusing our legal immigration system via illegal preferences against American workers, you must stop. The law applies to you, and you are not above the law. The EEOC is here to protect all workers from unlawful national origin discrimination, including American workers.”
EEOC’s Final Rule Under the Pregnant Workers Fairness Act Under Attack. Acting Chair Lucas also issued a statement describing her opposition to certain parts of the Commission’s Final Rule implementing the Pregnant Workers Fairness Act (PWFA). The acting chair does not agree with the Commission’s interpretation of the phrase “pregnancy, childbirth, or related medical conditions” and the contrivances the Commission used to arrive at its construction of the statute. Related to this, on Thursday February 20, 2025, the Eighth Circuit Court of Appeals issued a decision holding that attorneys general from 17 Republican-majority states have the right to sue the EEOC over the same PWFA rule, reviving their challenge to abortion-related components of the regulations.
Currently, both the NLRB and EEOC lack a sufficient quorum to enact any changes since President Trump fired members from both those agencies. It is clear that the Trump Administration will be issuing many more changes in enforcement strategy and implementing policies that will be directly affecting employers. Stay tuned!
State Department Updates Criteria for Nonimmigrant Visa Interview Waivers
On February 18, 2025, the U.S. Department of State updated visa interview waiver (“drop box”) eligibility criteria for individuals renewing their visa stamps, resulting in sudden drop box appointment cancellations and administrative processing for some who had already submitted documents. The update, which took effect immediately, limiting eligibility for visa interview waivers, supersedes the expanded criteria set forth on December 21, 2023.
Quick Hits
Updated interview waiver criteria limits eligibility to those seeking a visa renewal in the same category and only if their most recent visa expired within twelve months prior to the application.
Visa appointment wait times are likely to increase.
Consulate action such as scheduling interviews for those already issued drop box appointments who may now be ineligible remains unclear.
The State Department updates followed the recent changes to U.S. Mission India’s nonimmigrant visa processing, which included application of the February 18, 2025, visa interview waiver criteria.
Eligible visa applicants under the new interview waiver criteria include those:
applying for visa classifications under A-1, A-2, C-3 (except attendants, servants, or personal employees of accredited officials), G-1, G-2, G-3, G-4, NATO-1 through NATO-6, or TECRO E-1;
applying for diplomatic- or official-type visas; or
applying for a visa in the same category as a previously held visa that expired less than twelve months prior to the new application.
In addition to falling under the above-listed categories, applicants must also:
apply in their country of nationality or residence;
have never been refused a visa (unless such refusal was overcome or waived); and
have no apparent or potential ineligibility.
The latest guidance also removes interview waiver eligibility for first-time H-2 visa applicants.
The State Department’s February 18, 2025, interview waiver eligibility criteria supersedes the interview waiver criteria published on December 21, 2023. Notably, the December 2023 criteria considered eligible for interview waivers those applying for a visa who were previously issued a visa in any category (except for a B-1 or B-2 visa) that expired less than forty-eight months prior to the new application.
The sudden change in eligibility has led to drop box appointment cancellations and administrative processing for some applicants who had submitted documents under the previous policy. The Bureau of Consular Affairs has not issued formal clarification on how these appointments and submissions will be treated, and each consulate may operate differently.
Key Takeaways
Stakeholders can expect longer visa appointment wait times due to the increased demand for visa interview appointments. Visa applicants may consider scheduling appointments and planning international travel well in advance. For employers, longer appointment wait times may mean a longer lead time during international new-hire onboarding, renewal processes, and business travel planning. Finally, stakeholders may want to consider cost-reduction measures, such as purchasing refundable plane tickets and other travel accommodations.
Trump Administration: TPS for Haiti Will Terminate Aug. 3, 2025
On Feb. 20, 2025, DHS Secretary Kristi Noem partially vacated a July 1, 2024, decision by former DHS Secretary Alejandro Mayorkas to extend the Temporary Protected Status (TPS) designation for Haiti for 18 months.
Secretary Noem has limited the extension to 12 months, expiring Aug. 3, 2025, instead of Feb. 3, 2026. Work authorization documents based upon Haitian TPS are auto-extended to Aug. 3, 2025, rather than Feb. 3, 2026.
If no decision is made to extend Haitian TPS beyond Aug. 3, 2025, the expiration will become final.
Two lawsuits were recently filed in response to Secretary Noem’s decision to terminate Venezuelan TPS. Similar legal challenges may be made to the decision to terminate Haitian TPS.
March 14, 2025, Looming as Important Date for Congressional Republicans and President Trump, and May Provide Leverage to Democrats
March 14, 2025, looms as an important deadline in the middle of President Trump’s first 100 days in office, a milestone often used to evaluate the effectiveness of a new President. March 14 is the day that the American Relief Act, 2025 (Public Law 118-158), which provides temporary funding for the federal government, expires. The law was enacted during the 118th Congress and signed into law by President Biden. At the time, some questioned whether having government funding expire during President Trump’s first 100 days in office was a good idea. Now, Republicans, who control the White House, Senate, and House of Representatives, need to pass legislation to avoid a government shutdown on March 15, and may need Democratic support to do so. The question is, at what cost?
Government funding is not the only thing that expires March 14, 2025. The National Flood Insurance Program was extended through March 14, 2025, and will also expire if not extended, as will Temporary Assistance for Needy Families (TANF), which provides benefits to families in need. Congress also needs to raise the debt limit, but not necessarily within this same timeframe.
Simultaneous with figuring out how to fund the federal government for the remainder of Fiscal Year 2025, the Republican-led Congress also is working on legislation to enact President Trump’s priority issues, including extending the 2017 tax provisions, providing money for border security, and addressing immigration. Making matters more challenging, leadership in the House of Representatives and Senate are taking sharply different approaches to developing such legislation. Adding one more degree of difficulty to this legislative effort, House Republicans in the last Congress needed Democrats to vote for the legislation for it to pass. What is unknown this time is whether Democrats will vote in sufficient numbers with Republicans to fund the government and, if so, what concessions they will be able to gain from Republicans to secure their support.
I wrote in December that slim majorities will test Republican unity in the 119th Congress. The looming March 14, 2025, deadline combined with the desire to pass legislation to enact President Trump’s priorities early in 2025, present an interesting test of Republican unity, and may present out-of-power Democrats with sufficient leverage to gain concessions to win their support. The next few weeks will provide a fascinating look at what to expect for the remainder of the 119th Congress.
Two Lawsuits Challenge Trump Administration’s Termination of Venezuela TPS
Advocacy groups and Venezuelan immigrants have filed suit in federal courts over terminated removal protections for Venezuelans in the United States.
On Feb. 19, 2025, the National TPS Alliance, an advocacy group for immigrants who have been granted Temporary Protected Status (TPS), and seven Venezuelans living in the United States, filed a lawsuit in the U.S. District Court for the Northern District of California challenging the Department of Homeland Security’s (DHS’s) decision to terminate Venezuela TPS. The termination impacts approximately 600,000 Venezuelan nationals (350,000 under the 2023 designation and 250,000 under the 2021 designation).
On Feb. 20, 2025, immigrant advocacy groups CASA, Inc. and Make the Road New York filed a lawsuit in the U.S. District Court for the District of Maryland also challenging the termination of Venezuela TPS.
Both suits allege that DHS Secretary Kristi Noem lacked legal authority to vacate former DHS Secretary Alejandro Mayorkas’ Jan. 17, 2025, decision to grant an 18-month extension of TPS for Venezuela.
The suits further contend that even if DHS possessed legal authority to terminate Venezuela TPS, it arbitrarily deviated from prior decisions, incorrectly concluding that Venezuelans granted TPS reside in the United States illegally.
The plaintiffs also allege that Secretary Noem’s decision was motivated by “racial animus,” pointing to an interview she gave to Fox News announcing her Feb. 5, 2025, decision to terminate Venezuela TPS in which she referred to Venezuelans granted TPS as “dirtbags.”
Both suits cite violations of the Administrative Procedure Act (APA) and the Fifth Amendment’s Equal Protection and Substantive Due Process clauses. They ask the courts to declare that former DHS Secretary Mayorkas’ 18-month extension of Venezuela TPS remains in effect and to enjoin enforcement of the Feb. 3, 2025, vacatur and Feb. 5, 2025, termination decisions.
Both suits have the potential to extend the Venezuela TPS designation for individuals who registered under both the 2021 and 2023 designations, as well as the validity of work authorizations based upon Venezuela TPS, while the litigation is pending.
Florida Enacts Immigration-Related Laws Expanding Law Enforcement, Restricting In-State Tuition, and Increasing Criminal Penalties
On February 13, 2025, Florida Governor Ron DeSantis signed into law Senate Bill (SB) 2-C and Senate Bill (SB) 4-C, immigration-related legislation that addresses a variety of matters, including in-state tuition benefits, new criminal penalties, and law enforcement structure and funding.
Quick Hits
Under recently enacted state legislation, undocumented immigrants in Florida will no longer be eligible for in-state tuition benefits at public colleges and universities.
Any undocumented immigrant convicted of a capital felony will face the death penalty.
A new State Board of Immigration Enforcement will be created, and more than $298 million will be allocated to law enforcement for immigration-targeted hiring and training, including bonuses to officers who cooperate in federal enforcement activities.
In-State Tuition Benefits
Under newly enacted SB 2-C, undocumented immigrants living in Florida will no longer be eligible for the in-state tuition rate at Florida’s public colleges and universities. Starting on July 1, 2025, students will be reevaluated for tuition eligibility.
Heightened Criminal Penalties
SB 2-C and SB 4-C provide for several new criminal penalties, including a provision in SB 4-C requiring courts to impose the death penalty for any undocumented immigrant “who is convicted or adjudicated guilty of a capital felony”—such as first-degree murder—in Florida. This provision is expected to be challenged in court.
SB 4-C also makes it a first-degree misdemeanor for undocumented immigrants who are eighteen years of age or older to “knowingly” enter or attempt to enter Florida. SB 2-C and SB 4-C enhance the penalties of all misdemeanor crimes committed by undocumented immigrants.
Under SB 2-C, undocumented immigrants who vote or aid noncitizens in voting can be charged with a third-degree felony.
Creation of the State Board of Immigration Enforcement
Senate Bill 2-C creates a State Board of Immigration Enforcement. The State Board of Immigration Enforcement will coordinate with and assist the federal government and state law enforcement agencies in enforcing “federal immigration laws and other matters related to the enforcement of federal immigration laws.”
The State Board of Immigration Enforcement will be composed of the governor and a cabinet to be appointed.
More Than $298 Million Allocated to Immigration-Focused Law Enforcement
SB 2-C allocates more than $298 million for state law enforcement agencies to carry out the state’s immigration objectives. The allocation includes funding for the hiring of fifty new law enforcement officers, a $1,000 bonus incentive program for immigration enforcement officers, and training grants.
Governor DeSantis’s signing of both bills continues his immigration objectives and follows Senate Bill 1718, which he signed into law in May 2023.
ICE Inspections in the Workplace: What Employers Need to Know
With the increasing activity by the U.S. Immigration and Customs Enforcement (ICE), employers should be aware of their responsibilities and how to interact with ICE agents. Generally, ICE agents may inspect a business for workplace enforcement or to conduct inspections of employee I-9 documentation. It is imperative that employers are aware of how to best prepare and respond to these types of situations.
What Information Should Employers Obtain from ICE Agents During a Workplace Interaction?
If ICE agents visit the workplace, employers should immediately contact counsel regarding next steps. ICE agents are required to identify themselves and present proper documentation regarding the proposed search, to enter nonpublic areas of the workplace.
Here are a few steps to follow if ICE agents appear at your place of business:
Ask the ICE agents to identify themselves with their badge information and a valid subpoena or warrant.
Document each of the ICE agent’s names, the name of the U.S. attorney assigned to the case, and the type of documentation presented for your records.
Ask the ICE agents to inform you of the nature and purpose of their visit.
Ask for a copy of the warrant or subpoena. You do not have to allow ICE agents access to nonpublic areas of the workplace if a proper warrant is not present.
Once you are handed a warrant and documentation from ICE agents, tell the ICE agent that “It is our company’s policy to call our lawyer and I am doing that now.” Contact your legal counsel immediately so that they can review the documents, ensure that the warrant is valid, and whether they should be present during the search.
Do not obstruct or interfere with ICE activities or agents. Do not hide employees or help them evade the search. Do not provide any false information, shred documents, or hide documents.
Create a list of employees present during the raid.
What Parts of the Workplace Can ICE Enter?
ICE is permitted to enter publicly accessible areas of a business without a warrant. However, to enter non-public areas of a business, ICE agents are required to present, upon request, a proper warrant or subpoena. ICE generally operates using either an ICE-issued warrant, or a warrant issued by a state or federal judge in the jurisdiction in which the inspection is occurring. Only a warrant signed by a judge gives ICE agents access to the private areas of a workplace. To determine whether a judicial warrant is valid, ensure that the warrant:
States “U.S. District Court” or a California Superior Court (if in California)
Is signed by a judge
Describes the physical place to be searched
Describes the individuals to be searched or describes the items to be seized, if any
Is dated
Has been issued within the past 14 calendar days
If the warrant is missing any of these requirements, it is invalid, and employers are permitted to refrain from permitting ICE agents from entering private areas of the workplace.
What Can Employers Tell Their Employees To Do During an ICE Inspection?
If ICE agents seek to speak with an employee in the workplace during an investigation, employees do have the right to remain silent and obtain legal counsel.
What Should Employers Do Next?
Employers should have policies in place to ensure a smooth process if ICE agents conduct an inspection at the workplace. Here are some recommendations:
Indicate which areas of the office are considered public and which areas are nonpublic – since ICE can only enter public areas, if there are areas marked “Employees Only,” those are nonpublic, and ICE cannot enter without a valid warrant.
Assign an employee to be the designated representative if ICE agents visit the premises to accompany the agent(s) during an inspection. The employee may take notes or videotape the officer. The employee should note any items seized and ask the officer if copies can be made before the originals are taken. If ICE does not agree, you can obtain copies later.
Ask for a list of items seized during the search. Agents are required to provide you with an inventory of items taken.
Contact counsel for further assistance on next steps.
What Differentiates an ICE Inspection from a Notice of Inspection (NOI)?
Federal law requires that employers have an I-9 form on file for each employee within three days of an employee’s hire date to prove that the employee is authorized to work in the U.S. A Form I-9 investigation is initiated when ICE serves the employer with a Notice of Inspection (NOI) – this should not be confused with a warrant, which is addressed above. Employers are required to deliver notice to their employees within 72 hours of receiving the NOI regarding the inspection.
If ICE serves a NOI, immediately contact counsel. Additionally, employers are entitled to up to three business days to produce their employee’s I-9 forms and, if ICE determines that one or more employees are not authorized to work in the United States, employers have up to 10 days to provide valid work authorization for these employees. The employer must notify any employees who the NOI indicates are not authorized to work in the United States of that determination within 72 hours.
Ultimately, when interacting with ICE, employers should immediately contact counsel to determine next steps and the appropriate course of action.
DOS Announces Dropbox Eligibility Reduced to 12 Months
After quietly updating consular websites, signaling a significant change to Visa Interview Waiver (“dropbox”) eligibility requirements, on Feb. 18, 2025, the Department of State (DOS) officially announced the reversion to pre-COVID eligibility standards, reducing the window for dropbox eligibility from 48 months to 12 months. This update follows reports of Visa Application Centers turning away applicants who no longer meet the revised criteria. Effective immediately, only those renewing a visa in the same nonimmigrant category that expired within the past year qualify for the dropbox process.
This shift means more applicants will need to schedule and attend in-person visa interviews, potentially increasing wait times at U.S. consulates worldwide.
If you have questions about your visa renewal or need assistance navigating these changes, please contact your immigration counsel as soon as possible.
Proposed Legislation Targets Nonprofits Supporting Immigrant Communities
Proposed legislation introduced in the US Senate last week would deny tax-exempt status to certain organizations that support undocumented immigrants. The legislation would change the eligibility requirements for 501(c)(3) tax-exempt status.
Fixing Exemptions for Networks Choosing to Enable Illegal Migration Act
On February 10, US Senator Bill Hagerty (R-TN) introduced S.497, the “Fixing Exemptions for Networks Choosing to Enable Illegal Migration Act” or the “FENCE Act” (Act). The Act would amend Section 501(c)(3) of the Internal Revenue Code to provide that an organization is only described in Section 501(c)(3) if it “does not engage in a pattern or practice of providing financial assistance, benefits, services, or other material support” to individuals the organization “knows or reasonably should know to be unlawfully present in the United States.”
The Act states that the added language “shall not be construed … to require a religious organization to act in violation of its religious belief.” The Act also states that the provision “should not be construed to require proof of citizenship or verification of an individual’s immigration status to be presented.”
If enacted, the Act could affect both new organizations seeking tax-exempt status and existing tax-exempt organizations that serve immigrant populations. New organizations applying for tax-exempt status under Section 501(c)(3) could be required to certify or otherwise establish that they will not provide prohibited support to persons described in the Act. An organization denied exempt status may appeal that decision through an administrative process and may ultimately seek a declaratory judgment in a court proceeding if needed. Existing organizations working with immigrant populations could also be impacted by, for example, an Internal Revenue Service (IRS) audit to evaluate whether an organization continues to operate exclusively for tax-exempt purposes within the meaning of Section 501(c)(3) or is engaged in activities that would be prohibited because of the Act. During an audit of a tax-exempt organization for this purpose, the IRS may examine the organization’s activities and finances to determine whether the organization complies with the criteria for exemption under Section 501(c)(3). Based on the examination, an organization could be asked to adjust its activities to ensure compliance or face an adverse determination as to its tax-exempt status. An organization has the right to appeal an adverse determination resulting from an audit through an administrative process similar to an organization denied tax-exempt status and it may also ultimately litigate the issue in court if needed.
S.497 has been referred to the Senate Finance Committee. It currently has no cosponsors, and there is no companion bill in the US House of Representatives.
Navigating the H-1B Cap Registration Season: Key Dates and Fee Changes for 2025
As we approach the H-1B cap season for fiscal year 2026, it is crucial for employers and prospective H-1B candidates to stay informed about the registration process, important deadlines, and recent changes.
Key Dates for H-1B Cap Registration
Registration Period: The registration period begins on March 7, 2025, at noon EST, and will close at noon EST on March 24, 2025. During this time, employers must submit the necessary information about their prospective H-1B employees through the USCIS online registration system and pay the required fees.
Lottery Selection: Assuming USCIS receives more registrations than the allotted number of visas available (which happens nearly every year), the agency will conduct a lottery selection. By March 31, 2025, USCIS will notify employers which of their registrants were selected, if any.
Petition Filing: Employers whose registrations are selected will be given a 90-day window to file H-1B petitions starting April 1, 2025. Approved petitions will be effective on October 1, 2025.
Supplemental Lottery Selection: USCIS may conduct supplemental lotteries if the initial round does not meet the annual cap due to withdrawals, rejections, or failure to timely file H-1B petitions. They generally announce the supplemental lottery in late July or early August, with the possibility of additional lotteries if needed. Any registrants who were not selected are automatically considered in the supplemental lottery.
Increased Registration Fee
One of the most significant changes for the upcoming H-1B cap season is the increase in the registration fee. Previously set at $10, the fee has been raised to $215 per registration. This fee is non-refundable, regardless of selection result. Employers should ensure they account for this change when budgeting for the H-1B registration process.
Preparation Tips
Early Planning: Begin gathering the necessary documents and information well before the registration period opens. This includes verifying the eligibility of potential H-1B candidates and ensuring compliance with all legal requirements.
Stay Updated: Keep an eye on USCIS announcements for any changes or updates to the registration process or timeline. This will ensure you are well-prepared to meet all deadlines.
Consider Alternatives: If a registration is not selected in the lottery, explore other visa options, or consider reapplying in the next cap season.
Navigating the H-1B cap registration process can be complex, but staying informed about the important dates and changes can help streamline the experience. By preparing early and understanding the process, employers and candidates can maximize their chances of securing an H-1B visa for the upcoming fiscal year.
Practical Implications of Immigration Enforcement Activity on Retirement Plans
The second Trump administration is intensely focused on enforcement of U.S. immigration laws. Understandably, employers are concerned about immigration visits and Form I-9 compliance, and human resource professionals are bracing for potential workforce disruptions and increased scrutiny of hiring procedures. Retirement plan administrators should also consider the consequences of undocumented workers participating in company retirement plans.
How an Undocumented Worker Becomes a 401(k) Plan Participant
In spite of an employer’s Form I-9 process, employees can provide incorrect, misleading, or false documentation as evidence that they are legally allowed to work in the U.S. If the employer does not have adequate systems in place to verify the documentation provided, then such employee can, nevertheless, become a participant in the employer’s 401(k) plan in accordance with the plan’s eligibility terms. For example, an employer may automatically enroll new employees in its 401(k) plan at three percent of compensation. The employer may also provide a matching or nonelective contribution on a payroll-by-payroll basis. Under this scenario, an unauthorized worker could relatively quickly begin accruing an account balance as a participant under the 401(k) plan. The same result could occur for undocumented workers under the eligibility terms of most retirement plans.
Plan Language Regarding “Employee” and ERISA
Most retirement plans define “employee,” “eligible employee,” or “participant” without reference to immigration status. For example, a common definition of “employee” could be similar to –
Employee means an individual who is reported on the payroll records of the Employer as a common-law employee.
While it may seem counter-intuitive, undocumented workers are indeed protected under the Fair Labor Standards Act (FLSA), which is enforced by the Department of Labor (DOL). Interestingly, the DOL also enforces the Employee Retirement Income Security Act (ERISA), which does not address the immigration status of employees. In other words, an individual is a covered (protected) employee under ERISA whether documented or not. So employers should proceed with the understanding that a plan participant – without regard to immigration status – is entitled to the benefits earned under a retirement plan.
It is important to distinguish undocumented workers from the “nonresident aliens” exclusion from eligibility that is contained in many retirement plans. Nonresident aliens without United States source income are often expressly excluded from retirement plan participation. According to the Internal Revenue Service, an alien is any individual who is not a U.S. citizen or U.S. national. A nonresident alien is an alien who has not passed the green card test or the substantial presence test. Because undocumented workers have U.S. source income, that exclusion under the retirement plan does not address issues that may come up related to undocumented workers.
With the assistance of counsel, employers may consider whether it is feasible to amend the plan to expressly exclude undocumented workers – i.e., employees who do not provide documentation that they are legally allowed to work in the U.S. Care should be taken in order to make sure such amendment can be properly administered without triggering any unintended consequences. Moreover, the amendment should not inadvertently violate applicable employment discrimination laws.
Distributions to Deported and Terminated Undocumented Workers
If an undocumented participant is deported or is absent from work for an extended period without notice, then the employer may terminate their employment. In such cases, like any other participant, an undocumented participant is entitled to receive distributions of vested benefits under a retirement plan upon termination of employment. The issue becomes how to process the distribution when the employer’s Form I-9 records include an incorrect or false individual tax identification number (ITIN) or Social Security number (SSN). Employers – plan recordkeepers, in particular – require a correct ITIN or SSN in order to properly report a retirement plan distribution on Form 1099-R. Obtaining this information from an undocumented participant may be challenging because they may be in custody, living in a different location, or intentionally avoiding contact. In these circumstances, the employer should designate them as “missing or lost participants” and take actions consistent with the DOL’s best practices for handling such participants (see our previous articles related to missing participants in retirement plans here and here).
Keep in mind that the employer should consider the DOL guidance whether the distribution is a small balance cashout, an automatic rollover to an IRA, or a series of installment payments. After the employer has exhausted its responsibilities under the DOL guidance, it may be able to transfer certain small distributions ($1,000 or less) to state unclaimed property funds as described under the recent Field Assistance Bulletin 2025-01.
Distributions to Those Seeking to Help Deported Family Members
Employees affected by immigration enforcement efforts may be interested in accessing their retirement accounts to provide financial assistance to deported friends and family. If the employer sponsors a 401(k) plan, then the plan may allow loans or penalty-free in-service distributions (if the participant has reached age 59½).
In addition, as permitted under SECURE 2.0, a 401(k) plan may be amended to allow employees to take penalty-free distributions up to $1,000 (or smaller amounts that leave at least $1,000 of vested benefits in the account afterward) if they certify the amount is for a personal or family emergency. Such emergency distributions must be repaid to the plan within three years of receipt in order to remain penalty-free.
Action Steps
Assess Risks. Based on workforce demographics, proximity to immigration enforcement activity, and other related factors, consider the likelihood that immigration enforcement agencies will select the employer for an on-site review or worker deportation. If so, consider whether to amend the 401(k) plan to permit emergency distributions for those wishing to provide financial assistance to deported family members.
Audit. Human resource, payroll, and benefits professionals should collaborate to determine whether undocumented workers are currently eligible for retirement plan benefits (or any other employee benefits offered by the employer). Consider whether it may be appropriate to engage a background screening service to verify Form I-9 employee authorization documentation.
Review DOL Missing Participant Best Practices. Review and document the procedures and processes used to locate missing participants, including those who may be at risk for deportation.
Consult Plan Recordkeeper. Contact the recordkeeper to inquire what procedures it has in place to process distributions and Forms 1099-R when there is an incorrect ITIN or SSN (or none at all).
Seek Legal Counsel. Ask legal counsel whether it is feasible to amend the retirement plan to expressly exclude undocumented workers.