We are trying to reallocate forfeitures for a plan. They have a 501 hour requirement attached to the receiving the allocation. One participant wa on military leave since Feb. 2003 and only reached 200 hours for the 2003 year.

Should he be part of the allocation since he was on military leave, no matter the number of hours he worked?

Assuming all other requirements are satisfied when they come back from military service, in order to accrue benefits under USERRA, the hours and compensation used for allocation accruals must be based on a reasonable estimate of what he/she would have earned had they not left for military duty. In some circumstances where the "rate of pay" cannot be reasonably estimated, the employer should use an average from the 12 months prior to the leave.

If his average 12 month hours is > 500, a 2003 forfeiture allocation should be earmarked for his account. I do not think the forfeiture amount is physically allocated to their account until they have returned to the employ of the employer and satisfied all other notice and leave requirements.

If you hold the amount in suspense until the person returns and is qualified, what if the person does not? How do you allocate then and for what year do you allocate?

Another way to do it is to allocate all the forfeitures without the missing participant and make up the amount the person would have received if and when the person returns. Yes, it costs the employer something, but the employer makes up all the other employer funded contributions based on imputed service and pay for the period as well.

I don't know what is best. It is disappointing that we don't have guidance for these issues. Military service is not that rare.

I don't think that they get forfeitures. See http://www.irs.gov/retirement/article/0,,i...9878,00.html#A5

I agree with Katherine.