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Austin, look at Q&A-7 of the regulations at 31.3405©-1.

There are no unspent FSA funds. There may be a difference between salary reduction amounts and the amounts of benefits paid. That difference is reflected in the general assets of the employer. For a healthcare FSA, the difference could be positive or negative.

Please make no mistake - cash balance plans are always defined benefit plans, no matter how much they are disguised to look like defined contribution plans. None of the defined contribution rules apply to them and all of the defined benefit rules apply (i.e., PBGC premiums, no lump sums without spousal consent, no last day rule, minimum contributions that may be greater or less than the "principal credit" - there is no necessary correlation between the assets held by the plan and the total of the account balances, etc.). And don't forget that an annual valuation by an enrolled actuary is always required! And if the enrolled actuary certifies an AFTAP below 80%, lump sum payments are subject to restriction under IRC Section 436.

In a DB plan, any eligible employee who works at least 1000 hours during the year must be credited with a benefit. The last day of the plan year concept is specific to DC plans only. Good Luck!

The procedures are always usable for retroactive corrections. It is the nature of the beast, isn't it?