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Zorro1k. You must be kidding. There is no state that does not already have and pay for a section 125 plan. Since they do pay those fees, it stands to reason that there would be no law against paying for an FSA to be included, if not already built in but just not used. I also cannot think of any state that does not have an FSA..

Q and A #28 ASPPA Conference 2012 Assume a calendar year 401(k) plan. Plan has a 100% match on deferrals up to 6% of compensation and plan will fail the ACP test. The employer's return for 2012 is on extension until 9/15/2013. Because of cash flow issues, the employer will not make the matching contribution for 2012 by 3/15/13. Based on deferrals for 2012, the matching contribution will result in a violation of the ACP test for 2012. 1. Is there a way for the employer to make a corrective distribution by 3/15/2013 to correct the impending ACP failure, even though the matching contribution won’t be made until after 3/15/2013? IRS response: If contributions aren't made by 3/15/13, then a corrective distribution attributable to the impending ACP failure may not be made by such date.

I'd be shocked if your adoption agreement says forfeitures occur at the time of distribution doesn't also provide that a forfeiture will ocurr after 5 breaks in service if no distribution is taken within that timeframe. Perhaps it's buried in Basic Plan Document, but it doesn't sound right to me that the two would not go together...