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Here are the regs on this: Q-7: When is a distribution from a plan a required minimum distribution under section 401(a)(9)? A-7: (a)General rule. Except as provided in paragraphs (b) and (c) of this Q&A, if a minimum distribution is required for a calendar year, the amounts distributed during that calendar year are treated as required minimum distributions under section 401(a)(9), to the extent that the total required minimum distribution under section 401(a)(9) for the calendar year has not been satisfied. Accordingly, these amounts are not eligible rollover distributions. For example, if an employee is required under section 401(a)(9) to receive a required minimum distribution for a calendar year of $5,000 and the employee receives a total of $7,200 in that year, the first $5,000 distributed will be treated as the required minimum distribution and will not be an eligible rollover distribution and the remaining $2,200 will be an eligible rollover distribution if it otherwise qualifies. If the total section 401(a)(9) required minimum distribution for a calendar year is not distributed in that calendar year (e.g., when the distribution for the calendar year in which the employee reaches age 70 1/2 is made on the following April 1), the amount that was required but not distributed is added to the amount required to be distributed for the next calendar year in determining the portion of any distribution in the next calendar year that is a required minimum distribution. https://www.law.cornell.edu/cfr/text/26/1.402(c)-2 Note it is clear and say if an RMD is required for a calendar year the amounts distributed during that year are treated as having the first dollars be the RMDs. Note is doesn't say amounts distributed after the person terminates and then an RMD is required. If at any time in a year an RMD ever becomes required for 2017- which your facts say "yes" to that idea- any distribution during that year has the RMD in it. It can literally become a retroactive RMD upon the person's termination. So while it is true if you give this lady an in-service today there is no RMD in the amount paid. If she quits any time in 2017 then any payment in 2017 has an RMD in it. So if that RMD ended up in the IRA it doesn't belong there. This idea you might give an in-service not knowing if the 70.5 year old person might terminated later is a known quirk but how I described it is clearly how the regs read.

Is there some reason not to allocate the forfeitures? I feel like I'm missing something. I understand not wanting to create small balances, but it appears that's not a problem. Getting back to your original post, no, allocating forfeitures has no impact on the business accounting. I don't see that amending the plan will accomplish anything; your choices will still be to pay expenses or allocate.

I coonsider the 45 day rule to be abhorrent in that it puts a plan sponsor that is lower on the compliance ladder in a better position than a pro-active, but not perfect, plan sponsor. So, let's see how we can adjust the focus of the proverbial microscope... Is it reasonable to analyze what is really going on and come to the conclusion that the payroll system was not coded correctly in December in that it excluded bonuses? I think most would agree with that statement. In the interim, was the payroll system re-programmed? Probably not. So, even though the deferral amounts happened to be correct, had there been a bonus paid it would have resulted in an incorrect deferral. Can it be argued that correct deferrals have not begun until the payroll system is re-programmed to include bonuses? If so, your 45-day period hasn't begun, yet. Just a thought.

Creating small balances can be a pain, no question about it. But it really doesn't change the fact that the forfeiture needs to be used, either for fees or as an allocation. Where it really causes an issue is where you have top heavy plan that relies on the exemption. Having to allocate thousands in top heavy minimums because of a few hundred in forfeiture allocations can really sting...

Agreed. No breach. This isn't a plan decision, but an employer decision. It's a plan design issue, a "settlor" function, not subject to the fiduciary rules.

No breach.

If October 13 falls on Friday the 13th, you have good luck and your deadline is extended until Monday the 16th. Now there is a comforting thought!

Not disrespecting the TPA and/or its president, does the plan document permit this?

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Maybe you made a $5 error in the calculation of the present value of the contributions?

I would take it out.

Gosh, I hate to agree AGAIN with Belgarath (just on principle) but he raises very good points. Keep in mind that a "partial plan termination" is a LEGAL conclusion based on facts and circumstances, and they must be taken as a whole, to reach the conclusion. I am always perturbed when one raises the so-called 20% threshold for a partial plan termination. It is not a "litmus" test. It is a "rule of thumb" and generally (but not always, as Belgarath points out) when one exceeds the 20% mark (as a result of one or a series of related corporate actions), a partial plan termination occurs. BUT, you can MOST CERTAINLY have a partial plan termination with less than 20%. Case in point, a company with 5000 employees in 10 separate divisions of 500 employees each, doing different work (separate lines completely) can have a partial plan termination when they shut down one division, resulting in a 10% reduction in their entire workforce, but 100% reduction in the workforce of the shut down division. Partial plan termination? The IRS would probably say yes - and in my experience, they do.....

The original question noted that there is nothing specific in EPCRS about this and asked whether it would be reasonable to self-correct under EPCRS general principles by distributing the deferrals and earnings and forfeiting match. It seems reasonable to me.