austinh2591

Apologies for my lack of clarity. I'm the plan sponsor and the forfeitures were placed in participant accounts, not actually dispersed from the plan. the recordkeeper has offered to reverse this, but only with a hold harmless letter. I reviewed the plan document and it only mentions "pass through processing" for loans/distributions. Nothing related to forfeitures.

Hi there - our plan recently had the forfeitures reallocated automatically due to "pass through processing" and they were distributed to plan participants (myself excluded). We had intended to use these for plan expenses and told the recordkeeper this back in March, however, they did not do so. We've asked the recordkeeper to reverse the transaction, but they will not and are requesting a hold harmless letter and want us to take on the risk. They mentioned there could be a fine or penalty for removing funds from the participant's account, although they incorrectly allocated to them in the first place. My questions are: 1) What the fine would be if this reversal came up in an audit? 2) What the risk is that this reversal would cause an audit for a small plan filer? 3) Would an auditor be understanding since the recordkeeper has even confirmed via email that we had requested the fees be applied to plan expenses back in March?