Search the Community

Hi all, When should a previously forfeited ESOP balance be restored to an employee’s account? Should the forfeited balance be restored upon return? After a year of service? Retroactively to the day of return after a year of service? I’ve confirmed with the Admin that it’s eligible for restoration. I left at 0% vested and my entire balance was forfeited. I returned a year and a half later, and have put in a full year of service since. There is nothing specific that I can find in the document. It states, “Forfeitures: Some participants will terminate employment before they are fully vested in all of their Accounts. The portion of those Accounts that is not vested is called a “forfeiture.” Forfeited benefits will be used to pay Plan expenses or added to the Company’s contributions and allocated to eligible participants’ Accounts. If you are rehired by an Employer after your non-vested Account has been forfeited but before you have five consecutive one-year breaks in service, you are eligible to have the amount of the forfeiture restored to your Account. If you received a distribution of the vested portion of your Account, you must pay back to the Plan the amount of your distribution to have the forfeiture restored. Whether you repay the distribution or not, your prior vesting service will be counted for vesting your Account.” The timing of the restoration makes a rather huge difference in this case, since the appreciation of the balance through 2020 is significant. I returned in February 2020 but my shares were only restored in March 2021. My thinking is since I didn’t receive a distribution at termination, I would have been fully “repayed” upon rehire and immediately eligible for restoration. If not specified in the document, is there a standard to follow? Is there somewhere else in the document I should check?

Our ESOP administrator reinstates shares for those rehired participants that terminated employment with a 0% vested balance. There is no time limitation for reinstatement. It was my understanding that if a participant terminated employment 0% vested the terminatino date was considered a distribution and the 5 year Break in service rule calculation would start. Is there a limitation on reinstatement for 0% vested rehires? The plan doc does provide language for partially vested balances reinstated within the 5 year break in service for those that return the vested shares.