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I am trying to get a definite answer on this question, any prior discussion seems to skate around the issue. Can a Plan Administrator use forfeiture assets to fund the lost opportunity cost portion of a missed discretionary contribution (i.e - Profit Sharing)? I am certain that forfeiture assets cannot be used to fund the lost opportunity cost portion of "required contributions" (either employee or employer) because this is in direct violation of a fiduciary's "Prudence Standard" as well as a Prohibited Transaction, accordingly, when these types of contributions are delinquent the plan has a claim against the employer. However, Field Assistance Bulletin (FAB) 2008-01, specifically states that "employer contributions become an asset of the plan only when the contribution has been made". Under this definition because the contribution is not late it cannot be a PT; but does the fiduciary still have a duty to collect creating a claim against the employer for the lost opportunity portion. I am inclined to say that forfeitures cannot be used to fund the lost opportunity cost portion of a missed discretionary contribution. I don't see any language that qualifies the lost opportunity cost as an expense eligible to be pulled from the forfeiture account, and transferring the lost opportunity cost from the forfeiture to the participant does not make the plan whole.

When drafting a board resolution that indicates the amount of an employer's discretionary profit sharing contribution, is there any compelling reason (legal or practical) to list the amount to be allocated to each individual employee? I have someone who wants it done that way and I don't think it makes much sense. Any thoughts?

Client would like to have one match formula for executives & office staff and a second match formula for warehouse staff. We are told that the match for the warehouse staff will be a better formula than the formula for executives & office staff (which is where we are told HCEs are). We don't have a breakdown by group yet. If we do this in the FT William document, we were told to use the discretionary match of D.6.a "A discretionary amount and percentage of Matched Employee Contributions". The Note in document states "The discretionary formula in D.6.a. must meet the nondiscrimination requirements regarding benefits, rights or features described in Treas. Reg. section 1.401(a)(4)-4. While I understand that if you have different match formulas for different groups of people, you must do BRF testing, I'm not convinced that it is o.k. to use a discretionary match option in the document. Using discretionary in the document should mean having one discretionary formula for everyone in the plan, shouldn't it? And, I understand that while the client is telling us that the match formula for the warehouse staff is better than the one for executives & office staff, we wouldn't know that until we actually saw what formulas they are thinking of using. And who knows what they would think up for the match formulas for future years. Anyone else run into a formula like this or have any idea where/if it will fit into the FT William document? I'm not looking forward to this at all as the BRF will be something we have to calculate manually as the testing software doesn't do that test for any match formulas. Any thoughts? (maybe I should say useful thoughts )

Hi all! The answer to this may be black and white and I apologize in advance if it has been asked before (I did my due diligence searching for the answer on here prior to posting) Basic info: 1 HCE, 13 NHCEs, multiple contrib allocation groups all of which get a contribution (no zeros), last day employment requirement so all terminees didn't get an allocation Plan passes ABPT but fails 410(b) ratio percentage at 60%. I understand that the plan can pass coverage with ABPT only, given "Reasonable Classification" was utilized in assigning allocation groups. Given the following excerpt, I would say it's okay to skip the 410(b), however one issue is not clear to me: Is giving a zero allocation to terminees due to the last day employment provision of the plan, not make a "Reasonable Classification" thus requiring us to pass the ratio test?? Thank you.