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  1. Because of the recent litigation regarding usage of forfeitures, I wanted to get some back up for how this is being viewed in 401(k) and other participant directed account plans. Forfeitures must be used according to the plan document and most big providers have the standard "pay plan expenses" and reduce employer contributions. Some also have the prorata allocation. Given all of that, we have seen it recommended that the forfeitures be used for participant education, specifically financial wellness. That also being a way to deplete the forfeiture account when the plan sponsor is paying the fees and/or does not have contributions to reduce. Any thoughts on this being a reasonable "plan expense" noting here that I have reviewed ยง2550.404a-5 as well as the settlor vs permitted plan expenses the DOL has opined on and it does indicate educational seminars and retirement planning software is permitted. So if it is permitted - does the financial education need to be specific to retirement planning or is overall financial wellness ok or is there some gray area? Thanks!
  2. A cross-tested Safe Harbor 401k Plan has approximately $14,000 in forfeitures. The plan permits them to be applied towards ALL employer contributions or pay Plan expenses. The Plan is Top-Heavy. The employer does not want to contribute much if anything because 2021 was down. 1 HCE/Key employee; 6 NHCEs, 1 of whom terminated before end of year. The Safe Harbor Matching contribution plus the discretionary Matching that satisfies ACP Safe Harbor total approximately $11,000. This leaves $3,000 in forfeitures on the table. The $3,000 is not sufficient to fully fund the 3% Top Heavy Minimums - this means the employer will have to fund the difference. Since it is cross-tested the Key/HCE could provide 0% Profit Sharing for himself (Plan does not require THM for Keys) - this would then permit a zero PS allocation to the 1 terminated NHCE; fund only the 5 Active NHCE staff but this still requires some employer funding to satisfy the 3% Top Heavy Minimums to the Active NHCEs. Note: the NHCEs must receive the full 3% because the HCE/Key allocation is greater than 3% even with Profit Sharing at zero. QUESTION: Is there any prohibition in using $11,000 towards the Safe Harbor Matching contributions (ADP and ACP), and not allocate any Profit Sharing to avoid the Top Heavy Minimum trigger; use the balance of the forfeitures towards the Plan's Annual Fees (that is usually paid by the employer)? Would this be prohibited since it is avoiding the Top Heavy Minimum requirement? Thank you.
  3. Plan Sponsor chose to forfeit participants' non-vested account balances immediately upon their termination of employment and use that money to reduce their payroll period employer match contribution payments. The plan document states the typical requirements of forfeitures occurring on the earlier of being fully paid out their vested portion upon termination OR having incurred 5 1-year Breaks-in-Service. The Adoption Agreement also states that the timing of allocation of forfeitures should occur in the Plan Year following the Plan Year in which the forfeitures occur. It appears that the employer should not have had access to the forfeited amounts until the year following the year the "true" forfeiture would have occurred. How should this problem be corrected? Everything I'm finding so far discusses employers NOT using forfeitures by Year-End. This employer seemed to use them too soon. Is this addressed in EPCRS? Thanks in advance for your help!
  4. If a plan document allows forfeitures to be used to fund corrective contributions for missed deferrals and associated match, may forfeitures also be used to fund the attributable earnings on those contributions?
  5. For top heavy account balance determination in a DC plan, are unvested amounts that are forfeited included when adding back distributions for participants who terminated during the year? For example, a participant with a total account balance of $10K, of which $9K is vested, terminates during 2017 and takes a distribution during 2017. Would you add back $10K or $9K? EOB gives an example that says, "the former employee's account balance must be included in the top heavy ratio" [my emphasis added]. I can't seem to find anything definitive in the Regs., but logically, it seems like you would add back what would have been the full value of the account (unvested portion included) since that's the amount you would include for someone who wasn't terminated.
  6. Is the cost of conversion from one investment platform/recordkeeper to another considered a settlor expense? I think not, but want to confirm since it is a Trustee discretionary decision to move the plan's assets.
  7. Assume that a 401(k) plan with matching and/or profit sharing subject to vesting has a cash-out and buyback provision and language in the plan document that says that forfeiture of nonvested portion of account occurs immediately following the participant's taking a lump sum distribution of vested portion. Assume plan document also says that forfeitures can be used to pay admin expenses and that any amount not used to pay admin expenses may be used to offset "any payments that the employer would otherwise be required to make to the plan." Could the employer not transfer to the plan amounts withheld from employees' pay as elective 401(k) contributions and loan repayments and credit to the accounts of the affected employees instead amounts pulled from current forfeitures? Assume that the crediting of the previously forfeited amounts would be at least as rapid as if the withheld amounts were transferred to the plan and credited to the affected employees' accounts and that the time period would pass the DOL's requirements.
  8. Good morning! I have an ERISA 403(b) plan who used forfeitures to offset one payroll. The payroll, however, included deferrals, profit sharing, disc match, and loan repayments. Total allocation was $6847.96 and it was offset by $4610.39 from the forfeiture account. They do their profit sharing and matching contributions each payroll. What's the fix? Thanks in advance!
  9. I have an indiviudally drafted 403(b) PS Plan that has a 5 year vesting schedule. I have read the document 5 times but no where does it state how to use the Forfeitures? Has anyone come across this?
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