Reversion of Plan Assets

[Guest LoloV]

I've run into the situation described below:

Plan document states that ER Match forfeitures are used to reduce the match contribution in the year of the forfeiture. At 12/31/01 there is an $18,000 balance. The match formula is not discretionary and the match was fully funded by 12/31/01. (The forfeitures were not used to reduce the contribution.) In addition, the plan held about $17,000 in forfeitures at 12/31/00. Again they were not used to reduce the match.

I feel this plan was overfunded on 12/31/00 and 12/31/01 and is subject to an excise tax. Also, I would assume the total 12/31/01 match amount deposited is not deductible.

A suggestion was made to cut a check back to the employer for the amount of the forfeiture account. Isn't this a reversion of assets?

Any advice would be greatly appreciated.

[QDROphile]

No money goes back to the employer. The plan terms are not especially smart. Depending on when forfeitures are calculated and when matching contributions are made, it may be difficult or impossible to comply. Someone ought to rethink design and procedures.