ACP refunds Forfeitures or Check to ER?

[Guest Kim S.]

Plan failed ADP/ACP. Refunds for the ACP normally put in to the forfeiture account. I have looked through their document and what I find is 1 "Notwithstanding anything in the Plan to the contrary, all matching contributions which relate to distributions of Excess Deferred Compensation, Excess Contributions, and Excess Aggregate Contributions shall be Forfeited". That is from the Adoption Agreement.

In the trust document it states that "The distribution and/or Forfeiture of Excess Aggregate Contributions shall be made in the following order: 1 Employer matching contributios distributed and/or forfeited pursuant to Section 11.5a1." Section 11.5 goes over ADP refunds.

Employer insisting they get a check for the ACP refunds so the company can right that off as expense or something.

[Alf]

The refunds should never go to the employer. They should either stay in the plan as forfeitures (which might be able to be used by the employer to pay expenses or offset contributions) or returned to vested participants, depending on what the refund is.

Under the section you mentioned, matching contributions can be forfeited by all employees if they are made on amounts that end up being refunded. However, if the matching contribution itself is causing the test to fail and has to be refunded, only the unvested match can only be forefeited and the vested match has to be distributed to the employees (not the employer). That is why the provision you cite says "matching contributions which relate to" distributions of excesses, because if the match itself is the excess, it can't be forfeited from vested participants.