Buy-back of forfeited amount

[Brian Gallagher]

I understand how a person can "buy back" the forfeited amounts under a plan. However, in my office there is some dissent on whether or not someone who was 0% vested can get the forf'd amount back.

The pension answer book says that as long as the person pays back the entire distribution, the forfeited amount can be restored. Some people here believe that if the the person was zero % vested, he could not buy back because he could not pay back the vested portion (because there was none).

Any thoughts?

(I also understand the 5 breaks in service stuff, too)

[Mike Preston]

If they are eligible for buy-back (that is, they haven't incurred the five breaks) they are deemed to have bought back the moment they reenter the plan.

[Brian Gallagher]

But does a person had to have had a vested balance before the forfeitures can be restored? Take these four examples; who can have forf's restored upon rehire (assuming w/in the 5 yrs)?

At the time of full distribution:

A) $10,000 acct bal

8,000 401k

2,000 match

0% vested

8,000 distribution

2,000 forfeited

B) $10,000 acct bal

8,000 401k

2,000 match

50% vested

9,000 distribution

1,000 forfeited

C) $3,000 acct bal

3,000 profit sharing

0% vested

0 distribution

3,000 forfeited

D) $3,000 acct bal

3,000 profit sharing

50% vested

1,500 distribution

1,500 forfeited

According to some in my office, it's B & D (but not S & M...lol) who can get the forfeitures reinstated.

[ccassetty]

All of the above are eligible for reinstatement of their forfeited account balances.

In order to allow the forfeiture of a 0% vested participant prior to a five year break, your document probably has language that states that a 0% vested participant is deemed to have received a distribution upon termination of employment. If they come back prior to a five year break, this "distribution" must be repaid prior to reinstatement of the forfeited account balance. Since there was no actual distribution, the deemed distribution is deemed to be repaid.

[Guest crosseyedtester]

Here's another situation from a Profit Sharing Plan with only Employer money.

The employee terminated at 60% vested and took distribution of vested balance.

2 years later he was rehired and told that he can buy-back the forfeited amount if he repays the distributed amount.

2 years later or so, he terminated again, and is now 100% vested in a new balance. He never repaid the distributed amount.

Is he automatically vested in the suspended amount and therefore eligible to receive distribution of that amount, or, since he never repaid his original distribution, does he not have a right to it?

If it is the second case, can he still repay the original distribution amount before the 5 year break in service, even though he is no longer an active participant?

Thanks