Multiple Employer Plan - Another Question

[Guest cease]

Hi. I am a novice when it comes to multiple employer plans. A question came up on the use of forfeitures. I did some research and came to a conclusion that there is no black and white guidance here. Specifcally, within a mulitiple employer plan there are a number of employers that offer similar benefits but maintain different vesting schedules. The issue is whether or not forfeitures derived from non-vested balances of one employer within the plan are used to reduce contributions required by that employer or have the forfeiture used by all employers within the plan. I think the ambiguity here is around the concept that plan assets (which are held by all employers in the plan) are used to pay for the benefits of any of the participants. I was looking at Reg. 1.414(l)-1(b)(1) and it doesn't seem to require that forfeitures be allocated among all participants of the plan, but only that all assets of the plan may be used to pay the benefits due any participant. Does anyone feel that the definition of benefits is extended to the use of forfeitures, or only for the use of paying benefits?

Thanks for your assistance.

[Archimage]

It really is a very gray area. I would say the conservative approach is to apply forfeitures to all plans. The more moderate approach (and the approach I would use until further guidance is issued) is to allocate forfeitures only to the related plan.

[RTK]

I agree that there is not much clear guidance. That said, my two cents:

I do not believe 414(l) reg. requires the forfeitures with respect to the participants of one employer be allocated to the participants of all employers, but instead requires all plan assets be available to pay all benfits (assuming want single employer plan status).

Since (non collective bargained) multiple employer plan is tested for discrimination on employer by employer basis, and since forfeitures are included with employer contributions for testing purposes, I actually think it makes more sense to allocate the forfeitures on an employer by employer basis, rather than plan wide. Also, this would faciliates different contribution levels for each employer.