When to forfeit?

[R. Butler]

Forefitures under plan reallocate. Plan document provides that forfeitures occur upon the earlier of payout or 5 yrs break. Document further provides that if the Former Participant is eligible to share in the allocation of employer contributions or forfeitures in the year the forfeiture would otherwise occur, then the forfeiture won't occur until the first year that the former participant is not eligbile to share.

Participant terminated in June, paid out in July, rehired in September. Generally participant forfeits in July at payout, however, because she is rehired this participant is eligible to share in contribution/forfeiuture allocation. It seems to me that even though participant did not repay vested distirbution amount, she won't forfeit (in affect a restoration with no repayment.)

Just curious if anyone else has different thoughts.

[Tom Poje]

so now you have 2 things you are required to do.

1. forfeit upon distribution

2. not forfeit because eligible to receive a contribution.

I would lean toward the first, ee has received a distribution, therefore has given up a right to the non vested portion. My understanding was the two monies were tied together.

the person then receives a contribution at the end of the year.

I would interpret the second condition to pertain to individuals who are 0 vested. Usually those people forfeit the year of termination. however, this condition overrides that and says provide the contribution and forfeit the next year.

........

By the way, there are other cases in which the law seems to say to do two things.

The one that comes to mind are issues with top heavy. You ignore balances of those who perform no service after 1 year. So you stop counting someone. Now the ee receives a distribution. The law says you ignore the distribution after 1 year. so do you magically count the distribution for 1 year after previously ignoring the individual?