Forfeiture problem

[Guest LoloV]

I'm working on a plan which states, in the adoption agreement, that forfeitures will reduce the ER Match (stated formula in AA) in the year of the forfeiture. In addition, the core document states "If the Employer elects to allocate forfeitures to reduce nonelective or matching contributions and the forfeitures exceed the amount of the contribution to which the Plan Administrator will apply the forfeitures, the Plan Administrator will allocate the remaining forfeitures as an additional discretionary nonelevtive or discretionary matching contribution or the Plan Administrator will apply the forfeitures to the Employer's nonelective or matching contribution in the succeeding Plan Year."

This plan has not used any forfeitures for the past three years and the forfeiture account has steadily increased. Would I be able to go back and allocate each year's forfeiture even though the match actually exceeded the forfeiture amount in each year?

At this point, I'm not sure how to correct and any advice would be appreciated. I would like to give the administrator on the plan some options when I send the work back.

[ljr]

Technically speaking, you should probably go back year by year and allocate as it should have been done. Depending upon the amount involved, this might not make sense if you end up with participants with tiny account balances. There is no black and white answer so you're back to the usual - get an ERISA counsel idea.

[Bird]

Agreed that it's probably technically correct to go back and allocate for prior years.

If the plan permits forfeitures to be used to pay expenses, could you accrue enough expenses to get rid of the excess for those years and pay them this year? Just a thought.

[Kirk Maldonado]

If you don't have enough expenses, I can generate whatever level of legal fees you need to consume all of the forfeitures.

[Blinky the 3-eyed Fish]

Kirk, your philanthropy warms the cockles of my heart.

[WDIK]

Refer here for a more detailed explanation of Blinky's cardiological response.