Forfeitures?

[Guest mrilao]

Plan document says that we use all forfeitures to reduce in the year in which they occur. We didn't do that in 2002. Now in 2003 there are even more forfeitures - and the admin wants us to use of all them (allocate as employer matching contributions) now - so 2002 and 2003 allocated at same time. Is it a plan failure if we do so? Does this make any sense at all?

[FundeK]

Does your document indicate that if the forfeitures are not used to reduce, then they will be allocated to the participants?

At my previous place of employment we had to do massive clean up of forfeiture accounts. If you can give me more specific language in the document, I can tell you what we did.

[Guest mrilao]

I didn't expect anyone to reply so thanks for replying! The election document (I think people call it the adoption agreement) says that the forfeitures will be timing to be allocated in teh same plan year in which they occur and that the medhto fo allocationg them is to reduce the employer's matching contribution.

Now the thicker document (that is really long and confusing) provides that depending on what you elect in the small agreement, that the timing of the forfeiture allocation is in the plan year in which they occur or in the plan year after they occur.

Then it says regarding the method of alloating forfeitures is as elected in the smaller agreement (reduce MCs) and then that part of the base goes on to say that with regard to using forfeitures to reduce MCs that the employer may adjust its contributions/deposits in any way that it wants to as long as the total employer contributions for the year "properly" take into account the forfeitures that are used to reduce the contributions for that year. If the contributions are "allocated" over several "allocation periods" the employer is then permitted to reduce its contributions for allocation periods within the plan year in which forfeitures are to be allocated so that the total allocated for the plan year is proper.

This is where I am confused - in other words - does that mean we can take the prior forfeitures and apply then for a plan year that is two years away from the plan year when they were actually forfeited? It seems contrary to the small agreement, but I am not sure if the larger document changes this.

Sorry if this is too basic.

[FundeK]

Based on your response, and without seeing the document, it seems that the 2002 forfeitures should have been used by the end of 2003 and 2003 have to be used by the end of 2004.

Now, a few more questions.

What was the 2002 forfeiture balance? Very small hopefully?

Are we talking about profit sharing or match forfeitures? Both?

Any chance that you have a profit sharing contribution that hasn't been made for 2003?