missing participant in an ongoing PS/401(k) plan

[Guest jigpsu100]

In an ongoing profit sharing/401(k) plan, how are forfeitures handled? I understand the different ways to try and locate missing participants, and I understand that if they ever come back it must be reinstated. Aside from those issues, the plan uses forfeited matching contributions to off-set future matching contributions. The plan even provides for accounts of missing participants to be forfeited, but what then. Should they just distribute them pro-rata to all participants? Should they treat the forfeitures the same way as the matching contributions? I just don't know.

[jquazza]

What does your document say about the forfeitures?

[Guest Pensions in Paradise]

Read your plan document. It should (if it is a good document) indicate what to do with the accounts of missing participants.

[Guest jigpsu100]

The plan document says that the accounts of missing participants will be forfeited. It says that Matching and Employer Contributions that are forfeited are used to reduce future Employer Contributions. It makes no reference to forfeited elective deferrals. This is my problem. I appreciate your help.

[jquazza]

Elective contributions are usually considered employer contributions (except on 5500.)

[No Name]

If you're referring to deferrals, these are never forfeitable.

[jquazza]

They can be forfeitable if the participant is missing.

[QDROphile]

No Name:

Why are they any less forfeitable than vested matching or discretionary contributions?

[Lori Friedman]

NoName,

Reg. Sec. 1.411(a)-4(b)(6). If a benefit is payable but the participant/beneficiary can't be located, the benefit may be forfeited. The forfeiture gets reinstated if the individual later makes a claim.

Why am I suddenly thinking about Gilligan, the Skipper, the Professor, and Mary Ann?

[QDROphile]

Lori:

I think you meant to post the following message:

No Name:

It is true that elective deferrals must be fully vested, but this discussion relates to the special provisions of Reg. Sec. 1.411(a)-4(b)(6). If a benefit is payable but the participant/beneficiary can't be located, the benefit may be forfeited. The forfeiture gets reinstated if the individual later makes a claim. The discussion of forfeitures and the regulation have nothing to do with the regular vesting rules. The regulation provides for forfeiture of all fully vested amounts, including elective deferrals.

[JDuns]

I agree with QDROphile and Lori that the forfeiture of lost participant, fully vested account balance (regardless of whether the vested amount is from employee elective deferrals or satisfaction of a service based vesting schedule).

The next question is what happens with the forfeited balance.

In all cases, the plan document governs. It is my understanding that a profit sharing plan must reallocate "regular forfeitures" that are not used for permitted things (funding other employer contributions, restore forfeitures, etc.) to the remaining participants. It is my understanding that a plan may keep the lost participant forfeitures in a suspense account (not allocated to participants) if the plan draws a distinction (since the plan remains liable for the lost participant benefit when the participant is located).

[No Name]

All,

I'll cop to the fact that accounts of lost participants can be forfeited. I've just never done so. I deal with small plans, but can imagine the nightmares the large plans run into.

[AndyH]

QDROphile,

Would that make you a telepath, Lori's official editor, or just an alternate personality?

[Guest welcomehome]

How would you track these forfeitures if the old participant ever came back to claim his/her portion? I am assuming it would generate interest as well.