Deemed Distribution for 0% Vested

[austin3515]

Can you provide that a deemed distriubtion to a zero percent vested participant will occur when employer sources are 0% vested? I.e., allow a forfeiture even if there is a 401(k) balance allocated to the participant.

[austin3515]

http://benefitslink.com/boards/index.php?s...t=0entry50929

Found an old post on this.

[MWeddell]

The answer used to be yes, but now it's no for plan years beginning after 12/31/05. If you've got the Federal Register copy of the final 401(k) regulations, it's easier to find this in the supplementary information. See the first full paragraph of column 1 on page 78148 of Volume 69, No. 249 of the Federal Register.

Note that there have been a bunch of articles summarizing the contents of the 401(k) final regulations and I've not seen any that mention this development -- that one can no longer process deemed cash-outs of employer sources for terminated employees who are 0% vested for employer sources but have elective deferrals in the plan stil -- was in the final regulations. The cite with the supplementary information seem clear to me, but it'd be great if someone else confirms this.

[austin3515]

Daggonit!

But I have to say, you hope for answers like yours (i.e., a perfect site, not just the page but WHERE on the page. The technical equivalent to a GPS!).

[Tom Poje]

I'd agree with you MWeddell. Without the notes I doubt I would read

Treas Reg §1.401(k)-1©(2) to say that. that cite refers one to 411(a)(3) whereas the notes refer to 411(a)(6)(D)(iii). though the notes, when referencing the cite simply say ...for example...

thus I would conclude you are not just limited to that section alone.

what is interesting, at the fall ASPPA conference the IRS agent said the opposite - but of course the final regs weren't out yet, though the proposed regs had been.