Ugh! Messy plan termination

[Santo Gold]

Soon to be extinct company wants to terminate and pay out its 401(k) plan before the end of 2006. The plan has about $5,000 in forfeitures however that need re-allocated before doing so. Document calls for forfs to first pay down expenses (of which there will be about $1,000) and then re-allocate anything leftover (about $4,000).

The big problem though, is that no one has worked for the company since 2003. The owner has been there, but he's not taken any pay since 2003. On what basis would we re-allocate the forfeitures?

I have not seen the documet and will assume for now, that the plan calls for forfeitures to be re-allocated after 5 breaks in service. So perhaps the plan was correct in not re-allocating sooner. But would that mean that now, we have to go back and fully vest the folks whose non-vested balances created these forfeitures?

[Leopurrd]

Sounds like the plan was never administered correctly. In my opinion, you may need to go back and see when the forfeitures occurred and then see if and when they should be allocated and adjust the current participant balances. I would think that a partial plan termination would have occurred in 2003 when the last employee left and everything after that would be 100% vested, but it may not be the case.