Timing of Forfeitures

[MBCarey]

Is it possible to forfeit a non-vested account balance when the participant terminates rather than waiting until a distribution is requested or until a break in service occcurs. The document states "immediately upon distribution". Immediately upon termination is not an option. Is it even allowed?

[JanetM]

Yes. a plan document can provide that a participant with a vested percentage of zero will be deemed to be cashed out. This allows the forfeiture of unvested accrued benefits to occur immediately at severance of employment

[MBCarey]

If the participant is partially vested, can it still be done? Also, does it require an amendment to the plan?

[JanetM]

Nope not if partially vested. Forfeiture in that case happens the earlier of the year in which the participant takes a distribution or after five one year breaks in service.

Am thinking it is 411a6A to 411a6D as the cite. Could be wrong.

[Below Ground]

You may want to rethink what is being done. Keep in mind that a person can have his or her balance restored if he or she returns to work. Did the person even have a Break in Service? If no, and the person returns to work, you may have a problem if you move forward with "immediate forfeiture". There is a reason why plan language typical requires at least a One Year Break in Service.

Our approach when designing plans always uses the "5 Year or Payout" that Janet M refers to. While I can't say this method is required, I think any other way has too much potential for problems.

Just offering "food for thought".