Reinstate Nonvested Amount to Rehire?

[mming]

A terminated participant was rehired the year after she was paid the vested portion of her account balance. Her nonvested amount was placed in the plan's forfeiture account at the time of her distribution and then used to offset contributions. At the time of her rehire, she had not incurred a 5-year break in service. Regarding rehired participants, the doc only mentions that if the participant pays back the distribution, the earnings and/or forfeitures that would be allocated to the other participants in the year of rehire can be reduced to reclaim the nonvested portion so that she could have her entire balance again, but only if a 5 yr. BIS has been incurred.

It seems that since the doc does not address what to do for rehires who either don't have a 5 yr. BIS or agree to repay the distribution, any method can be applied as long as it's reasonable. The issue I see is that since the plan has individually directed accounts, a PR problem may be created by transferring amounts from the other participants to the rehire (who is a participant on the date of rehire). There are only 4 participants with account balances in the plan, and they are all 100% vested, so there won't be any forfeitures to use for this purpose in the foreseeable future. And, of course, the likelihood that the participant will pay back the distribution is practically nonexistent. The amount of the nonvested balance is only about $600, but we would like to have the employer handle this as appropriately as possible - what should be done in this situation?

[Mike Preston]

Under no circumstances can you reclaim the money allocated to other participants. That money is gone. Now it becomes a simple matter:

1) Does she repay?

2) If so, are there forfs in the year that can be used to establish the account?

3) If not, the employer must deposit funds.

I don't think there are any other options.