Match Forfeiture reinstate

[alexa]

A participant in our 401k plan terminated in 2000 and took distribution of his 401k balance in 7/2007. He was 0% vested in match. He was rehired in late 2007.

401k Plan has standard 5-year break-in-service language with buyback option.

Would he have to pay back his 401k balance to get the match forfeiture restored?

[Guest pensionadmin]

I think the plan document should address this. We use a PPD Prototype document and it provides that the deferral account must be repaid in order for the match forfeiture to be restored.

[Kimberly S]

Also look at what is says about the Rule of Parity and Break in Service rules. This participant was 0% vested and appears to have had a 5 year break in service.

[alexa]

I think the plan document should address this. We use a PPD Prototype document and it provides that the deferral account must be repaid in order for the match forfeiture to be restored.

doc does mention the "full amount" of cash out received

This particular individual did incur a 5 year break - plan doc seems to only allow for this buyback if didn't incur a 5-year break

[alexa]

yes he did have a 5-year break but was 100% vested in 401k employee deferral. It's my understanding in a 401k plan , the 5 year break issue becomes mute if you will due to 100% vesting in employee account.

Do do you agree? Others input?

[masteff]

Whoa.... we're confusing ourselves w/ two separate 5-year rules. One applies to excluding years of service. The other applies to the buyback option relating to forfeitures. They work separately from each other.

See Code section 411(a)(3)(D)(ii).

...The plan provision required under this clause may provide that such repayment must be made

(I) in the case of a withdrawal on account of separation from service, before the earlier of 5 years after the first date on which the participant is subsequently re-employed by the employer, or the close of the first period of 5 consecutive 1-year breaks in service commencing after the withdrawal; or

(II) in the case of any other withdrawal, 5 years after the date of the withdrawal.

As the earlier date for the case in question here would be counted from the date of the withdrawal, and as the withdrawal occurred in 2007 (per the original post), the employee has time to repay the withdrawal and have his forefeitures restored (at 0% vesting).

I'd suggest a review of your plan text, specifically the section that describes the buyback and any limitation on how long the participant has to complete the buyback.

[JanetM]

yes he did have a 5-year break but was 100% vested in 401k employee deferral

Just pointing out - participants are always 100% vested in employee deferrals.

[BG5150]

I seem to remember something about 0% vested people not being able to buy back because they never had any vested interest in the plan (as to ER money) to begin with.