alloc of employer match

[Guest pensiondoc]

Client's 401(K) plan was amended 1/1/98 to use forfeitures of matching contribs to reduce employer match.

So, the 1/1/98 amounts in the forfeiture account should've been applied toward employer match. They've been matching. Can the client direct that an amount equal to the 1/1/98 forfeiture be refunded only this time under the "mistake of fact"? They reduced the November match, but I want to cover them for 1/1/98-10/31/98.

Any thoughts??

[LCARUSI]

Can't the client just start drawing down the forfeiture account now to fund future matching contributions until it is depleted?

Why distribute the forfeiture account to the employer so he can then recontribute the funds to the plan to fund the future matching contributions?

[Guest pensiondoc]

Your point is well taken; he was hoping he could get the plan to reimburse him for the matching contribution that he'd made erroneously during the year. Of course, from now on they would be drawing down from the forfeiture account. He doesn't want to add to the contribution.

I can see this either way: he can get a check from the plan as reimbursement for prior errors but then he won't be able to deduct the match. Possibly they could do this and claim the contribution was a "mistake of fact" and should not have been made, ie it was made in error and they are refunding it w/in 12 months.

On the other hand, possibly upon audit the IRS could challenge this as a "reversion" and say that it may have been made in error but it does not constitute "actuarial error".