Last Day Clause

[Guest Sara H]

An employer has a "last day clause" (the employee has to be employed on the last day of the plan year to get any matching or profit sharing contributions). If the employer made matching & profit sharing contributions throughout the plan year and an employee terminates, are the employer contributions forfeitures or do they go back to the employer? (Forfeitures are allocated to employees)

[LCARUSI]

If the plan has a "last day clause" and the employee is not there on the last day, then the matching contributions and profit sharing contributions never belonged to the employee. Therefore, there is no forfeiture. The funds belong to the employer.

Why would the employer fully fund these contributions over the course of the year if there is a last day clause?

P.S. Check the Plan document.

[Guest ESOPwizard]

Once deposited in the trust the funds may not revert to the employer except

under very limited circumstances. They must be allocated in accordance with

the plan document (which is supposed to have a definitely determinable

allocation formula to cover situations such as this. You may find that the

employer made a discretionary profit-sharing contribution that must be

allocated in proportion to compensation.