Reinstate fofeitured balance upon rehire

[Guest Lisak]

A participant who was zero percent vested in an employer match terminated and was paid out of a 401(k) plan. The match portion was forfeited. He has since rehired in the same plan year. Can he have his match restated?

[masteff]

terminated and was paid out of a 401(k) plan

What does the plan document say about when to restore forfeitures? Under Code Sec 411(a)(3)(D) the plan must restore forfeitures to the participant after the distribution is restored to the plan. Your plan doc should have language about this.

[ERISAnut]

Also, in the event your interpretation of the plan document leads you to any answer other than the fact his matching contributions must be reinstated, then you should seek another interpretation:-)

Actually, they are required to be reinstated.

If he was 40% vested and taken that balance at the time he left the company, then the plan may require him to redeposit the 40% vested amount he took in order to have the 60% forfeited amount reinstated. In this case, he was zero vested and cashed out. Therefore, upon his return, there is no vested match to redeposit. So, the plan is required to redeposit the entire match that was forfeited.

[K2retire]

If he was 40% vested he would have been required to redeposit the 40% match and the deferrals to have his nonvested balance restored. Are you saying that because he was 0% vested he no longer has to return the deferrals to get the match restored?

[Tom Poje]

well, under the old rules, 1.401(k)-1©(1)(ii) says (in referring to deferrals) "The contributions are disregarded for applying section 411(a) to other contributions and benefits"

now, section 411(a) deals with minimum vesting and in particular 411(a)(7) deals with restoration of benefits.

so I believe the conclusion was that you therefore ignore (disregard) having to payback deferrals.

however, the new regs 1.401(k)-1©

"The contributions are disregarded for applying section 411(a)(2) to other contributions and benefits"

so that could throw a monkey wrench into everything. personally I'd lean toward the following:

a 401(k) plan consiasts of 3 plans - 401(k), 401(m) and nonelective.

therefore, the person forfeited the match because they were 0% vested (e.g. the deemed cash out rule), not because they received a deferral distribution.