DCAP Forfeitures

[Guest sjphillips]

We have a plan design where DCAP experience gains are forfeited. This surplus is used to increase the annual benefit amount to each employee who is participating in the DCAP the following year. The experience gain is $6.99 - or about $0.58 per participant. Is there a di minimus threshold when working with forfeitures?

[J Simmons]

Don't know about a de minimis exception.

The new Proposed Treas Regs would let the ER keep the experience gains.

You need to follow what your plan doc says about dealing with experience gains, particularly if the plan is subject to ERISA--it's a fiduciary duty to apply the plan as written.

Also, if the plan is subject to ERISA, there is the fiduciary rule about discharging duties for the sole benefit of the participants and beneficiaries, but also 'defraying reasonable expenses of administering the plan'. So perhaps you could in a de minimis situation balance those in favor of avoiding extra admin costs that would be greater than the amount of experience gains in question.

Look at ERISA § 404.

[QDROphile]

Unless the plan is subject to ERISA, and few DCAPs are, the employer could always keep the money. The proposed regulations add nothing new.