Volume Submitter plans

[Guest ccharper]

In our GUST Volume Submitter plan documents we were allowed several choices of when a forfeiture would occur. We have always used "after a one (1) year break". Now for the EGTRRA Volume Submitter restatements, our document provider is telling me we can no longer have that option. Are any document providers allowing for a forfeiture to occur after a one (1) year break?

[Guest Sieve]

I don't beleive a forfeiture can occur in a VS or prototype after a one-year break in service. You have to wait until, at best, the earlier of (i) distribution, or (ii) 5 breaks in service.

However, you can limit distributions only to those who have incurred a break in service, which is not an uncommon provision (especially among manufacturing concerns). Then, when the distribution occurs after the break, then you'd have a forfeiture because it would result from the distribution (prior to the 5 breaks).

Maybe that's what you were thinking of . . .

[JanetM]

Larry, does that apply if they are not partially vested at termination and they are deemed distributed and forfieted at that time.

[Kevin C]

Janet,

You should still be able to forfeit nonvested participants when they terminate employment. We are using ASC documents for the EGTRRA restatements. It has that provision in the base document. The entire account must be nonvested, not just the employer provided portion.

[Guest Sieve]

Kevin is correct. Plans now ought to contain a provision that a participant who terminates when 0% vested will be deemed to have taken a distribution, thus allowing the forfeitures to be allocable.

And, yes, if there's an employee deferral, which is obviously fully vested, then the terminated employee is not considered non-vested, and allocation of forfeitures from the employer $$ cannot occur until distribution or 5 breaks.

Before such "deemed distribution" provisions for non-vested terminated employees, participants would take the position that a terminated employee who was 0% vested did not take a distribution and thus became fully vested if the Plan terminated prior to their forfieture 5 breaks later. The IRS approves plans with this "new" language.

[K2retire]

In our GUST Volume Submitter plan documents we were allowed several choices of when a forfeiture would occur. We have always used "after a one (1) year break". Now for the EGTRRA Volume Submitter restatements, our document provider is telling me we can no longer have that option. Are any document providers allowing for a forfeiture to occur after a one (1) year break?

I recall having a choice that said that forfeited funds were used to reduce the contribution in the year following the forfeiture. Is that what you're really asking?