vested balance after partial distribution

[Chippy]

I have an annual profit sharing plan. The termiated participant was paid 20% of his 12/31/2006 balance during 2008. 2007 there was a gain, 2008, loss. If the participant was due 2,200 as of 12/31/2007, but the participant was mistakenly paid 20% of the 12/31/2006 balance, which as an example was 2,100. How would his vested balance be calculated at 12/31/2008. I have always used ending balance plus distribution paid during year times vested percent, less amount paid. This way it shows he was overpaid, but is this particpant due the difference between the vested balances at 12/31/2006 and 12/31/2007, which would be $100 less the loss for 2008?

I hope this isn't too confusing. Has anyone ever had this happen?

[J Simmons]

I hate to dash your hopes, Chippy, but I'm confused. So I think the particpant is due the difference between the vested balances at 12/31/2006 and 12/31/2007, $100 on your example. But I do not think you want to make this individual suffer any 2008 investment losses on the $100 that were sustained after the date he was paid the rest of his vested benefits. It wasn't his mistake that led to those dollars yet being in the plan after the others were paid out.

[Chippy]

I hate to dash your hopes, Chippy, but I'm confused. So I think the particpant is due the difference between the vested balances at 12/31/2006 and 12/31/2007, $100 on your example. But I do not think you want to make this individual suffer any 2008 investment losses on the $100 that were sustained after the date he was paid the rest of his vested benefits. It wasn't his mistake that led to those dollars yet being in the plan after the others were paid out.

That would be fair to pay the participant the additional due without regards to gain/loss, it wasn't his fault he was not paid out correctly. Would it be appropiate to forfeit the remaining balance now, so that he is 100% vested in the remaining balance? I'm just trying to think of the cleanest way on Relius for his vested balance to show correctly.

[J Simmons]

Don't know about the functionalities of Relius, but forfeiture as a pension law concept would not occur until the former employee is cashed out entirely or incurs a forfeiture break in service.

[Tom Poje]

what does the document say?

I thought it had to specify one of 2 possible formulas

1. X = P (AB+(R * D)) – (R * D)

2. X = P (AB+D) – D

X = remaining vested balance

P = current vested percentage

AB = account balance after the distribution

D = amount of distribution

R =Ratio of the account balance at the relevant time divided by the account balance immediately after the distribution. The relevant time is that point in time the vested percentage cannot increase.

I believe Relius uses method 2.

as an additional comment, I have seen some documents that say if you get paid a partial distribution, you also partially forfeit

[Chippy]

what does the document say?

I thought it had to specify one of 2 possible formulas

1. X = P (AB+(R * D)) – (R * D)

2. X = P (AB+D) – D

X = remaining vested balance

P = current vested percentage

AB = account balance after the distribution

D = amount of distribution

R =Ratio of the account balance at the relevant time divided by the account balance immediately after the distribution. The relevant time is that point in time the vested percentage cannot increase.

I believe Relius uses method 2.

as an additional comment, I have seen some documents that say if you get paid a partial distribution, you also partially forfeit

Tom, this is a corbel non-standardized. The basic plan document has the formula, but it says for a participant that has not severed employment. I can't find a section that refers to terminated participants paid a partial amount. But Relius does use method 2, which is what I've always used. Doing it method two, the particpant was overpaid by 341. Would that be correct?