401k forfeiture accounts

[Guest Eric401k]

about 9 years ago, Company 2 acquires company 1, and 80% of 1's people quit, leaving their unvested 401(k) contributions behind. Company 2 never merges the old 1 401(k) Plan into 2's Plan, so all of the remaining 1 people hold two 401(k) accounts. A few years go by, and nobody is left from the original 1 organization. What is supposed to happen to the funds forfeited under 1's Plan?

In reality, there were three companies involved. Company 2 was further acquired by Company 3, which did merge 2's 401(k) into 3's. But, I don't think it affects my original question, as 1's Plan was left alone..

what was supposed to happen?

[Guest Sieve]

As a result of the actual termination of employment of 80% of the employees of 1 following the acquisition, those terminated employees were part of a partial termination of the plan, and they therefore became fully vested. So, their "forfeitures" should be distributed to those individuals in whose accounts the amounts were credited.

The 20% whose employment transferred to 2 are also treated as having terminated employment if the sale was a sale of assets, so they, too, should receive 100% of their account balances. If the acquisition was a stock deal, but 1's plan was inactive following the sale, then the plan should have been treated as terminated a few years later as a result of a lack of continuing contributions, so those remaining individuals also should be treated as fully vested (because of the plan's termination) and receive a distribution of their own "forfeitures". (The result for these individuals would have been different had the assets from 1's plan been merged with 2's plan.)

Then, I guess, there's nothing left in the plan.

At least that's how I see it.

[J Simmons]

Eric401k, I second Sieve's analysis and conclusions.

[Guest Eric401k]

thanks for the thoughtful replies.