Match forfeitures

[pbarrett]

We have a client using a standarized 401(k) plan document, with the provision that forfeitures will reduce match contributions.

There are no highly compensated participants in the plan. The match is $1 for $1 up to $1,000. The company has high turnover and wants to net the match contribution. For example, assume during the '98 plan year 3 participants deferred $1,000 each. All three particpants quit before becoming 20% vested. Can the employer contribute a $0 match on their behalf? Or must the employer contribute the $3000 for '98 and then have it forfeited out?

Thanks for your help.

[Tom Poje]

I believe the company must make the contribution, otherwise you are violating terms of the document -

then the ees turn around and forfeit.

I know some people now put in the document that forfeitures reduce/occur in year following termination to avoid an ee getting a contribution and forfeiting the same year.

[Guest T Hoffman]

I think Tom is right. You should consult the plan document to determine when forfeitures occur (and when the deemed cashout occurs for that matter). I guess that a standardized plan could not have a last day of year requirement, but that is really what this employer needs if they want to avoid making these contributions.