Forfeitures to reduct Employer Contribution

[Guest ebailey]

We have a plan that currenlty allows for forfeitures to be used to first pay for Plan Admin expenses and then to be allocated to participants per non elective employer contribution formula. If we amend the plan to use forfeitures to reduce employer contributions is there are timing issue? Can forfeitures from this plan year be used for any employer contributions of this plan year? Is it on a prospective basis by plan year or from effective date of amendment? I think it can only be prospective and it would be safer to say forfeitures for next plan year will be used for employer contributions for next plan year but can find where I'm prohibited from using them this year.. Any help would be appreciated.

thanks

[JanetM]

I would agree that the amendment would be prospective only, and better if you do it for following plan year. That makes for a simpler audit. You would have to use the forfietures to pay any expense then allocate to participants at year end. Then next year use future forfeitures to reduce ER contributions. I think you would have to name which ER contributions are reduced, either match or profit sharing. Am not sure about safe harbor, but my gut says no.