Forfeiture Account Incorrectly Used

[Guest koo]

According to our Plan Document, our Plan can use forfeitures to reduce the employer match. Our TPA incorrectly used it to reduce employee contributions. This happened in 2006. How does our Company correct this error? Do we just give an amount equal to the forfeitures used in 2006 to our current forfeiture account?

Any help would be appreciated.

[Guest Sieve]

How are forfeitures used to reduce employee contributions?

[jkdoll2]

Did they do a match in 2006? If they offset employee money - what did they do with the money they received from the employees paychecks for the deferrals?

[Guest koo]

The match was not paid in 2006 and the forfeitures were used to pay an under funding for employee contributions. How do I correct this?

[jkdoll2]

The match was not paid in 2006 and the forfeitures were used to pay an under funding for employee contributions. How do I correct this?

I guess Im confused on how you have an underfunding of employee money when the money comes from the employees paychecks.

I think the employer needs to make up those forfeitures from company money.

[BG5150]

Are you considering salary deferrals as "employee" money? I always considered after-tax and rollover as the only "employee" money, and all other types of contributions as "employer" contributions.

[Bird]

QUOTE (koo @ Jan 20 2010, 07:26 PM) *

The match was not paid in 2006 and the forfeitures were used to pay an under funding for employee contributions. How do I correct this?

I guess Im confused on how you have an underfunding of employee money when the money comes from the employees paychecks.

I think the employer needs to make up those forfeitures from company money.

I agree. I think we are all confused about how this came to be; if the employer didn't submit deferral money for some reason and forfeitures were used to make up the difference, that is clearly wrong and the forfeiture account should be reimbursed. I don't know if it is as simple as that if you want to make sanctioned correction, but that is ultimately what should happen.

[austin3515]

I think the DOL would conclude that those deferrals were never deposited to the plan, and should therefore be deposited plus lost interest. I would just allocate it pro rata to anyone who had deferrals in the pay-period in which it was used. The forfeitures that were put in their accounts could probably just be considered additional profit sharing, but is probably way to insignificant to worry about. The most important thing is to get the deferrals into the plan(i.e., the ones that are sitting in the corporate checking account).