What should be done with match associated with excess contributions wh

[John A]

Employer fails ADP test and the correction was to return excess contributions. There was match associated with the returned deferrals. Because matching contributions are immediately 100% vested, the plan document seems to assume there will never be any forfeitures and so is silent on what to do with forfeitures.

I believe the match associated with the returned deferrals has to be forfeited. What should be done with these forfeitures if the plan document truly is silent on the issue?

How do documents generally deal with this issue? (I've seen one that said what to do with forfeitures in this case was at the discretion of the Plan Administrator.)

[Dawn Hafner]

The match should be forfeited. To allow the HCE to receive the match as a distribution would be providing a higher rate of matching contributions than available to other employees. Not sure what the right answer is though on what to do with the forfeitures since your plan in silent. You could amend the plan currently to provide for a use for forfeitures.

[Guest JWBrown]

I'm not sure that forfeiture is mandatory. Forfeiture is certainly permitted, but I think that the plan document should address whether forfeiture or distribution is appropriate.

I believe that the removal (via either forfeiture or distribution) from the HCE's account of the portion of the match that is discriminatory solves the 401(a)(4) dilemma.