Subject: Using Yr. #1 Forfeitures in Yr. #2

[Guest Mindy]

We are looking for practical feedback on how other independent TPA firms may handle the following situation.

Plan Background: Standardized 401(k) plan (Corbel) with forfeitures used to reduce contributions (match only). Match is 25% of first 6% with discretionary match above 25%. Many participants terminated during the year, so there were significant forfeitures. The employer contributes the match each payroll along with the deferrals. By the time the forfeiture amount was determined, it was well into the following plan year.

Question 1: Since forfeitures were not calculated until late the following year, can the forfeitures be used to offset employer contributions from the following year rather than the actual year of the forfeitures?

Question 2: Since the forfeitures were not known until late in the following year and the company had been contributing the match all along, the available forfeitures exceeded the amount of the required match for the remainder of the year. If the employer has not yet filed the corporate tax return, can he take the employer contribution back (a mistake in fact) and claim a $0 employer contribution on the corporate tax return?

Question 3: If the employer can not get the money back, can the excess forfeitures be carried over to the next plan year?

Question 4: In general, if due to the preference of either the employer or the investment company, can forfeiture money be sent back to the employer so it can write a check for an employer contribution rather than directing the money be taken from the forfeiture account each month?