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Forfeiture allocations for terminating plan


Guest epoffice

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Guest epoffice

When a plan terminates and the forfeitures need to be allocated, do new participants get any part of the forfeiture? As new participants they just entered and have no salary deferral, profit sharing, or match. If the forfeitures are allocated to them, their only source of funds would be from the forfeiture amount. Would that make sense or should they be excluded all together?

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The plan's terms usually address this issue; as the method in which forfeitures are allocated are already there. Even in a plan start-up, you wouldn't want to have forfeitures allocated in a manner resulting in small balances to non-deferring participants. This is a practice despite plan termination.

Good Luck!

CPC, QPA, QKA, TGPC, ERPA

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  • 4 years later...

If a terminating plan uses forfeitures to pay expenses then to reduce the employer contribution, but if the sponsor has already paid plan expenses and there is no contribution, the forfeitures are allocated as if there was correct?

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