Contributions to ineligible employees forfeited

[Guest HJoseph]

During 2012 an ineligible employee had deferrals and employer contributions deposited. These contributions were forfeited (during 2012), he was made whole outside the plan for his deferrals and the employer will use the forfeitures as defined by the plan document, to reduce future contribuitons.

Would these contributions be included in the "other contributions" on the 5500 and would the sponsor be able to deduct them?

[Bird]

Technically, this was money contributed by the employer in 2012 and should be allocated in 2012. I think using the term "forfeitures" is misleading when you are talking about contributions for ineligibles, although I can see it winding up in a forfeiture account.

If it's a small amount you might want to do as you suggest, but it wouldn't be quite right.