Allocating Foreitures

[Guest A_Dude]

We have a cleint that wants to (has been) allocating forfeiture on a flat dollar amount to every person who is a participant that did not enter the plan this year.

Is this possible? Currently the plan document does not allow this, but is it possible to change this for the future (i.e. document with two classes)?

[QDROphile]

Forfeitures are annual additions. Allocation to a participant that does not have compensation for the year of allocation will violate section 415. There may be more reasons not to allocate as desired.

[Guest A_Dude]

I like that answer, and we are also the basis that currently the plan document says they are a contribution and must be allocated the same way as the PS contribution.

But, what if the forfieture is only allocated to participants who get a contribution. I ask on a more inquisitive basis, is it even possible to say that only a select group of people may get an additional contribution with a different formula (even if the group is broad)? Would the contribution be tested just on coverage and nondiscrimination?

I should add that is a PS plan only, and the regualar contribution is descrionary, proportional to comp.

[ETA Consulting LLC]

So, you would want the forfeiture to be allocated in some method other than proportional to Comp? You can do that as long as the formula is definitely determinable (meaning you define clearly how it will be allocated). You must also ensure you complete the appropriate non-discrimination test in the event you provide contributions pursuant to an allocation formula that is not uniform (i.e. prorata).

Good Luck!